SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1997 Commission File Number: 0-3024
NEW ULM TELECOM, INC.
(Exact Name of Registrant as Specified in its Charter)
Minnesota 41-0440990
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
400 Second Street North
New Ulm, Minnesota 56073
(Address of principal executive offices and zip code)
Registrant's telephone number including area code 507-354-4111
Securities registered pursuant to Section 12 (b) of the Act: None
Securities Registered pursuant to Section 12 (g) of the Act:
Title of each class
Common Stock, $5.00 par value
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. _X_
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant.
Not Available
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
1,732,455 Shares Outstanding at December 31, 1997
Documents Incorporated By Reference
Documents: Form 10-K Reference:
Proxy Statement, Filed Part III, Items 10-13
Within 120 Days
<PAGE>
PART I
Item 1. Business
New Ulm Telecom, Inc. was incorporated in 1905 under the laws of the State of
Minnesota, with headquarters in New Ulm, Minnesota. The Company's principal line
of business is the operation of local exchange telephone companies.
New Ulm Telecom, Inc. is the parent company for eight wholly-owned subsidiaries,
which are:
Western Telephone Company
Peoples Telephone Company
New Ulm Phonery, Inc.
New Ulm Cellular #7, Inc.
New Ulm Cellular #8, Inc.
New Ulm Cellular #9, Inc.
New Ulm Cellular #10, Inc.
New Ulm Long Distance, Inc.
New Ulm Telecom, Inc., Western Telephone Company and Peoples Telephone Company
are independent telephone companies which are regulated by the state utilities
commissions. None of these companies has experienced a major change in the scope
or direction of their operations during the past year. At December 31, 1997, the
Company served 15,054 access lines.
New Ulm Phonery, Inc. is a non-regulated telecommunications business which sells
and services telephone apparatus on a retail level primarily in the areas served
by the three operating telephone companies.
New Ulm Cellular #7, 8, 9 and 10, Inc. own cellular interests in a limited
liability corporation that provides cellular phone service in southern
Minnesota.
New Ulm Long Distance, Inc. is a non-regulated long distance business which
sells long distance service.
The Registrant's operations consist of only one segment, which is to provide
local exchange telephone service and related access to the long distance
network. The Company does not have any collective bargaining agreements with its
employees.
New Ulm Telecom, Inc. provides telephone service to the cities of New Ulm,
Courtland, Klossner, Searles and the adjacent rural areas. Western Telephone
Company provides telephone service to the cities of Springfield, Sanborn and the
adjacent rural areas. Peoples Telephone Company provides telephone service to
Aurelia, Iowa and the adjacent rural areas. Peoples Telephone Company operates a
cable television system in the city of Aurelia, Iowa, serving approximately 380
customers. Western Telephone Company operates three cable television systems in
Minnesota (cities of Sandborn, Jeffers and Wabasso) serving approximately 410
customers.
New Ulm Telecom, Inc., Western Telephone Company, and Peoples Telephone Company
derive their principal revenues from local service charges to their subscribers
and access charges to interexchange carriers for providing access to the long
distance network. Revenues are also received from long distance carriers for
providing the billing and collection of long distance toll calls to subscribers.
The three telephone companies are public utilities operating exclusively within
their serving areas pursuant to Indeterminate Permits and Certificates of
Territorial Authority issued by the Minnesota Public Utilities Commission and
the Iowa Utilities Board. The Minnesota Public Utilities Commission and the Iowa
Utilities Board regulate most services provided by the three telephone
companies.
<PAGE>
PART I
Item 1. (Continued)
The activities of New Ulm Phonery, Inc. are centered around the sale, lease and
service of telephone equipment primarily in the areas within the telephone
company's operations. New Ulm Phonery, Inc. also provides electronic voice mail,
video conferencing and internet services.
The four cellular companies derive their revenue from their respective
percentage ownership of the cellular limited liability corporation (LLC).
Peoples Telephone Company also has an equity interest in two rural service areas
in Iowa. The cellular LLC provides their cellular phone service on the wireline
side. The service area that the LLC operates in also has a non-wireline provider
that is the competition for that area. In addition, new wireless technology
called Personal Communications Service (PCS) will provide new competitors in the
future.
The Registrant and its subsidiaries are not planning to provide any new products
or services which would require the investment of a material amount of the
assets of the Registrant or its subsidiaries.
The materials and supplies which are necessary to the operation of the
businesses of the Registrant and its subsidiaries are available from a variety
of sources. No supply problems are anticipated during the coming year.
Patents, trademarks, licenses and concessions are not significant in the
businesses of the Registrant or its subsidiaries.
The Registrant's businesses are not highly seasonal. The Registrant and its
subsidiaries are engaged in service businesses. Working capital practices
primarily involve the allocation of funds for the construction and maintenance
of telephone plant, the payroll cost of skilled labor and the inventory to
service its telephone equipment customers.
The Registrant and its subsidiaries are not dependent upon any single customer
or small group of customers. There is no customer that accounts for ten percent
or more of the Registrant's consolidated revenues.
The Registrant and its subsidiaries are in a service business which provides an
ongoing benefit to their customers for a fee. These services are repetitive and
recurring. Backlog orders are not a significant factor in providing these
services.
There is no material portion of the businesses of the Registrant or its
subsidiaries which may be subject to renegotiation of profits or termination of
contracts at the election of the Government.
As a result of the Telecommunications Act of 1996, telephone companies no longer
have an exclusive franchise service area. Under the law, competitors may offer
telephone service to the Company's customers and request access to the Company's
local network facilities. The law also permits existing telephone companies to
offer telephone service outside their existing franchise service area. The law
includes universal service provisions, interconnection requirements, and rules
mandating how competition will be implemented. The FCC and state regulatory
agencies are responsible for establishing rule making procedures to implement
the law. The rule making procedures are not complete and a number of court cases
have already been filed challenging various aspects of the rules and procedures.
Until the rule making procedures are complete and the court issues settled, the
Company cannot predict how the new law will affect its business.
<PAGE>
PART I
Item 1. (Continued)
The three telephone companies currently do not have competition in the providing
of basic local telephone service. Competition does exist in some services
provided for interexchange carriers such as customer billing services. The
competition comes from the interexchange carriers themselves. The provision of
these services is by contract and is primarily controlled by the interexchange
carriers. The Company has experienced competition in the providing of access
service whereby the local network is by-passed through private line switched
voice and data services, microwave, or cellular service. Other services such as
directory advertising and local private line transport are open to competition.
Competition is based primarily on cost, service and experience.
There are a number of companies engaged in the sale of telephone equipment at
the retail level competing with New Ulm Phonery, Inc. Competition is based
primarily on price, service, and experience. No company is dominant in this
field.
The Registrant and its subsidiaries do not engage in material research and
development activities.
The Registrant and its subsidiaries anticipate no material effects on their
capital expenditures, earnings or competitive position because of laws relating
to the protection of the environment.
As of December 31, 1997, the total full time employees of the Registrant and its
subsidiaries was 40. New Ulm Telecom, Inc. employed 33 full time employees,
Western Telephone Company had 4 full time employees and Peoples Telephone
Company had 3 full time employees. New Ulm Phonery, Inc.'s and New Ulm Long
Distance, Inc.'s labor are provided by the employees of New Ulm Telecom, Inc.
The four cellular subsidiaries have no employees.
The Registrant and its subsidiaries operate only in southern Minnesota and
northern Iowa and have no foreign operations.
Item 2. Properties
The three operating telephone companies own central office equipment. The
central office equipment is used to record, switch and transmit the telephone
calls. New Ulm Telecom, Inc.'s host central office equipment was purchased in
1991 and consists of a Northern Telecom DMS-100/200 digital switch. New Ulm
Telecom, Inc. also has remote switching sites in two locations in New Ulm and in
the city of Courtland. The equipment at these remote switching sites is housed
within specially designed central office equipment buildings.
Western Telephone Company installed Northern Telecom remote central office
equipment in 1996. This remote switching equipment utilizes the host switch in
New Ulm. Western Telephone Company also has a remote switching site in the city
of Sanborn. The equipment at Sanborn is housed within a specially designed
central office equipment building.
<PAGE>
PART I
Item 2. (Continued)
Peoples Telephone Company's central office equipment was purchased in 1989 and
consists of a Stromberg Carlson DCO digital switch.
The Company owns various buildings and related land as follows:
(1) New Ulm Telecom, Inc. owns a building which is located at 400
Second Street North, New Ulm, Minnesota. It was originally
constructed in 1918 with various additions and remodeling
through the years. This building contains the main business
offices and central office equipment. The building also has
warehouse and garage space. This building contains
approximately 23,700 square feet of floor space.
(2) New Ulm Telecom, Inc. constructed a warehouse in 1992 that is
located at 225 20th South Street, New Ulm, Minnesota. The
warehouse has 10,800 square feet of space and is used
primarily as a storage facility for trucks, generators,
trailers, plows, and inventory used in outside plant
construction.
(3) New Ulm Telecom, Inc. has three remote central office
buildings that are located on the north side of New Ulm, the
south side of New Ulm, and in Courtland. These buildings
contain central office equipment that remote off of New Ulm's
main central office equipment.
(4) New Ulm Telecom, Inc. owns buildings in Klossner and Searles,
Minnesota. These buildings were built in 1954 and were
formally used to house central office equipment. These
buildings are now used for storage.
(5) New Ulm Telecom, Inc. owns land located at the corner of 7th
Street South and Valley Street in New Ulm, Minnesota. This lot
is utilized as storage for poles and cable inventory and
contains approximately 5,000 square feet of fenced in storage
area.
(6) Western Telephone Company owns a building at 22 South
Marshall, Springfield, Minnesota. This building contains the
business office and central office equipment. This building
contains approximately 2,100 square feet of floor space.
(7) Western Telephone Company has a building in Sanborn,
Minnesota, which contains central office equipment that
remotes off of Western's central office equipment.
(8) Western owns a warehouse located at 22 South Marshall,
Springfield, Minnesota. This building is used as a storage
facility for vehicles, other work equipment and inventory used
in outside plant construction. This building contains
approximately 3,750 square feet of space.
(9) Peoples Telephone Company owns a building in Aurelia, Iowa
that houses the business office, central office equipment and
cable television headend equipment.
(10) Peoples Telephone Company owns a building that is adjacent to
its main office building. This building will be used to expand
the present main office building.
<PAGE>
PART I
Item 2. (Continued)
(11) A warehouse building that contains approximately 1,875 sq. ft.
is owned by Peoples Telephone Company.
(12) Peoples Telephone Company also owns a vacant lot that is 25' x
100' in downtown Aurelia, Iowa.
In addition, New Ulm Telecom, Inc., Western Telephone Company and Peoples
Telephone Company own the lines, cables and associated outside physical plant
utilized in providing telephone service in their service areas. Western
Telephone Company and Peoples Telephone Company owns the cables and equipment to
provide cable television services.
New Ulm Phonery, Inc. owns the telephone sets and other similarly used
instruments and equipment which are leased to subscribers.
The Registrant believes that its property is suitable and adequate to provide
the necessary services and believes all properties are adequately insured. Note
6 to the financial statements describes mortgages and collateral relating to the
above properties, while Note 1 describes the composite depreciation rate.
Item 3. Legal Proceedings
There is no material litigation pending or threatened involving the Registrant
at this time in any court.
Item 4. Submission of Matters to a Vote of Security Holders
None.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Company's common stock is not traded on an exchange or in the
over-the-counter market; as such, it has a limited market. As of December 31,
1997, there were approximately 950 holders of record of the Company's common
stock.
Dividends
Dividends were declared quarterly in 1997 and 1996. In addition to the quarterly
dividends, a special dividend was declared in 1997.
Dividends were $.99 in 1997 (which includes the special dividend of $.25, per
share), $.65 per share in 1996, and $.58 per share in 1995. Any increase in
dividends will be decided by the Board of Directors based on anticipated
earnings, capital requirements and the operating and financial condition of the
Company. See Note 6 to the financial statements for restrictions on the payment
of dividends.
<PAGE>
PART II
Item 6. Selected Financial Data
Selected Income Statement Data:
<TABLE>
<CAPTION>
Year Ended December 31
----------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 9,666,727 $ 9,346,224 $ 8,975,187 $ 8,494,517 $ 7,603,014
Operating Expenses 5,812,800 5,631,181 5,477,162 4,915,602 4,401,869
Operating Income 3,853,927 3,715,043 3,498,025 3,578,915 3,201,145
Other Income (Expenses) 935,548 275,016 247,873 (39,317) (28,500)
Income Taxes 1,976,220 1,586,544 1,491,105 1,412,631 1,057,879
Net Income 2,813,255 2,403,515 2,254,793 2,126,967 2,114,766
Basic Net Income Per
Share 1.62 1.39 1.30 1.23 1.22
Dividends Per Share .99 .65 .58 .54 .49
</TABLE>
Selected Balance Sheet Data:
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Current Assets $ 4,411,510 $ 3,938,975 $ 3,478,049 $ 2,748,395 $ 2,931,579
Current Liabilities 1,325,949 937,488 949,532 821,823 1,574,795
Working Capital 3,085,561 3,001,487 2,528,517 1,926,572 1,356,784
Total Assets 23,978,695 22,849,405 22,021,455 20,976,195 21,309,082
Long-Term Debt 4,033,332 4,400,000 4,766,666 5,133,333 6,505,833
Stockholders' Equity 17,483,498 16,385,373 15,113,728 13,869,534 12,678,093
Book Value Per Share 10.09 9.46 8.72 8.01 7.32
</TABLE>
Selected income statement and balance sheet data include Peoples Telephone
Company subsequent to its acquisition on November 8, 1993. All per share amounts
have been adjusted to reflect a three-for-one stock split effective April 1,
1996.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Description of Business
The Company operates in one business segment providing telephone service in six
Minnesota cities and one Iowa city and the adjacent rural areas. The Company
provides telephone service to over 15,000 access lines through its three local
exchange telephone companies. In addition, the Company is an investor in a
cellular limited liability corporation in southern Minnesota and two RSAs (rural
service areas) in northwestern Iowa. The Company also operates four cable
television systems and resells long distance service.
<PAGE>
PART II
Item 7. Continued
Results of Operations
The majority of the Company's revenues are derived from providing its customers
access to the local network and to the long distance network. Customers pay
fixed monthly rates for access to local service. The Company receives access
revenues from long distance carriers for providing connections to the long
distance network. The Company also earns revenues from long distance carriers
for billing and collection services related to long distance services. Cable
television revenues are included in nonregulated and represent less than 2% of
total operating revenues. The following table reflects the percentage of revenue
derived from each category over the past three years:
Year Ended December 31
-----------------------------------------
1997 1996 1995
----------- ---------- -----------
Local Network 22.4% 22.0% 21.1%
Network Access 50.6 53.0 52.2
Billing and Collection 5.5 5.8 7.0
Miscellaneous 4.0 3.5 4.0
Nonregulated 17.5 15.7 15.7
----------- ---------- -----------
100.0% 100.0% 100.0%
=========== ========== ===========
1997 COMPARED TO 1996
The company accomplished record earnings for the year ending December 31, 1997.
New highs were set for revenues and net income. Total operating revenues
increased by $320,503, or 3.4%. The increased operating revenues were a result
of increased local network and nonregulated revenues. Local network revenues are
those revenues derived from providing basic telephone service and local private
line. Nonregulated revenues include transport from toll cable, retail sales of
telephone apparatus, cable television and long distance services. Local network
revenues increased $106,158, or 5.2%, which can be attributed to access line
growth of 700 lines, or an increase of 4.9%. Nonregulated revenues increased
$223,859, or 15.3%. Increased customer premise sales, Internet activation and
monthly service, and transport revenue accounts for approximately 75% of
nonregulated revenue growth. The remaining growth is attributed to cable
television and enhanced phone service monthly revenue.
Operating expenses increased by $181,619 or 3.2%. General and Administrative, as
well as Other Operating Expenses, accounted for the increase in operating
expenses in conjunction with a $161,449 decrease in depreciation. General and
Administrative expenses increased $106,444 or 9.7%, which can be attributed to
additional training and the company pursuing other business ventures to increase
revenues and stockholder value. Other Operating Expenses increased $238,698 or
27.7%. This increase was due mainly to an increase of cost of goods sold,
enhancements to our Internet system to accommodate the increase of approximately
500 subscribers during 1997, and additional marketing efforts associated with
our new long distance service being offered. Depreciation decreased by $161,449
or 8.8%. The decrease was due to an unusually high amount of depreciation
recorded for fiscal year ending December 31, 1996 for Western Telephone Co. due
to the replacement of its central office equipment with a remote central office
switch.
<PAGE>
PART II
Item 7. Continued
Interest expense decreased $23,571 or 7.9% reflecting the reduction in long-term
debt. Interest income increased $17,547 or 13.2%, which reflects an increase in
cash available for investment opportunities. The company's cellular investment
income increased $619,414 or 140.8%. This investment income is derived from the
company's ownership interest in Midwest Wireless Communications L.L.C. Midwest
Wireless owns and operates the five Southern Minnesota RSA's as well as the
Rochester MSA. The Company's cellular interests contributed $1,059,486 or 22.1%
of pre-tax income.
Income taxes increased $389,676 or 24.6%, with the effective tax rate increasing
from 39.8% in 1996 to 41.3% in 1997.
The increases in operating revenues and other income reflect favorably upon the
$409,740 or 17.1% increase in net income. The increase in net income reflects
the company's continued steady revenue growth in excess of the company's growth
in operating expenses.
1996 COMPARED TO 1995
The company once again experienced growth in income and operations. Total
operating income for 1996 grew $217,018 or 6.2%, which corresponds favorably to
revenue growth of $371,037 or 4.1%. The company's operations expanded through
the purchase of cable television systems in Sanborn, Jeffers and Wabasso. The
company's ownership of four Minnesota cellular partnerships was changed when
five Southern Minnesota RSAs merged to form Midwest Wireless Communications
L.L.C. The company is a 7.7% owner of Midwest Wireless Communications L.L.C.
Midwest Wireless owns and operates the five Southern Minnesota RSAs as well as
the Rochester MSA.
The increase in operating revenues can be attributed to the areas of local
service and network access. The company provides customers access to a 14,354
access line local network. Local service revenue increased 8.5% in 1996 and
12.2% in 1995. The growth in local service revenue is significant because it
exceeded the access line growth for those periods, which was 3.7% and 10.1%
respectively. CLASS services, Centrex and voice mail were significant to the
local service revenue growth, with this growth resulting from a commitment to
marketing efforts. Custom calling services were offered for the first time by
Western Telephone Company during 1996. Network access revenues increased
$263,735 or 5.6% in 1996. The continued growth in network access revenues can be
attributed to growth in access minutes of use. Western Telephone Company went to
equal access during 1996, which helped stimulate long distance traffic. Billing
and collection revenue decreased $82,891 or 13.3% as a result of long distance
carriers decisions to perform some of these functions internally.
Operating expenses increased $154,019 or 2.8%. The increase was primarily
depreciation expense. Western Telephone Company had additional depreciation of
$140,000 because their old central office equipment was replaced with a remote
switch. The Company also changed depreciation rates on their central office
switching equipment from 15 years to 12 years.
Excluding depreciation expense, operating expenses decreased $125,463 or 3.2%.
<PAGE>
PART II
Item 7. Continued
Interest expense declined $23,456 or 7.3% reflecting the reduction in long-term
debt, while interest income and cellular investment income was approximately the
same as 1995. The Company's cellular interests contributed $440,072 or 11% of
pre-tax income.
Income taxes increased $95,439, with the effective rate remaining constant at
39.8% in 1996 and 1995.
Net income for 1996 increased $148,722 or 6.6%, reflecting the continued steady
revenue growth along with slower rates of growth in operating expenses.
Regulatory Matters
A bill passed in 1995 by the Minnesota legislature allows telephone companies
serving less than 50,000 access lines to file an election to provide service
under an alternate form of regulation. Under this election, a company would not
be subject to a rate of return review by the State regulators, but in return, a
company must agree not to increase rates, other than in extraordinary
circumstances, for a two year period. New Ulm Telecom, Inc. and its subsidiary,
Western Telephone Company, have both made the alternate rate regulation election
as of January 1, 1996. Effective January 1, 1998 the companies would be able to
increase local service rates without regulatory review, unless customers file a
petition requesting such a review. Under Iowa law, Peoples Telephone Company is
not subject to rate of return review.
The Telecommunications Act passed by the federal government in February of 1996
will result in significant changes to the telecommunications industry. The
Federal Communications Commission (FCC) is in the process of determining how
competition will be introduced by setting standards for wholesale pricing,
unbundling local network rates, and interconnection rates. State regulators will
also be involved in implementing the transition to a competitive environment,
but the exact roles that the FCC and state regulators will play has yet to be
determined.
The Company follows the accounting practices prescribed by regulatory
authorities in accordance with Statement of Financial Accounting Standards No.
71 "Accounting for the Effects of Certain Types of Regulation" (SFAS No. 71).
Under SFAS No. 71, regulators may require certain treatment of revenues or
expenses that are recoverable through rates in future periods. Changes in
regulation and increased competition could impact the applicability of SFAS No.
71 in the future. At this time, the Company believes SFAS No. 71 is applicable.
Accounting Pronouncements
In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share." Adoption of this
standard had no effect on the Company's calculation of earnings per share.
<PAGE>
PART II
Item 7. Continued
The Financial Accounting Standards Board (FASB) has issued SFAS No. 130,
"Reporting Comprehensive Income". This statement establishes standards for
reporting and presenting comprehensive income and its components in the
financial statements and is effective for fiscal years beginning after December
15, 1997. Adoption of this standard will have no effect on the Company's results
of operations or financial position.
The FASB has also issued SFAS No. 131, "Disclosures about Segments of an
Enterprise and Related Information". This statement establishes standards for
the way public enterprises report information about operating segments in annual
financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports to
shareholders. SFAS No. 131 is effective for fiscal years beginning after
December 15, 1997. Adoption of this standard will have no effect on the
Company's results of operations or financial position.
Year 2000 Conversion
The Company has addressed the issue facing all users of automated information
systems whereby software used may not properly recognize and process information
related to the year 2000. Main areas affected by this issue include central
office switching equipment, customer billing records and accounting systems.
The Company has determined that all systems will be upgraded to be year 2000
compliant by the end of 1998. Based on current information the Company does not
believe that conversion costs will have a material effect on operations.
Liquidity and Capital Resources
The Company had an increase in cash of $288,846 in 1997. Cash provided by
operations was $3,863,992, or a decrease of $203,514 mainly due to an increase
in cellular investment income.
During 1997, cash of $1,471,433 was used for plant additions. Cash distributions
from the cellular partnerships were $289,731 in 1997, reflecting the strong
performance of the cellular partnerships. The Company made additional cellular
investments of $31,636 in 1997.
The Company continued to increase dividends paid to shareholders in 1997. The
1997 dividend of $1,715,130, which included a special dividend of $433,114 or
$.25 per share, represented an increase of 52% over 1996.
The Company does not believe inflation had a material effect on the Company in
1997 or 1996.
In 1998, the Company is budgeting approximately $1,600,000 for plant additions.
The Company will continue to look for investment opportunities in cable
television and other areas. Management believes the Company will internally
generate sufficient cash to meet its operating needs and sustain historical
dividend levels.
The Company has a line of credit of $1,640,000 with the Rural Telephone Finance
Corporation with interest at 1 1/2% over the prime rate.
<PAGE>
PART II
Item 8. Financial Statements and Supplementary Data
INDEPENDENT AUDITORS' REPORT
To the Shareholders and
Board of Directors
New Ulm Telecom, Inc.
New Ulm, Minnesota
We have audited the accompanying consolidated balance sheet of New Ulm Telecom,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity and cash flows for each
of the three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of New Ulm Telecom,
Inc. and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.
St. Paul, Minnesota
February 20, 1998 OLSEN THIELEN & CO., LTD.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Local Network $ 2,161,847 $ 2,055,689 $ 1,895,517
Network Access 4,894,243 4,950,007 4,686,272
Billing and Collection 531,529 542,360 625,341
Miscellaneous 387,436 330,355 361,627
Nonregulated 1,691,672 1,467,813 1,406,430
----------- ----------- -----------
Total Operating Revenues 9,666,727 9,346,224 8,975,187
----------- ----------- -----------
OPERATING EXPENSES:
Plant Operations 1,139,156 1,182,166 1,140,259
Depreciation 1,683,604 1,845,053 1,565,571
Amortization 113,776 113,776 113,776
Customer 564,358 523,422 558,607
General and Administrative 1,211,492 1,105,048 1,131,150
Other Operating Expenses 1,100,414 861,716 967,799
----------- ----------- -----------
Total Operating Expenses 5,812,800 5,631,181 5,477,162
----------- ----------- -----------
OPERATING INCOME 3,853,927 3,715,043 3,498,025
----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest Expense (274,748) (298,319) (321,775)
Interest Income 150,810 133,263 137,560
Cellular Investment Income - Note 3 1,059,486 440,072 432,088
----------- ----------- -----------
Other Income (Expenses), Net 935,548 275,016 247,873
----------- ----------- -----------
INCOME BEFORE INCOME TAXES 4,789,475 3,990,059 3,745,898
INCOME TAXES - Note 7 1,976,220 1,586,544 1,491,105
----------- ----------- -----------
NET INCOME $ 2,813,255 $ 2,403,515 $ 2,254,793
=========== =========== ===========
BASIC NET INCOME PER SHARE $ 1.62 $ 1.39 $ 1.30
=========== =========== ===========
DIVIDENDS PER SHARE $ .99 $ .65 $ .58
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
ASSETS
1997 1996
----------- -----------
CURRENT ASSETS:
Cash $ 906,716 $ 617,870
Certificates of Deposit 2,000,000 1,900,000
Receivables, Net of Allowance for Doubtful
Accounts of $31,000 and $23,500 933,109 981,336
Materials, Supplies and Inventories 488,770 357,900
Prepaid Expenses 82,915 81,869
----------- -----------
Total Current Assets 4,411,510 3,938,975
----------- -----------
INVESTMENTS AND OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 3,674,010 3,787,786
Notes Receivable 79,965 78,226
Cellular Investments 3,547,686 2,746,295
Other 331,863 152,291
----------- -----------
Total Investments and Other Assets 7,633,524 6,764,598
----------- -----------
PROPERTY, PLANT AND EQUIPMENT:
Telecommunications Plant 25,039,400 23,726,599
Other Property and Equipment 1,462,575 1,356,503
Cable Television Plant 762,048 753,054
----------- -----------
Total 27,264,023 25,836,156
Less Accumulated Depreciation 15,330,362 13,690,324
----------- -----------
Net Property, Plant and Equipment 11,933,661 12,145,832
----------- -----------
TOTAL ASSETS $23,978,695 $22,849,405
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997 AND 1996
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 366,666 $ 366,666
Accounts Payable 621,338 222,970
Accrued Taxes 62,198 57,650
Other Accrued Liabilities 275,747 290,202
----------- -----------
Total Current Liabilities 1,325,949 937,488
----------- -----------
LONG-TERM DEBT - Note 6 3,666,666 4,033,334
----------- -----------
DEFERRED CREDITS: - Note 7
Income Taxes 1,467,487 1,439,279
Investment Tax Credits 35,095 53,931
----------- -----------
Total Deferred Credits 1,502,582 1,493,210
----------- -----------
STOCKHOLDERS' EQUITY: - Note 8
Common Stock - $5.00 Par Value, 6,400,000
Shares Authorized, 1,732,455 Shares Issued 8,662,275 8,662,275
Retained Earnings 8,821,223 7,723,098
----------- -----------
Total Stockholders' Equity 17,483,498 16,385,373
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $23,978,695 $22,849,405
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
Common Stock
---------------------------- Retained
Shares Amount Earnings
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE on December 31, 1994 577,485 $ 2,887,425 $ 10,982,109
Net Income 2,254,793
Dividends (1,010,599)
------------ ------------ ------------
BALANCE on December 31, 1995 577,485 2,887,425 12,226,303
Three-for-One Stock Split - Note 8 1,154,970 5,774,850 (5,774,850)
Net Income 2,403,515
Dividends (1,131,870)
------------ ------------ ------------
BALANCE on December 31, 1996 1,732,455 8,662,275 7,723,098
Net Income 2,813,255
Dividends (1,715,130)
------------ ------------ ------------
BALANCE on December 31, 1997 1,732,455 $ 8,662,275 $ 8,821,223
============ ============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,813,255 $ 2,403,515 $ 2,254,793
Adjustments to Reconcile Net Income to Net
Cash Provided By Operating Activities:
Depreciation and Amortization 1,797,380 1,958,829 1,679,347
Cellular Investment Income (1,059,486) (440,072) (432,088)
(Increase) Decrease in:
Receivables 46,926 199,981 (355,992)
Materials, Supplies and Inventories (130,870) 12,562 31,574
Prepaid Expenses (1,046) 9,720 (15,108)
Increase (Decrease) in:
Accounts Payable 398,368 (37,381) 64,531
Accrued Taxes 4,548 278 2,775
Other Accrued Liabilities (14,455) 25,059 60,403
Deferred Income Taxes 28,208 (30,511) 84,971
Deferred Investment Tax Credits (18,836) (34,474) (44,947)
----------- ----------- -----------
Net Cash Provided By
Operating Activities 3,863,992 4,067,506 3,330,259
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant
and Equipment, Net (1,471,433) (1,620,255) (1,827,903)
Change in Certificates of Deposit (100,000) (500,000) (786,666)
Change in Notes Receivable (438) (57,026) 7,412
Purchase of Cellular Investments (31,636) (443,803) --
Distributions from Cellular Investments 289,731 226,747 286,455
Other, Net (179,572) 14,023 (23,514)
----------- ----------- -----------
Net Cash Used In Investing Activities (1,493,348) (2,380,314) (2,344,216)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt (366,668) (366,667) (366,667)
Dividends (1,715,130) (1,131,870) (1,010,599)
----------- ----------- -----------
Net Cash Used In
Financing Activities (2,081,798) (1,498,537) (1,377,266)
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH 288,846 188,655 (391,223)
CASH at Beginning of Year 617,870 429,215 820,438
----------- ----------- -----------
CASH at End of Year $ 906,716 $ 617,870 $ 429,215
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NEW ULM TELECOM INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS - The Company's principal line of business is providing
local telephone service and access to long-distance telephone service through
its local exchange network. The Company owns and operates three independent
telephone companies serving six communities in southern Minnesota, one community
in Iowa, and the adjacent rural areas. The Company also has investments in
cellular entities and operates four cable television systems.
CONSOLIDATION - The consolidated financial statements include the accounts of
the Company and its eight wholly owned subsidiaries. All significant
intercompany transactions and accounts have been eliminated.
REGULATORY ACCOUNTING - The consolidated financial statements have been prepared
in conformity with generally accepted accounting principles including certain
accounting practices prescribed by regulatory authorities in accordance with
Statement of Financial Accounting Standards No. 71, "Accounting for the Effects
of Certain Types of Regulation" (SFAS No. 71). For example, the Company's
financial statements are affected by depreciation rates prescribed by regulatory
authorities, which may result in different depreciation rates then for an
unregulated enterprise.
ACCOUNTING ESTIMATES - The presentation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities as of the date
of the financial statements and the reported amount of revenues and expenses
during the operating period. Actual results could differ from those estimates.
MATERIALS, SUPPLIES AND INVENTORIES - Materials, supplies and inventories are
recorded at the lower of average cost or market.
PROPERTY AND DEPRECIATION - Property, plant and equipment are recorded at
original cost. Additions, improvements or major renewals are capitalized. When
telecommunications assets are sold, retired or otherwise disposed of, the cost
plus removal costs less salvage is charged to accumulated depreciation. Any
gains or losses on non-telecommunications property and equipment retirements are
reflected in the current year operations.
Depreciation is computed using the straight-line method based on estimated
service or remaining useful lives. The composite depreciation rates on
telecommunications equipment for the three years ended December 31, 1997, 1996,
and 1995 were 6.7%, 7.7%, and 6.9%. Other property is depreciated over estimated
useful lives of three to fifteen years.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVESTMENTS AND OTHER ASSETS - The excess of cost over net assets of acquired
companies is being amortized equally over forty years and is shown net of
accumulated amortization of $877,031 and $763,255 at December 31, 1997 and 1996.
Investment in a cellular telephone limited liability corporation is recorded
using the equity method of accounting, which reflects original cost and equity
in undistributed earnings and losses.
Cellular investments in two Iowa RSAs consist of a common stock equity interest
of less than 20%. The cost method is used to account for these RSA investments
which total $462,287. Long-term investments in other companies that are not
intended for resale or are not readily marketable are valued at the lower of
cost or net realizable value.
NETWORK ACCESS REVENUE - Revenues are recognized when earned. Interstate access
revenue is based on settlements with the National Exchange Carrier Association.
Interstate access settlements are based on cost studies for New Ulm Telecom,
Inc. and by nationwide average cost schedules for its subsidiaries, Western
Telephone Company and Peoples Telephone Company. Access revenues for New Ulm
Telecom, Inc. include estimates which management believes are reasonable,
pending finalization of cost studies. Local and intrastate access revenues are
based on tariffs filed with the state regulatory commissions.
INCOME TAXES AND INVESTMENT TAX CREDITS - The provision for income taxes
consists of an amount for taxes currently payable and a provision for tax
consequences deferred to future periods. Deferred income taxes are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. The major temporary difference that resulted in the
net deferred tax liability is depreciation, which for tax purposes is determined
based on accelerated methods and shorter lives. For financial statement
purposes, deferred investment tax credits and excess deferred income taxes
relating to depreciation of regulated assets are being amortized as a reduction
of the provision for income taxes over the estimated useful or remaining lives
of the related property, plant and equipment.
BASIC NET INCOME PER COMMON SHARE - Basic net income per common share is based
on the weighted average number of shares outstanding of 1,732,455 shares during
each of the three years presented.
RECLASSIFICATIONS - Certain amounts in the 1996 and 1995 financial statements
have been reclassified to conform with the 1997 presentation. These
reclassifications had no effect on net income for either period.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for which it is practicable to estimate that
value:
CERTIFICATES OF DEPOSIT: The carrying amount approximates fair value because of
the short maturity of those instruments.
LONG-TERM INVESTMENTS: It was not practicable to estimate a fair value for
common stock investments in companies carried on the cost basis due to a lack of
quoted market price. The Company believes the original cost is not impaired at
December 31, 1997.
LONG-TERM DEBT: The fair value of the Company's long term debt is estimated
based on the discounted value of the future cash flows expected to be paid using
current rates of borrowing for similar types of debt. Fair value of the debt
approximates carrying value.
NOTE 3 - CELLULAR INVESTMENTS
The cellular partnership investments consisted of investments in four rural
service areas (RSAs) which were consolidated into one entity (Midwest Wireless
Communications L.L.C.) on July 1, 1996. This entity provides cellular phone
service to southern Minnesota. The Company's ownership in Midwest Wireless
Communications L.L.C. is 7.7%. At December 31, 1997, the Company's total
investment was $3,085,399 including cumulative earnings of $2,368,583 less
distributions of $980,863. The Company believes that it has the ability to
significantly influence the operating and financial policies of this
corporation.
The difference between the carrying amount of the equity method investment and
the underlying equity in its net assets is $765,214 as of December 31, 1997, net
of accumulated amortization of $19,621. This amount is being amortized over 40
years. Amortization of $19,621 was included in cellular investment income in
1997.
Following is summarized financial information for this corporation:
YEAR ENDED Six Months Ended
DECEMBER 31, 1997 December 31, 1996
----------------- -----------------
Current Assets $ 13,622,176 $ 6,211,038
Non-current Assets 39,729,609 35,243,820
Current Liabilities 8,403,886 4,299,058
Non-current Liabilities 15,344,657 17,393,410
Members' Equity 29,603,242 19,762,390
Revenues 40,284,059 17,982,165
Expenses 26,660,623 13,970,615
Net Income 13,623,436 4,011,550
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - SAVINGS PLAN
The Company has a 401(k) Employee Savings Plan in effect for employees who meet
certain age and service requirements. The Company makes contributions of 50% of
the employee's contribution up to 6% of compensation. In 1997, 1996, and 1995,
the Company also made an additional discretionary contribution of 4% of the
covered employees' compensation in addition to the matching amount. The
Company's total contribution to the 401(k) plan was $93,302 in 1997, $89,507 in
1996, and $88,092 in 1995.
NOTE 5 - LINE OF CREDIT
The Company has a revolving short-term line of credit of $1,640,000 at 1 1/2%
over the bank prime rate with the Rural Telephone Finance Cooperative. No
amounts are outstanding at December 31, 1997 under this line of credit.
NOTE 6 - LONG-TERM DEBT
Long-term debt is as follows:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Unsecured note payable by New Ulm Telecom, Inc.
to Phoenix Home Life Mutual Insurance Company
in quarterly installments of $65,000 plus 6.45%
interest through December 1, 2008. $ 2,860,000 $ 3,120,000
Unsecured note payable by Western Telephone Company,
a wholly owned subsidiary, to Phoenix Home Life Mutual
Insurance Company in quarterly installments of $18,333
plus 6.45% interest through December 1, 2008. The payment
of this note is guaranteed by New Ulm Telecom, Inc. 806,665 880,000
Unsecured note payable by Peoples Telephone Company,
a wholly owned subsidiary, to Phoenix Home Life Mutual
Insurance Company in quarterly installments of $8,333
plus 6.45% interest through December 1, 2008. The payment
of this note is guaranteed by New Ulm Telecom, Inc. 366,667 400,000
----------- -----------
Total 4,033,332 4,400,000
Less Amount Due Within One Year 366,666 366,666
----------- -----------
Long-Term Debt $ 3,666,666 $ 4,033,334
=========== ===========
</TABLE>
Principal payments required during the next five years are $366,666 annually.
Cash payments for interest were $276,718 in 1997, $300,290 in 1996, and $323,745
in 1995.
The debt agreements contain covenants relating to maintenance of working
capital, additional borrowings, leases, and payment of cash dividends. At
December 31, 1997, approximately $1,066,000 of consolidated retained earnings
were available for dividends under these covenants.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 7 - INCOME TAXES AND INVESTMENT TAX CREDITS
Income tax expense consists of the following:
1997 1996 1995
----------- ----------- -----------
Taxes Currently Payable:
Federal $ 1,478,402 $ 1,239,127 $ 1,095,146
State 488,446 412,402 355,935
Deferred Income Taxes 28,208 (30,511) 84,971
Amortization of Investment Tax Credits (18,836) (34,474) (44,947)
----------- ----------- -----------
Income Tax Expense $ 1,976,220 $ 1,586,544 $ 1,491,105
=========== =========== ===========
The differences between the statutory federal tax rate and the effective tax
rate were as follows:
1997 1996 1995
---- ---- ----
Statutory Tax Rate 35.0% 35.0% 35.0%
Effect of:
Surtax Exemption (1.0) (1.0) (1.0)
State Income Taxes, Net of
Federal Tax Benefit 6.7 6.7 6.7
Amortization of Investment Tax Credits (.4) (.9) (1.2)
Other 1.0 -- .3
---- ---- ----
Effective Tax Rate 41.3% 39.8% 39.8%
==== ==== ====
The components of deferred income taxes are as follows:
1997 1996
---------- ----------
Deferred Tax Liabilities:
Depreciation $1,448,315 $1,408,139
Other 19,172 31,140
---------- ----------
Total $1,467,487 $1,439,279
========== ==========
Cash payments for income taxes were $1,942,500 in 1997, $1,639,398 in 1996, and
$1,477,000 in 1995.
NOTE 8 - COMMON STOCK
On March 4, 1996, the Company's Board of Directors declared a three-for-one
stock split, effected in the form of a stock dividend, to stockholders of record
on March 4, 1996, payable on April 1, 1996. An amount equal to the par value of
the additional 1,154,970 shares issued has been transferred from retained
earnings to the common stock account. Earnings and dividends per common share
have been restated to reflect the stock split.
<PAGE>
PART II
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information for Part III, Items 10, 11, 12, and 13, are hereby incorporated
by reference to the Company's Proxy Statement, which will be filed with the
Commission within 120 days after the close of the fiscal year ending December
31, 1997.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Page Numbers
------------
Independent Auditors' Report 11
Consolidated Statement of Income for the Three
Years Ended December 31, 1997, 1996 and 1995 12
Consolidated Balance Sheet at December 31, 1997
and 1996 13-14
Consolidated Statement of Stockholders' Equity
for the Three Years Ended December 31, 1997,
1996 and 1995 15
Consolidated Statement of Cash Flows for the
Three Years Ended December 31, 1997,
1996 and 1995 16
Notes to Consolidated Financial Statements 17-21
(a)2. Financial Statement schedules:
Separate financial statements of Midwest Wireless
Communications L.L.C, a 50 percent or less owned equity
method investment, are included as part of this report
because this entity constitutes a "significant subsidiary"
pursuant to the provisions of Regulation S-X, Article 3-09. 25-37
Other schedules are omitted because they are not required
or are not applicable, or the required information is
shown in the financial statements or notes thereto.
(a)3. Exhibits
Exhibits required to be filed by Item 601 of Regulation
S-K are included as Exhibits to this report as follows:
3(i) Restated Articles of Incorporation (incorporated by
reference to the New Ulm Telecom, Inc. Form 10-K
dated December 31, 1986).
3(ii) Restated By-Laws (incorporated by reference to the
New Ulm Telecom, Inc. Form 10-K dated December 31,
1986).
4 The registrant, by signing this Report, agrees to
furnish the Securities and Exchange Commission, upon
its request, a copy of any instrument which defines
the rights of holders of long-term debt of the
registrant and all of its subsidiaries for which
consolidated financial statements are required to be
filed, and which authorizes a total amount of
securities not in excess of 10% of the total assets
of the registrant and its subsidiaries on a
consolidated basis.
21 Subsidiaries of the Registrant are included as an
Exhibit to this report on page 38.
27 Financial data schedule
b) Reports on Form 8-K
None
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
NEW ULM TELECOM, INC.
(Registrant)
Date March 30, 1998 By: /s/ James Jensen
----------------------------------------
James Jensen, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the date indicated.
Date March 30, 1998 By: /s/ R. T. Rodenberg
----------------------------------------
R. T. Rodenberg, Chairman of the Board
and Director
/s/ Bill Otis
----------------------------------------
Bill Otis, Executive Vice-President/
Chief Operating Officer
/s/ Mark Retzlaff
----------------------------------------
Mark Retzlaff, Vice-President
and Director
/s/ Gary Nelson
----------------------------------------
Gary Nelson, Secretary and Director
/s/ Lavern Biebl
----------------------------------------
Lavern Biebl, Treasurer and Director
/s/ Chris Hopp
----------------------------------------
Chris Hopp, Controller
/s/ Rosemary Dittrich
----------------------------------------
Rosemary Dittrich, Director
/s/ Linus Grathwohl
----------------------------------------
Linus Grathwohl, Director
/s/ Perry Meyer
----------------------------------------
Perry Meyer, Director
/s/ Robert Ranweiler
----------------------------------------
Robert Ranweiler, Director
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
REPORT ON AUDIT OF FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND
FOR THE PERIOD FROM JULY 1, 1996 (DATE OF INCEPTION)
TO DECEMBER 31, 1996
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Managers
Midwest Wireless Communications L.L.C.
d/b/a Cellular 2000:
We have audited the accompanying statements of financial position of Midwest
Wireless Communications L.L.C. d/b/a Cellular 2000 as of December 31, 1997 and
1996, and the related statements of operations, changes in members' equity and
cash flows for the year ended December 31, 1997, and the period from July 1,
1996 (date of inception) to December 31, 1996. These financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Midwest Wireless Communications
L.L.C. d/b/a Cellular 2000 as of December 31, 1997 and 1996, and the results of
its operations and its cash flows for the year ended December 31, 1997, and the
period from July 1, 1996 (date of inception) to December 31, 1996, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Minneapolis, Minnesota
February 27, 1998
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
STATEMENTS OF FINANCIAL POSITION
AS OF DECEMBER 31, 1997 AND 1996
<TABLE>
<CAPTION>
ASSETS 1997 1996
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,063,280 $ 1,318,098
Marketable securities 5,911,871 --
Accounts receivable, less allowance for doubtful
accounts of $360,122 and $139,996 in 1997 and
1996, respectively 4,548,991 4,139,568
Inventories 770,617 425,266
Other 327,417 328,106
----------- -----------
Total current assets 13,622,176 6,211,038
Property, cellular plant and equipment, net 21,032,370 15,788,685
Investment in Switch 2000 1,466,820 1,949,279
FCC license, net 16,832,224 17,281,088
Other 398,195 224,768
----------- -----------
Total assets $53,351,785 $41,454,858
=========== ===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Current portion of long-term debt 2,767,000 1,569,000
Accounts payable 2,106,461 521,069
Accrued commissions 649,891 821,311
Accrued liabilities 2,880,534 1,387,678
----------- -----------
Total current liabilities 8,403,886 4,299,058
Other liabilities 195,247 --
Long-term debt 15,149,410 17,393,410
----------- -----------
Total liabilities 23,748,543 21,692,468
Members' equity 29,603,242 19,762,390
----------- -----------
Total liabilities and members' equity $53,351,785 $41,454,858
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM JULY 1, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
1997 1996
(12 MONTHS) (SIX MONTHS)
Operating revenues:
Retail service $ 27,785,727 $ 11,043,039
Roamer service 10,374,827 5,824,188
Equipment sales 2,123,505 1,079,355
------------ ------------
40,284,059 17,946,582
------------ ------------
Operating expenses:
Operations and maintenance 8,464,911 4,259,858
Cost of equipment sold 2,988,131 1,598,400
Depreciation 3,068,687 1,245,068
Amortization 448,864 210,861
Selling, general and administrative 9,517,110 4,949,103
Management fees -- 702,709
Home roamer costs 804,709 438,582
------------ ------------
25,292,412 13,404,581
------------ ------------
Operating income 14,991,647 4,542,001
------------ ------------
Other income (expense):
Equity (loss) earnings on Switch 2000 (482,459) 35,583
Interest expense (1,106,380) (566,034)
Interest income 220,628 --
------------ ------------
(1,368,211) (530,451)
------------ ------------
Net income $ 13,623,436 $ 4,011,550
============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
STATEMENTS OF CHANGES IN MEMBERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM JULY 1, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
TOTAL
CAPITAL ACCUMULATED MEMBERS'
CONTRIBUTIONS INCOME EQUITY
Balance, June 30, 1996 $ 15,750,840 $ -- $ 15,750,840
Net income -- 4,011,550 4,011,550
------------ ------------ ------------
Balance, December 31, 1996 15,750,840 4,011,550 19,762,390
Redemption of units (2,646) (24,468) (27,114)
Distributions to members -- (3,755,470) (3,755,470)
Net income -- 13,623,436 13,623,436
------------ ------------ ------------
Balance, December 31, 1997 $ 15,748,194 $ 13,855,048 $ 29,603,242
============ ============ ============
The accompanying notes are an integral part of the financial statements.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997 AND THE PERIOD FROM JULY 1, 1996 (DATE OF
INCEPTION) TO DECEMBER 31, 1996
<TABLE>
<CAPTION>
1997 1996
(12 MONTHS) (SIX MONTHS)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 13,623,436 $ 4,011,550
Adjustments to reconcile net income to net cash
provided by operating activities:
Provision for bad debts 769,330 364,245
Depreciation 3,068,687 1,245,068
Amortization 448,864 210,861
Equity loss (earnings) on investments in Switch 2000 482,459 (35,583)
Accretion of discount (106,506) --
Changes in assets and liabilities:
Accounts receivable (1,178,753) (4,384,193)
Inventories (345,351) (425,266)
Accounts payable 1,166,996 324,740
Accrued liabilities 1,321,436 1,893,576
Other 195,936 (106,518)
------------ ------------
Net cash provided by operating activities 19,446,534 3,098,480
------------ ------------
Cash flows from investing activities:
Payments for property, cellular plant and equipment (7,893,976) (2,466,775)
Purchases of marketable securities (10,805,365) --
Proceeds received upon maturity of marketable securities 5,000,000 --
Other (173,427) (97,536)
------------ ------------
Net cash used in investing activities (13,872,768) (2,564,311)
------------ ------------
Cash flows from financing activities:
Payments on long-term debt (1,046,000) --
Distributions to members (3,755,470) --
Redemption of units (27,114) --
------------ ------------
Net cash used in financing activities (4,828,584) --
------------ ------------
Net change in cash and cash equivalents 745,182 534,169
Cash and cash equivalents, beginning of period 1,318,098 783,929
------------ ------------
Cash and cash equivalents, end of period $ 2,063,280 $ 1,318,098
============ ============
Supplemental disclosure:
Cash paid during the year for interest $ 1,116,505 $ 328,520
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION:
Midwest Wireless Communications L.L.C. (the Company) is a Delaware
limited liability company organized to provide cellular communications
services in certain service areas within the State of Minnesota. The
latest date the Company may be dissolved is December 31, 2034.
Effective June 29, 1996, pursuant to the Consolidation Agreement dated
May 16, 1995, the following entities combined and contributed
substantially all their assets and liabilities to the Company in exchange
for all 1,000,000 ownership units of the Company: Cellular Seven
Partnership, Hiawathaland Cellular Limited Partnership, Marshall Cellular
Partnership, Minnesota RSA #9 Limited Partnership and Minnesota RSA #10
Limited Partnership (the Partnerships). Units were assigned to the
Partnerships based upon their pro rata share of fair market values of the
assets contributed as determined by an appraisal performed as of January
1, 1995. This transaction was accounted for using the pooling of
interests method of accounting, and as such, the Company recorded the
assets and liabilities contributed by the Partnerships at carrying value.
Effective June 28, 1996, the Company acquired all the operating assets of
Rochester Cellular Telephone Company, L.P. (RCTC) in exchange for cash
totaling $18,846,000. This transaction was accounted for using the
purchase method of accounting, and as such, the assets acquired,
principally cellular plant and equipment and a FCC license, were recorded
at fair value.
ESTIMATES:
The Company prepares its financial statements in conformity with
generally accepted accounting principles, which require management to
make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses during the period presented.
They also affect the disclosure of contingencies. Actual results could
differ from those estimates.
CASH AND CASH EQUIVALENTS:
For the purpose of the statements of cash flows, the Company considers
all investments purchased with original maturities of three months or
less to be cash equivalents.
MARKETABLE SECURITIES:
Marketable securities which the Company has the positive intent and
ability to hold to maturity are stated at cost adjusted for accretion of
discounts computed under a method which approximates the interest method.
The marketable securities have maturity dates ranging from January 1998
to August 1998. The market value approximated amortized cost at December
31, 1997. Unrealized gains and losses were not significant.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
CELLULAR TELEPHONE INVENTORIES:
Inventories consist primarily of cellular phones and accessories held for
resale with cost determined using the specific identification method.
Consistent with industry practice, losses on sales of cellular phones are
recognized in the period in which sales are made as a cost of acquiring
subscribers.
PROPERTY, CELLULAR PLANT AND EQUIPMENT:
Property, cellular plant and equipment is stated at its original cost.
Depreciation is provided on a straight-line basis over the estimated
useful lives of the cellular plant and equipment, which range from three
to fifteen years. Property, cellular plant and equipment consists of the
following:
1997 1996
Land $ 1,212,608 $ 1,188,840
Plant in service 29,184,958 20,915,824
Plant under construction 1,273,872 1,254,402
-------------- -------------
31,671,438 23,359,066
Less accumulated depreciation (10,639,068) (7,570,381)
-------------- -------------
$ 21,032,370 $ 15,788,685
============== =============
At December 31, 1997 and 1996, accounts payable includes $418,396 and
$53,276, respectively, related to the purchase of property, cellular
plant and equipment. The Company capitalized interest in the amount of
$151,361 and $81,396 for the year ended December 31, 1997, and the
six-month period ended December 31, 1996, respectively.
INCOME TAXES:
No provision for income taxes has been recorded since all income, losses
and tax credits are allocated to the members for inclusion in their
respective income tax returns.
ADVERTISING:
Advertising costs are expensed as incurred. Total advertising expenses
were $1,049,000 and $759,000 for the year ended December 31, 1997, and
the six-month period ended December 31, 1996, respectively.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
FEDERAL COMMUNICATIONS COMMISSION (FCC) LICENSE:
The Company acquired a FCC license to provide cellular service in FCC
market NO. 288B in conjunction with the purchase of the Rochester service
area. This license was recorded at fair market value and is being
amortized on a straight-line basis over 39 years.
RECLASSIFICATIONS:
Certain reclassifications have been made to 1996 amounts to conform to
the 1997 presentation. These reclassifications had no effect on net
income or members' equity.
2. INVESTMENT IN SWITCH 2000:
Switch 2000 L.L.C. (Switch 2000) is an entity that provides switching and
interconnection services to the Company. As a result of the combination
described in Note 1, the Company gained ownership and voting interests in
Switch 2000 of 54.93% and 45.55%, respectively. Accordingly, this
investment is accounted for using the equity method of accounting.
Effective with the date of combination, the Company retroactively
recorded its share of undistributed earnings of Switch 2000.
Effective June 30, 1997, Switch 2000 and the Company entered into a
Management Agreement which expired on December 31, 1997. Under the terms
of the Management Agreement, Switch 2000 retained the services of the
Company to manage the operations of Switch 2000, including administration
of transport and switching services and other general business
operations. Switch 2000 is required to pay a management fee equal to the
total costs incurred by the Company related to the management of Switch
2000. Total management fees paid to the Company in 1997 were $119,000.
The Company had management fees due from Switch 2000 of $18,000 as of
December 31, 1997.
Switch 2000, in turn, allocates management fees and certain other
expenses, primarily network costs, to its owners, which include the
Company. Amounts billed to the Company totaled approximately $2,879,000
and $2,101,000 for the year ended December 31, 1997, and the six-month
period ended December 31, 1996, respectively. The Company had an amount
due to Switch 2000 of $227,000 and $78,000 at December 31, 1997 and 1996,
respectively.
The change in the investment relates to the Company's proportionate
ownership share of Switch 2000's net (loss) earnings. Switch 2000 had
assets of $3,376,866 and $4,519,969 and liabilities of $708,893 and
$971,309 at December 31, 1997 and 1996, respectively.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
3. MEMBERS' CAPITAL:
Members' capital includes capital contributions made by the members and
the accumulated income resulting from operations. Company income or loss
is allocated to the individual members based upon their ownership
percentage, as defined in the Limited Liability Company Agreement (the
Agreement). Pursuant to the Agreement, members are not obligated for the
debts and obligations of the Company, including accumulated losses in
excess of capital contributions.
Each member is entitled to one vote for each unit owned. Certain
restrictions on voting rights exist when units are sold to an acquiring
person as defined in the Agreement.
4. DEBT:
Long-term debt at December 31, 1997 and 1996 consists of a term note with
principal and interest payable quarterly beginning June 30, 1997, with
final maturity on March 31, 2004. The note bears interest at a rate equal
to the bank's 30 day cost of funds plus 1.25%. This rate is reset on the
first business day of each month and was 6.88% and 6.61% at December 31,
1997 and 1996, respectively. The Company has the option to fix the
interest rate for periods of up to seven years at rates set forth in the
Term Loan Agreement.
The Term Loan Agreement contains covenants which restrict distributions
to members and require the Company to maintain certain minimum levels of
equity, as well as debt to operating cash flow and debt service ratios.
Substantially all assets of the Company are pledged as collateral under
the Agreement.
Maturities of long-term debt are as follows:
1998 $ 2,767,000
1999 2,428,000
2000 2,628,000
2001 2,844,000
2002 3,080,000
Thereafter 4,169,410
-------------
$ 17,916,410
=============
The Agreement also provides for a $10,000,000 line of credit expiring May
31, 1998, which is renewable at the option of the bank. This line of
credit bears interest at the varying rates as defined in the Agreement.
The Company had no amounts outstanding under this line of credit as of
December 31, 1997 and 1996.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
5. COMMITMENTS:
Future minimum rental payments required under operating leases,
principally for real estate related to tower sites, that have initial or
remaining noncancellable lease terms in excess of one year as of December
31, 1997, are as follows:
1998 $ 224,219
1999 200,069
2000 195,070
2001 168,627
2002 121,111
Thereafter 55,585
----------
$ 964,681
==========
Rental expense was $424,554 and $161,093 for the year ended December 31,
1997, and the six-month period ended December 31, 1996, respectively.
The Company has entered into an agreement with a third party to purchase
certain equipment in the amounts of $5,027,813 and $1,270,000 during 1998
and 1999, respectively.
6. CELL SITE SHARING AGREEMENTS:
Hiawathaland Limited Partnership, one of the combining entities described
in Note 1, entered into an agreement in 1993 with a partnership located
in Wisconsin, to jointly construct and operate common cellular base
station facilities (Cell Sites) in Nelson, Wisconsin and Red Wing,
Minnesota. Under the agreement, both parties agreed to share the costs to
construct the Cell Sites, selected ongoing costs of operation and roamer
revenues attributable to the Cell Sites. The term of the agreement is for
a period of five years unless terminated by mutual agreement of the
parties. Additionally, the agreement automatically renews for successive
five-year terms unless either party gives prior notice of non-renewal.
The Company has included its proportionate share of the assets,
liabilities, revenues and expenses of the Cell Sites in these financial
statements. As of December 31, 1997 and 1996, these assets were
approximately $766,000 and $588,000 and liabilities were approximately
$2,700 and $6,000, respectively. For the year ended December 31, 1997,
and the six-month period ended December 31, 1996, these operating
revenues were approximately $521,000 and $279,000 and expenses were
$165,000 and $77,000, respectively.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
7. MANAGEMENT OF THE COMPANY:
Under an agreement effective October 25, 1995, the Company contracted
with Pacific Telecom Cellular, Inc. (the Manager), formerly North-West
Cellular, Inc., to construct, operate and manage the cellular system. All
services were provided at cost, including reasonable and necessary
overhead expenses of the Manager.
The management agreement provides for payment of a monthly management fee
equal to 3.75% of adjusted income (as defined in the agreement) plus
3.25% of adjusted retail revenue. The agreement expired on December 31,
1996, and was not renewed. During 1997, the Company performed the
services formerly provided by the Manager. In 1996, the Manager also
engaged other parties, including its affiliates, to provide goods or
services directly to the Company. The amount of goods and services
provided by the Manager and its affiliates totaled approximately
$4,080,000 for the six-month period ended December 31, 1996. Accounts
payable includes approximately $248,000 due to the Manager and its
affiliates at December 31, 1996. At December 31, 1996, the Manager had
collected $468,000 of roamer receivables subsequently remitted to the
Company.
8. CONCENTRATION OF CREDIT RISK:
The Company provides cellular service and sells cellular telephones to a
diversified group of consumers within a concentrated geographical area.
The Company performs credit evaluations of its customers and requires a
deposit when deemed necessary. Receivables are generally due within 30
days. Credit losses related to customers have been within management's
expectations.
9. EMPLOYEE BENEFITS:
Effective September 1, 1996, the Company established the Midwest Wireless
Communications L.L.C. 401(k) Profit Sharing Plan and Trust (the 401(k)
Plan) for all employees who meet certain service and age requirements.
The 401(k) Plan is comprised of a matching contribution component and a
profit sharing component. Participating employees may contribute a
maximum of 15% of their annual compensation and the Company will match
between 33.33% and 75% of the participant contribution. An eligible
employee may begin participating in the plan on the first day of the plan
fiscal quarter after date of employment. Company contributions are 100%
vested after one year of participation. Employer contributions to this
component of the plan were $91,968 and $5,867 for the year ended December
31, 1997, and the six-month period ended December 31, 1996, respectively.
The profit sharing component of the plan allows for an annual
discretionary contribution to the tax deferred accounts of all eligible
employees. Profit sharing contributions are 100% vested after five years
of employment. Profit sharing contribution expenses were $118,411 and $0
for the year ended December 31, 1997, and the six-month period ended
December 31, 1996, respectively.
<PAGE>
MIDWEST WIRELESS COMMUNICATIONS L.L.C.
d/b/a CELLULAR 2000
NOTES TO FINANCIAL STATEMENTS, CONTINUED
9. EMPLOYEE BENEFITS, CONTINUED:
Effective January 1, 1997, the Company established the Midwest Wireless
Communications L.L.C. Appreciation Rights Plan (the Plan) for certain key
employees. The Plan is designed to create two classes of appreciation
rights, Class A and Class B, which become fully vested three years and
five years after the first day of the year the rights are granted,
respectively. Participants in the Plan are eligible to receive awards
based on the change in members' equity from the date of grant through the
end of the vesting period. The Board of Managers granted both Class A and
Class B appreciation rights in 1997. Under the terms of the Plan, no
additional Class B appreciation rights will be granted, and additional
Class A appreciation rights will be granted at the discretion of the
Board of Managers. During 1997, the Company recognized $195,247 in
compensation expense related to the Plan.
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
(1) Western Telephone Company
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(2) Peoples Telephone Company
100% - Owned Subsidiary
Incorporated in the State of Iowa
(3) New Ulm Phonery, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(4) New Ulm Cellular #7, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(5) New Ulm Cellular #8, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(6) New Ulm Cellular #9, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(7) New Ulm Cellular #10, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
(8) New Ulm Long Distance, Inc.
100% - Owned Subsidiary
Incorporated in the State of Minnesota
The financial statements of all such subsidiaries are included on the
consolidated financial statements of New Ulm Telecom, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 906,716
<SECURITIES> 0
<RECEIVABLES> 933,109
<ALLOWANCES> 31,000
<INVENTORY> 488,770
<CURRENT-ASSETS> 4,411,510
<PP&E> 27,264,023
<DEPRECIATION> 15,330,362
<TOTAL-ASSETS> 23,978,695
<CURRENT-LIABILITIES> 1,325,949
<BONDS> 3,666,666
0
0
<COMMON> 8,662,275
<OTHER-SE> 8,821,223
<TOTAL-LIABILITY-AND-EQUITY> 23,978,695
<SALES> 0
<TOTAL-REVENUES> 9,666,727
<CGS> 0
<TOTAL-COSTS> 5,812,800
<OTHER-EXPENSES> (1,210,296)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 274,748
<INCOME-PRETAX> 4,789,475
<INCOME-TAX> 1,976,220
<INCOME-CONTINUING> 2,813,225
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,813,255
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
</TABLE>
