UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
[ ] 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
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(Address of Principal executive offices)
(507) 354-4111
---------------------------------
(Registrant's telephone number)
Check whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes __X__ No ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: 1,732,455 .
<PAGE>
NEW ULM TELECOM, INC.
CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets 3-4
Unaudited Consolidated Statements of
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 9-10
PART II. OTHER INFORMATION 10-11
<PAGE>
PART I. FINANCIAL INFORMATION
NEW ULM TELECOM, INC. AND SUBSIDIARIES
ITEM I. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 505,367 $ 906,716
Certificates of Deposit 2,302,486 2,000,000
Receivables, Net of Allowance for
Doubtful Accounts of $26,979 and $31,000 1,297,284 933,109
Inventories 560,999 488,770
Prepaid Expenses 64,302 82,915
------------- -------------
Total Current Assets 4,730,438 4,411,510
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INVESTMENTS & OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 3,617,121 3,674,010
Notes Receivable, Less Current Portion
of $5,403 and $4,745 77,722 79,965
Cellular Investments 3,888,739 3,547,686
Other 331,916 331,863
------------- -------------
Total Investments and Other Assets 7,915,498 7,633,524
------------- -------------
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant 25,517,094 25,039,400
Other Property & Equipment 1,518,564 1,462,575
Cable Television Plant 762,048 762,048
------------- -------------
Total 27,797,706 27,264,023
Less Accumulated Depreciation 16,249,453 15,330,362
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Net Property, Plant & Equipment 11,548,253 11,933,661
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TOTAL ASSETS $ 24,194,189 $ 23,978,695
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
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<S> <C> <C>
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 366,666 $ 366,666
Accounts Payable 234,445 622,110
Other Accrued Taxes 66,487 62,198
Other Accrued Liabilities 238,504 274,975
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Total Current Liabilities 906,102 1,325,949
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LONG-TERM DEBT, LESS CURRENT PORTION 3,483,334 3,666,666
------------- -------------
DEFERRED CREDITS:
Income Taxes 1,467,487 1,467,487
Investment Tax Credits 29,090 35,095
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Total Deferred Credits 1,496,577 1,502,582
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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 9,645,901 8,821,223
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Total Stockholders' Equity 18,308,176 17,483,498
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TOTAL LIABILITIES AND
STOCKHOLDER'S EQUITY $ 24,194,189 $ 23,978,695
============= =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
JUNE 30, JUNE 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Local Network $ 561,465 $ 530,493 $ 1,113,133 $ 1,058,910
Network Access 1,287,604 1,169,081 2,588,016 2,511,836
Billing and Collection 126,694 135,120 267,771 280,856
Miscellaneous 115,739 89,330 211,571 195,163
Nonregulated 506,901 457,494 1,003,012 826,101
------------ ------------ ------------ ------------
Total Operating Revenue 2,598,403 2,381,518 5,183,503 4,872,866
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Plant Operations 326,750 273,825 585,244 529,535
Depreciation 458,268 440,315 916,535 880,629
Amortization 28,444 38,253 56,888 66,697
Customer 130,000 136,704 265,265 281,559
General and Administrative 352,720 294,386 671,529 582,600
Other Operating Expenses 307,450 290,690 625,669 523,651
------------ ------------ ------------ ------------
Total Operating Expenses 1,603,632 1,474,173 3,121,130 2,864,671
------------ ------------ ------------ ------------
OPERATING INCOME 994,771 907,345 2,062,373 2,008,195
------------ ------------ ------------ ------------
OTHER (EXPENSES) INCOME:
Interest Expense (63,382) (69,204) (128,080) (140,210)
Interest Income 41,944 36,726 87,275 79,670
Cellular Partnership Income 268,549 156,187 563,644 289,687
------------ ------------ ------------ ------------
Total Other Income, Net 247,111 123,709 522,839 229,147
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES 1,241,882 1,031,054 2,585,212 2,237,342
INCOME TAXES 513,241 427,396 1,067,552 923,382
------------ ------------ ------------ ------------
NET INCOME $ 728,641 $ 603,658 $ 1,517,660 $ 1,313,960
============ ============ ============ ============
NET INCOME PER SHARE - NOTE 2 $ 0.42 $ 0.35 $ 0.88 $ 0.76
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK RETAINED
SHARES AMOUNT EARNINGS
---------- ---------- ----------
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
Net Income 1,517,660
Dividends (692,982)
---------- ---------- ----------
BALANCE on June 30, 1998 1,732,455 $8,662,275 $9,645,901
========== ========== ==========
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,517,660 $ 1,313,960
Adjustments to Reconcile Net Income to Net
Net Cash Provided by Operating Activities:
Depreciation and Amortization 973,423 947,326
Cellular Partnerships Income (563,644) (289,687)
(Increase) Decrease in:
Receivables (363,517) (237,637)
Inventories (72,229) (152,148)
Prepaid Expenses 18,613 25,049
Increase (Decrease) in:
Accounts Payable (387,665) 98,069
Other Accrued Taxes 4,289 199
Other Accrued Liabilities (36,471) (24,160)
Deferred Investment Tax Credits (6,005) (9,418)
----------- -----------
Net Cash Provided by Operating Activities 1,084,454 1,671,553
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant & Equipment, Net (531,126) (485,261)
Change in Notes Receivable 1,585 (543)
Cellular Investments 222,591 62,511
Change in Temporary Cash Investments (302,486) 300,000
Other, Net (53) (121,162)
----------- -----------
Net Cash Used in Investing Activities (609,489) (244,455)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt (183,332) (183,334)
Dividends Paid (692,982) (1,056,798)
----------- -----------
Net Cash Used in Financing Activities (876,314) (1,240,132)
----------- -----------
NET INCREASE (DECREASE) IN CASH (401,349) 186,966
CASH
AT BEGINNING OF PERIOD 906,716 617,870
----------- -----------
CASH
AT END OF PERIOD $ 505,367 $ 804,836
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED FINANCIAL STATEMENTS
NOTE 1 - CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting of only normal recurring items) necessary to
present fairly the financial position as of JUNE 30, 1998 and December 31, 1997
and the results of operations and changes in cash flows for the six months ended
JUNE 30, 1998 and 1997.
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, 1997 Annual Report to Shareholders. The results of
operations for the period ending June 30, 1998 are not necessarily indicative of
the operating results of the entire year.
NOTE 2 - NET INCOME PER COMMON STOCK
Net income per common share for 1998 and 1997 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: 1998 1997
---------- ----------
Interest $ 129,066 $ 141,196
Income taxes 1,194,000 1,081,500
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1997
The increase in total operating revenues was $310,637 or 6.4%. Local network saw
an increase of 5.1% due to an increase in Centrex service. Network Access
increased 3.0%, which can be attributed to an increase in minutes of use billed
to interexchange carriers. Nonregulated revenue continues to show strong growth.
These revenues grew 21.4% over the revenues recorded for the same period in
1997. The increase of $176,911 is the result of our success with cable
television, Internet services, increased sales of customer premise equipment and
increased market share of our long distance service, which was introduced during
the third quarter of 1997.
Total operating expenses increased by $256,459 or 9.0%. General and
Administrative expenses were responsible for 34.7% 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. Other operating expenses were responsible for 39.8% of
the increase in operating expenses. This increase is associated with the
increased marketing efforts of our Nonregulated services and increase in cost of
goods sold for customer premise equipment.
Interest expense decreased by $12,130 due to a decrease in long-term debt
outstanding. Interest income increased by $7,605 reflecting larger amounts of
funds available for investment. The investment in Midwest Wireless continues to
be a strong performer, which is reflected by a 94.6% or $273,957 increase.
Net income increased by $203,700 or 15.5%.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THE THREE MONTHS
ENDED JUNE 30, 1997
The increase in total operating revenues was $216,885 or 9.1%. Local network saw
an increase of 5.8% due to an increase in Centrex service. Network Access
increased 10.1%, which can be attributed to an increase in minutes of use billed
to interexchange carriers. Nonregulated revenue showed a 10.8% growth in the
second quarter of 1998. This increase of $49,407 is attributed to our success
with cable television, Internet services, increased sales of customer premise
equipment and increased market share of our long distance service, which was
introduced in the third quarter of 1997.
Total operating expenses increased by $129,459 or 8.8%. Plant Operations
increased $52,975 or 19%, which can be attributed to increased labor and
materials due to storms and maintenance of existing facilities. General and
Administrative expenses were responsible for 45.1% 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. Other operating expenses were responsible for 13.0% of
the increase in operating expenses. This increase is associated with the
increased marketing efforts of our Nonregulated services and increase in cost of
goods sold for customer premise equipment.
Interest expense decreased by $5,822 due to a decrease in long-term debt
outstanding. Interest income increased by $5,218 reflecting larger amounts of
funds available for investment. The investment in Midwest Wireless continues its
strong performance record, which is reflected by a 71.9% or $112,362 increase.
Net income increased by $124,983 or 20.7%.
<PAGE>
Liquidity and Capital Resources
The Company had a decrease in cash of $401,349 for the quarter resulting in a
balance of $505,367 as of June 30, 1998. Cash invested in Certificates of
Deposit at June 30, 1998 was $2,302,486, which is an increase of $302,486 over
the balance at December 31, 1997. Working Capital increased $738,775 from
December 31, 1997, which was $3,085,561. This increase can be attributed to a
decrease in accounts payable of $387,665 and an increase in receivables of
$364,175.
The Company is budgeting approximately $1,600,000 for 1998 plant additions. The
Company intends to use internal funds for all of the 1998 expenditures.
Management believes the Company will be able to generate sufficient cash
internally from operations to meet its operating needs and sustain its
historical dividend levels.
PART II. OTHER INFORMATION
NEW ULM TELECOM, INC. AND SUBSIDIARIES
ITEMS 1-3. Not applicable.
ITEM 4. Submission of matters to a vote of Security Holders
The annual meeting of shareholders of the registrant was held May 7, 1998 in New
Ulm, Minnesota. The total number of shares outstanding and entitled to vote at
the meeting was 1,732,455 of which 1,356,275 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
- -------- --- ------- -------
Lavern Biebl 1,349,412 1,463
James Jensen 1,365,612 1,463
Perry Meyer 1,349,772 1,103
The Board members continuing and whose terms expire at subsequent annual
meetings are as follows:
1999 Annual Meeting 2000 Annual Meeting
- ------------------- -------------------
Robert Ranweiler Rosemary Dittrich
Mark Retzlaff Linus Grathwohl
Richard Rodenberg Gary Nelson
The shareholders also approved the appointment of Olsen, Thielen & Co., Ltd. as
the auditors for 1999, by a vote of 1,352,882 for, 1,503 against and 1,890
abstained.
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
ITEM 5. Not applicable
ITEM 6. Exhibits and Reports on Form 8-K
There were no reports on Form 8-K for the Quarter ended June 30, 1998.
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: July 31, 1998 By /s/ James P. Jensen
------------------------------------
James P. Jensen, President
Dated: July 31, 1998 By /s/ Bill Otis
------------------------------------
Bill Otis, Executive Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 505,367
<SECURITIES> 2,302,486
<RECEIVABLES> 1,297,284
<ALLOWANCES> 26,979
<INVENTORY> 560,999
<CURRENT-ASSETS> 4,730,438
<PP&E> 27,797,706
<DEPRECIATION> 16,249,453
<TOTAL-ASSETS> 24,194,189
<CURRENT-LIABILITIES> 906,102
<BONDS> 3,483,334
0
0
<COMMON> 8,662,275
<OTHER-SE> 9,645,901
<TOTAL-LIABILITY-AND-EQUITY> 24,194,189
<SALES> 0
<TOTAL-REVENUES> 5,183,503
<CGS> 0
<TOTAL-COSTS> 3,121,130
<OTHER-EXPENSES> (650,919)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 128,080
<INCOME-PRETAX> 2,585,212
<INCOME-TAX> 1,067,552
<INCOME-CONTINUING> 1,517,660
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,517,660
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
