Nuvera Communications, Inc 10-Q for FY2023 Q1

Nuvera Communications, Inc. (NUVR)

10-Q 2023-05-10 For: 2023-03-31

Added on April 06, 2026

About this 10-Q

Nuvera Communications, Inc filed this 10-Q on May 10, 2023, covering the quarter ended March 31, 2023 (FY2023 Q1).

Headline figures

Quarter ended March 31, 2023, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $16.36M; down 0.7% from $16.47M a year earlier
Net income: $4.32M; up 79.9% from net income of $2.4M a year earlier
Diluted EPS: $0.84; up 78.7% from $0.47 a year earlier

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Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock - $1.66 par value	NUVR	OTCQB Marketplace

PART I – FINANCIAL INFORMATION

Item 1	Financial Statements	4 - 9

	Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2023 and 2022	4

	Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended March 31, 2023 and 2022	5

	Consolidated Balance Sheets (unaudited) as of March 31, 2023 and December 31, 2022	6 - 7

	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2023 and 2022	8

	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended March 31, 2023 and 2022	9

	Condensed Notes to Consolidated Financial Statements (unaudited)	10 - 34

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	34 - 46

Item 3	Quantitative and Qualitative Disclosures About Market Risk	46

Item 4	Controls and Procedures	46 - 47

PART II – OTHER INFORMATION

Item 1	Legal Proceedings	47

Item 1A	Risk Factors	47 - 56

Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	57

Item 3	Defaults upon Senior Securities	57

Item 4	Mine Safety Disclosures	57

Item 5	Other Information	57

Item 6	Exhibits Listing	58

	Signatures	59

	Exhibits

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)

	Three Months Ended March 31,
	Three Months Ended March 31,
	2023		2022
OPERATING REVENUES:
Voice Service	$	1,312,593	$	1,468,178
Network Access		1,095,292		1,291,310
Video Service		3,051,297		3,141,492
Data Service		6,816,549		6,716,852
A-CAM/FUSF		2,988,279		2,894,587
Other Non-Regulated		1,098,937		962,353
Total Operating Revenues		16,362,947		16,474,772

OPERATING EXPENSES:
Plant Operations (Excluding Depreciation and Amortization)		3,980,487		3,427,246
Cost of Video		2,465,320		2,549,852
Cost of Data		1,066,178		1,028,534
Cost of Other Nonregulated Services		396,387		378,194
Depreciation and Amortization		3,687,032		3,498,284
Selling, General and Administrative		2,579,346		2,661,463
Total Operating Expenses		14,174,750		13,543,573

OPERATING INCOME		2,188,197		2,931,199

OTHER INCOME (EXPENSE)
Interest Expense		(1,202,923)		(496,655)
Interest/Dividend Income		89,275		177,045
Interest During Construction		58,499		32,204
Gain on Sale of Investments		4,087,207		-
CoBank Patronage Dividends		692,371		567,468
Other Investment Income		89,536		124,301
Total Other Income (Expense)		3,813,965		404,363

INCOME BEFORE INCOME TAXES		6,002,162		3,335,562

INCOME TAXES EXPENSE		1,680,603		933,956

NET INCOME	$	4,321,559	$	2,401,606

NET INCOME PER SHARE
Basic	$	0.85	$	0.47
Diluted	$	0.84	$	0.47

DIVIDENDS PER SHARE	$	0.14	$	0.14

WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		5,095,097		5,111,622
Diluted		5,136,814		5,124,540

The accompanying notes are an integral part of these consolidated financial statements.

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)

	Three Months Ended March 31,
	Three Months Ended March 31,
	2023		2022

Net Income	$	4,321,559	$	2,401,606

Other Comprehensive Income:
Unrealized Gain (Loss) on Interest Rate Swaps		(446,508)		1,799,825
Income Tax (Expense) Benefit Related to Unrealized Gain (Loss) on Interest Rate Swaps		127,433		(513,670)
Other Comprehensive Gain (Loss)		(319,075)		1,286,155

Comprehensive Income	$	4,002,484	$	3,687,761

The accompanying notes are an integral part of these consolidated financial statements.

NUVERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (Unaudited)

ASSETS

	March 31, 2023		December 31, 2022
	March 31, 2023		December 31, 2022
CURRENT ASSETS:
Cash	$	830,401	$	310,556
Receivables, Net of Allowance for Doubtful Accounts of $140,000 and $140,000		5,001,009		3,725,422
Income Taxes Receivable		-		283,665
Materials, Supplies, and Inventories		31,389,383		23,617,800
Prepaid Expenses and Other Current Assets		2,095,154		1,886,480
Total Current Assets		39,315,947		29,823,923

INVESTMENTS & OTHER ASSETS:
Goodwill		49,903,029		49,903,029
Intangibles		15,941,773		16,363,192
Other Investments		8,362,540		11,016,246
Right of Use Asset		1,255,835		1,341,029
Financial Derivative Instruments		1,767,954		2,214,462
Other Assets		455,944		461,445
Total Investments and Other Assets		77,687,075		81,299,403

PROPERTY, PLANT & EQUIPMENT:
Communications Plant		227,331,203		219,891,050
Other Property & Equipment		30,239,490		29,836,775
Video Plant		16,122,912		16,096,032
Total Property, Plant and Equipment		273,693,605		265,823,857
Less Accumulated Depreciation		162,897,906		159,632,293
Net Property, Plant & Equipment		110,795,699		106,191,564

TOTAL ASSETS	$	227,798,721	$	217,314,890

The accompanying notes are an integral part of these consolidated financial statements.

Nuvera Communications, Inc 10-Q for FY2023 Q1

About this 10-Q

Headline figures

NUVERA COMMUNICATIONS, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

See Consolidated Statements of Income (for discussion below)

Other Income (Expense) and Interest Expense

Income Taxes

NUVERA COMMUNICATIONS, INC. CONSOLIDATED BALANCE SHEETS (continued) (Unaudited)

LIABILITIES AND STOCKHOLDERS' EQUITY

	March 31, 2023		December 31, 2022
	March 31, 2023		December 31, 2022
CURRENT LIABILITIES:
Current Portion of Long-Term Debt, Net of Unamortized Loan Fees	$	-	$	-
Accounts Payable		9,477,514		7,012,264
Accrued Income Taxes		1,296,938		-
Other Accrued Taxes		306,140		243,965
Accrued Compensation		2,042,964		2,051,316
Other Accrued Liabilities		1,961,087		2,354,395
Total Current Liabilities		15,084,643		11,661,940

LONG-TERM DEBT, Net of Unamortized Loan Fees		82,706,175		78,552,197

NONCURRENT LIABILITIES:
Loan Guarantees		-		169,565
Deferred Income Taxes		22,610,097		22,737,530
Unrecognized Tax Benefit		23,304		23,304
Other Accrued Liabilities		1,397,304		1,588,502
Total Noncurrent Liabilities		24,030,705		24,518,901

COMMITMENTS AND CONTINGENCIES:		-		-

STOCKHOLDERS' EQUITY:
Preferred Stock - $1.66 Par Value, 10,000,000 Shares Authorized, No Shares Issued and Outstanding		-		-
Common Stock - $1.66 Par Value, 90,000,000 Shares Authorized, 5,098,865 and 5,093,213 Shares Issued and Outstanding		8,498,109		8,488,689
Accumulated Other Comprehensive Gain		1,263,380		1,582,455
Unearned Compensation		69,763		79,892
Retained Earnings		96,145,946		92,430,816
Total Stockholders' Equity		105,977,198		102,581,852

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	227,798,721	$	217,314,890

The accompanying notes are an integral part of these consolidated financial statements.

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Three Months Ended
	March 31, 2023		March 31, 2022
	March 31, 2023		March 31, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income	$	4,321,559	$	2,401,606
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and Amortization		3,738,611		3,523,156
Gain on Sale of Investments		(4,087,207)		-
Undistributed Earnings of Other Equity Investments		(88,509)		(121,963)
Noncash Patronage Refund		(106,769)		(118,223)
Stock Issued in Lieu of Cash Payment		177,400		140,518
Distributions from Equity Investments		-		100,000
Stock-based Compensation		22,262		3,782
Changes in Assets and Liabilities:
Receivables		(273,354)		(108,585)
Income Taxes Receivable		283,665		933,956
Inventories for Resale		16,842		(12,527)
Prepaid Expenses		(302,424)		(249,030)
Other Assets		5,501		(15,322)
Accounts Payable		25,557		862,316
Accrued Income Taxes		1,296,938		-
Other Accrued Taxes		62,175		62,726
Other Accrued Liabilities		(507,664)		158,426
Net Cash Provided by Operating Activities		4,584,583		7,560,836

CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant, and Equipment, Net		(5,282,546)		(4,116,747)
Materials and Supplies for Construction		(7,938,169)		(1,957,139)
Proceeds from Sale of Equity Investments		5,576,804		-
Other, Net		189,825		12,788
Net Cash Used in Investing Activities		(7,454,086)		(6,061,098)

CASH FLOWS FROM FINANCING ACTIVITIES:
Principal Payments of Long-Term Debt		-		(1,152,600)
Loan Origination Fees		(9,912)		(28,000)
Changes in Revolving Credit Facility		4,112,310		2,148,698
Repurchase of Common Stock		-		(3,187,500)
Dividends Paid		(713,050)		(708,407)
Net Cash Used in Financing Activities		3,389,348		(2,927,809)

NET CHANGE IN CASH		519,845		(1,428,071)

CASH at Beginning of Period		310,556		2,306,149

CASH at End of Period	$	830,401	$	878,078

Supplemental cash flow information:
Cash paid for interest	$	1,720,633	$	466,266
Net cash paid for income taxes	$	100,000	$	-

Certain historical numbers have changed to conform with the current year's presentation.

The accompanying notes are an integral part of these consolidated financial statements.

NUVERA COMMUNICATIONS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)

	THREE MONTHS ENDED MARCH 31, 2023
				Accumulated Other Comprehensive Gain (Loss)

	Common Stock					Unearned Compensation		Retained Earnings		Total Equity
	Shares	Amount				Unearned Compensation		Retained Earnings		Total Equity

BALANCE on December 31, 2022	5,093,213	$	8,488,689	$	1,582,455	$	79,892	$	92,430,816	$	102,581,852

Employee Stock Plan	5,652		9,420		-		-		74,230		83,650
Restricted Stock Grant	-		-		-		(10,129)		-		(10,129)
Non-Cash, Share-Based Compensation	-		-		-		-		32,391		32,391
Net Income	-		-		-		-		4,321,559		4,321,559
Dividends	-		-		-		-		(713,050)		(713,050)
Unrealized Loss on Interest Rate Swap	-		-		(319,075)		-		-		(319,075)

BALANCE on March 31, 2023	5,098,865	$	8,498,109	$	1,263,380	$	69,763	$	96,145,946	$	105,977,198


	THREE MONTHS ENDED MARCH 31, 2022
				Accumulated Other Comprehensive Gain (Loss)

	Common Stock					Unearned Compensation		Retained Earnings		Total Equity
	Shares	Amount				Unearned Compensation		Retained Earnings		Total Equity
BALANCE on December 31, 2021	5,210,053		8,683,422	$	(631,253)	$	259,620	$	90,338,806	$	98,650,595

Employee Stock Plan	4,676		7,793		-		-		92,741		100,534
Restricted Stock Grants	-		-		-		3,782		-		3,782
Exercise of RSUs	31		52		-		(667)		615		-
Repurchase of Common Stock	(150,000)		(250,000)		-		-		(2,937,500)		(3,187,500)
Net Income	-		-		-		-		2,401,606		2,401,606
Dividends	-		-				-		(708,407)		(708,407)
Unrealized Gain on Interest Rate Swap	-		-		1,286,155		-		-		1,286,155

BALANCE on March 31, 2022	5,064,760	$	8,441,267	$	654,902	$	262,735	$	89,187,861	$	98,546,765

The accompanying notes are an integral part of these consolidated financial statements.

	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Three Months Ended March 31, 2023				Three Months Ended March 31, 2022
	Basic		Diluted		Basic		Diluted

Net Income	$	4,321,559	$	4,321,559	$	2,401,606	$	2,401,606

Weighted-average common shares outstanding		5,095,097		5,136,814		5,111,622		5,124,540

Net income per share	$	0.85	$	0.84	$	0.47	$	0.47

	Three Months Ended March 31,
	2023		2022
Voice Service¹	$	1,440,026	$	1,611,058
Network Access¹		1,129,085		1,325,637
Video Service¹		3,051,297		3,141,352
Data Service¹		6,253,196		6,149,460
Directory²		155,259		161,092
Other Contracted Revenue³		655,389		671,607
Other⁴		452,806		305,501

Revenue from customers		13,137,058		13,365,707

Subsidy and other revenue outside scope of ASC 606⁵		3,225,889		3,109,065

Total revenue	$	16,362,947	$	16,474,772

¹ Month-to-Month contracts billed and consumed in the same month.

² Directory revenue is contracted annually, however, this revenue is recognized monthly over the contract period as the advertising is used.

³ This includes long-term contracts where the revenue is recognized monthly over the term of the contract.

⁴ This includes CPE and other equipment sales.

⁵ This includes governmental subsidies and lease revenue outside the scope of ASC 606.

	Quarter Ended March 31,
	2023		2022

Accounts receivable, net - beginning balance	$	1,477,692	$	1,512,369
Accounts receivable, net - ending balance	$	1,751,045	$	1,790,233

Contract assets - beginning balance		794,193		662,437
Contract assets - ending balance		810,814		701,963

Contract liabilities - beginning balance		626,306		602,007
Contract liabilities - ending balance		776,984		849,479

Right of Use Asset	Balance March 31, 2023		Balance December 31, 2022
Operating Lease Right-Of-Use Assets	$	1,255,835	$	1,341,029

Operating Lease Liability	Balance March 31, 2023		Balance December 31, 2022
Short-Term Operating Lease Liabilities	$	361,576	$	356,400
Long-Term Operating Lease Liabilities		934,674		1,026,978
Total	$	1,296,250	$	1,383,378

Maturity Analysis	Balance March 31, 2023
2023 (remaining)	$	323,152
2024		319,215
2025		130,863
2026		128,822
2027		131,626
Thereafter		572,681
Total		1,606,359
Less Imputed Interest		(310,109)
Present Value of Operating Leases	$	1,296,250

Weighted Average Remaining Lease Term (Years)	6.78
Weighted Average Discount Rate	6.00%

	Level 1:	Inputs are quoted prices in active markets for identical assets or liabilities.

	Level 2:	Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data.

	Level 3:	Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable.

			March 31, 2023				December 31, 2022
			Gross Carrying Amount				Gross Carrying Amount
	Useful Lives				Accumulated Amortization				Accumulated Amortization
	Useful Lives				Accumulated Amortization				Accumulated Amortization
Definite-Lived Intangible Assets
Customers Relationships	14-15 yrs	$	42,878,445	$	30,835,621	$	42,878,445	$	30,429,708
Regulatory Rights	15 yrs		4,000,000		4,000,000		4,000,000		4,000,000
Trade Name	3-5 yrs		310,106		288,971		310,106		273,465
Indefinitely-Lived Intangible Assets
Video Franchise			3,000,000		-		3,000,000		-
Spectrum			877,814		-		877,814		-
Total		$	51,066,365	$	35,124,592	$	51,066,365	$	34,703,173

Net Identified Intangible Assets				$	15,941,773			$	16,363,192

● (April 1 – December 31)	$	1,238,876
● 2024	$	1,623,654
● 2025	$	1,618,732
● 2026	$	1,613,809
● 2027	$	906,667
● 2028	$	906,667

●	Communications Companies:
	•	Nuvera Communications, Inc., the parent company;
	•	Hutchinson Telephone Company (HTC), a wholly-owned subsidiary of Nuvera;
	•	Peoples Telephone Company, a wholly-owned subsidiary of Nuvera;
	•	Scott-Rice Telephone Co., a wholly-owned subsidiary of Nuvera;
	•	Sleepy Eye Telephone Company, a wholly-owned subsidiary of Nuvera;
	•	Western Telephone Company, a wholly-owned subsidiary of Nuvera; and
	•	Hutchinson Telecommunications, Inc., a wholly-owned subsidiary of HTC, located in Litchfield, Minnesota;
●	Our investments and interests in the following entities include some management responsibilities:
	•	Broadband Visions, LLC (BBV) – 24.30% subsidiary equity ownership interest. BBV provides video headend and Internet services;
	•	Independent Emergency Services, LLC (IES) – 14.29% subsidiary equity ownership interest. IES is a provider of E-911 services to the State of Minnesota as well as a number of counties located in Minnesota; and
	•	Fiber Minnesota, LLC (FM) – 7.54% subsidiary equity ownership interest. FM is a Minnesota state-wide network that provides connectivity for regional businesses.

	Time-Based RSU's	Targeted Performance-Based RSU's		Closing Stock Price	Vesting Date
Balance at December 31, 2021	9,440	13,270
Forfeited	(1,685)	(4,325)
Exercised	(4,391)	(4,244)	$	17.18	12/31/2022
Balance at December 31, 2022	3,364	4,701
Forfeited	-	-
Exercised	-	-
Balance at March 31, 2023	3,364	4,701

	Options		Closing Stock Price	Vesting Date
Balance at December 31, 2021	-
Issued	40,577	$	21.20	4/11/2023
Issued	40,583	$	21.20	4/11/2024
Issued	40,583	$	21.20	4/11/2025
Balance at December 31, 2022	121,743
Issued	51,431	$	14.70	3/31/2024
Issued	51,431	$	14.70	3/31/2025
Issued	51,432	$	14.70	3/31/2026
Balance at March 31, 2023	276,037

	2023 Grants		2022 Grants
Exercise Price	$	14.70	$	21.20
Risk-Free Rate of Interest		2.957%		1.515%
Expected Term (Years)		10		10
Expected Stock Price Volatility		20.7%		18.1%
Dividend Yield		2.83%		2.44%

				Weighted Average Remaining Term (Years)	Aggregate Intrinsic Value (in Thousands)
		Weighted Average Exercise Price
	Number of Shares
	Number of Shares
Outstanding as of December 31, 2021	-	$	-	-	$	-
Granted	121,743		21.20	9.00		-
Forfeited	-		-	-		-
Outstanding as of December 31, 2022	121,743	$	21.20	9.00	$	-
Granted	154,294		14.70	9.75		-
Forfeited	-		-	-		-
Outstanding as of March 2023	276,037	$	17.57	9.42	$	-

Communications Segment
	Three Months Ended March 31,
	2023		2022		Increase (Decrease)
Operating Revenues
Voice Service	$	1,312,593	$	1,468,178	$	(155,585)	-10.60%
Network Access		1,095,292		1,291,310		(196,018)	-15.18%
Video Service		3,051,297		3,141,492		(90,195)	-2.87%
Data Service		6,816,549		6,716,852		99,697	1.48%
A-CAM/FUSF		2,988,279		2,894,587		93,692	3.24%
Other		1,098,937		962,353		136,584	14.19%
Total Operating Revenues		16,362,947		16,474,772		(111,825)	-0.68%

Cost of Services, Excluding Depreciation and Amortization		7,908,372		7,383,826		524,546	7.10%
Selling, General and Administrative		2,579,346		2,661,463		(82,117)	-3.09%
Depreciation and Amortization Expenses		3,687,032		3,498,284		188,748	5.40%
Total Operating Expenses		14,174,750		13,543,573		631,177	4.66%

Operating Income	$	2,188,197	$	2,931,199	$	(743,002)	-25.35%

Net Income	$	4,321,559	$	2,401,606	$	1,919,953	79.94%

Capital Expenditures	$	5,282,546	$	4,116,747	$	1,165,799	28.32%

Key metrics
Access Lines		15,017		16,801		(1,784)	-10.62%
Video Customers		8,879		10,100		(1,221)	-12.09%
Broadband Customers		32,646		32,752		(106)	-0.32%

●					We may be required to use a substantial portion of our cash flow from operations to make principal and interest payments on our debt, which will reduce funds available for operations, capital expenditures, future business opportunities and strategic initiatives;

●					We may have limited flexibility to react to changes in our business and our industry;

●				It may be more difficult for us to satisfy our other obligations;

●			We may have a limited ability to borrow additional funds or to sell assets to raise funds if needed for working capital, capital expenditures to complete our FTTH initiatives, acquisitions or other purposes;

●		We may become more vulnerable to general adverse economic and industry conditions, including changes in interest rates; and

●	We may be at a disadvantage compared to our competitors that have less debt.

	●	Hazardous materials may have been released at properties that we currently own or formerly owned (perhaps through our predecessors). Under certain environmental laws, we could be held liable, without regard to fault, for the costs of investigating and remediating any actual or threatened contamination at these properties and for contamination associated with disposal by us, or by our predecessors, of hazardous materials at third-party disposal sites;

	●	We could incur substantial costs in the future if we acquire businesses or properties subject to environmental requirements or affected by environmental contamination. In particular, environmental laws regulating wetlands, endangered species and other land use and natural resources may increase the costs associated with future business or expansion or delay, alter or interfere with such plans;

	●	The presence of contamination can adversely affect the value of our properties and make it difficult to sell any affected property or to use it as collateral; and

	●	We could be held responsible for third-party property damage claims, personal injury claims or natural resource damage claims relating to contamination found at any of our current or past properties.

	NUVERA COMMUNICATIONS, INC.

Dated: May 10, 2023	By	/s/ Glenn H. Zerbe
	Glenn H. Zerbe, President and Chief Executive Officer

Dated: May 10, 2023	By	/s/ Curtis O. Kawlewski
	Curtis O. Kawlewski, Chief Financial Officer

Date: May 10, 2023	By	/s/ Glenn H. Zerbe
		Glenn H. Zerbe
		President and Chief Executive Officer

Date: May 10, 2023		/s/ Curtis O. Kawlewski
		Curtis O. Kawlewski
		Chief Financial Officer