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Previous: NEW ENGLAND POWER CO, 10-Q, EX-27, 2000-11-13 |
Next: NEW ULM TELECOM INC, 10-Q, EX-27, 2000-11-13 |
| X | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE |
| SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2000
| TRANSITION REPORT PURSUANT TO 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 (State or jurisdiction of incorporation) |
41-0440990 (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 | |||||
|---|---|---|---|---|---|
| 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 | 9-12 | ||||
| and Results of Operations | |||||
| PART II. Other Information | 13-15 | ||||
| September 30, 2000 |
December 31, 1999 | |||||||
|---|---|---|---|---|---|---|---|---|
| CURRENT ASSETS: | ||||||||
| Cash | $ | 437,558 | $ | 1,533,044 | ||||
| Certificates of Deposit | 0 | 600,000 | ||||||
| Receivables, Net of Allowance for | ||||||||
| Doubtful Accounts of $318,578 and $33,000 | 1,257,872 | 1,457,274 | ||||||
| Inventories | 3,414,736 | 557,315 | ||||||
| Prepaid Expenses | 71,270 | 88,117 | ||||||
| Total Current Assets | 5,181,436 | 4,235,750 | ||||||
| INVESTMENTS & OTHER ASSETS: | ||||||||
| Excess of Cost Over Net Assets Acquired | 3,361,124 | 3,446,456 | ||||||
| Notes Receivable, Less Current Portion | ||||||||
| of $4,200 and $3,689 | 973,676 | 977,166 | ||||||
| Cellular Investments | 5,771,352 | 5,282,233 | ||||||
| Other | 1,521,603 | 688,593 | ||||||
| Total Investments and Other Assets | 11,627,755 | 10,394,448 | ||||||
| PROPERTY, PLANT & EQUIPMENT: | ||||||||
| Telecommunications Plant | 32,931,635 | 28,356,244 | ||||||
| Other Property & Equipment | 1,875,058 | 1,779,022 | ||||||
| Cable Television Plant | 802,899 | 802,899 | ||||||
| Total | 35,609,592 | 30,938,165 | ||||||
| Less Accumulated Depreciation | 20,157,789 | 18,541,294 | ||||||
| Net Property, Plant & Equipment | 15,451,803 | 12,396,871 | ||||||
| TOTAL ASSETS | $ | 32,260,994 | $ | 27,027,069 | ||||
The accompanying notes are an integral part of the financial statements.
3
| September 30, 2000 |
December 31, 1999 | |||||||
|---|---|---|---|---|---|---|---|---|
| CURRENT LIABILITIES: | ||||||||
| Current Portion of Long-Term Debt | $ | 366,666 | $ | 366,666 | ||||
| Accounts Payable | 940,152 | 1,256,049 | ||||||
| Accrued Income Taxes | (157,708 | ) | – | |||||
| Other Accrued Taxes | 48,464 | 58,006 | ||||||
| Other Accrued Liabilities | 354,499 | 332,542 | ||||||
| Total Current Liabilities | 1,552,073 | 2,013,263 | ||||||
| LONG-TERM DEBT, Less Current Portion | 7,782,334 | 2,933,334 | ||||||
| DEFERRED CREDITS: | ||||||||
| Income Taxes | 1,510,554 | 1,510,554 | ||||||
| Investment Tax Credits | 14,679 | 17,336 | ||||||
| Total Deferred Credits | 1,525,233 | 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 | 12,739,079 | 11,890,307 | ||||||
| Total Stockholders’ Equity | 21,401,354 | 20,552,582 | ||||||
| TOTAL LIABILITIES AND | ||||||||
| STOCKHOLDERS’ EQUITY | $ | 32,260,994 | $ | 27,027,069 | ||||
The accompanying notes are an integral part of the financial statements.
4
| FOR THREE MONTHS ENDED SEPTEMBER 30, |
FOR THE NINE MONTHS ENDED SEPTEMBER 30, | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 2000 |
1999 |
2000 |
1999 | |||||||||||
| OPERATING REVENUES: | ||||||||||||||
| Local Network | $ | 712,395 | $ | 646,085 | $ | 2,113,219 | $ | 1,939,782 | ||||||
| Network Access | 1,407,610 | 1,429,004 | 4,231,375 | 4,245,950 | ||||||||||
| Billing and Collection | 117,584 | 115,920 | 340,631 | 357,318 | ||||||||||
| Miscellaneous | 104,769 | 95,649 | 338,796 | 321,412 | ||||||||||
| Nonregulated | 757,228 | 640,032 | 2,155,226 | 1,788,337 | ||||||||||
| Total Operating Revenues | 3,099,586 | 2,926,690 | 9,179,247 | 8,652,799 | ||||||||||
| OPERATING EXPENSES: | ||||||||||||||
| Plant Operations | 486,283 | 355,729 | 1,287,733 | 1,034,162 | ||||||||||
| Depreciation | 551,821 | 473,561 | 1,656,205 | 1,426,991 | ||||||||||
| Amortization | 28,456 | 28,480 | 85,368 | 85,368 | ||||||||||
| Customer | 232,136 | 145,855 | 637,411 | 440,746 | ||||||||||
| General and Administrative | 383,863 | 384,271 | 1,239,725 | 1,105,888 | ||||||||||
| Other Operating Expenses | 465,077 | 389,200 | 1,309,584 | 952,115 | ||||||||||
| Total Operating Expenses | 2,147,636 | 1,777,096 | 6,216,026 | 5,045,270 | ||||||||||
| OPERATING INCOME | 951,950 | 1,149,594 | 2,963,221 | 3,607,529 | ||||||||||
| OTHER (EXPENSES) INCOME: |
||||||||||||||
| Interest Expense | (129,306 | ) | (55,872 | ) | (249,064 | ) | (172,300 | ) | ||||||
| Interest Income | 9,102 | 26,049 | 45,815 | 83,827 | ||||||||||
| Cellular Partnership Income | 328,910 | 327,119 | 933,441 | 981,359 | ||||||||||
| Other Investment Income (Expense) | 4,570 | (32,445 | ) | (6,007 | ) | (98,462 | ) | |||||||
| Total Other Income, Net | 213,276 | 264,851 | 724,185 | 794,424 | ||||||||||
| INCOME BEFORE INCOME TAXES |
1,165,226 | 1,414,445 | 3,687,406 | 4,401,953 | ||||||||||
| INCOME TAXES | 487,242 | 585,588 | 1,539,293 | 1,817,515 | ||||||||||
| NET INCOME | $ | 677,984 | $ | 828,857 | $ | 2,148,113 | $ | 2,584,438 | ||||||
| NET INCOME PER SHARE – NOTE 2 |
$ | 0.39 | $ | 0.48 | $ | 1.24 | $ | 1.49 | ||||||
The accompanying notes are an integral part of the financial statements.
5
| Common Stock |
|||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Shares |
Amount |
Retained Earnings | |||||||||
| 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 | 2,148,113 | ||||||||||
| Dividends | (1,299,341 | ) | |||||||||
| BALANCE on September 30, 2000 | 1,732,455 | $ | 8,662,275 | $ | 12,739,079 | ||||||
The accompanying notes are an integral part of the financial statements.
6
| FOR NINE MONTHS ENDED | ||||||||
|---|---|---|---|---|---|---|---|---|
| 2000 |
1999 | |||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
| Net Income | $ | 2,148,113 | $ | 2,584,438 | ||||
| Adjustments to Reconcile Net Income to Net | ||||||||
| Net Cash Provided by Operating Activities: | ||||||||
| Depreciation and Amortization | 1,741,573 | 1,512,359 | ||||||
| Cellular Investment Income | (933,441 | ) | (981,359 | ) | ||||
| Cellular Investments | 444,322 | 388,288 | ||||||
| (Increase) Decrease in: | ||||||||
| Receivables | 199,913 | (328,308 | ) | |||||
| Inventories | (29,544 | ) | (20,511 | ) | ||||
| Prepaid Expenses | 16,847 | 36,366 | ||||||
| Increase (Decrease) in: | ||||||||
| Accounts Payable | (315,897 | ) | (1,179,171 | ) | ||||
| Accrued Income Taxes | (157,708 | ) | (8,507 | ) | ||||
| Other Accrued Taxes | (9,542 | ) | 0 | |||||
| Other Accrued Liabilities | 21,957 | 34,299 | ||||||
| Deferred Investment Tax Credits | (2,657 | ) | (4,676 | ) | ||||
| Net Cash Provided by Operating Activities | 3,123,936 | 2,033,218 | ||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
| Additions to Property, Plant & Equipment, Net | (4,711,173 | ) | (1,680,612 | ) | ||||
| Increase in M & S | (2,827,877 | ) | 0 | |||||
| Change in Notes Receivable | 2,979 | 2,609 | ||||||
| Change in Temporary Cash Investments | 600,000 | (300,000 | ) | |||||
| Other, Net | (833,010 | ) | (198,878 | ) | ||||
| Net Cash Used in Investing Activities | (7,769,081 | ) | (2,176,881 | ) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
| Principal Payments of Long-Term Debt | (275,000 | ) | (275,000 | ) | ||||
| Issuance of Long-Term Debt | 5,124,000 | 0 | ||||||
| Dividends Paid | (1,299,341 | ) | (1,212,719 | ) | ||||
| Net Cash Provided (Used) in Financing Activities | 3,549,659 | (1,487,719 | ) | |||||
| NET INCREASE (DECREASE) IN CASH | (1,095,486 | ) | (1,631,382 | ) | ||||
| CASH | ||||||||
| at Beginning of Period | 1,533,044 | 2,551,066 | ||||||
| CASH | ||||||||
| at End of Period | $ | 437,558 | $ | 919,684 | ||||
The accompanying notes are an integral part of the financial statements.
7
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, 2000 and December 31, 1999 and the results of operations and changes in cash flows for the nine months ended September 30, 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 September 30, 2000 are not necessarily indicative of the operating results of the entire year.
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.
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for:
| 2000 |
1999 | |||||||
|---|---|---|---|---|---|---|---|---|
| Interest | $ | 221,488 | $ | 173,779 | ||||
| Income taxes | $ | 1,563,768 | $ | 2,031,000 | ||||
In fiscal 2000, the Company entered into a $10 million unsecured ten-year reducing revolving credit facility maturing in 2010. The borrowings under the credit facility bear interest, at the Company’s option, at either fixed or variable rates linked to the Company’s overall leverage ratio. At September 30, 2000, there was $5,124,000 of direct borrowings outstanding under this facility at an interest rate of 7.81%.
8
NINE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Total operating revenues increased by $526,448 or 6.1%. Local network revenues saw an increase of 8.9%. The revenue increase can be attributed to a larger than expected increase in access lines, and the success of our marketing promotion of CLASS calling features as shown below.
| 9/30/99 |
9/30/00 |
% Increase | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Total Access Lines | 16,170 | 16,999 | 5 | .1% | |||||||
| CLASS Subscribers | 2,175 | 2,655 | 22 | .1% | |||||||
Although the minutes of use billed to Interexchange Carriers (IXC’s) rose 2.5%, a reduction in rates charged to IXC’s caused Network access revenues to remain comparable to the previous year. Billing and collection revenues decreased by $16,687 or 4.7% as a result of IXC’s taking back the billing and collection function. Nonregulated revenues continue to show strong growth. The $366,889 or 20.5% increase in revenues reflects our success with the sale of nonregulated services such as voicemail and Internet services, stronger profit margins on customer premise equipment sales and increased market share of our long distance service. The following table illustrates the growth of customers purchasing these types of services.
| 9/30/99 |
9/30/00 |
% Increase | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Voicemail Subscribers | 1,926 | 2,489 | 29.2 | % | |||||||
| Internet Subscribers | 2,397 | 3,309 | 38.1 | % | |||||||
The growth in nonregulated revenues is expected to continue as the Company proactively markets these services.
Total operating expenses increased by $1,170,756 or 23.2%. Plant operations increased by $253,571 or 24.5% due to increased labor costs and higher maintenance expenses on telephone plant associated with the Company’s initiative to bring state of the art very high speed digital subscriber line (VDSL) technology to the community of New Ulm, MN. This platform will allow the Company to offer telephony, high bandwidth data connections and a variety of video services on the same infrastructure. Depreciation increased by $229,214 or 16.1%, resulting from an increase in property, plant and equipment associated with the Company’s 1999 plant additions of $2.8 million. These additions enabled the Company to bring advanced services to its subscribers.
9
The $196,665 or 44.6% increase in customer operations reflects the Company’s commitment to provide superior customer service and the ever expanding basket of services we are providing our subscribers. This commitment can be seen through one of the Company’s primary objectives: Achieve and sustain a customer satisfaction index of 100%. The Company will strive to meet this objective by making the customer of primary importance, deserving our best service, attitude, and consideration. The dedication to this objective is evidenced by the use of focus groups, customer satisfaction surveys, and specialized training for customer service personnel. As the marketplace continues to evolve and our subscribers become more technically savvy, there will continue to be increasing demands on our customer relations area to provide solutions to the unique telecommunications needs of our subscribers.
General and Administrative expenses were responsible for a $133,837 or 12.1% 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 Company is pursuing possible acquisition of Local Exchange Carrier (LEC) operations to provide our vast array of services to a larger geographic area. In addition, the Company continues to study possible expansion opportunities through Competitive Local Exchange Carrier (CLEC) ventures.
Other operating expenses increased $357,469 or 37.5%. This increase reflects implementation of an aggressive marketing campaign of services such as Internet through the use of advertising, mass mailings, bill stuffers and promotions. This directly ties with the Company’s strategic plan of building a basket of services that will make the Company difficult to compete with in the future. The increase in operating expenses is also reflective of the Company’s desire to be an active participant in the continual quality-of-life advancements in our community as demonstrated by its generous charitable contributions.
Interest expense increased by $76,764 due to an increase in outstanding debt relating to the increase in property, plant and equipment. Interest income decreased by $38,012 reflecting fewer funds available for investment. Despite the fact that our cellular investment had a $47,918 or 4.9% decrease in income, the investment in Midwest Wireless continues to be a strong source of income. The $92,455 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 $436,325 or 16.9%.
10
THREE MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 1999
The increase in total operating revenues was $172,896 or 5.9%. Local network saw an increase of $66,310 or 10.3% due to an increase in CLASS services, and increased demand for second telephone lines to provide Internet services. Network Access decreased $21,394 or 1.5%, which can be attributed to a decrease in the rates billed to interexchange carriers to access our network. Nonregulated revenue showed an 18.3% growth in the second quarter of 2000. This increase of $117,196 is attributed to our success with cable television, Internet services, and increased market share of our long distance service.
Total operating expenses increased by $370,540 or 20.9%. Plant operations increased $130,554 or 36.7%. This increase reflects the rise in labor cost and higher maintenance expenses on telephone plant. This increase is associated with the Company’s initiative to bring state of the art very high-speed digital subscriber line (VDSL) technology to the community of New Ulm, MN. Depreciation increased by $78,260 or 16.5%, resulting from increased property, plant and equipment. Customer operations increased $86,281 or 59.2%. This increase reflects the Company’s commitment to superior customer service to a customer base that is increasing their technical savvy and demanding an expanding basket of services to meet their telecommunications needs. General and Administrative expenses remained steady, decreasing only $408 or 0.1%. The Company continues to search for activities to enhance shareholder value—video, CLEC, and acquisition opportunities to name a few. Other operating expenses increased $75,877 or 19.5% reflecting an implementation of an aggressive marketing campaign which the Company has undertaken to proactively assess the changing market brought about by The Telecommunications Act of 1996.
Interest expense increased by $73,434 due to an increase in long-term debt outstanding. Interest income decreased by $16,947 reflecting fewer funds available for investment. The investment in Midwest Wireless showed an increase in income of $1,791. The small increase reflects the pursuit of growth opportunities by Midwest Wireless. Despite the small size of the increase, our cellular investment continues to be a strong source of income. The $37,015 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 $150,873 or 18.2%.
The Company had a decrease in cash of $1,095,486 for the quarter
resulting in a balance of $437,558 as of September 30, 2000. The purchase of
inventory and the additions to property, plant and equipment were the primary
use of funds. These purchases were
11 predominantly associated with inventory and equipment needed to provide
VDSL. There was no cash invested in Certificates of Deposit at September 30, 2000, which
was a source of $600,000 from Investing Activities. Net cash from Financing Activities
was $3,549,659. Included in these financing activities is $5,124,000 of borrowings from
the Company’s term loan with CoBank. The Company also made $275,000 of long-term
debt repayments and made dividend payments of $1,299,341 during the first nine months of
2000 as compared to $1,212,719 for the same period in 1999. Working Capital increased $1,406,876 from December 31, 1999.
This increase is the result of a $2,857,421 increase in inventory, which is
comprised of the equipment, such as line cards and electronics, needed to
provide VDSL. Notes Receivable includes $700,000 from the 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. As mentioned in Note 4, the Company secured new
financing to cover these expenditures. 12 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 4, 2000 in New Ulm, MN. The total number of shares outstanding and
entitled to vote at the meeting was 1,732,455 of which 1,157,193 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: The Board Members continuing and whose terms expire at
subsequent annual meetings are as follows: Also, Article IV of the Articles of Incorporation were amended to read as
follows: The government of said corporation for the management of its affairs,
shall be vested in a Board of nine (9), who shall be stockholders. The number of
directors will be reduced to eight (8) at the annual meeting in 2001 and reduced to seven
(7) at the annual meeting in 2002 and shall thereafter remain at seven, unless and until
this Article is amended. The directors shall be elected to office at the annual meeting of
stockholders of the corporation to be held in New Ulm, Minnesota, or at such other place
as designated by a Resolution of the Board of Directors during the month of May in each
year. Each director shall be elected to office for a term of three (3) years
and shall continue to serve until the director’s successor has been duly elected and
qualified. Any vacancy that may occur shall be filled by appointment by the Board until
the next annual meeting, at which time a director will be elected by the stockholders to
fill the unexpired term. 13 The votes to approve this amendment were as follows: Also, Section 8 paragraphs (b) and (c), were amended in their
entirety to read as follows: The votes to approve this amendment were as follows: The shareholders also approved the appointment of Olsen, Thielen & Co.,
Ltd. as the auditors for 2000, by a vote of 1,146,287 for, 2,460 against, and 8,416
abstained. Item 5 – 6. Not Applicable 14 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
PART II. OTHER INFORMATION
DIRECTOR
FOR
AGAINST
ABSTAIN
Rosemary Dittrich
1,141,198
10,460
Mary Ellen Domeier
1,142,031
9,627
Gary Nelson
1,164,967
3,305
2001 Annual Meeting
2002 Annual Meeting
Lavern Biebl
Robert Ranweiler
James Jensen
Mark Retzlaff
Perry Meyer
Duane Lambrecht
FOR
AGAINST
ABSTAIN
Article IV
1,048,867
92,817
15,509
(b)
No individual shall be eligible to be appointed or
elected as a director after attaining the age of 69
(c)
This eligibility restriction shall be effective as of the
date of the approval of the Resolution amending these
By-Laws by membership at an annual meeting
FOR
AGAINST
ABSTAIN
Section 8
974,890
167,754
14,519
SIGNATURES
NEW ULM TELECOM, INC.
(Registrant)
Dated:
By /s/ James P. Jensen
James P. Jensen, Chairman
Dated:
By /s/ Bill Otis
Bill Otis, President
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