Nuvera Communications, Inc. - Quarter Report: 2007 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON,
DC 20549
FORM 10-Q
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007 |
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number 0-3024
NEW ULM TELECOM, INC.
(Exact Name of Registrant as Specified in Its
Charter)
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Minnesota |
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41-0440990 |
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(State or Other Jurisdiction |
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(I.R.S. Employer |
27 North Minnesota Street
New Ulm, Minnesota 56073
(Address of Principal Executive Offices, Including Zip Code)
(507) 354-4111
(Registrant’s Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or 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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer o |
Accelerated Filer x |
Non-Accelerated Filer o |
Indicate by
check mark whether the registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).
Yes o No x
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of August 8, 2007: 5,115,435 shares of common stock outstanding.
NEW ULM TELECOM, INC. AND SUBSIDIARIES
JUNE 30, 2007
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PART I FINANCIAL INFORMATION |
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Item 1 |
Financial Statements |
3-7 |
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3-4 |
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5 |
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6 |
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7 |
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8-13 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
14-24 |
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24 |
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25 |
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26-27 |
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26 |
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26-27 |
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27 |
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27 |
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28 |
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29 |
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NEW ULM TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
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June 30, |
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December
31, |
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(unaudited) |
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CURRENT ASSETS |
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Cash and cash equivalents |
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$ |
11,167,964 |
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$ |
30,457,707 |
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Receivables, net of allowance for doubtful accounts of $369,323 and $322,500 |
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1,001,804 |
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1,337,367 |
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Inventories |
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518,996 |
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239,707 |
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Prepaid expenses |
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146,161 |
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206,927 |
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12,834,925 |
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32,241,708 |
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INVESTMENTS AND OTHER ASSETS |
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Investment in Hector Communications Corporation |
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19,429,238 |
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20,295,933 |
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Goodwill and intangibles, net of amortization |
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3,237,207 |
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3,238,233 |
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Other |
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1,684,637 |
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1,572,902 |
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24,351,082 |
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25,107,068 |
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PROPERTY, PLANT AND EQUIPMENT |
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Telecommunications plant |
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61,052,174 |
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59,903,762 |
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Other property and equipment |
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3,075,074 |
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2,976,784 |
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Video plant |
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2,636,516 |
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2,489,752 |
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66,763,764 |
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65,370,298 |
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Less Accumulated Depreciation |
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44,677,791 |
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42,663,233 |
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22,085,973 |
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22,707,065 |
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TOTAL ASSETS |
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$ |
59,271,980 |
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$ |
80,055,841 |
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The accompanying notes are an integral part of the financial statements.
3
NEW ULM TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (continued)
LIABILITIES AND STOCKHOLDERS’ EQUITY
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June 30, |
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December
31, |
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(unaudited) |
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CURRENT LIABILITIES |
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Current portion of long-term debt |
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$ |
26,149 |
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$ |
26,149 |
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Accounts payable |
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733,648 |
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294,756 |
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Accrued income taxes |
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163,887 |
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22,392,040 |
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Other accrued taxes |
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87,480 |
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76,828 |
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Other accrued liabilities |
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652,614 |
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715,624 |
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1,663,778 |
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23,505,397 |
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LONG-TERM DEBT, less current portion |
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63,177 |
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79,983 |
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NON-CURRENT LIABILITIES |
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Loan guarantee |
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1,198,719 |
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2,478,474 |
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Deferred income taxes |
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3,405,994 |
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3,244,134 |
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4,604,713 |
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5,722,608 |
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STOCKHOLDERS’ EQUITY |
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Preferred stock - $1.66 par value, 10,000,000 shares authorized, no shares issued and outstanding |
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— |
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— |
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Common stock - $1.66 par value, 90,000,000 shares authorized, 5,115,435 shares issued and outstanding |
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8,525,725 |
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8,525,725 |
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Retained earnings |
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44,414,587 |
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42,222,128 |
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52,940,312 |
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50,747,853 |
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TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY |
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$ |
59,271,980 |
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$ |
80,055,841 |
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The accompanying notes are an integral part of the financial statements.
4
NEW ULM TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
INCOME
(unaudited)
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THREE
MONTHS ENDED |
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SIX MONTHS
ENDED |
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2007 |
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2006 |
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2007 |
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2006 |
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OPERATING REVENUES |
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Local network |
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$ |
977,194 |
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$ |
994,768 |
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$ |
1,911,908 |
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$ |
1,948,243 |
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Network access |
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1,366,375 |
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1,377,340 |
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2,777,470 |
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2,808,631 |
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Directory advertising, billing and other services |
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161,574 |
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128,544 |
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303,571 |
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246,418 |
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Video services |
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583,525 |
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530,907 |
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1,134,001 |
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1,049,745 |
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Internet services |
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417,735 |
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391,815 |
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824,729 |
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777,898 |
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Other nonregulated services |
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670,228 |
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556,239 |
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1,302,059 |
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1,192,974 |
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4,176,631 |
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3,979,613 |
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8,253,738 |
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8,023,909 |
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OPERATING EXPENSES |
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Plant operations, excluding depreciation and amortization |
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664,528 |
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643,401 |
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1,229,773 |
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1,243,461 |
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Cost of video services |
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414,269 |
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381,528 |
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824,548 |
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741,844 |
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Cost of internet services |
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161,283 |
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158,504 |
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292,028 |
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315,682 |
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Cost of other nonregulated services |
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342,346 |
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276,120 |
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680,746 |
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551,496 |
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Depreciation and amortization |
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1,004,573 |
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1,136,214 |
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2,021,013 |
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2,139,606 |
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Selling, general and administrative |
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1,085,644 |
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909,184 |
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2,089,371 |
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1,895,744 |
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3,672,643 |
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3,504,951 |
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7,137,479 |
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6,887,833 |
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OPERATING INCOME |
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503,988 |
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474,662 |
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1,116,259 |
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1,136,076 |
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OTHER (EXPENSES) INCOME |
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Interest expense |
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(1,442 |
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(223,523 |
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(3,094 |
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(438,260 |
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Interest income |
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343,886 |
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15,794 |
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666,691 |
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40,089 |
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Cellular investment income |
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— |
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1,821,088 |
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— |
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3,732,674 |
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Gain on Sale of MWH |
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3,116,624 |
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— |
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3,116,624 |
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— |
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Hector investment income |
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218,423 |
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— |
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399,971 |
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— |
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Other investment income (expense) |
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(17,098 |
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(12,463 |
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107,302 |
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140,148 |
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3,660,393 |
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1,600,896 |
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4,287,494 |
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3,474,651 |
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INCOME BEFORE INCOME TAXES |
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4,164,381 |
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2,075,558 |
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5,403,753 |
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4,610,727 |
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INCOME TAXES |
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1,686,441 |
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840,576 |
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2,188,207 |
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1,867,186 |
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NET INCOME |
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$ |
2,477,940 |
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$ |
1,234,982 |
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$ |
3,215,546 |
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$ |
2,743,541 |
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BASIC AND DILUTED NET INCOME PER SHARE |
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$ |
0.48 |
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$ |
0.24 |
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$ |
0.63 |
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$ |
0.54 |
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DIVIDENDS PER SHARE |
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$ |
0.10 |
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$ |
0.09 |
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$ |
0.20 |
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$ |
0.18 |
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WEIGHTED AVERAGE SHARES OUTSTANDING |
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5,115,435 |
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5,115,435 |
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5,115,435 |
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5,115,435 |
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The accompanying notes are an integral part of the financial statements.
5
NEW ULM TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
YEAR ENDED DECEMBER 31, 2006 AND
SIX MONTHS ENDED JUNE 30, 2007
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Common Stock |
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Retained |
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Shares |
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Amount |
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BALANCE on December 31, 2005 |
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5,115,435 |
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$ |
8,525,725 |
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$ |
23,019,926 |
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Net income |
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35,111,205 |
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Dividends |
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(15,909,003 |
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BALANCE on December 31, 2006 |
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5,115,435 |
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$ |
8,525,725 |
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$ |
42,222,128 |
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Net income |
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3,215,546 |
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Dividends |
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(1,023,087 |
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BALANCE on June 30, 2007 (unaudited) |
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5,115,435 |
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$ |
8,525,725 |
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$ |
44,414,587 |
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The accompanying notes are an integral part of the financial statements.
6
NEW ULM TELECOM, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(unaudited)
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SIX MONTHS ENDED |
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JUNE 30, 2007 |
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JUNE 30, 2006 |
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CASH FLOWS FROM OPERATING ACTIVITIES |
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Net income |
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$ |
3,215,546 |
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$ |
2,743,541 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
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2,021,013 |
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2,139,606 |
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Cellular investment income |
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— |
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(3,732,674 |
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Gain on Sale of MWH |
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(3,116,624 |
) |
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— |
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Distributions from cellular investments |
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— |
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1,964,086 |
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Hector investment income |
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(399,971 |
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— |
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Deferred income taxes |
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161,860 |
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— |
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(Increase) Decrease in: |
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Receivables |
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335,563 |
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(427,133 |
) |
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Inventories |
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(279,289 |
) |
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(71,891 |
) |
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Prepaid expenses |
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60,766 |
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115,862 |
|
|
Increase (Decrease) in: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
445,075 |
|
|
(11,197 |
) |
|
Accrued income taxes |
|
|
(22,228,153 |
) |
|
(673,994 |
) |
|
Other accrued taxes |
|
|
10,652 |
|
|
11,193 |
|
|
Other accrued liabilities |
|
|
(63,010 |
) |
|
4,350 |
|
|
|
|
|
|
|
| ||
|
Net cash provided by (used in) operating activities |
|
|
(19,836,572 |
) |
|
2,061,749 |
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
Additions to property, plant and equipment, net |
|
|
(1,405,078 |
) |
|
(1,067,022 |
) |
|
Proceeds from Sale of MWH |
|
|
3,116,624 |
|
|
— |
|
|
Other, net |
|
|
(124,824 |
) |
|
(294,008 |
) |
|
|
|
|
|
|
| ||
|
Net cash provided by (used in) investing activities |
|
|
1,586,722 |
|
|
(1,361,030 |
) |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
Principal payments of long-term debt |
|
|
(16,806 |
) |
|
(1,258,295 |
) |
|
Dividends paid |
|
|
(1,023,087 |
) |
|
(920,778 |
) |
|
|
|
|
|
|
| ||
|
Net cash used by financing activities |
|
|
(1,039,893 |
) |
|
(2,179,073 |
) |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH AND CASH EQUIVALENTS |
|
|
(19,289,743 |
) |
|
(1,478,354 |
) |
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
|
30,457,707 |
|
|
2,706,764 |
|
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
CASH AND CASH EQUIVALENTS |
|
$ |
11,167,964 |
|
$ |
1,228,410 |
|
|
|
|
|
|
|
| ||
The accompanying notes are an integral part of the financial statements.
7
NEW ULM TELECOM, INC. AND SUBSIDIARIES
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
NOTE 1 – CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements include the accounts of New Ulm Telecom, Inc. and its wholly owned subsidiaries (Company). All material intercompany transactions and accounts have been eliminated.
The presentation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and disclosure of contingent assets and liabilities at the balance sheet date, and the reported amounts of revenues and expenses during the reporting period. The estimates and assumptions used in the accompanying consolidated financial statements are based upon management’s evaluation of the relevant facts and circumstances as of the time of the financial statements. Actual results could differ from those estimates.
Revenues are recognized when earned, regardless of the period in which they are billed. Interstate network access revenues are furnished in conjunction with interexchange carriers and are determined by cost separation studies and nationwide average schedules. Revenues include estimates pending finalization of cost studies. Interstate network access revenues are based upon interstate tariffs filed with the Federal Communications Commission (FCC) by the National Exchange Carrier Association and state tariffs filed with state regulatory agencies. Management believes recorded revenues are reasonable based on estimates of cost separation studies, which are typically settled within two years. Local network and intrastate access revenues are based on tariffs filed with the state regulatory commissions. Revenues from system sales and services are derived from the sale, installation, and servicing of communication systems. In accordance with EITF 00-21, these deliverables are separate units of accounting. Customer contracts of sales and installations are recognized using the completed-contract method, which recognizes income when the contract is substantially complete. Rental revenues are recognized over the rental period.
The provision for income taxes consists of an amount for taxes currently payable and a provision for tax consequences deferred to future periods. Deferred income taxes are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Significant components of the Company’s deferred taxes arise from differences in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes and partnerships due to the difference between book and tax income. The Company’s effective income tax rate is higher than the U.S. rate due to the effect of state income taxes.
Effective January 1, 2007, the Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48 (“FIN 48”), Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109. The implementation of FIN 48 had no impact on the company’s financial statements as the Company has no unrecognized tax benefits. The Company is primarily subject to U.S. federal, Minnesota, Iowa, Nebraska and Wisconsin income tax. Tax years
8
subsequent to 2002 remain open to examination by U.S. federal and state tax authorities. The Company’s policy is to recognize interest and penalties related to income tax matters in income tax expense. As of January 1, 2007, and June 30, 2007, the Company had no accrual for interest or penalties related to income tax matters.
The balance sheets and statement of stockholders’ equity as of June 30, 2007, and statements of income and the statements of cash flows for the periods ended June 30, 2007 and 2006 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and changes in cash flows at June 30, 2007 and for the six-month periods ended June 30, 2007 and 2006 have been made.
The accompanying unaudited interim financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006. The results of operations for the period ended June 30, 2007 are not necessarily indicative of the operating results to be expected for the entire year.
NOTE 2 – SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the six months ended June 30:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
2006 |
|
||
|
|
|
|
|
|
|
|
||
|
|
Interest |
|
$ |
3,308 |
|
$ |
435,249 |
|
|
|
Income taxes |
|
$ |
25,254,500 |
|
$ |
3,011,000 |
|
Noncash investing activities included $6,183 and $367,859 during the periods ended June 30, 2007 and 2006, respectively, relating to plant and equipment additions placed in service, which are reflected in accounts payable at June 30, 2007 and 2006.
The noncash effect of the changes in loan guarantees and the respective investments in Hector and FiberComm, LC were decreases in the amount of $1,279,755 and $17,415 during the periods ended June 30, 2007 and 2006, respectively.
NOTE 3 – SECURED REDUCING REVOLVING CREDIT FACILITY
In 2001, the Company entered into a $15 million secured ten-year reducing revolving credit facility with CoBank, ACB, maturing in 2011. The Company also entered into a $10 million secured ten-year reducing revolving credit facility during 2001 with CoBank, ACB, maturing in 2011. In October 2006 and December 2006, the Company made long-term debt repayments that extinguished its debt with CoBank, ACB.
9
NOTE 4 – GOODWILL AND INTANGIBLE ASSETS
At June 30, 2007, the Company had goodwill for wireline acquisitions of $3,218,906. The Company annually tests this as required under SFAS 142 and has determined that the goodwill is not impaired.
Intangible assets with definite lives are amortized over their useful lives. Amortization expense is $2,052 per year.
NOTE 5 – SEGMENT INFORMATION
The Company is organized into three business segments: the Telecom Segment, the Cellular Segment, and the Phonery Segment.
|
|
|
|
|
|
• |
The Telecom Segment consists of the operations of its incumbent local exchange carriers (ILECs), its competitive local exchange carrier (CLEC), and its operations that provide Internet and video services. In addition, this Segment also has a 25.18% investment in FiberComm, LC, a competitive local exchange carrier (CLEC), in Sioux City, Iowa. The Company acquired a 33.33% ownership interest in Hector Communications Corporation (HCC) on November 3, 2006. HCC offers ILEC, CATV and Internet services to various communities in Minnesota and Wisconsin. The Company records its share of any income or loss from its investments in FiberComm, LC and HCC on the equity method. |
|
|
|
|
|
|
• |
The Cellular Segment includes the sales and service of cellular phones and accessories, and had a 9.88% cellular investment in Midwest Wireless Holdings, LLC (MWH) that was sold to Alltel on October 2, 2006. The cellular investment was recorded on the equity method on the financial statements and is presented in this note using the proportionate consolidation method. The Company recorded its 9.88% investment in MWH using the proportionate consolidation method so that it could be compared to the cellular industry, as well as the Company’s other business segments, and because the Company’s Chief Operating Decision Maker (CODM) reviewed the performance of MWH using the proportionate method. |
|
|
|
|
|
|
• |
The Phonery Segment includes the sales and service of customer premise equipment (CPE), transport operations, and the resale of long distance toll service. |
No single customer accounted for a material portion of the Company’s revenues in any of the last three years.
10
NOTE 5 – SEGMENT INFORMATION (continued)
Segment information is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom |
|
Cellular |
|
Phonery |
|
|
|
|
|
|
|
|||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
$ |
3,751,781 |
|
$ |
213,741 |
|
$ |
456,487 |
|
$ |
(245,378 |
) |
$ |
4,176,631 |
|
|
Depreciation and Amortization |
|
|
993,604 |
|
|
— |
|
|
10,969 |
|
|
— |
|
|
1,004,573 |
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
2,540,665 |
|
|
128,642 |
|
|
244,141 |
|
|
(245,378 |
) |
|
2,668,070 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
217,512 |
|
|
85,099 |
|
|
201,377 |
|
|
— |
|
|
503,988 |
|
|
Interest Expense |
|
|
(1,442 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(1,442 |
) |
|
Gain on Sale of MWH |
|
|
— |
|
|
3,116,624 |
|
|
— |
|
|
— |
|
|
3,116,624 |
|
|
Hector Investment Income |
|
|
218,423 |
|
|
— |
|
|
— |
|
|
— |
|
|
218,423 |
|
|
Other Investment Income |
|
|
114,498 |
|
|
212,290 |
|
|
— |
|
|
— |
|
|
326,788 |
|
|
Income Taxes |
|
|
(223,293 |
) |
|
(1,381,651 |
) |
|
(81,497 |
) |
|
— |
|
|
(1,686,441 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
325,698 |
|
$ |
2,032,362 |
|
$ |
119,880 |
|
$ |
— |
|
$ |
2,477,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
113,949,869 |
|
$ |
61,915 |
|
$ |
6,939,599 |
|
$ |
(61,679,403 |
) |
$ |
59,271,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
611,569 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
611,569 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom |
|
Cellular |
|
Phonery |
|
|
|
|
|
|
|
|||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Three Months Ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
$ |
3,661,180 |
|
$ |
7,117,916 |
|
$ |
422,696 |
|
$ |
(7,222,179 |
) |
$ |
3,979,613 |
|
|
Depreciation and Amortization |
|
|
1,123,874 |
|
|
786,724 |
|
|
12,340 |
|
|
(786,724 |
) |
|
1,136,214 |
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
2,297,913 |
|
|
4,284,286 |
|
|
214,823 |
|
|
(4,428,285 |
) |
|
2,368,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
239,393 |
|
|
2,046,906 |
|
|
195,533 |
|
|
(2,007,170 |
) |
|
474,662 |
|
|
Interest Expense |
|
|
(190,214 |
) |
|
(99,575 |
) |
|
— |
|
|
66,266 |
|
|
(223,523 |
) |
|
Cellular Investment Income |
|
|
— |
|
|
— |
|
|
— |
|
|
1,821,088 |
|
|
1,821,088 |
|
|
Other Investment Income (Expense) |
|
|
3,331 |
|
|
(119,816 |
) |
|
— |
|
|
119,816 |
|
|
3,331 |
|
|
Income Taxes |
|
|
(22,475 |
) |
|
(738,969 |
) |
|
(79,132 |
) |
|
— |
|
|
(840,576 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
30,035 |
|
$ |
1,088,546 |
|
$ |
116,401 |
|
$ |
— |
|
$ |
1,234,982 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
90,029,239 |
|
$ |
53,318,631 |
|
$ |
6,363,650 |
|
$ |
(94,898,065 |
) |
$ |
54,813,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
323,106 |
|
$ |
788,622 |
|
$ |
— |
|
$ |
(788,622 |
) |
$ |
323,106 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11
NOTE 5 – SEGMENT INFORMATION (continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom |
|
Cellular |
|
Phonery |
|
|
|
|
|
|
|
|||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Six Months Ended June 30, 2007 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
$ |
7,435,574 |
|
$ |
356,141 |
|
$ |
945,918 |
|
$ |
(483,895 |
) |
$ |
8,253,738 |
|
|
Depreciation and Amortization |
|
|
1,993,234 |
|
|
— |
|
|
27,779 |
|
|
— |
|
|
2,021,013 |
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
4,859,861 |
|
|
271,260 |
|
|
469,240 |
|
|
(483,895 |
) |
|
5,116,466 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
582,479 |
|
|
84,881 |
|
|
448,899 |
|
|
— |
|
|
1,116,259 |
|
|
Interest Expense |
|
|
(3,094 |
) |
|
— |
|
|
— |
|
|
— |
|
|
(3,094 |
) |
|
Gain on Sale of MWH |
|
|
— |
|
|
3,116,624 |
|
|
— |
|
|
— |
|
|
3,116,624 |
|
|
Hector Investment Income |
|
|
399,971 |
|
|
— |
|
|
— |
|
|
— |
|
|
399,971 |
|
|
Other Investment Income |
|
|
561,703 |
|
|
212,290 |
|
|
— |
|
|
— |
|
|
773,993 |
|
|
Income Taxes |
|
|
(624,975 |
) |
|
(1,381,563 |
) |
|
(181,669 |
) |
|
— |
|
|
(2,188,207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
916,084 |
|
$ |
2,032,232 |
|
$ |
267,230 |
|
$ |
— |
|
$ |
3,215,546 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
113,949,869 |
|
$ |
61,915 |
|
$ |
6,939,599 |
|
$ |
(61,679,403 |
) |
$ |
59,271,980 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
1,405,078 |
|
$ |
— |
|
$ |
— |
|
$ |
— |
|
$ |
1,405,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom |
|
Cellular |
|
Phonery |
|
|
|
|
|
|
|
|||
|
|
|
Segment |
|
Segment |
|
Segment |
|
Eliminations |
|
Consolidated |
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
Six Months Ended June 30, 2006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Revenues |
|
$ |
7,301,636 |
|
$ |
13,833,015 |
|
$ |
954,301 |
|
$ |
(14,065,043 |
) |
$ |
8,023,909 |
|
|
Depreciation and Amortization |
|
|
2,105,986 |
|
|
1,560,872 |
|
|
33,620 |
|
|
(1,560,872 |
) |
|
2,139,606 |
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
4,603,338 |
|
|
8,199,890 |
|
|
445,225 |
|
|
(8,500,226 |
) |
|
4,748,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
592,312 |
|
|
4,072,253 |
|
|
475,456 |
|
|
(4,003,945 |
) |
|
1,136,076 |
|
|
Interest Expense |
|
|
(374,599 |
) |
|
(294,478 |
) |
|
— |
|
|
230,817 |
|
|
(438,260 |
) |
|
Cellular Investment Income |
|
|
— |
|
|
— |
|
|
— |
|
|
3,732,674 |
|
|
3,732,674 |
|
|
Other Investment Income (Expense) |
|
|
180,237 |
|
|
(40,454 |
) |
|
— |
|
|
40,454 |
|
|
180,237 |
|
|
Income Taxes |
|
|
(162,275 |
) |
|
(1,512,494 |
) |
|
(192,417 |
) |
|
— |
|
|
(1,867,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
235,675 |
|
$ |
2,224,827 |
|
$ |
283,039 |
|
$ |
— |
|
$ |
2,743,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
90,029,239 |
|
$ |
53,318,631 |
|
$ |
6,363,650 |
|
$ |
(94,898,065 |
) |
$ |
54,813,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital Expenditures |
|
$ |
1,067,022 |
|
$ |
1,569,431 |
|
$ |
— |
|
$ |
(1,569,431 |
) |
$ |
1,067,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTE 6 – SUBSEQUENT EVENTS
Pending Acquisition of Hutchinson Telephone Company
On August 3, 2007, New Ulm Telecom, Inc. entered into an agreement and plan of merger with Hutchinson Telephone Company (“HTC”) under which New Ulm will acquire HTC for approximately $62 million in cash. After giving effect to closing date adjustments for HTC cash and working capital, and transaction expenses, the overall transaction size will be approximately $77 million. The transaction is being structured as a reverse triangular merger under which a newly-formed subsidiary of New Ulm, Hutchinson Acquisition Corp, will merge into HTC at closing with HTC continuing as a subsidiary of New Ulm. The acquisition will result in a combined company that provides phone, video and internet services with over 50,000 connections in a number of Minnesota and Iowa communities.
12
The proposed transaction is subject to customary closing conditions, regulatory approvals and approval by the shareholders of HTC. The transaction has been unanimously approved by the Boards of Directors of New Ulm and HTC and is expected to close late in the fourth quarter of 2007. New Ulm is funding the purchase from available cash and borrowings from CoBank, ACB.
13
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Company’s future results of operation and any forward-looking statements made in this Form 10-Q are subject to risks and uncertainties, including, but not limited to, the effects of deregulation in the telecommunications industry as a result of the Telecommunications Act of 1996. These forward-looking statements are subject to risks and uncertainties that could cause the Company’s actual results to differ materially from these statements and the Company disclaims any obligation to update or revise any forward-looking statements based on the occurrence of future events or the receipt of new information. See “Risk Factors” in Item 1A of the 2006 Form 10-K.
OVERVIEW
|
|
|
The Company
is organized into three business segments, as described in Note 5 to the
Financial Statements in this Form |
RESULTS OF OPERATIONS
CONSOLIDATED OPERATING RESULTS
The following is a summarized discussion of consolidated results of operations. More detailed discussion of operating results by segment follows this discussion.
|
|
|
|
|
OPERATING REVENUES: |
|
|
|
|
|
Total operating revenues were $4,176,631 for the three months ended June 30, 2007, for an increase of 5.0% or $197,018 compared to the same period in 2006. Total operating revenues were $8,253,738 for the six months ended June 30, 2007, for an increase of $229,829 or 2.9% compared to the same period in 2006. All segments experienced increases. |
|
|
|
|
|
The Telecom segment continues to experience decreases in its local network and network access revenues, both common industry trends. These decreases have been offset by increases in revenues from its expanded service offerings: digital video, digital subscriber line (DSL), Internet service provision, and the operations of a Competitive Local Exchange Carrier (CLEC) in the City of Redwood Falls, Minnesota. The Telecom segment has invested heavily in its infrastructure, which has allowed it to enhance its local network so that it could offer a “triple-play” of services to its subscribers. In the telecommunications industry, a “triple-play” of services refers to offering telephone, Internet and video services over the same infrastructure. The Company expects that continued infrastructure investment will allow it to offer its customers new technologies, such as hi-definition television (HDTV), which the Company began offering during the second quarter in its New Ulm and Redwood Falls, Minnesota locations. The geographic expansion of its service offerings will provide this segment with future growth. |
|
|
|
|
|
The Telecom segment’s decrease in its network access revenues is the result of downward pricing pressure on access charges and a decrease in the access minutes of use. The decrease in network access revenues was minimized due to the Company’s eligibility for high-cost loop funding through the Universal Service Fund for its ILEC operations in Springfield and |
14
|
|
|
|
|
Sanborn, Minnesota, and Aurelia, Iowa, and the immediately surrounding areas served by the affected ILECs. The Company continues to monitor the negative effects of network access pricing and the downward trend in access minutes of use that could affect future revenues in the Telecom sector in order to minimize the impact on the Company. Also, the FCC continues to examine inter-carrier compensation (payments from one telecommunications company to another for the use of their interconnecting networks). The FCC currently has an open docket on intercarrier compensation as well as several dockets on Voice over Internet Protocol (VoIP). The Company cannot predict the outcome of these proceedings nor can it estimate the impact, if any, on the Company. |
|
|
|
|
|
The Company believes that, despite the regulatory and competitive challenges faced by the Telecom segment, the Company has positioned itself for future revenue growth. The Company believes that future growth will be realized through increases in revenue due to new and expanded service offerings. The Company also continually evaluates new and emerging technologies to keep the Company’s service offerings innovative and competitive. The Company expects that continued infrastructure investment will allow the Company to continue to offer its customers new technologies as they emerge, and that geographic expansion of the Company’s service offerings will provide this segment with continued future growth. |
|
|
|
|
|
The Cellular segment saw an increase in its sales and service revenues of cellular phones and accessories for the three months and the six months ended June 30, 2007. The Phonery segment experienced an increase in operating revenues for the three months and the six months ended June 30, 2007 due to increased sales of customer premise equipment (CPE). |
|
|
|
|
|
OPERATING EXPENSES: |
|
|
|
|
|
Operating expenses for the three months ended June 30, 2007 increased $167,692, or 4.8%, compared to the same period in 2006. Operating expenses for the six months ended June 30, 2007 increased $249,646 or 3.6%. The Telecom segment was responsible for $143,771 of the increase in operating expenses for the six months ended June 30, 2007. Depreciation expense for the Telecom segment saw a decrease of $112,752 for the first six months of 2007 compared to 2006. Depreciation decreased due to some long-lived assets becoming fully depreciated even as the Company continues to make investments in the Telecom segment’s infrastructure. The increase in operating expenses, excluding depreciation and amortization, of $256,523 was due to the increased cost of providing services and an increasing customer base for the segment’s expanded services, such as digital video, DSL and Internet service. In addition, operating expenses increased due to additional costs incurred in connection with the Company’s ongoing compliance with Sarbanes-Oxley Act Section 404. The remainder of the increase in the Telecom segment reflected the additional selling, general and administrative expenses associated with the commitment of the Company to compete in all aspects of communication services and to provide exceptional customer service for the Company’s assortment of products and services to the communities that it serves. The Cellular and Phonery segments increased cost of goods sold accounted for the remainder of the increase. |
|
|
|
|
|
OPERATING INCOME: |
|
|
|
|
|
Operating income for the three months ended June 30, 2007 increased $29,326 or 6.2% over |
15
|
|
the three months ended June 30, 2006. Operating income for the six months ended June 30, 2007 decreased $19,817 or 1.7% compared to the six-month period ended June 30, 2006. The decrease in income for the six months ended June 30, 2007 was primarily due to the increase in video and other nonregulated service expenses and the increase in general and administrative expenses, including Sarbanes-Oxley Act Section 404 compliance costs, from the Telecom segment’s operations and the increased cost of goods sold from the Cellular and Phonery segments. |
|
|
|
|
|
OTHER INCOME: |
|
|
|
|
|
Overall, other income for the three months ended June 30, 2007 increased $2,059,497 compared to the three months ended June 30, 2006. Other income increased $812,843 for the six months ended June 30, 2007 compared to the same period in 2006. |
|
|
|
|
|
The Company’s cellular investment income for the six months ended June 30, 2007 decreased $3,732,674 due to the October 2006 sale of MWH to Alltel. The Company received $3.1 million in the first six month of 2007 due to the receipt of a portion of the escrow funds from Alltel in April 2007. The Company’s investment income increased $399,971 for the six months ended June 30, 2007 compared to the same period in 2006 due to the Company’s 33.33% ownership interest in Hector Communications Corporation acquired on November 3, 2006. |
|
|
|
|
|
Other investment income decreased $32,846 for the six months ended June 30, 2007 over the same period in 2006. This decrease was due to a decrease in the patronage income received from CoBank, a cooperative lender that specializes in agribusiness, communications, energy and water systems, and agricultural export financing, offset by an increase of investment income from Fibercom, L.C., a CLEC in Sioux City, Iowa for the six month period ended 2007 as compared to 2006. |
|
|
|
|
|
There was an increase of $626,602 in interest income for the six months ended June 30, 2007 compared to the same period in 2006. The increase was due to increased funds available for investment. |
|
|
|
|
|
There was a $435,166 decrease in interest expense for the six-month period ended June 30, 2007 compared to the same period in 2006. The decrease in interest expense was due to the Company’s repayment of its outstanding CoBank, ACB debt in 2006. |
|
|
|
|
|
NET INCOME: |
|
|
|
|
|
Net income was $2,477,940 for the three months ended June 30, 2007 compared with $1,234,982 for the same period in 2006. Net income was $3,215,546 for the six-month period ending June 30, 2007 compared with $2,743,541 compared with the same six-month period in 2006. The $1,242,958 or 100.6% increase in net income for the three months ended June 30, 2007 was primarily attributed to the increase in the gain on sale of MWH from the receipt of the first portion of the escrow funds received in early April 2007 and the increase in the Hector investment income, which were partially offset by the decrease in cellular investment income as a result of the October 2006 sale of the Company’s interest in MWH. |
16
Summary of Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
|
|
|
|
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating Income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Telecom Segment |
|
$ |
217,512 |
|
$ |
239,393 |
|
$ |
582,479 |
|
$ |
592,312 |
|
|
Cellular Segment |
|
|
85,099 |
|
|
39,736 |
|
|
84,881 |
|
|
68,308 |
|
|
Phonery Segment |
|
|
201,377 |
|
|
195,533 |
|
|
448,899 |
|
|
475,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
503,988 |
|
|
474,662 |
|
|
1,116,259 |
|
|
1,136,076 |
|
|
Other Income |
|
|
3,661,835 |
|
|
1,824,419 |
|
|
4,290,588 |
|
|
3,912,911 |
|
|
Interest Expense |
|
|
(1,442 |
) |
|
(223,523 |
) |
|
(3,094 |
) |
|
(438,260 |
) |
|
Income Taxes |
|
|
(1,686,441 |
) |
|
(840,576 |
) |
|
(2,188,207 |
) |
|
(1,867,186 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
2,477,940 |
|
$ |
1,234,982 |
|
$ |
3,215,546 |
|
$ |
2,743,541 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted Earnings Per Share |
|
$ |
.48 |
|
$ |
.24 |
|
$ |
.63 |
|
$ |
.54 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted Average Shares Outstanding |
|
|
5,115,435 |
|
|
5,115,435 |
|
|
5,115,435 |
|
|
5,115,435 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RESULTS OF OPERATIONS BY BUSINESS SEGMENT
Telecom Segment Operations
The Telecom segment revenues represented 84.8% of the Company’s consolidated operating revenues for the three-month period ended June 30, 2007 and 85.1% of the Company’s consolidated operating revenues for the six-month period ended June 30, 2007, before intercompany eliminations. Revenues are primarily earned by providing approximately 16,350 customers access to the local network in ILEC and CLEC operations, and by providing inter-exchange access for long distance network carriers. The Telecom segment also earns revenue by providing Internet services, including high-speed DSL Internet access, and video services to its subscribers, directory advertising, through billing and collecting for various long distance companies, and for management and billing services provided to HCC. This segment has invested in its infrastructure so that it can provide its customers with the latest technological advances, including being able to offer its “triple-play” of services. Total Telecom segment revenues for the three-month period ending June 30, 2007 increased $90,601 or 2.5% compared to the same period in 2006. Total Telecom segment revenues for the six-month period ending June 30, 2007 increased $133,938 or 1.8% compared to the same period in 2006. All information contained in the following table is before intercompany eliminations.
17
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
| ||||||||
|
|
|
|
|
|
| ||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2007 |
| ||||
|
|
|
|
|
|
|
|
|
|
| ||||
|
Operating Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Local Network |
|
$ |
1,000,645 |
|
$ |
1,018,219 |
|
$ |
1,958,810 |
|
$ |
1,995,145 |
|
|
Network Access |
|
|
1,373,773 |
|
|
1,384,540 |
|
|
2,792,134 |
|
|
2,823,031 |
|
|
Other |
|
|
1,377,363 |
|
|
1,258,421 |
|
|
2,684,630 |
|
|
2,483,460 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total Operating Revenues |
|
|
3,751,781 |
|
|
3,661,180 |
|
|
7,435,574 |
|
|
7,301,636 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
2,540,665 |
|
|
2,297,913 |
|
|
4,859,861 |
|
|
4,603,338 |
|
|
Depreciation and Amortization Expenses |
|
|
993,604 |
|
|
1,123,874 |
|
|
1,993,234 |
|
|
2,105,986 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
Total Operating Expenses |
|
|
3,534,269 |
|
|
3,421,787 |
|
|
6,853,095 |
|
|
6,709,324 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
217,512 |
|
|
239,393 |
|
|
582,479 |
|
|
592,312 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
325,698 |
|
$ |
30,035 |
|
$ |
916,084 |
|
$ |
235,675 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Local network revenue decreased in the Telecom segment by $17,574 or 1.7% for the three months ended June 30, 2007 compared to the same period in 2006. Local network revenue decreased in the Telecom segment by $36,335 or 1.8% for the six months ended June 30, 2007 compared to the same period in 2006. Local network revenue decreased during these periods as a result of a decrease in access lines of approximately 250 for the first three months of 2007 and approximately 350 for the first six months of 2007 compared to the same periods in 2006. The decrease in access lines is due to customers increasingly utilizing their wireless phones and customers dropping second phone lines in their homes when they move their Internet service from a dial-up platform to a DSL platform or a cable platform.
Network access revenue decreased $10,767 or 0.8% for the three months ended June 30, 2007 compared with the same period in 2006. Network access revenue decreased $30,897 or 1.1% for the six months ended June 30, 2007 compared to the same period in 2006. The decrease in network access revenue reflects the overall decrease in minutes of use and the negative effects of downward pricing pressure on network access pricing, a common industry trend. The Telecom segment experienced a 6.7% decrease in access minutes for the six months ended June 30, 2007 compared to the same period in 2006. In order to minimize the impact on the Company, the Company continues to monitor the negative effects of network access pricing and the downward trend in access minutes of use. The Telecom segment has maintained and enhanced its infrastructure, and has invested over $8.5 million in capital expenditures since 2004. These capital expenditures have enhanced this segment’s infrastructure and have allowed the Company to receive additional settlements from the National Exchange Carrier Association (NECA). The additional investment in the local loop (access line cost) has made the Company eligible for high-cost loop funding through the Universal Service Fund.
Other operating revenues increased $118,942 or 9.5% for the three months ended June 30, 2007 compared with the same period in 2006. Other operating revenues increased $201,170 or 8.1% for the six months ended June 30, 2007 compared with the same period in 2006. Due to the infrastructure enhancements that have taken place since 2000, the Telecom segment has been able to
18
offer its customers a “triple-play” of services over the existing infrastructure and offer its services on a CLEC basis to the city of Redwood Falls, Minnesota. The video product offered in New Ulm, Essig, Searles, Courtland, Springfield, Sanborn and Redwood Falls, Minnesota was responsible for $36,801 of the increase in these revenues for the six months ended June 30, 2007. The cable television services offered in the Minnesota communities of Cologne, Mayer, New Germany and New Market Township were responsible for $47,455 of the increase in other operating revenues for the six months ended June 30, 2007. Approximately $60,000 of the increase in other operating revenues was from the management services and billing services that the Company provided to HCC. Internet services were responsible for a $68,116 increase in operating revenues for the six months ended June 30, 2007. These increases were slightly offset by a decline in the amount of billing and collection revenue from interexchange carriers.
Operating expenses, excluding depreciation and amortization, increased $242,752 or 10.6% for the three-month period ended June 30, 2007 and increased $256,523 or 5.6% for the six-month period ended June 30, 2007 compared with the same periods in 2006. The increases in operating expenses were the result of increased selling, general and administrative costs, particularly those associated with compliance with Sarbanes-Oxley Act Section 404, and the increasing expenses associated with the expanded array of services offered such as video and DSL that allow the Company to offer the “triple-play” of services to its customers. The Telecom segment has recognized the value in being able to compete in all aspects of communication services. This realization has motivated the segment to enhance its awareness of customer satisfaction (including 24 hours a day, 7 days a week access to Internet support due to customers’ desire for this service), offer additional services (video and DSL), pursue aggressive marketing to develop brand recognition, and provide solutions for our customers’ evolving communication needs. The Company has expanded its services and product offerings in an effort to meet its objective of achieving 100% customer satisfaction by making the customer its top priority, deserving the Company’s best service, attitude and consideration.
Depreciation and amortization expenses decreased $130,270 or 11.6% for the three months ended June 30, 2007 compared with the same period in 2006. Depreciation and amortization expenses decreased $112,752 or 5.4% for the six months ended June 30, 2007 compared with the same period ended June 30, 2006. The decreases were due to certain long-lived assets that have become fully depreciated, while continuing to make investments in the Telecom segment’s infrastructure.
Operating income decreased $21,881 or 9.1% for the three months ended June 30, 2007 compared with the same period in 2006. Operating income decreased $9,833 or 1.7% for the six months ended June 30, 2007 compared to the same period in 2006. The decrease in operating income for the six months ended June 30, 2007 was primarily due to decreases in network access revenues, increased cost of providing additional services (video) to an increasing customer base, and additional general and administrative expenses associated with the commitment of the Telecom segment to effectively compete in all aspects of communication services and to provide superior customer-focused service for the Telecom segment’s complete array of products and services. These decreases in operating income were partially offset by increased revenue for video and Internet services due to an increase in customers, and the increase in revenues due to the management and billing services that the company provides to HCC.
Cellular Segment
The Cellular segment operations include the sales and service of cellular phones and accessories, and the Company’s 9.88% ownership interest in MWH (sold to Alltel on October 2, 2006). The
19
operating revenue from sales of cellular phones and accessories increased by $80,198 for the three month period ending June 30, 2007 and $117,468 for the six month period ending June 30, 2007 as compared to the same periods in 2006, due primarily to an increase in the sale of cellular phones. The cellular partnership income decreased $1,821,088 for the three months ended June 30, 2007 compared to the same period ended in 2006, and decreased $3,732,674 for the six months ended June 30, 2007 as compared to June 30, 2006 due to the sale of MWH to Alltel on October 2, 2006. The Cellular segment had an increase of $3,116,624 in the gain on sale of MWH due to the receipt of a portion of the escrow funds in April 2007 for the six months ended June 30, 2007. The Cellular segment information for its investment in MWH is shown in the following table using the proportionate consolidation method. The Company recorded its 9.88% investment in MWH using the proportionate consolidation method so that it could be compared to the cellular industry, as well as the Company’s other business segments, and because the Company’s CODM reviews the performance of MWH using the proportionate method.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||||||
|
|
|
|
|
|
|
||||||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Proportionate Method: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Operating Revenues |
|
$ |
— |
|
$ |
6,984,373 |
|
$ |
— |
|
$ |
13,594,342 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
— |
|
|
4,190,479 |
|
|
— |
|
|
8,029,525 |
|
|
|||
|
Depreciation and Amortization Expenses |
|
|
— |
|
|
786,725 |
|
|
— |
|
|
1,560,872 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Total Operating Expenses |
|
|
— |
|
|
4,977,204 |
|
|
— |
|
|
9,590,397 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Operating Income |
|
|
— |
|
|
2,007,169 |
|
|
— |
|
|
4,003,945 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
|
Net Income |
|
$ |
— |
|
$ |
1,821,088 |
|
$ |
— |
|
$ |
3,732,674 |
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||
A recap of income for the cellular segment using the equity method to record earnings on its investment in MWH, is contained in the following table.
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
|
|
|
|
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|||||||||||||
|
Operating Revenues: |
|
$ |
213,741 |
|
$ |
133,543 |
|
$ |
356,141 |
|
$ |
238,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
128,642 |
|
|
93,807 |
|
|
271,260 |
|
|
170,365 |
|
|
Depreciation and Amortization Expenses |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
128,642 |
|
|
93,807 |
|
|
271,260 |
|
|
170,365 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
85,099 |
|
|
39,736 |
|
|
84,881 |
|
|
68,308 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest Expense |
|
|
— |
|
|
(33,309 |
) |
|
— |
|
|
(63,661 |
) |
|
Interest Income |
|
|
212,290 |
|
|
— |
|
|
212,290 |
|
|
— |
|
|
Cellular Investment Income |
|
|
— |
|
|
1,821,088 |
|
|
— |
|
|
3,732,674 |
|
|
Gain on Sale of MWH |
|
|
3,116,624 |
|
|
— |
|
|
3,116,624 |
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Taxes |
|
|
1,381,651 |
|
|
738,969 |
|
|
1,381,563 |
|
|
1,512,494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
2,032,362 |
|
$ |
1,088,546 |
|
$ |
2,032,232 |
|
$ |
2,224,827 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As previously disclosed, on October 2, 2006, MWH was sold to Alltel.
Phonery Segment
The Phonery segment represented 10.3% of the consolidated operating revenues for the three-month period ended June 30, 2007 and 10.8% of the consolidated operating revenues for the six-month period ended June 30, 2007 before intercompany eliminations. Revenues are earned primarily by sales, installation and service of business telephone systems and data communications equipment. In addition, the Phonery segment leases network capacity to provide additional network access revenues and resells long distance toll service. This segment’s expertise is the quality installation and maintenance of CPE, provision of customer long distance needs and transport solutions in communication to end user customers. All information contained in the following table is before intercompany eliminations.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, |
|
Six Months Ended June 30, |
|
||||||||
|
|
|
|
|
|
|
||||||||
|
|
|
2007 |
|
2006 |
|
2007 |
|
2006 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
|
|||||||||||||
|
Operating Revenues: |
|
$ |
456,487 |
|
$ |
422,696 |
|
$ |
945,918 |
|
$ |
954,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses, Excluding Depreciation and Amortization |
|
|
244,141 |
|
|
214,823 |
|
|
469,240 |
|
|
445,225 |
|
|
Depreciation and Amortization Expenses |
|
|
10,969 |
|
|
12,340 |
|
|
27,779 |
|
|
33,620 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Operating Expenses |
|
|
255,110 |
|
|
227,163 |
|
|
497,019 |
|
|
478,845 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
201,377 |
|
|
195,533 |
|
|
448,899 |
|
|
475,456 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
119,880 |
|
$ |
116,401 |
|
$ |
267,230 |
|
$ |
283,039 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenue increased $33,791 or 8.0%, for the three months ended June 30, 2007 compared to the same period ended 2006. Operating revenue decreased $8,383 or 0.9% for the six months ended June 30, 2007 compared to the same period in 2006. The Phonery segment experienced
21
decreased operating revenues for the six months ended June 30, 2007 primarily due to decreased revenues from the resale of long distance toll.
Operating expenses, excluding depreciation and amortization increased $29,318 or 13.6% for the three months ended June 30, 2007 and increased $24,015 or 5.4% for the six months ended June 30, 2007 compared to the same periods in 2006. This six-month increase in operating expenses is primarily due to increased cost of goods sold. This segment strives for cost efficiencies, while continuing to endeavor to reach the customer service goal of achieving 100% customer satisfaction. This segment continues to seek new technologies to better serve customer needs and to operate efficiently.
Depreciation and amortization expenses decreased $1,371 or 11.1% for the three months ended June 30, 2007 compared with the same period in 2006. Depreciation and amortization expenses decreased $5,841 or 17.4% for the six months ended June 30, 2007 compared to the same period in 2006. These decreases were due to long-lived asset that have become fully depreciated.
Operating income increased by $5,844 or 3.0% for the three months ended June 30, 2007 compared to the three months ended June 30, 2006. This three-month increase in income was primarily the result of the increase in operating revenues. Operating income decreased $26,557 or 5.6% for the six months ended June 30, 2007 compared to the same period in 2006.
LIQUIDITY AND CAPITAL RESOURCES
Capital Structure
The total long-term capital structure (long-term debt plus stockholders’ equity) for the Company was $53,003,489 at June 30, 2007, reflecting 99.9% equity and 0.1% debt. This compares to a capital structure of $50,827,836 at December 31, 2006, reflecting 99.8% equity and 0.2% debt. Management believes adequate internal and external resources are available to finance ongoing operating requirements, including capital expenditures, business development, debt service and the payment of dividends for at least the next 12 months.
Cash Flows
Cash used by operations was $19,836,572 for the six-month period ended June 30, 2007 compared to cash provided by operations of $2,061,749 for the six-month period ended June 30, 2006. The cash flows used by operations for the six months ended June 30, 2007 were primarily due to the payment of income taxes, partially offset by net income and non-cash expenses for depreciation and amortization. Cash flows from operations for the six months ended June 30, 2006 were primarily attributable to net income plus non-cash expenses for depreciation and amortization.
Cash flows provided by investing activities were $1,586,722 for the six months ended June 30, 2007 compared to cash flows used in investing activities of $1,361,030 for the same period in 2006. In April 2007, the Company received $3,116,624, a portion of the escrow funds from the MWH sale to Alltel. Capital expenditures relating to on-going businesses were $1,405,078 during the first six months of 2007 as compared to $1,067,022 for the same period in 2006. The Company operates in a capital-intensive business. The Company is continuing to upgrade its local networks for changes in
22
technology to provide the most advanced services to its customers. The Company expects total plant additions of approximately $4,000,000 in 2007.
Cash flows used by financing activities were $1,039,893 for the six-month period ended June 30, 2007 compared to cash flows used by financing activities of $2,179,073 for the six-month period ended June 30, 2006. Included in cash flows used in financing activities were debt repayments and dividend payments.
Dividends
The Company paid dividends of $1,023,087 during the first six months of 2007 and $920,778 during the first six months of 2006. This represented a dividend of $.10 per share per quarter for 2007 and $.09 per share per quarter for 2006. The Company continues to reinvest in its infrastructure while maintaining dividends to shareholders. The Board of Directors reviews dividend declarations based on anticipated earnings, capital requirements and the operating and financial condition of the Company. The Company does not expect its payout of dividends at the existing level to negatively affect the liquidity of the Company.
Receipt of Remaining Funds From MWH
Prior to the sale of MWH, the Company owned approximately 9.88% of MWH. In November 2005, MWH and Alltel entered into an agreement under which Alltel agreed to purchase MWH. The transaction was closed October 2, 2006 after the satisfaction of conditions and the receipt of regulatory approvals. Under the terms of the agreement, all of the members of MWH sold their membership interests to Alltel.
Upon closing, New Ulm Telecom, Inc. received approximately 90% of the sale proceeds attributable to its interest or approximately $74 million on October 6, 2006. Alltel delivered the other 10% to the escrow agent. The escrow account will be used for any true-up adjustments, indemnifications, and other specified costs. Funds not used for these purposes will be released to the members.
As of December 2006, the Company’s prorated share of the amount in escrow was $8,170,263, plus accrued interest. On April 5, 2007, the Company received payment of approximately $3 million plus accrued interest from the escrow fund. As previously disclosed, New Ulm expects to receive an additional payment of approximately $5 million plus accrued interest in January 2008, from the remaining amounts in escrow, subject to certain contingencies and fulfillment of the escrow conditions. Due to the contingencies for release of the escrow funds, the Company had not recorded a receivable for any part of the funds at December 31, 2006 and June 30, 2007 and has not recorded a receivable for the remaining escrow funds that the Company would receive in January 2008.
Financing Related to Acquisition of Hutchinson Telephone Company
In connection with its proposed acquisition of Hutchinson Telephone Company, described above in Note 6 of Notes to Financial Statements, New Ulm intends to establish a credit facility with CoBank, ACB, to finance a portion of the purchase price and to establish a working capital line of credit. The Company expects to close on the credit facility concurrent with the closing of the acquisition.
23
Working Capital
The Company had working capital of $11,171,147 as of June 30, 2007, compared to working capital of $8,736,311 as of December 31, 2006. The ratio of current assets to current liabilities was 7.7:1.0 as of June 30, 2007 and 1.4:1.0 as of December 31, 2006.
Long-Term Debt
See Note 3 on page 9 of this Form 10-Q.
Other
The Company has not conducted a public equity offering. It operates with original equity capital, retained earnings and indebtedness.
By utilizing cash flow from operations and current cash balances, the Company feels it has adequate resources to meet its anticipated operating, capital expenditures, and debt service requirements.
Recent Accounting Developments
In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS 159”). The Statement permits entities to choose to measure at fair value many financial instruments and certain other items that are not currently required to be measured at fair value. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS 159 will be effective for the first fiscal year that begins after November 15, 2007. The Company has not yet assessed the impact of this Statement on the Company’s financial statements.
In July 2006, the Financial Accounting Standards Board (the FASB) issued FASB Interpretation No. 48 (FIN 48), “Accounting for Uncertainty in Income Taxes, an interpretation of FASB Statement No. 109.” FIN 48 clarifies the accounting for income taxes by prescribing the minimum recognition threshold a tax position is required to meet before being recognized in the financial statements. FIN 48 also provides guidance on derecognition, measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 applies to all tax positions related to income taxes subject to FASB Statement No. 109, Accounting for Income Taxes” (FASB No. 109). FIN 48 is effective for fiscal years beginning after December 15, 2006. Differences between the amounts recognized in the statements of financial position prior to the adoption of FIN 48 and the amounts reported after adoption should be accounted for as a cumulative-effect adjustment recorded to the beginning balance of retained earnings. The Company’s implementation of FIN 48 had no impact on its financial statements as the Company has no unrecognized tax benefits.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have operations subject to risks of foreign currency fluctuations, nor does the Company use derivative financial instruments in its operations or investment portfolio.
24
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
As of December 31, 2006, the management of the Company carried out an assessment under the supervision of and with the participation of the Company’s Chief Executive Officer, the Chief Financial Officer and Chief Operating Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act Rules 13a-15(b) and 15d-15(b). In the course of completing management’s assessment of the Company’s internal control over financial reporting, management has identified a control deficiency that is a material weakness, as reported in the Company’s Annual Report on Form 10-K for 2006 which was filed on March 28, 2007 (the “2006 Form 10-K”). As of the date of that assessment, the Chief Executive Officer, the Chief Financial Officer and Chief Operating Officer concluded that as a result of the material weakness, the Company’s disclosure controls and procedures were not effective as of December 31, 2006.
A material weakness is a significant deficiency (as defined in Public Company Accounting Oversight Board Auditing Standard No. 2), or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected.
The Company’s management with the participation of the Chief Executive Officer and the Chief Financial Officer, evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation they have concluded that the Company’s disclosure controls and procedures are not effective in ensuring that all material information required to be filed with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time period specified in the rules and forms of the Commission because of the material weakness in its internal control over financial reporting as discussed and reported in the Company’s 2006 Form 10-K.
In light of the material weaknesses described in the 2006 Form 10-K, management continues to monitor its carrier access billings and has determined appropriate remediation steps to ensure all access revenues are accurately billed and expects to have these steps completed by year-end. Management believes that the interim consolidated financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the period presented.
(b) Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2007 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
25
Other than the additional risk factors described below, there have been no material changes to the risk factors described in our annual report on Form 10-K for the year ended December 31, 2006.
There can be no assurance that we will be able to successfully complete the acquisition of Hutchinson Telephone Company or to operate it successfully after the acquisition.
As described above in Note 6 of Notes to Financial Statements, on August 3, 2007, New Ulm Telecom, Inc. entered into an agreement and plan of merger with Hutchinson Telephone Company (“HTC”) under which New Ulm will acquire HTC for approximately $62 million in cash. There can be no assurance that we will obtain the required federal, state and local regulatory approvals needed for consummation of the merger, obtain the required approval by the shareholders of HTC, or operate the combined company in a profitable manner after the merger.
There can be no assurance that we will receive the escrow proceeds from the sale of our interest in MWH in their entirety.
In connection with the acquisition of MWH by Alltel in October 2006, New Ulm received approximately 90% of the sale proceeds attributable to its interest or approximately $74 million on October 6, 2006. Alltel delivered the other 10% to the escrow agent. The escrow account will be used for any true-up adjustments, indemnifications, and other specified costs. Funds not used for these purposes will be released to the members. As of December 2006, the Company’s prorated share of the amount in escrow was $8,170,263, plus accrued interest. On April 5, 2007, the Company received a payment from the escrow fund of approximately $3 million plus accrued interest. As previously disclosed, New Ulm expects to receive an additional payment of approximately $5 million plus accrued interest in January 2008 from the remaining amounts in escrow, subject to certain contingencies and fulfillment of the escrow conditions. Due to the contingencies for release of the escrow funds, the Company had not recorded a receivable for any part of the funds at December 31, 2006 and June 30, 2007 and has not recorded a receivable for the remaining escrow funds that the Company would receive in January 2008.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the stockholders of the Company was held May 31, 2007 in New Ulm, Minnesota. The total number of shares outstanding and entitled to vote at the meeting was 5,115,435 of which 3,742,367 shares were present either in person or by proxy. The election of directors was the only matter presented to stockholders.
Two 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 |
WITHHELD |
BROKER |
|
|
|
|
|
|
|
|
James Jensen |
3,677,770 |
64,597 |
443,787 |
|
|
Perry Meyer |
3,680,986 |
61,381 |
443,787 |
26
The Board Members continuing and whose terms expire at subsequent annual meetings are as follows:
|
|
|
|
|
|
|
2008 Annual Meeting |
2009 Annual Meeting |
|
|
|
|
|
|
|
|
Paul Erick |
Rosemary Dittrich |
|
|
|
Duane Lambrecht |
Mary Ellen Domeier |
|
|
|
|
Gary Nelson |
|
Receipt of Remaining Funds from Sale of Midwest Wireless Holding
As previously disclosed, on October 6, 2006, New Ulm received approximately 90% of the sale proceeds attributable to its interest in MWH or approximately $74 million. The purchaser Alltel delivered the other 10% to the escrow agent. The escrow account will be used for any true-up adjustments, indemnifications, and other specified costs. Funds not used for these purposes will be released to the members.
As of December 2006, the Company’s prorated share of the amount in escrow was $8,170,263, plus accrued interest. On April 5, 2007, the Company received payment of approximately $3 million plus accrued interest from the escrow fund. New Ulm expects to receive an additional payment of approximately $5 million plus accrued interest in January 2008, from the remaining amounts in escrow, subject to certain contingencies and fulfillment of the escrow conditions. Due to the contingencies for release of the escrow funds, the Company had not recorded a receivable for any part of the funds at December 31, 2006 and June 30, 2007 and has not recorded a receivable for the remaining escrow funds that the Company would receive in January 2008.
Pending Acquisition of Hutchinson Telephone Company
As described in Note 6 of Note to Financial Statements, on August 3, 2007, New Ulm Telecom, Inc. entered into an agreement and plan of merger with Hutchinson Telephone Company (“HTC”) under which New Ulm will acquire HTC.
|
|
|
|
|
|
(a) |
Exhibits |
|
|
|
|
|
|
|
See “Index to Exhibits” on page 29 of this Form 10-Q. |
27
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
|
|
|
|
|
NEW ULM TELECOM, INC. |
|
|
|
|
|
Dated: August 8, 2007 |
By |
/s/ Bill Otis |
|
|
|
|
|
|
|
Bill Otis, President |
|
|
|
|
|
Dated: August 8, 2007 |
By |
/s/ Nancy Blankenhagen |
|
|
|
|
|
|
|
Nancy Blankenhagen, Chief Financial Officer |
28
|
|
|
|
|
Exhibit |
|
Description |
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2.1 |
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Agreement and Plan of Merger, dated August 3, 2007, by and among New Ulm Telecom, Inc., Hutchinson Acquisition Corp. and Hutchinson Telephone Company. |
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31.1 |
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Chief Executive Officer Certification Pursuant to Exchange Act Rule 13a-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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31.2 |
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Chief Financial Officer Certification Pursuant to Exchange Act Rule 13a-14, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
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32.1 |
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Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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32.2 |
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Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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