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, 1998
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
EXCHANGE ACT
For the transition period from __________ to _________.
Commission File Number 0-3024
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New Ulm Telecom, Inc.
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(Exact name of small business issuer as specified in its charter.)
Minnesota 41-0440990
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(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
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(Issuer's telephone number)
Check whether the issue (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
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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 .
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<PAGE>
The Form 10-Q for the quarter ended September 30, 1998 has been amended for Part
1, Item 2 to reflect the "Year 20000 Issue". There was no change to net
revenues, net income or net earnings for the quarters ended September 30, 1998
and 1997.
NEW ULM TELECOM, INC.
CONTENTS
Page
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION 9-11
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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, 1998 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 1997
The increase in total operating revenues was $450,042 or 6.1%. Local network saw
an increase of 5.1% due to an increase in Centrex service and the number of
access lines. An increase in minutes of use billed to interexchange carriers is
responsible for a 3.5% increase in network access revenues. Nonregulated revenue
continues to show strong growth. These revenues grew 18.9% over the revenues
recorded for the same period in 1997. The increase, of $236,491, 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 $410,054 or 9.6%. General and
Administrative expenses were responsible for 36.7% 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. A 28.9% increase in plant operations expense is primarily
the result of increased labor and associated expenses caused by a July 20, 1998
storm. Other operating expenses were responsible for 28.6% 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 $18,196 due to a decrease in long-term debt
outstanding. Interest income increased by $16,500 reflecting larger amounts of
funds available for investment. Cellular partnership income increased $344,217
or 71%, as the investment in Midwest Wireless continues to be a strong
performer.
Net income increased by $244,019 or 12.0%.
THREE MONTHS ENDED SEPTEMBER 30, 1998 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1997
The increase in total operating revenues was $139,405 or 5.6%. Local network saw
an increase of 5.1% due to an increase in Centrex service and the number or
access lines. An increase in minutes of use billed to interexchange carriers is
responsible for a 4.4% increase in network access revenues. Nonregulated revenue
continues to show strong growth. These revenues grew 14% over the revenues
recorded for the same period in 1997. The increase of $59,580 is the result of
our success with cable television, Internet service, 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 $143,785 or 10.1%. General and
Administrative expenses were responsible for 42.7% 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. A 43.6% increase in plant operations expense is primarily
the result of increased labor and associated expenses caused by a July 20, 1998
storm. Other operating expenses were responsible for 10.7% 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 $6,066 due to a decrease in long-term debt
outstanding. Interest income increased by $8,895 reflecting larger amounts of
funds available for investment. Celluar partnership income increased $60,450 or
29.5%, as the investment in Midwest Wireless continues to be a strong performer.
Net income increased by $40,319 or 5.6%.
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Liquidity and Capital Resources
The Company had an increase in cash of $199,852 for the quarter resulting in a
balance of $1,106,568 as of September 30, 1998. Cash invested in Certificates of
Deposit at September 30, 1998 was $1,400,000, which is a decrease of $600,000
over the balance at December 31, 1997. Cash decreased due to the registrant
loaning the General Manager $700,000 to purchase stock of the company. The
balance can be found in Investments and Other Assets on the Balance Sheet. Notes
Receivable includes $700,000 from Manager. The note is secured by 51,230 shares
of stock in New Ulm Telecom, Inc., has a variable interest rate which was 6% at
September 30, 1998 and is collectible within 60 days from the date of
termination or date of death. Interest payments are to be paid annually on
December 31. Working Capital increased $98,699 from December 31, 1997, which was
$3,085,561. This increase can be attributed to a decrease in accounts payable of
$405,038 and an increase in receivables of $220,841.
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.
Year 2000 Compliance Issue
In short, the "Year 2000 issue" is issues resulting 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
will be completed by June 1, 1999. 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
will not need to accelerate any upgrades to become Year 2000 compliant.
The Company's internal business software consists of billing and customer care,
plant records and trouble report software that is currently Year 2000 compliant.
A conversion of the
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Year 2000 Compliance Issue (continued)
Company's accounting and financial reporting software will be completed by July
1, 1999. This conversion is part of the Company's business plan and was not
entered into for the sole purpose of Year 2000 compliance. However, the new
system will be 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 Company. The cost of the Year
2000 initiatives is not expected to be material to the Company's results of
operations or financial position.
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.
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(Registrant)
Dated: January 19, 1999 By /s/ James P. Jensen
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James P. Jensen, President
Dated: January 19, 1999 By /s/ Bill Otis
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Bill Otis, Executive Vice-President
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