UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from _______________ to _______________.
Commission File Number 0-3024
New Ulm Telecom, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Minnesota 41-0440990
------------------------------ --------------------------
(State or jurisdiction of incorporation) (IRS Employer Identification Number)
400 2nd Street North, New Ulm, MN 56073-0697
---------------------------------------------------------
(Address of Principal executive offices)
(507) 354-4111
------------------------------------------
(Registrant's telephone number)
Indicate by checkmark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during
the past 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes _X_ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuer's
classes of Common stock, as of the latest practicable date: 1,732,455.
<PAGE>
NEW ULM TELECOM, INC.
CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets 3-4
Unaudited Consolidated State Income 5
Unaudited Consolidated Statements of Stockholders' Equity 6
Unaudited Consolidated Statements of Cash Flows 7
Notes to Unaudited Consolidated Financial Statements 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION 9-11
PART II. OTHER INFORMATION 12-13
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1999
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------- -----------
CURRENT ASSETS:
Cash $ 919,684 $ 2,551,066
Certificates of Deposit 1,200,000 900,000
Receivables, Net of Allowance for
Doubtful Accounts of $47,863 and $33,000 1,650,518 1,322,903
Inventories 374,538 354,027
Prepaid Expenses 59,069 95,435
----------- -----------
Total Current Assets 4,203,809 5,223,431
----------- -----------
INVESTMENTS & OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 3,474,901 3,560,233
Notes Receivable, Less Current Portion
of $4,304 and $4,997 781,532 783,448
Cellular Investments 5,100,149 4,507,078
Other 636,344 437,466
----------- -----------
Total Investments and Other Assets 9,992,926 9,288,225
----------- -----------
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant 27,746,747 26,261,325
Other Property & Equipment 1,716,818 1,568,153
Cable Television Plant 798,827 787,548
----------- -----------
Total 30,262,392 28,617,026
Less Accumulated Depreciation 18,477,015 17,085,234
----------- -----------
Net Property, Plant & Equipment 11,785,377 11,531,792
----------- -----------
TOTAL ASSETS $25,982,112 $26,043,448
=========== ===========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1999
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
SEPTEMBER 30, DECEMBER 31,
1999 1998
----------- -----------
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 366,666 $ 366,666
Accounts Payable 507,472 1,686,643
Other Accrued Taxes 46,007 54,514
Other Accrued Liabilities 258,697 224,398
----------- -----------
Total Current Liabilities 1,178,842 2,332,221
----------- -----------
LONG-TERM DEBT, LESS CURRENT PORTION 3,025,000 3,300,000
----------- -----------
DEFERRED CREDITS:
Income Taxes 1,519,148 1,519,148
Investment Tax Credits 18,412 23,088
----------- -----------
Total Deferred Credits 1,537,560 1,542,236
----------- -----------
STOCKHOLDERS' EQUITY:
Common Stock - $5 Par Value, 6,400,000 Shares
Authorized, 1,732,455 Shares Issued and
Outstanding 8,662,275 8,662,275
Retained Earnings 11,578,435 10,206,716
----------- -----------
Total Stockholders' Equity 20,240,710 18,868,991
----------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $25,982,112 $26,043,448
=========== ===========
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1999
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED FOR NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Local Network $ 646,085 $ 559,636 $ 1,939,782 $ 1,672,769
Network Access 1,429,004 1,348,749 4,245,950 3,936,765
Billing and Collection 115,920 124,022 357,318 391,793
Miscellaneous 95,649 94,174 321,412 305,745
Nonregulated 640,032 484,699 1,788,337 1,487,711
----------- ----------- ----------- -----------
Total Operating Revenues 2,926,690 2,611,280 8,652,799 7,794,783
----------- ----------- ----------- -----------
OPERATING EXPENSES:
Plant Operations 355,729 366,641 1,034,162 951,885
Depreciation 473,561 458,266 1,426,991 1,374,801
Amortization 28,480 28,444 85,368 85,332
Customer 145,855 118,947 440,746 384,212
General and Administrative 384,271 325,885 1,105,888 997,414
Other Operating Expenses 389,200 271,908 952,115 907,156
----------- ----------- ----------- -----------
Total Operating Expenses 1,777,096 1,570,091 5,045,270 4,700,800
----------- ----------- ----------- -----------
OPERATING INCOME 1,149,594 1,041,189 3,607,529 3,093,983
----------- ----------- ----------- -----------
OTHER (EXPENSES) INCOME:
Interest Expense (55,872) (61,847) (172,300) (189,927)
Interest Income 26,049 42,240 83,827 129,515
Cellular Investment Income 327,119 265,094 981,359 828,738
Other Investment Income (Expense) (32,445) 0 (98,462) 9,579
----------- ----------- ----------- -----------
Total Other Income, Net 264,851 245,487 794,424 777,905
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES 1,414,445 1,286,676 4,401,953 3,871,888
INCOME TAXES 585,588 525,415 1,817,515 1,592,967
----------- ----------- ----------- -----------
NET INCOME $ 828,857 $ 761,261 $ 2,584,438 $ 2,278,921
=========== =========== =========== ===========
NET INCOME PER SHARE - NOTE 2 $ 0.48 $ 0.44 $ 1.49 $ 1.32
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1999
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
COMMON STOCK RETAINED
SHARES AMOUNT EARNINGS
----------- ----------- -----------
BALANCE on December 31, 1997 1,732,455 $ 8,662,275 $ 8,821,223
Net Income 3,239,220
Dividends (1,853,727)
----------- ----------- -----------
BALANCE on December 31, 1998 1,732,455 $ 8,662,275 $10,206,716
Net Income 2,584,438
Dividends (1,212,719)
----------- ----------- -----------
BALANCE on September 30, 1999 1,732,455 $ 8,662,275 $11,578,435
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
SEPTEMBER 30, 1999
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR NINE MONTHS ENDED
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,584,438 $ 2,278,921
Adjustments to Reconcile Net Income to Net
Net Cash Provided by Operating Activities:
Depreciation and Amortization 1,512,359 1,460,134
Cellular Investment Income (981,359) (828,738)
Distributions from Cellular Investments 388,288 110,757
(Increase) Decrease in:
Receivables (328,308) (220,412)
Inventories (20,511) 76,781
Prepaid Expenses 36,366 44,891
Increase (Decrease) in:
Accounts Payable (1,179,171) (405,038)
Other Accrued Taxes (8,507) (7,309)
Other Accrued Liabilities 34,299 12,669
Deferred Investment Tax Credits (4,676) (9,007)
----------- -----------
Net Cash Provided by Operating Activities 2,033,218 2,513,649
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant & Equipment, Net (1,680,612) (940,188)
Change in Notes Receivable 2,609 (696,980)
Change in Temporary Cash Investments (300,000) 600,000
Other, Net (198,878) 37,843
----------- -----------
Net Cash Used in Investing Activities (2,176,881) (999,325)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt (275,000) (274,999)
Dividends Paid (1,212,719) (1,039,473)
----------- -----------
Net Cash Used in Financing Activities (1,487,719) (1,314,472)
----------- -----------
NET INCREASE (DECREASE) IN CASH (1,631,382) 199,852
CASH
AT BEGINNING OF PERIOD 2,551,066 906,716
----------- -----------
CASH
AT END OF PERIOD $ 919,684 $ 1,106,568
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<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 September 30, 1999 and December 31,
1998 and the results of operations and changes in cash flows for the nine months
ended September 30, 1999 and 1998.
Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Company's December 31, 1998 Annual Report to Shareholders. The results of
operations for the period ending September 30, 1999 are not necessarily
indicative of the operating results of the entire year.
NOTE 2 - NET INCOME PER COMMON SHARE
Net income per common share for 1999 and 1998 was computed by dividing the
weighted average number of shares of common stock outstanding into the net
income.
NOTE 3 - STATEMENTS OF CASH FLOW
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
1999 1998
---- ----
Interest $173,779 $191,405
Income taxes $2,031,000 $1,692,500
8
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1998
The increase in total operating revenues for the nine months ended September 30,
1999 was $858,016 or 11.0%. Local network revenue saw an increase of 16.0% as
the result of increased demand for telephone lines to provide internet services,
an increase in Centrex service, and an increase in the monthly local service
rates that took effect October 1, 1998. An increase in minutes of use billed to
interexchange carriers (IXC's) and increased interstate access settlements from
NECA is responsible for a 7.9% increase in network access revenues. Billing and
collection revenues decreased $34,475 or 8.8% as the result of IXC's taking back
the billing and collection function. Strong growth continues with our
nonregulated services. These revenues grew 20.2% over the revenues recorded for
the same period in 1998. The $300,626 increase in revenues is the result of our
success with cable television, Internet services, price increase of our inside
wire maintenance fees and increased market share of our long distance service,
which was introduced during the third quarter of 1997. Continued growth of
nonregulated revenues is expected as the Company increases its marketing of
these services.
Total operating expenses increased by $344,470 or 7.3%. Plant operations
increased by $82,277 or 8.6% due to increased labor costs and higher maintenance
expenses on telephone plant. Depreciation increased by $52,190 or 3.8%,
resulting from an increase in property, plant and equipment. A $56,534 or 14.7%
increase in customer operations is the result of an increase in labor costs due
to an increasing focus on the customer service operations of the company, which
is a result of an increasing customer base and product offerings. General and
Administrative expenses were responsible for a $108,474 or 10.9% increase in
operating expenses. This increase is attributed to an increase in labor expense
and the Company's continued search for acquisition opportunities and other
investments to enhance shareholder value and to strengthen corporate
performance. The increase in G & A expenses were also effected by the hiring of
outside consultants to assist with the development of a new Company Logo. This
new logo reflects our expanding services such as high-speed data delivery and
enhanced entertainment to the home, while maintaining focus on customer service
and voice delivery. The logo's design uses futuristic art that will allow for
growth and expansion of services. Other operating expenses increased $44,959 or
5%. This increase is associated with the increased marketing efforts of our
nonregulated services.
Interest expense decreased by $17,627 due to a decrease in long-term debt
outstanding. Interest income decreased by $45,688 reflecting fewer funds
available for investment. The investment in Midwest Wireless continues to be a
strong performer, which is reflected by an 18.4% or
9
<PAGE>
$152,621 increase in cellular investment income. The $88,883 decrease in income
from other investment income consists of the anticipated loss from an investment
in Fibercom, Inc. for 1999. Fibercom, Inc. is a startup operation, which seeks
to provide competitive local exchange service in Iowa.
Net income increased by $305,517 or 13.4%.
THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1998
The increase in total operating revenues was $315,410 or 12.1%. Local network
saw an increase of $86,449 or 15.5% due to an increase in Centrex service, an
increased demand for telephone lines to provide Internet services, and an
increase in the monthly local service rate that took effect October 1, 1998.
Network Access increased $80,255 or 6% which can be attributed to an increase in
minutes of use billed to interexchange carriers, increased special access
billing, and increased interstate access settlements from NECA. Nonregulated
revenue showed a 32.1% growth in the third quarter of 1999. This increase of
$155,333 is attributed to our success with cable television, Internet services,
increased pricing of our inside wire maintenance fees, and increased market
share of our long distance service, which was introduced in the third quarter of
1997.
Total operating expenses increased by $207,005 or 13.2%. Plant operations were
accountable for 5.3% decrease in operating expenses. This decrease reflects the
absence of the costs associated with the repair of telephone plant incurred in
1998 by a storm on July 20, 1998. Customer operations contributed 13% of the
increase in operating expenses through increased labor costs due to increasing
staff size to better serve a growing customer base. General and Administrative
expenses were responsible for 28.2% of the increase in operating expenses. This
increase is attributed to an increase in labor expense and the use of outside
consultants to enhance shareholder value and to strengthen corporate performance
by searching out acquisition opportunities and developing a new Company Logo.
The new Company logo reflects our expanding services such as high-speed data
delivery and enhanced entertainment delivery to the home, while continuing to be
focused on customer service and voice delivery. The logo's design uses
futuristic art that will allow for growth & expansion of services. Other
operating expenses accounted for 56.7% of the increase in operating expenses.
This increase is associated with the increased marketing efforts of our
nonregulated services.
Interest expense decreased by $5,975 due to a decrease in long-term debt
outstanding. Interest income decreased by $16,191 reflecting fewer funds
available for investment. The investment in Midwest Wireless continues its
strong performance record, which is reflected by a 23.4% or $62,025 increase.
Net income increased by $67,596 or 8.9%.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company had a decrease in cash of $1,631,382 for the first nine months of
1999 resulting in a balance of $919,684 as of September 30, 1999. Cash invested
in Certificates of Deposit at September 30, 1999 was $1,200,000, which is an
increase of $300,000 over the balance at December 31, 1998. Cash decreased due
to the reduction in accounts payable and increased investment of cash resources
as compared to December 31, 1998. Working Capital increased $133,757 from
December 31, 1998. This increase is the result of profitable internal
operations. Notes Receivable includes $700,000 from the General Manager. The
note is secured by 51,230 shares of stock in New Ulm Telecom, Inc., has a
variable interest rate which was 6% at December 31, 1998. Interest payments are
to be paid annually on December 31. The note is to be paid in full on January 1,
2001.
The Company continues to make investments in state-of-the-art technology to
offer subscribers the best possible service. Capital expenditures for 1999 are
expected to be $2,450,000. Management believes the Company will generate
sufficient working capital internally from operations to meet its operating
needs and maintain historical dividend levels.
YEAR 2000 CONVERSION
The "Year 2000 Issue" results from computer programs that were written using two
digits rather than four to define the applicable year. A problem arises when the
Registrant's date sensitive computer programs recognize a date using "00" as the
Year 1900 rather than 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including the temporary
inability to process transactions, send invoices or engage in normal business
activities.
A team of internal staff is managing the Company's comprehensive Year 2000
initiative. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations and that transactions
with customers, suppliers and financial institutions are fully supported.
The Company has identified which software upgrades to its NORTEL switching and
transport network are necessary to become Year 2000 compliant. All upgrades have
been completed. These upgrades are part of an ongoing contract that is entered
into every three years to keep the network up to current standards. The Company
would be entering into this upgrade normally and did not need to accelerate any
upgrades to become Year 2000 compliant.
The Company's internal business software consists of a billing and customer
care, plant records and trouble reporting software that is currently Year 2000
compliant. A conversion of the Company's accounting and financial reporting
software was completed on July 1, 1999. This conversion was part of the
Company's business plan and was not entered into for the sole purpose of Year
2000 compliance. However, the new system is Year 2000 compliant.
While the Company believes its planning efforts are adequate to address its Year
2000 concerns, there can be no guarantee that the systems of other companies on
which the Company's systems and operations rely will be converted on a timely
basis and will not have a material effect on the
11
<PAGE>
Company. The cost of the Year 2000 initiatives is not expected to be material to
the Company's results of operations or financial position.
PART II. OTHER INFORMATION
Items 1-3. Not Applicable
Item 4. Submission of matters to a vote of Security Holders
The annual meeting of the shareholders of the registrant was held May 6, 1999 in
New Ulm, MN. The total number of shares outstanding and entitled to vote at the
meeting was 1,732,455 of which 1,217,095 were present either in person or by
proxy. Three directors were elected to serve three-year terms. The names of the
directors elected at the annual meeting and the applicable votes were as
follows:
DIRECTOR FOR AGAINST ABSTAIN
Robert Ranweiler 1,230,079 3,216
Mark Retzlaff 1,205,392 6,303
Duane Lambrecht 1,202,654 9,041
Also, one director was elected to fill the unexpired term of the deceased Linus
Grathwohl to hold office until the Annual Meeting of Shareholders to be held in
May of the year 2000. The name of the director elected and the applicable votes
were as follows:
DIRECTOR FOR AGAINST ABSTAIN
Mary Ellen Domeier 1,208,260 3,435
The Board Members continuing and whose terms expire at subsequent annual
meetings are as follows:
2000 Annual Meeting 2001 Annual Meeting
Rosemary Dittrich Lavern Biebl
Gary Nelson James Jensen
Mary Ellen Domeier Perry Meyer
The shareholders also approved the appointment of Olsen, Thielen & Co., Ltd. as
the auditors for 1999, by a vote of 1,213,908 for, 855 against, and 2,332
abstained.
Item 5. Not Applicable
12
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
On October 29, 1999 the Registrant filed a Form 8-K. The form
reported the Company's plan to upgrade the communications infrastructure of the
urban district of New Ulm, Minnesota. The project is estimated to cost $10
million. The company will begin construction in the fourth quarter of 1999 with
an estimated completion of third quarter 2000.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized
NEW ULM TELECOM, INC.
(Registrant)
Dated: November 10, 1999 By /s/ James P. Jensen
-------------------------
James P. Jensen, Chairman
Dated: November 10, 1999 By /s/ Bill Otis
-------------------------
Bill Otis, President
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 919,684
<SECURITIES> 1,200,000
<RECEIVABLES> 1,650,518
<ALLOWANCES> 47,863
<INVENTORY> 374,538
<CURRENT-ASSETS> 4,203,809
<PP&E> 30,262,392
<DEPRECIATION> 18,477,015
<TOTAL-ASSETS> 25,982,112
<CURRENT-LIABILITIES> 1,178,842
<BONDS> 3,025,000
0
0
<COMMON> 8,662,275
<OTHER-SE> 11,578,435
<TOTAL-LIABILITY-AND-EQUITY> 25,982,112
<SALES> 0
<TOTAL-REVENUES> 8,652,799
<CGS> 0
<TOTAL-COSTS> 5,045,270
<OTHER-EXPENSES> (966,724)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 172,300
<INCOME-PRETAX> 4,401,953
<INCOME-TAX> 1,817,515
<INCOME-CONTINUING> 2,584,438
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,584,438
<EPS-BASIC> 1.49
<EPS-DILUTED> 1.49
</TABLE>
