Mail Stop 0407
April 13, 2005
Via U.S. Mail and Fax (1-507-359-1611)
Ms. Nancy Blankenhagen
Chief Financial Officer
New Ulm Telecom, Inc.
27 North Minnesota Street
New Ulm, Minnesota 56073
RE: New Ulm Telecom, Inc.
Form 10-K for the fiscal year ended December 31, 2004
Filed March 30, 2005
File No. 0-3024
Dear Ms. Blankenhagen:
We have reviewed the above referenced filings and have the
following comments. We have limited our review to only your
financial statements and related disclosures and will make no
further
review of your documents. As such, all persons who are
responsible
for the adequacy and accuracy of the disclosure are urged to be
certain that they have included all information required pursuant
to
the Securities Exchange Act of 1934. Please address the following
comments in future filings. If you disagree, we will consider
your
explanation as to why our comment is inapplicable or a future
revision is unnecessary. Please be as detailed as necessary in
your
explanation. In some of our comments, we may ask you to provide
us
with supplemental information so we may better understand your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 10-K for the fiscal year ended December 31, 2004
Item 7. Management`s Discussion and Analysis of Financial
Condition
and Results of Operations
Non-GAAP Measures, page 11
1. Refer to the definition of your measure labeled as EBITDA.
Please
see question 14 of our frequently asked questions regarding the
use
of Non-GAAP financial measures available on our website at
http://www.sec.gov/divisions/corpfin/faqs/nongaapfaq.htm that
clarifies that "Earnings" as used in the commonly used metric
"EBITDA" is intended to mean net income (loss) presented in the
statement of operations under GAAP, instead of operating income as
you have disclosed in your definition. Please see our adopting
release, that states that non-GAAP measures that are calculated
differently than EBITDA should not be characterized as EBITDA.
Therefore, please revise the title of this measure and provide a
definition that identifies clearly how the measure is being
calculated and how the calculation of your non-GAAP measure
differs
from the most directly comparable GAAP measure, net income (loss).
2. In addition disclose in more detail why you believe your
measures
labeled as EBITDA is a useful indicator of operating performance.
Specifically, since capital items are necessary to enable you to
generate revenues, it is unclear how a financial measure that
omits
depreciation could be a relevant and useful measure of operating
performance. Additionally, it is unclear how EBITDA is a useful
measure of operating performance when it also omits recurring
items
such as "interest expense," "interest and dividend income," "gain
on
dissolution," "equity earnings in cellular partnership" and "other
investment income (expense)." Avoid mere conclusions that the
measure "is provided because the Company understands that such
information is used by certain investors when analyzing the
financial
position and performance of the Company." Rather, explain in
clear
language what the core operating performance is and how it is
used,
and clearly explain the items not considered by your non-GAAP
performance measure and why management believes it is relevant to
do
so. Refer to Item 10 of Regulation S-K and Question 8 of our
Frequently Asked Questions document on non-GAAP measures which is
available on our website at:
<http://www.sec.gov/divisions/corpfin/faqs/nongaapfaq.htm>.
3. Finally since you disclose that EBITDA is presented because it
is
used by certain investors when analyzing the financial position
and
performance of the company, you must reconcile them to the most
closely comparable GAAP measure of operating performance: net
income
(loss). As such, do not reconcile them to operating loss. Please
see question 15 of our frequently asked questions regarding the
use
of Non-GAAP financial measures available on our website at
http://www.sec.gov/divisions/corpfin/faqs/nongaapfaq.htm and
revise
your future filings accordingly.
Consolidated Results of Operations, page 12
4. We note your discussion of consolidated results of operations
on
page 12 does not correspond to the line items presented in your
consolidated statement of income on page 26. Revise your
discussion
of consolidated results of operations to discuss each significant
component of revenues and expenses in accordance with Section 303
(a)
of Regulation S-K.
Results of Operations by Segment, page 13
5. We note that your segment tabular presentation and discussion
of
result and operations does not match your segment footnote
presentation on page 38. Revise your discussion of segment
results
of operations to correspond to your segment presentation on page
38
in accordance FRC Section 501.06. Include a discussion your
measure
of profit or loss for each reportable segment as per our comment
number 10 below. Furthermore, if you choose to present "cash
operating expenses" and "non-cash operating expenses," provide a
reconciliation showing which line items are included from the
consolidated statement of income.
Consolidated Statements of Income, page 26
6. If costs and expenses applicable to sales and revenue exclude
depreciation and amortization directly applicable to the
generation
of revenue, then revise your presentation to comply with SAB 11:B.
7. Tell us and discuss in your MD&A what is included in other
nonregulated services. Tell us where you have included the costs
related to the nonregulated services.
Note 1 - Summary of Significant Accounting Policies
Revenue Recognition, page 30
8. We note on page 16 of your MD&A that your phonery segment has
revenues earned by sales, installation and service of business
telephone systems and data communications equipment. Tell us your
revenue recognition policy regarding this type of revenue. Tell
your
consideration of EITF 00-21. Include a discussion of revenue from
sales, installation and service of systems and equipment in your
revenue recognition policy footnote.
Note 4 - Goodwill and intangibles, page 33
9. It appears that you are testing goodwill for impairment,
including
the goodwill related to your equity investment in MWH under the
provisions of SFAS 142. Tell us in detail how you test goodwill
associated with the acquisition of ownership interests in MWH.
Tell
us how you considered paragraphs B169 and B170 of SFAS 142.
Note 13 - Segment Information, page 38
10. Disclose you measure of profit or loss for each reportable
segment in accordance with paragraph 27 of SFAS 131.
11. Since you use proportionate consolidation for segment
reporting
in connection with your equity investment in MWH, you should
disclose
your accounting policy for segment reporting in accordance with
paragraph 31(b) of SFAS 131 and the investment in the investee as
required by paragraphs 28(a) of SFAS 131. Also, confirm that you
are
using proportionate consolidation for segment reporting because
that
is the way the CODM reviews the performance of your equity
investee.
* * * *
Please respond to these comments within 10 business days or
tell us when you will provide us with a response. Please furnish
a
letter that keys your responses to our comments and provides any
requested supplemental information. Please file your response
letter
on EDGAR.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filings reviewed by the staff to
be
certain that they have provided all information investors require
for
an informed decision. Since the company and its management are in
possession of all facts relating to a company`s disclosure, they
are
responsible for the accuracy and adequacy of the disclosures they
have made.
In connection with responding to our comments, please
provide,
in writing, a statement from the company acknowledging that
* the company is responsible for the adequacy and accuracy of the
disclosure in the filings;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filings; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of
Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filings or
in
response to our comments on your filings.
You may contact Inessa Berenbaum, Staff Accountant, at (202)
942-5288 or Ivette Leon, Assistant Chief Accountant, at (202) 942-
1982 if you have questions regarding comments on the financial
statements and related matters. Please contact me at (202) 942-
1990
with any other questions.
Sincerely,
Larry Spirgel
Assistant Director
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Ms. Nancy Blankenhagen
New Ulm Telecom, Inc.
April 13, 2005
Page 5
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
DIVISION OF
CORPORATION FINANCE