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 March 31, 2000
--------------------
[ ] 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 9
CONDITION AND RESULTS OF OPERATION
PART II. OTHER INFORMATION 10
2
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2000
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,724,738 $ 1,533,044
Certificates of Deposit -- 600,000
Receivables, Net of Allowance for
Doubtful Accounts of $220,181 and $33,000 1,070,527 1,457,274
Inventories 863,798 557,315
Prepaid Expenses 73,290 88,117
------------ ------------
Total Current Assets 3,732,353 4,235,750
------------ ------------
INVESTMENTS & OTHER ASSETS:
Excess of Cost Over Net Assets Acquired 3,418,013 3,446,456
Notes Receivable, Less Current Portion
of $4,766 and $4,997 975,899 977,166
Cellular Investments 5,462,046 5,282,233
Other 909,343 688,593
------------ ------------
Total Investments and Other Assets 10,765,301 10,394,448
------------ ------------
PROPERTY, PLANT & EQUIPMENT:
Telecommunications Plant 28,728,632 28,356,244
Other Property & Equipment 1,821,360 1,779,022
Cable Television Plant 802,899 802,899
------------ ------------
Total 31,352,891 30,938,165
Less Accumulated Depreciation 19,091,491 18,541,294
------------ ------------
Net Property, Plant & Equipment 12,261,400 12,396,871
------------ ------------
TOTAL ASSETS $ 26,759,054 $ 27,027,069
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2000
UNAUDITED CONSOLIDATED BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Current Portion of Long-Term Debt $ 366,666 $ 366,666
Accounts Payable 612,761 1,256,049
Accrued Income Taxes 187,125 --
Other Accrued Taxes 37,277 58,006
Other Accrued Liabilities 284,725 332,542
------------ ------------
Total Current Liabilities 1,488,554 2,013,263
------------ ------------
LONG-TERM DEBT, LESS CURRENT PORTION 2,841,666 2,933,334
------------ ------------
DEFERRED CREDITS:
Income Taxes 1,510,554 1,510,554
Investment Tax Credits 16,451 17,336
------------ ------------
Total Deferred Credits 1,527,005 1,527,890
------------ ------------
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 12,239,554 11,890,307
------------ ------------
Total Stockholders' Equity 20,901,829 20,552,582
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 26,759,054 $ 27,027,069
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2000
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
MARCH 31,
2000 1999
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Local Network $ 696,290 $ 635,929
Network Access 1,318,067 1,336,440
Billing and Collection 101,714 121,598
Miscellaneous 148,538 93,285
Nonregulated 659,179 554,728
------------ ------------
Total Operating Revenues 2,923,788 2,741,980
------------ ------------
OPERATING EXPENSES:
Plant Operations 374,707 325,629
Depreciation 552,562 477,141
Amortization 28,456 28,444
Customer 199,751 144,566
General and Administrative 415,964 348,750
Other Operating Expenses 392,445 280,070
------------ ------------
Total Operating Expenses 1,963,885 1,604,600
------------ ------------
OPERATING INCOME 959,903 1,137,380
------------ ------------
OTHER (EXPENSES) INCOME:
Interest Expense (52,858) (59,062)
Interest Income 25,507 32,434
Cellular Investment Income 415,785 327,120
Other Investment Income (Expense) (13,847) (32,445)
------------ ------------
Total Other Income, Net 374,587 268,047
------------ ------------
INCOME BEFORE INCOME TAXES 1,334,490 1,405,427
INCOME TAXES 552,129 579,740
------------ ------------
NET INCOME $ 782,361 $ 825,687
============ ============
NET INCOME PER SHARE - NOTE 2 $ 0.45 $ 0.48
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2000
UNAUDITED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
COMMON STOCK RETAINED
SHARES AMOUNT EARNINGS
------------ ------------ ------------
<S> <C> <C> <C>
BALANCE on December 31, 1998 1,732,455 $ 8,662,275 $ 10,206,716
Net Income 3,329,423
Dividends (1,645,832)
------------ ------------ ------------
BALANCE on December 31, 1999 1,732,455 $ 8,662,275 $ 11,890,307
Net Income 782,361
Dividends (433,114)
------------ ------------ ------------
BALANCE on March 31, 2000 1,732,455 $ 8,662,275 $ 12,239,554
============ ============ ============
</TABLE>
6
<PAGE>
NEW ULM TELECOM, INC. AND SUBSIDIARIES
MARCH 31, 2000
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THREE MONTHS ENDED
2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 782,361 $ 825,687
Adjustments to Reconcile Net Income to Net
Net Cash Provided by Operating Activities:
Depreciation and Amortization 581,018 505,585
Cellular Investment Income (415,785) (327,120)
(Increase) Decrease in:
Receivables 386,962 69,020
Inventories (306,483) (50,243)
Prepaid Expenses 14,827 29,940
Increase (Decrease) in:
Accounts Payable (643,288) (1,210,568)
Accrued Income Taxes 187,125 297,977
Other Accrued Taxes (20,729) 6,440
Other Accrued Liabilities (47,817) 42,705
Deferred Investment Tax Credits (885) (2,629)
------------ ------------
Net Cash Provided by Operating Activities 517,306 186,794
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant & Equipment, Net (417,104) (448,003)
Change in Notes Receivable 1,052 1,434
Cellular Investments 235,972 127,062
Change in Temporary Cash Investments 600,000 (600,000)
Other, Net (220,750) (97,197)
------------ ------------
Net Cash Used in Investing Activities 199,170 (1,016,704)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt (91,668) (91,666)
Dividends Paid (433,114) (381,140)
------------ ------------
Net Cash Used in Financing Activities (524,782) (472,806)
------------ ------------
NET INCREASE (DECREASE) IN CASH 191,694 (1,302,716)
CASH
AT BEGINNING OF PERIOD 1,533,044 2,551,066
------------ ------------
CASH
AT END OF PERIOD $ 1,724,738 $ 1,248,350
============ ============
</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 March 31, 2000 and December 31, 1999
and the results of operations and changes in cash flows for the three months
ended March 31, 2000 and 1999.
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, 1999 Annual Report to Shareholders. The results of
operations for the period ending March 31, 2000 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 2000 and 1999 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:
2000 1999
---- ----
Interest $53,352 $59,556
Income taxes $230,000 $150,000
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
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO
THE THREE MONTHS ENDED MARCH 31, 1999
The increase in total operating revenues was $181,808 or 6.6%. Local network saw
revenues rise 9.5%, due to an increase in Centrex service and the number of
access lines. A reduction in the rates charged to interexchange carriers (IXC's)
resulted in a 1.4% decrease in network access revenues. Billing and collection
revenues decreased $19,884 or 16.4% as a result of IXC's taking back the billing
and collection function. Nonregulated revenues continue to show strong growth.
The $104,451 or 18.8% increase in revenues is the result of our success with
cable television, Internet services, strong sales of customer premise equipment
and increased market share of our long distance service. Our nonregulated
revenues are expected to show continued growth as the Company increases it's
marketing of these services.
Total operating expenses increased by $359,285 or 22.4%. Plant operations
increased by $49,078 or 15.1% due to increased labor costs and higher
maintenance expenses on telephone plant, which correlates to the increase in
access lines. Depreciation increased by $75,421 or 15.8%, which is directly
related to the increase in property, plant and equipment associated with the
Company's effort to bring state of the art very high speed digital subscriber
line (VDSL) technology to the community of New Ulm, MN. The plant construction
will bring fiber optics to every neighborhood within the city limits of New Ulm,
MN. This platform will allow the Company to offer telephony, high bandwidth
connections and a variety of video services on the same infrastructure. Customer
expenses increased $55,185 or 38.2%. This increase is a reflection of the
Company's commitment to provide superior customer service and the ever-expanding
basket of services we are providing our subscribers. The marketplace is
continuing to evolve and our subscribers are becoming more technically savvy
which places demands on our customer relations area to provide our subscribers
with solutions to their unique telecommunication needs. In addition, we have
implemented an aggressive marketing campaign. The benefits provided by our
marketing efforts have been seen in large number of activations generated by
Internet and class features. General and Administrative expenses were
responsible for a $67,214 or 19.3%. 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. Other operating expenses increased $112,375 or
40.1%. This increase is associated with the Company's strategic plan of building
a basket of services that will make the Company difficult to compete with in the
future.
Interest expense decreased by $6,204 due to a decrease in long-term debt
outstanding. Interest income decreased by $6,927 reflecting fewer funds
available for investment. Our cellular
9
<PAGE>
investment income increased $88,665 or 27.1%, as the investment in Midwest
Wireless continues to be a strong performer. The $18,598 increase in income from
other investment income consists of the expected income from an investment in
Fibercom, Inc. for 2000. Fibercom, Inc. provides competitive local exchange
service in Iowa.
Net income decreased by $43,326 or 5.3%.
LIQUIDITY AND CAPITAL RESOURCES
The Company had an increase in cash of $191,694 for the quarter resulting in a
balance of $1,724,738 as of March 31, 2000. Operating activities was the primary
source of funds. Net Income and Depreciation and Amortization generated the bulk
of those funds. There was no cash invested in Certificates of Deposit at March
31, 2000, which was a source of $600,000 from Investing Activities. Net cash
used in Financing Activities was $524,782. Principal payments and Dividend
payments accounted for that usage. Working Capital increased $21,312 from
December 31, 1999. This increase is the result of a $643,288 decrease in
accounts payable. Notes Receivable includes $700,000 from Manager. The note is
secured by 51,230 shares of stock in New Ulm Telecom, Inc., had a variable
interest rate which was 5.20% at December 31, 1999. Interest Payments are to be
paid annually on December 31. The note is to be paid in full on January 1, 2001.
The Company operates in a capital-intensive industry. To meet the demands of the
industry the Company continues to make investments in state-of-the-art
technology to offer subscribers state of the art technological solutions to
their communication needs. Capital expenditures for 2000 are expected to be $10
million.
10
<PAGE>
PART II. OTHER INFORMATION
Items 1-5. Not Applicable
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: April 25, 2000 By /s/ James P. Jensen
--------------------------------------
James P. Jensen, Chairman
Dated: April 25, 2000 By /s/ Bill Otis
--------------------------------------
Bill Otis, President
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,724,738
<SECURITIES> 0
<RECEIVABLES> 1,070,527
<ALLOWANCES> 220,181
<INVENTORY> 863,798
<CURRENT-ASSETS> 3,732,353
<PP&E> 31,352,891
<DEPRECIATION> 19,091,491
<TOTAL-ASSETS> 26,759,054
<CURRENT-LIABILITIES> 1,488,554
<BONDS> 2,841,666
0
0
<COMMON> 8,662,275
<OTHER-SE> 12,239,554
<TOTAL-LIABILITY-AND-EQUITY> 26,759,054
<SALES> 0
<TOTAL-REVENUES> 2,923,788
<CGS> 0
<TOTAL-COSTS> 1,963,885
<OTHER-EXPENSES> (427,445)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,858
<INCOME-PRETAX> 1,334,490
<INCOME-TAX> 552,129
<INCOME-CONTINUING> 782,361
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 782,361
<EPS-BASIC> 0.45
<EPS-DILUTED> 0.45
</TABLE>
