Company Quick10K Filing
Nuvera Communications
Price18.99 EPS1
Shares5 P/E15
MCap99 P/FCF6
Net Debt53 EBIT12
TEV151 TEV/EBIT13
TTM 2019-09-30, in MM, except price, ratios
10-Q 2021-03-31 Filed 2021-05-10
10-K 2020-12-31 Filed 2021-03-16
10-Q 2020-09-30 Filed 2020-11-09
10-Q 2020-06-30 Filed 2020-08-10
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-03-16
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-10
10-K 2018-12-31 Filed 2019-03-14
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-15
10-K 2017-12-31 Filed 2018-03-15
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-14
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-15
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-15
10-Q 2015-09-30 Filed 2015-11-16
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-16
10-Q 2014-09-30 Filed 2014-11-14
10-Q 2014-06-30 Filed 2014-08-14
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-03-14
10-Q 2013-09-30 Filed 2013-11-12
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-03-22
10-Q 2012-09-30 Filed 2012-11-09
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-26
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-28
10-Q 2010-09-30 Filed 2010-11-12
10-Q 2010-06-30 Filed 2010-08-12
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-29
8-K 2020-09-02
8-K 2020-05-21
8-K 2020-04-01
8-K 2019-08-27
8-K 2019-05-23
8-K 2019-05-23
8-K 2019-04-15
8-K 2019-03-08
8-K 2018-11-15
8-K 2018-07-31
8-K 2018-07-31
8-K 2018-06-04
8-K 2018-05-24
8-K 2018-05-23
8-K 2018-03-26
8-K 2018-02-22

NUVR 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Basis of Presentation and Consolidation
Note 2 - Revenue Recognition
Note 3 - Leases
Note 4 - Fair Value Measurements
Note 5 - Goodwill and Intangibles
Note 6 - Secured Credit Facility
Note 7 - Interest Rate Swaps
Note 8 - Other Investments
Note 9 - Guarantees
Note 10 - Restricted Stock Units (Rsu)
Note 11 - Segment Information
Note 12 - Commitments and Contingencies
Note 13 - Broadband Grants
Note 14 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings.
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Item 3. Defaults Upon Senior Securities.
Item 4. Mine Safety Disclosures
Item 5. Other Information.
Item 6. Exhibits.
EX-31.1 exhibit31_1.htm
EX-31.2 exhibit31_2.htm
EX-32.1 exhibit32_1.htm
EX-32.2 exhibit32_2.htm

Nuvera Communications Earnings 2021-03-31

Balance SheetIncome StatementCash Flow
16513299663302012201420172020
Assets, Equity
2015117302012201420172020
Rev, G Profit, Net Income
40236-11-28-452012201420172020
Ops, Inv, Fin

Form 10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_________________

 

FORM 10-Q

 

(Mark One)

        QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:

 

For the quarterly period ended March 31, 2021

 

       TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934:


For the transition period from_____to_____.

 

Commission File Number  0-3024

 

NUVERA COMMUNICATIONS, INC.

(Exact name of Registrant as specified in its charter)

 

Minnesota

(State or other jurisdiction of

incorporation or organization)

 

41-0440990

(I.R.S. Employer

Identification No.)

 

 

27 North Minnesota Street

New Ulm, Minnesota 56073

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (507) 354-4111

 

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 for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No  

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No  

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definition of “large accelerated filer,” “accelerated filer,” “non-accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer  Accelerated filer  Non-accelerated filer  Smaller reporting company Emerging growth company 

 

 

1


 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 

 

Securities registered pursuant to Section 12(b) of the Act: None.

 

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock - $1.66 par value

NUVR

OTCQB Marketplace

 

 

The total number of shares of the registrant’s common stock outstanding as of May 10, 2021: 5,207,119.

 

2


 

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1

Financial Statements

4 - 9

Consolidated Statements of Income (unaudited) for the Three Months Ended March 31, 2021 and 2020

4

Consolidated Statements of Comprehensive  Income (unaudited) for the Three Months Ended March 31, 2021 and 2020

5

Consolidated Balance Sheets (unaudited) as of March 31, 2021 and December 31, 2020

6 - 7

Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended March 31, 2021 and 2020

8

Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended March 31, 2021 and 2020

9

Condensed Notes to Consolidated Financial Statements (unaudited)

10 - 30

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

30 - 43

Item 3

Quantitative and Qualitative Disclosures About Market Risk

43

Item 4

Controls and Procedures

43 - 44

PART II – OTHER INFORMATION

Item 1

Legal Proceedings

44

Item 1A

Risk Factors

44

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

44 - 45

Item 3

Defaults Upon Senior Securities

45

Item 4

Mine Safety Disclosures

45

Item 5

Other Information

45

Item 6

Exhibits Listing

45 - 46

Signatures

47

Exhibits

 

 

 

3


 

Table of Contents

 

 

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 
 

Three Months Ended

March 31,

 
 

2021

 

2020

 

 

 

 

 

 

OPERATING REVENUES:

         

Voice Service

$

1,551,278

 

$

1,748,696

Network Access

 

1,582,440

   

1,631,942

Video Service

 

3,028,877

 

 

2,981,594

Data Service

 

6,267,971

   

5,651,518

A-CAM/FUSF

 

2,968,195

 

 

3,099,035

Other Non-Regulated

 

1,079,362

 

 

1,054,273

Total Operating Revenues

 

16,478,123

 

 

16,167,058

           

OPERATING EXPENSES:

 

 

 

 

 

Plant Operations (Excluding Depreciation
    and Amortization)

 

3,417,738

   

3,050,616

Cost of Video

 

2,756,343

 

 

2,629,609

Cost of Data

 

923,514

   

842,062

Cost of Other Nonregulated Services

 

409,246

 

 

414,210

Depreciation and Amortization

 

3,071,572

   

3,052,102

Selling, General and Administrative

 

2,663,890

 

 

2,670,868

Total Operating Expenses

 

13,242,303

 

 

12,659,467

 

 

 

 

 

 

OPERATING INCOME

 

3,235,820

 

 

3,507,591

 

 

 

 

 

 

OTHER INCOME (EXPENSE)

         

Interest Expense

 

 (565,374)

 

 

(683,663)

Interest/Dividend Income

 

101,402

   

46,193

Interest During Construction

 

9,992

 

 

41,188

Gain on Debt Forgiveness

 

 2,912,433

   

 -

CoBank Patronage Dividends

 

625,490

 

 

647,369

Other Investment Income

 

66,048

 

 

81,331

Total Other Income (Expense)

 

3,149,991

 

 

132,418

           

INCOME BEFORE INCOME TAXES

 

6,385,811

 

 

3,640,009

           

INCOME TAXES EXPENSE

 

1,205,100

 

 

1,019,201

           

NET INCOME

$

5,180,711

 

$

2,620,808

           

NET INCOME PER SHARE

 

 

 

 

 

Basic

$

1.00

 

$

0.51

Diluted

$

0.99

 

$

0.51

           

DIVIDENDS PER SHARE

$

0.13

 

$

0.13

           

WEIGHTED AVERAGE SHARES OUTSTANDING

 

 

 

 

 

Basic

 

5,202,832

 

 

5,184,605

Diluted

 

5,210,554

 

 

5,188,146

           

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

 

4


 

Table of Contents

 

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

Three Months Ended

March 31,

2021

2020

Net Income

$

5,180,711

 

$

2,620,808

Other Comprehensive Income (Loss):

 

 

 

 

 

Unrealized Gains (Losses) on Interest Rate Swaps

945,061

(2,766,829)

Income Tax Benefit (Expense) Related to Unrealized
   (Gains) Losses on Interest Rate Swaps

 

(269,720)

 

 

789,653

Other Comprehensive Income (Loss):

 

675,341

 

(1,977,176)

 

 

 

 

 

 

Comprehensive Income

$

5,856,052

$

643,632

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

 

 

5


 

Table of Contents

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

ASSETS

March 31,

2021

    December 31,

2020

CURRENT ASSETS:

 

 

 

 

 

Cash

$

9,825,210

$

8,617,660

Receivables, Net of Allowance for
   Doubtful Accounts of $141,000 and $160,000

 

2,222,739

 

 

1,885,196

Income Taxes Receivable

 

-

 

 

615,587

Materials, Supplies, and Inventories

3,450,274

2,965,960

Prepaid Expenses and Other Current Assets

 

2,454,856

 

 

1,000,395

Total Current Assets

 

17,953,079

 

15,084,798

 

 

 

 

 

 

INVESTMENTS & OTHER ASSETS:

Goodwill

 

49,903,029

 

 

49,903,029

Intangibles

20,808,351

21,639,293

Other Investments

 

10,033,068

 

 

9,960,187

Right of Use Asset

1,138,875

1,211,707

Other Assets

 

363,827

 

 

299,155

Total Investments and Other Assets

 

82,247,150

 

83,013,371

 

 

 

 

 

 

PROPERTY, PLANT & EQUIPMENT:

Communications Plant

 

173,466,276

 

 

171,961,736

Other Property & Equipment

25,987,857

25,758,591

Video Plant

 

11,144,025

 

 

11,143,951

Total Property, Plant and Equipment

210,598,158

208,864,278

Less Accumulated Depreciation

 

140,626,258

 

 

138,385,628

Net Property, Plant & Equipment

 

69,971,900

 

70,478,650

 

 

 

 

 

 

TOTAL ASSETS

$

170,172,129

$

168,576,819

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

 

 

6


 

Table of Contents

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED BALANCE SHEETS (continued)

(Unaudited)

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 
 

March 31,

2021

 

December 31,

2020

   
           

CURRENT LIABILITIES:

 

 

 

 

 

Current Portion of Long-Term Debt, Net of
    Unamortized Loan Fees

$

4,511,844

 

$

6,788,430

Accounts Payable

 

1,772,377

 

 

1,604,735

Accrued Income Taxes

 

489,513

   

-

Other Accrued Taxes

 

320,653

 

 

258,691

Deferred Compensation

 

256,008

   

319,754

Accrued Compensation

 

2,617,805

 

 

2,247,057

Other Accrued Liabilities

 

793,974

   

811,003

Total Current Liabilities

 

10,762,174

 

 

12,029,670

           

LONG-TERM DEBT, Net of Unamortized
      Loan Fees

 

45,421,066

 

 

47,161,441

 

 

 

 

 

 

NONCURRENT LIABILITIES:

         

Loan Guarantees

 

261,087

 

 

273,805

Deferred Income Taxes

 

17,258,129

   

16,988,409

Unrecognized Tax Benefit

 

47,363

 

 

47,363

Other Accrued Liabilities

 

1,223,060

 

 

1,283,834

Financial Derivative Instruments

 

1,776,057

   

2,721,118

Deferred Compensation

 

444,444

 

 

450,473

Total Noncurrent Liabilities

 

21,010,140

 

 

21,765,002

 

 

 

 

 

 

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,
   5,207,119 and 5,200,689 Shares Issued and Outstanding

 

8,678,533

   

8,667,816

Accumulated Other Comprehensive Loss

 

(1,269,170)

 

 

 (1,944,511)

Unearned Compensation

 

174,983

   

149,100

Retained Earnings

 

85,394,403

 

 

80,748,301

Total Stockholders' Equity

 

92,978,749

 

 

87,620,706

 

 

 

 

 

 

TOTAL LIABILITIES AND
        STOCKHOLDERS' EQUITY

$

170,172,129

 

$

168,576,819

           

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

 

7


 

Table of Contents

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 
 

Three Months Ended

 

March 31,

2021

 

March 31,

2020

   
           

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

Net Income

$

5,180,711

 

$

2,620,808

Adjustments to Reconcile Net Income to Net Cash
    Provided by Operating Activities:

 

 

 

 

 

Depreciation and Amortization

 

3,096,211

   

3,076,741

PPP Loan Forgiveness

 

(2,912,433)

 

 

-

Undistributed Earnings of Other Equity Investments

 

(64,423)

   

(92,511)

Noncash Patronage Refund

 

(129,177)

 

 

(143,692)

Stock Issued in Lieu of Cash Payment

 

39,984

   

29,995

Distributions from Equity Investments

 

150,000

 

 

-

Stock-based Compensation

 

178,081

   

(53,054)

Changes in Assets and Liabilities:

 

 

 

 

 

Receivables

 

(337,167)

   

(31,755)

Income Taxes Receivable

 

615,587

 

 

-

Materials, Supplies and Inventories

 

(484,314)

   

(83,429)

Prepaid Expenses

 

(1,494,445)

 

 

 (445,671)

Other Assets

 

(65,048)

   

 (21,295)

Accounts Payable

 

174,178

 

 

24,552

Accrued Income Taxes

 

489,513

   

719,201

Other Accrued Taxes

 

61,962

 

 

54,933

Other Accrued Liabilities

 

389,210

   

471,829

Deferred Compensation

 

(69,775)

 

 

 (66,912)

Net Cash Provided by Operating Activities

 

4,818,655

 

 

6,059,740

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES:

         

Additions to Property, Plant, and Equipment, Net

 

(1,740,415)

 

 

(1,754,189)

Grants Received for Construction of Plant

 

-

   

422,786

Other, Net

 

(42,000)

 

 

(26,992)

Net Cash Used in Investing Activities

 

(1,782,415)

 

 

 (1,358,395)

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES:

         

Principal Payments of Long-Term Debt

 

 (1,152,600)

 

 

 (1,164,015)

Repurchase of Common Stock

 

-

 

 

(238,612)

Dividends Paid

 

(676,090)

   

(674,171)

Net Cash Used in Financing Activities

 

 (1,828,690)

 

 

(2,076,798)

           

NET INCREASE IN CASH

 

1,207,550

 

 

2,624,547

           

CASH at Beginning of Period

 

8,617,660

 

 

2,993,000

           

CASH at End of Period

$

9,825,210

 

$

5,617,547

           

Supplemental cash flow information:

 

 

 

 

 

Cash paid for interest

$

782,399

 

$

679,202

Net cash paid for income taxes

$

100,000

 

$

300,000

           

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

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

 

 

 

8


 

Table of Contents

 

NUVERA COMMUNICATIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)

 
 

THREE MONTHS ENDED MARCH 31, 2021

           

Accumulated

Other

Comprehensive

Income (Loss)

                 
                             
 

Common Stock

   

Unearned

Compensation

 

Retained

Earnings

 

Total

Equity

 

Shares

 

Amount

       
                                 

BALANCE on December 31, 2020

5,200,689

 

 $

8,667,816

 

 $

(1,944,511)

 

 $

149,100

 

 $

80,748,301

 

 $

87,620,706

                                 

Employee Stock Plan

4,594

 

 

7,657

 

 

 

 

 

 

 

 

101,083

 

 

108,740

Restricted Stock Grant

 

 

 

 

 

 

 

 

 

69,341

 

 

 

 

 

 69,341

Exercise of RSUs

1,836

   

3,060

         

(43,458)

   

40,398

   

-

Net Income

                       

5,180,711

   

5,180,711

Dividends

 

 

 

 

 

 

 

 

 

 

 

 

 (676,090)

 

 

(676,090)

Unrealized Gain on Interest Rate Swap

           

 675,341

               

 675,341

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE on March 31, 2021

5,207,119

 

 $

8,678,533

 

 $

 (1,269,170)

 

 $

174,983

 

 $

85,394,403

 

 $

92,978,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

                                 
 

THREE MONTHS ENDED MARCH 31, 2020

           

Accumulated

Other

Comprehensive

Income (Loss)

                 
                             
 

Common Stock

   

Unearned

Compensation

 

Retained

Earnings

 

Total

Equity

 

Shares

 

Amount

       
                                 

BALANCE on December 31, 2019

5,189,218

 

 $

8,648,697

 

 $

(186,095)

 

 $

189,255

 

 $

72,106,198

 

 $

80,758,055

                                 

Restricted Stock Grant

 

 

 

 

 

 

 

 

 

(5,174)

 

 

 

 

 

(5,174)

Exercise of RSU's

4,144

 

 

6,907

 

 

 

 

 

(126,616)

 

 

71,829

 

 

(47,880)

Repurchase of Common Stock

(13,496)

   

(22,493)

               

(216,119)

   

(238,612)

Net Income

 

 

 

 

 

 

 

 

 

 

 

 

2,620,808

 

 

2,620,808

Dividends

                       

(674,171)

   

(674,171)

Unrealized Loss on Interest Rate Swap

 

 

 

 

 

 

(1,977,176)

 

 

 

 

 

 

 

 

(1,977,176)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE on March 31, 2020

5,179,866

 

 $

8,633,111

 

 $

(2,163,271)

 

 $

57,465

 

 $

73,908,545

 

 $

80,435,850

 

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

 

 

9


 

Table of Contents

 

NUVERA COMMUNICATIONS, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021 (Unaudited)

 

Note 1 – Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements of Nuvera Communications, Inc. and its subsidiaries (Nuvera) have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) for interim financial information, rules and regulations of the Securities and Exchange Commission (SEC) and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. Certain information and disclosures normally included in annual financial statements prepared in accordance with GAAP have been omitted or condensed pursuant to such rules and regulations. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments (consisting only of normal and recurring accruals) considered necessary for the fair presentation of the financial statements and present fairly the results of operations, financial position and cash flows for the interim periods presented as required by Regulation S-X, Rule 10-01. These unaudited interim condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020.

 

The preparation of our financial statements requires our management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for the fiscal year as a whole or any other interim period.

 

Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Communications Segment. Inter-company transactions have been eliminated from the consolidated financial statements.

 

Revenue Recognition

See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies.

 

Cost of Services (excluding depreciation and amortization)

Cost of services includes all costs related to delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transport cost.

 

10


 

Table of Contents

 

Selling, General and Administrative Expenses

Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated our operations.

 

Depreciation and Amortization Expense

We use the group life method (mass asset accounting) to depreciate the assets of our communications companies. Communications plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of communications plant and equipment requires a significant amount of judgment. We periodically review data on expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. Depreciation expense was $2,240,630 and $2,221,159 for the three months ended March 31, 2021 and 2020. We amortize our definite-lived intangible assets over their estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment.

 

Income Taxes

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 bases. Significant components of our deferred taxes arise from differences (i) in the basis of property, plant and equipment due to the use of accelerated depreciation methods for tax purposes, as well as (ii) in partnership investments and intangible assets due to the difference between book and tax basis. Our effective income tax rate is normally higher than the United States tax rate due to state income taxes and permanent differences, however, our effective income tax rate was lower than the United States tax rate in the quarter ended March 31, 2021 due to the Payroll Protection Program (PPP) loan forgiveness not being taxable at the federal level. 

 

We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. As required by GAAP, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

As of March 31, 2021 and December 31, 2020 we had $44,155 of unrecognized tax benefits that if recognized would not affect the tax rate. We do not expect the total amount of unrecognized tax benefits to materially change over the next 12 months.      

 

We are primarily subject to United States, Minnesota, Iowa, Nebraska, North Dakota and Wisconsin income taxes. Tax years subsequent to 2016 remain open to examination by federal and state tax authorities. Our policy is to recognize interest and penalties related to income tax matters as income tax expense. As of March 31, 2021 and December 31, 2020 we had $3,208 accrued interest that related to income tax matters.

 

11


 

Table of Contents

 

Earnings and Dividends Per Share

 

Basic and diluted net income per share are calculated as follows:

 

Three Months Ended

  March 31, 2021

Three Months Ended

  March 31, 2020

Basic

Diluted

Basic

Diluted

Net Income

$

5,180,711

 

$

5,180,711

 

$

2,620,808

 

$

2,620,808

Weighted-average common
shares outstanding

 

5,202,832

 

 

5,210,554 

 

 

5,184,605

 

 

5,188,146

Net income per share

$

1.00 

 

$

0.99

 

$

0.51

 

$

0.51

 

 

The weighted-average shares outstanding, basic and diluted, are calculated as follows:

 

 

Three Months Ended

  March 31, 2021

 

Three Months Ended

  March 31, 2020

   
 

Basic

 

Diluted

 

Basic

 

Diluted

                       

Weighted-average common
shares outstanding

 

5,202,832

 

 

5,202,832

 

 

5,184,605

 

 

5,184,605

                       

Unvested RSU's

 

 -

 

 

7,722

 

 

 -

 

 

3,541

                       

Weighted-average common
shares outstanding

 

5,202,832

 

 

5,210,554

 

 

5,184,605

 

 

5,188,146

 

 

Nuvera’s Board of Directors (BOD) reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions.  

 

Recent Accounting Developments

 

In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In January 2021, the FASB issued ASU No. 2101-01, “Reference Rate Reform (Topic 848): Scope.” ASU 2021-01 clarifies that certain optional expedients and exceptions in Topic 848 for contract modifications and hedge accounting apply to derivatives that are affected by the discounting transition. ASU 2020-04 and ASU 2021-01 are both elective and are effective upon issuance through December 31, 2022. The Company is evaluating the impact this update will have on our consolidated financial statements and related disclosures. 

 

12


 

Table of Contents

 

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU 2017-04 simplifies the subsequent measurement of goodwill by eliminating the second step of the goodwill impairment test. The second step measures a goodwill impairment loss by comparing the implied fair value of a reporting unit’s goodwill with the carrying amount of that goodwill. Under ASU 2017-04, a company will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value. ASU 2017-04 will be applied prospectively and is effective for annual or interim goodwill impairment tests in the fiscal years beginning January 1, 2021. The Company adopted ASU 2017-04 on January 1, 2021 and expects that adoption of the standard will not have a material effect on our financial position, results of operations or cash flows.

 

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosures relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. The Company is required to adopt ASU 2016-13 for fiscal periods beginning after December 15, 2022, including interim periods within that fiscal year. Early adoption as of December 15, 2018 is permitted. Management is evaluating the impact the adoption of ASU 2016-13 will have on the Company’s financial statements (if any).

 

We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations.

 

Note 2 – Revenue Recognition

 

The Company recognizes revenue based on the following single principles-based, five-step model that is applied to all contracts with customers. These steps include (1) identify the contact(s) with the customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when each performance obligation is satisfied.   

 

Our revenue contracts with customers may include a promise or promises to deliver services such as broadband, video or voice services. Promised services are considered distinct as the customer can benefit from the services either on their own or together with other resources that are readily available to the customer and the Company’s promise to transfer service to the customer is separately identifiable from other promises in the contract. The Company accounts for services as separate performance obligations. Each service is considered a single performance obligation as it is providing a series of distinct services that are substantially the same and have the same pattern of transfer.

 

13


 

Table of Contents

 

The transaction price is determined at contract inception and reflects the amount of consideration to which we expect to be entitled in exchange for transferring service to the customer. This amount is generally equal to the market price of the services promised in the contract and may include promotional or bundling discounts. The majority of our prices are based on tariffed rates filed with regulatory bodies or standard company price lists. The transaction price excludes amounts collected on behalf of third parties such as sales taxes and regulatory fees. Conversely, nonrefundable up-front fees, such as service activation and set-up fees, which are immaterial to our overall revenues, are included in the transaction price. In determining the transaction price, we consider our enforceable rights and obligations within the contract. We do not consider the possibility of a contract being cancelled, renewed or modified, which is consistent with Accounting Standards Codification (ASC) 606-10-32-4.

 

The transaction price is allocated to each performance obligation based on the standalone selling price of the service, net of the related discount, as applicable.

 

Revenue is recognized when performance obligations are satisfied by transferring service to the customer as described below.

 

Significant Judgements

 

The Company often provides multiple services to a customer. Provision of customer premise equipment (CPE) and additional service tiers may have a significant level of integration and interdependency with the subscription voice, video, Internet or connectivity services. Judgement is required to determine whether provision of CPE, installation services and additional service tiers are considered distinct and accounted for separately, or not distinct and accounted for together with the subscription services.

 

Allocation of the transaction price to the distinct performance obligations in bundled service subscriptions requires judgement. The transaction price for a bundle of services is frequently less than the sum of standalone selling prices of each individual service. Bundled discounts are allocated proportionally to the selling price of each individual service within the bundle. Standalone selling prices for the Company’s services are directly observable.

 

14


 

Table of Contents

 

Disaggregation of Revenue

 

The following table summarizes revenue from contracts with customers for the quarters ended March 31, 2021 and 2020:

 

 

Three Months Ended March 31,

 

2021

 

2020

Voice Service¹

$

1,785,080

 

$

1,944,528

Network Access¹

 

1,611,197

   

1,680,561

Video Service¹

 

3,027,547

 

 

2,978,285

Data Service¹

 

5,755,470

   

5,163,503

Directory²

 

178,119

 

 

208,005

Other Contracted Revenue³

 

624,494

   

602,542

Other4

 

301,088

 

 

252,542

           

    Revenue from customers

 

13,282,995

 

 

12,829,966

           

Subsidy and other revenue outside scope of ASC 6065

 

3,195,128

 

 

3,337,092

 

 

 

 

 

 

Total revenue

$

16,478,123

 

$

16,167,058

           

¹ Month-to-Month contracts billed and cosumed 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.

         
           

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

         

 

 

For the three months ended March 31, 2021, approximately 78.78% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 19.39% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 1.83% of total revenue was from other sources including CPE and equipment sales and installation.

 

For the three months ended March 31, 2020, approximately 77.80% of our total revenue was from month-to-month and other contracted revenue from customers. Approximately 20.64% of our total revenue was from revenue sources outside of the scope of ASC 606. The remaining 1.56% of total revenue was from other sources including CPE and equipment sales and installation.

 

15


 

Table of Contents

 

A significant portion of our revenue is derived from customers who may generally cancel their subscriptions at any time without penalty. As such, the amount of revenue related to unsatisfied performance obligations is not necessarily indicative of the future revenue to be recognized from our existing customer base. Revenue from customers with a contractually specified term and non-cancelable service period will be recognized over the term of such contracts, which is generally 3 to 10 years for these types of contracts.

 

Nature of Services

 

Revenues are earned from our customers primarily through the connection to our networks, digital and commercial television (TV) programming, Internet services (high-speed broadband), and hosted and managed services. Revenues for these services are billed based on set rates for monthly service or based on the amount of time the customer is utilizing our facilities. The revenue for these services is recognized over time as the service is rendered.

 

Voice Service – We receive recurring revenue for basic voice services that enable end-user customers to make and receive telephone calls within a defined local calling area for a flat monthly fee. In addition to subscribing to basic local telephone services, our customers may choose from multiple voice service plans with a variety of custom calling features such as call waiting, call forwarding, caller identification and voicemail. Our Voice Over Internet Protocol (VoIP) digital phone service is also available as an alternative to the traditional telephone line. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Network Access – We provide access services to other communication carriers for the use of our facilities to terminate or originate long distance calls on our network. Additionally, we bill monthly subscriber line charges (SLCs) to substantially all of our customers for access to the public switched network. These monthly SLCs are regulated and approved by the Federal Communications Commission (FCC). In addition, network access revenue is derived from several federally administered pooling arrangements designed to provide support and distribute funding to us.

 

Revenues earned from other communication carriers accessing our network are based on the utilization of our network by these carriers as measured by minutes of use on the network or special access to the network by the individual carriers on monthly basis. Revenues are billed at tariffed access rates for both interstate and intrastate calls and are recognized into revenue monthly based on the period the access was provided.

 

16


 

Table of Contents

 

The National Exchange Carriers Association (NECA) pools and redistributes the SLCs to various communication providers through the Connect America Fund. These revenues are earned and recognized into revenue on a monthly basis. Any adjustments to these amounts received by NECA are adjusted for in revenue upon receipt of the adjustment.

 

Video Service – We provide a variety of enhanced video services on a monthly recurring basis to our customers. We also receive monthly recurring revenue from our subscribers for providing commercial TV programming in competition with local cable TV (CATV), satellite dish TV and off-air TV service providers. We serve twenty-two communities with our IPTV services and five communities with our CATV services. Customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Data Service – We provide high speed Internet to business and residential customers depending on the nature of the network facilities that are available, the level of service selected and the location. Our revenue is earned based on the offering of various flat packages based on the level of service, data speeds and features. We also provide e-mail and managed services, such as web hosting and design, on-line file back up and on-line file storage. Data customers may generally cancel their subscriptions at any time without penalty. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized over a one month service period as the subscription services are delivered. Other optional services purchased by the customer are generally accounted for as a distinct performance obligation when purchased and revenue is recognized when the service is provided.

 

Directory – Our directory publishing revenue in our telephone directories recurs monthly and is recognized into revenue on a monthly basis. 

 

Other Contracted Revenue - Managed services and certain other data customers include fiber-delivered communications and managed information technology solutions to mainly business customers, as well as high-capacity last-mile data connectivity services to wireless and wireline carriers. Services are primarily offered on a subscription basis with a contractually specified and non-cancelable service period. The non-cancelable contract terms for these customers generally range from 3 to 10 years. Each subscription service provided is accounted for as a distinct performance obligation and revenue is recognized ratably over the contract period as the subscription services are delivered. These services are billed as monthly recurring charges to customers. 

 

Other – We also generate revenue from the sales, service and installation of CPE and other services. Sales and service of CPE are billed and recognized into revenue once the sale or service is complete or delivered. These sales and services are generally short-term in nature and are completed within one month. Other revenues are immaterial to our total revenues.

 

 

17


 

Table of Contents

 

Subsidy and Other Revenue outside the Scope of ASC 606 – We receive subsidies from governmental entities to operate and expand our networks. In addition, we have revenue from leasing arrangements. Both of these revenue streams are outside of the scope of ASC 606. 

 

Interstate access rates are established by a nationwide pooling of companies known as NECA. The FCC established NECA in 1983 to develop and administer interstate access service rates, terms and conditions. Revenues are pooled and redistributed on the basis of a company's actual or average costs. There has been a change in the composition of interstate access charges in recent years, shifting more of the charges to the end user and reducing the amount of access charges paid by the interexchange carriers (IXC’s). We believe this trend will continue.

 

Intrastate access rates are filed with state regulatory commissions in Minnesota and Iowa.

 

The Company currently receives funding based on the A-CAM as described below, with the exception of Scott-Rice Telephone Company (Scott-Rice), which receives funding from the Federal Universal Service Fund (FUSF). Scott-Rice’s settlements from the pools are based on nationwide average schedules, which includes the pooling and redistribution of revenues based on a company’s actual or average costs as described below. 

 

A-CAM

 

As described above, with the exception of Scott-Rice, the remainder of our companies receive funding from A-CAM.

 

On February 25, 2019, the FCC issued Public Notice DA 19-115, which contained revised offers of A-CAM support and associated revised service deployment obligations. On February 27, 2019, the Company’s BOD authorized and directed the Company to accept the FCC’s revised offer of A-CAM support and the revised associated service deployment obligations. Under the revised FCC offer Notice, the Company will be entitled to annually receive (i) $596,084 for its Iowa operations and (ii) $8,354,481 for its Minnesota operations. The Company will receive the revised A-CAM offer over the next 10 years starting in 2019. The Company will use the additional support that it receives through the A-CAM program to continue to meet its defined broadband build-out obligations, which the Company is currently completing. A letter of acceptance to elect the revised A-CAM support was filed by the Company with the FCC on March 8, 2019. The FCC accepted the Company’s letter on March 11, 2019.

 

18


 

Table of Contents

 

Accounts Receivable, Contract Assets and Contract Liabilities

 

The following table provides information about our receivables, contracts assets and contract liabilities from revenue contracts with our customers:

 

Quarter Ended March 31,

2021

2020

Accounts receivable, net

$

1,479,643

 

$

1,650,310

Contract assets

522,826

207,909

Contract liabilities

 

901,130

 

 

867,467

 

 

Accounts Receivable

 

A receivable is recognized in the period the Company provides goods and services when the Company’s right to consideration is unconditional. Payment terms on invoiced amounts are generally 30-60 days.

 

Contract Assets

 

Contract assets include costs that are incremental to the acquisition of a contract. Incremental costs are those that result directly from obtaining a contract or costs that would not have been incurred if the contract had not been obtained, which primarily relates to sales commissions. We defer and amortize these costs over the expected customer life as the contract obligations are satisfied. We determined that the expected customer life is the expected period of benefit as the commission on the renewal contact is commensurate with the commission on the initial contract. During the quarters ended March 31, 2021 and 2020, the Company recognized expenses of $38,033 and $13,547, respectively, related to deferred contract acquisition costs. Short-term contract assets are included in current assets under prepaid expenses and other current assets. Long-term contract assets are included in investments and other assets under other assets.

 

Contract Liabilities

 

Contract liabilities include deferred revenues related to advanced payments for services and nonrefundable, upfront service activation and set-up fees, which under the new standard are generally deferred. In addition, contract liabilities include customer deposits that are not recognized into revenue, but are instead returned to the customer after a holding period. Short-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the current portion of the deferred revenues that will be recognized monthly within one year. Short-term contract liabilities are included in current liabilities under other accrued liabilities. Long-term contract liabilities include deferred revenues for advanced payments for managed services and other long-term contracts. This includes the portion longer than one year and the corresponding deferred revenues are recognized into revenue on a monthly basis based on the term of the contract. Long-term contract liabilities are included in noncurrent liabilities under other accrued liabilities. During the quarters ended March 31, 2021 and 2020, the Company recognized revenues of $174,242 and $135,790, respectively, related to deferred revenues.

 

19


 

Table of Contents

 

Performance Obligations

 

ASC 606, Revenue from Contracts with Customers, requires that the Company disclose the aggregate amount of the transaction price that is allocated to remaining performance obligations that are unsatisfied as of March 31, 2021. The guidance provides certain practical expedients that limit this requirement. The service revenue contracts of the Company meet the following practical expedients provided by ASC 606:

 

1.  The performance obligation is part of a contract that has an original expected duration of one year or less.

    

2.  Revenue is recognized from the satisfaction of the performance obligations in the amount billable to the customer in accordance with ASC 606-10-55-18.

 

The Company has elected these practical expedients. Performance obligations related to our service revenue contracts are generally satisfied over time. For services transferred over time, revenue is recognized based on amounts invoiced to the customer as the Company has concluded that the invoice amount directly corresponds with the value of services provided to the customer. Management considers this a faithful depiction of the transfer of control as services are substantially the same and have the same pattern of transfer over the life of the contract. As such, revenue related to unsatisfied performance obligations that will be billed in future periods has not been disclosed.

 

Note 3 – Leases

 

In February 2016, the FASB issued ASU 2016-02, “Leases,” which, together with its related clarifying ASUs, provided revised guidance for lease accounting and related disclosure requirements and established a right-to-use (ROU) model that requires lessees to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition. The ASU also requires disclosures to allow financial statement users to better understand the amount, timing and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.   

 

The following table includes the ROU and operating lease liabilities as of March 31, 2021 and December 31, 2020.

 

Right of Use Asset

Balance
March 31, 2021

Balance
December 31, 2020

Operating Lease right-of-use assets

 

$

1,138,875

 

$

1,211,707

 

20


 

Table of Contents

 

Operating Lease Liability

 Balance
March 31, 2021

 Balance
December 31, 2020

Short-Term Operating Lease Liability

 

$

232,976

 

$

243,218

Long-Term Operating Lease Liability

933,874

993,596

Total

 

$

1,166,850

 

$

1,236,814

 

Maturity analysis under these lease agreements are as follows:

Maturity Analysis

 Balance
March 31, 2021

2021 (remaining)

 

$

223,058

2022

297,729

2023

 

 

297,515

2024

184,649

2025

 

 

67,140

Thereafter

 

365,064

Total

 

 

1,435,155

Less Imputed interest

 

(268,305)

Present Value of Operating Leases

 

$

1,166,850

 

We amortize our leases over the shorter of the term of the lease or the useful life of the asset. Lease expense for the three months ended March 31, 2021 and 2020 was $91,877 and $138,084.

 

Note 4 – Fair Value Measurements

 

We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:

 

      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.

 

21


 

Table of Contents

 

We have used financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We accounted for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings.

 

We have entered into interest rate swap agreements (IRSAs) with our lender, CoBank, ACB (CoBank) to manage our cash flow exposure to fluctuations in interest rates. These instruments are designated as cash flow hedges and are effective at mitigating the risk of fluctuations on interest rates in the market place. Any gains or losses related to changes in the fair value of these derivatives are accounted for as a component of accumulated other comprehensive income (loss) for as long as the hedge remains effective.

 

The fair value of our IRSAs is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreements was determined based on Level 2 inputs.

 

Other Financial Instruments

 

Other Investments - We conducted an evaluation of our investments in all of our investees in connection with the preparation of our audited financial statements at December 31, 2020. As of March 31, 2021, we believe the carrying value of our investments is not impaired.

 

Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value.

 

Other Financial Instruments - Our financial instruments also include cash equivalents, trade accounts receivable and accounts payable where the current carrying amounts approximate fair market value.

 

Note 5 – Goodwill and Intangibles

 

We account for goodwill and other intangible assets under GAAP. Under GAAP, goodwill and intangible assets with indefinite useful lives are not amortized, but are instead tested for impairment (i) on at least an annual basis and (ii) when changes in circumstances indicate that the fair value of goodwill may be below its carrying value. These circumstances include, but are not limited to (i) a significant adverse change in the business climate, (ii) unanticipated competition or (iii) an adverse action or assessment by a regulator. Determining impairment involves estimating the fair value of a reporting unit using a combination of (i) the income or discounted cash flows approach and (ii) the market approach that utilizes comparable companies’ data. If the carrying amount of a reporting unit exceeds its fair value, the amount of the impairment loss must be measured. The impairment loss is calculated by comparing the implied fair value of the reporting unit’s goodwill to its carrying amount. In calculating the implied fair value of the reporting unit’s goodwill, the fair value of the reporting unit is allocated to all of the assets and liabilities of the reporting unit. The excess of the fair value of a reporting unit over the amount assigned to its other assets and liabilities is the implied value of goodwill. We recognize impairment loss when the carrying amount of goodwill exceeds its implied fair value. Our goodwill totaled $49,903,029 at March 31, 2021 and December 31, 2020.    

 

22


 

Table of Contents

 

In 2020 and 2019, we engaged an independent valuation firm to aid in the completion of our annual impairment testing for existing goodwill. For 2020 and 2019, the testing results indicated no impairment charge to goodwill as the determined fair value was sufficient to pass the first step of the impairment test.   

 

Our intangible assets subject to amortization consist of acquired customer relationships, regulatory rights and trade names. We amortize intangible assets with finite lives over their respective estimated useful lives. Identifiable intangible assets that are subject to amortization are evaluated for impairment. In addition, we periodically reassess the carrying value, useful lives and classifications of our identifiable intangible assets.

 

The components of our identified intangible assets are as follows:

 

March 31, 2021

December 31, 2020

Useful Lives

Gross Carrying Amount

Accumulated Amortization

Gross Carrying Amount

Accumulated Amortization

Definite-Lived Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Customers Relationships

14-15 yrs

$

42,878,445

$

26,559,784

$

42,878,445

$

25,811,014

Regulatory Rights

15 yrs

 

 

4,000,000

 

 

3,533,301

 

 

4,000,000

 

 

3,466,635

Trade Name

3-5 yrs

310,106

164,929

310,106

149,423

Indefinitely-Lived Intangible Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Video Franchise

 

 

 

3,000,000

 

 

 

 

3,000,000

 

 

Spectrum

877,814

877,814

Total

 

 

$

51,066,365

 

$

30,258,014

 

$

51,066,365

 

$

29,427,072

Net Identified Intangible Assets

 

 

 

 

 

$

20,808,351

 

 

 

 

$

21,639,293

 

 

Amortization expense related to the definite-lived intangible assets was $830,942 and $830,943 for the three months ended March 31, 2021 and 2020. Amortization expense for the remaining nine months of 2021 and the five years subsequent to 2021 is estimated to be:

 

(April 1 – December 31)

$

2,492,784

2022

$

1,952,376

2023

$

1,660,295

2024

$

1,623,654

2025

$

1,618,732

2026

$

1,613,809

23


 

Table of Contents

 

Note 6 – Secured Credit Facility

 

We have a master loan agreement (MLA) with CoBank. Nuvera and its respective subsidiaries also have security agreements under which substantially all the assets of Nuvera and its respective subsidiaries have been pledged to CoBank as collateral. In addition, Nuvera and its respective subsidiaries have guaranteed all the obligations under the credit facility. These mortgage notes are required to be paid in quarterly installments covering principal and interest, beginning in September 2018 and maturing on July 31, 2025.  

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank require that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

As described in Note 7 – “Interest Rate Swaps,” on August 1, 2018 we entered into an IRSA with CoBank covering 25 percent of our existing debt balance or $16,137,500 of our aggregate indebtedness to CoBank at August 1, 2018. As of March 31, 2021, our IRSA covered $12,967,850, with a weighted average rate of 5.27%.

 

As described in Note 7 – “Interest Rate Swaps,” on August 29, 2019 we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank at August 29, 2019. As of March 31, 2021, our IRSA covered $36,346,569, with a weighted average rate of 3.50%.

 

Our remaining debt of $11.0 million ($10.0 million available under the revolving credit facilities and $1.0 million currently outstanding) remains subject to variable interest rates at an effective weighted average interest rate of 2.37%, as of March 31, 2021.

 

Our loan agreements include restrictions on our ability to pay cash dividends to our stockholders. However, we are allowed to pay dividends (a) (i) in an amount up to $2,700,000 in any year if our “Total Leverage Ratio,” that is, the ratio of our “Indebtedness” to “EBITDA” (earnings before interest, taxes, depreciation and amortization – as defined in the loan documents), is greater than 2.00 to 1.00, and (ii) in any amount if our Total Leverage Ratio is less than 2.00 to 1.00, and (b) in either case, if we are not in default or potential default under the loan agreements. On December 31, 2020 our Total Leverage Ratio fell below 2.00, thus eliminating any restrictions on our ability to pay cash dividends to our stockholders. Our current Total Leverage Ratio as of March 31, 2021 is 1.90

 

Our credit facility requires us to comply with specified financial ratios and tests. These financial ratios include total leverage ratio, debt service coverage ratio, equity to total assets ratio and annual maximum aggregate capital expenditures. At March 31, 2021, we were in compliance with all the stipulated financial ratios in our loan agreements.

 

24


 

Table of Contents

 

There are security and loan agreements underlying our current CoBank credit facility that contain restrictions on our distributions to stockholders and investment in, or loans, to others. Also, our credit facility contains restrictions that, among other things, limits or restricts our ability to enter into guarantees and contingent liabilities, incur additional debt, issue stock, transact asset sales, transfers or dispositions, and engage in mergers and acquisitions, without CoBank approval.  

 

On April 16, 2020, Nuvera received a $2,889,000 loan under the Small Business Administration’s (SBA’s) PPP, which was established as part of the Coronavirus Aid, Relief Economic Security Act, or CARES Act. The PPP Loan was unsecured and was evidenced by a note in the favor of Citizens as the lender

 

The interest rate on the Note was 1.0% per annum. Payments of principal and interest were deferred for 180 days from the date of the Note (the deferral period). The PPP provided a mechanism for forgiveness of up to the full amount borrowed as long as Nuvera used the loan proceeds during the 24-week period after the loan origination for eligible purposes, including U.S. payroll costs, certain benefit costs, rent and utilities costs, and maintained its employment and compensation levels, subject to certain other requirements and limitations. The amount of the loan forgiveness was subject to reduction, among other things, if Nuvera terminated employees or reduced salaries or wages during the 24-week period. Any unforgiven portion of the PPP Loan was payable over a two-year term, with payments deferred during the deferral period. Nuvera was permitted to prepay the Note at any time without payment of any premium. The Note contained customary events of material defaults, including, among others, those relating to failure to make a payment, bankruptcy, other indebtedness, breaches of representations, and material adverse changes. The Company adhered to all guidelines under the terms of the Note and applied for debt forgiveness in August, 2020.

 

On February 3, 2021, the Company was notified by Citizens, the lender on the Company’s PPP Loan that Citizens had received payment in full from the United States federal government for the amount of the Company’s PPP Loan and the Company’s PPP Loan had been fully forgiven. We recognized a gain on the forgiveness of $2,912,433, which included the original amount of the loan plus accrued interest in the quarter ended March 31, 2021.

 

Note 7 – Interest Rate Swaps

 

We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely affect expected future cash flows and by evaluating hedging opportunities.

 

We generally use variable-rate debt to finance our operations, capital expenditures and acquisitions. These variable-rate debt obligations expose us to variability in interest payments due to changes in interest rates. The terms of our credit facility with CoBank required that we enter into interest rate agreements designed to protect us against fluctuations in interest rates, in an aggregate principal amount and for a duration determined under the credit facility.

 

25


 

Table of Contents

 

To meet this objective, we have entered into an IRSA with CoBank covering 25 percent of our existing outstanding debt balance or $16,137,500 of our aggregate indebtedness to CoBank at August 1, 2018. The swap effectively locked in the interest rate on 25 percent of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable-rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

 

On August 29, 2019 we entered into a second IRSA with CoBank covering an additional $42,000,000 of our aggregate indebtedness to CoBank at August 29, 2019. The swap effectively locked in a significant portion of our variable-rate debt through July 2025. Under this IRSA, we have changed the variable rate cash flow exposure on the debt obligations to fixed cash flows. Under the terms of the IRSA, we pay a fixed contractual interest rate and (i) make an additional payment if the LIBOR variable rate payment is below a contractual rate or (ii) receive a payment if the LIBOR variable rate payment is above the contractual rate.

 

Each month, we make interest payments to CoBank under its loan agreements based on the current applicable LIBOR Rate plus the contractual LIBOR margin then in effect with respect to the loan, without reflecting our IRSAs. At the end of each calendar month, CoBank adjusts our aggregate interest payments based on the difference, if any, between the amounts paid by us during the month and the current effective interest rate. Net interest payments are reported in our consolidated income statement as interest expense.

 

Our IRSAs under our credit facilities both qualify as a cash flow hedges for accounting purposes under GAAP. We reflect the effect of these hedging transactions in the financial statements. The unrealized gain/loss is reported in other comprehensive income. If we terminate our IRSAs, the cumulative change in fair value at the date of termination would be reclassified from accumulated other comprehensive income, which is classified in stockholders’ equity, into earnings on the consolidated statements of income.

 

The fair value of the Company’s IRSAs were determined based on valuations received from CoBank and were based on the present value of expected future cash flows using discount rates appropriate with the terms of the IRSAs. The fair value indicates an estimated amount we would be required to pay if the contracts were canceled or transferred to other parties. On March 31, 2021, the fair value liability of these swaps was $1,776,057, which has been recorded net of deferred tax benefit of $506,887, resulting in the $1,269,170 in accumulated other comprehensive loss. 

 

 

26


 

Table of Contents

 

Note 8 – Other Investments  

 

We are a co-investor with other communication companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in new technologies with a lower level of financial risk. We recognize income and losses from these investments on the equity method of accounting. For a listing of our investments, see Note 11 – “Segment Information.” 

 

The FASB requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. However, an entity may choose to measure equity investments that do not have readily determinable fair values at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for an identical or similar investment of the same issuer.   

 

Note 9 – Guarantees

 

Nuvera has guaranteed a portion of a ten-year loan owed by FiberComm, LC, set to mature on April 30, 2026. As of March 31, 2021, we have recorded a liability of $261,087 in connection with the guarantee on this loan. This guarantee may be exercised if FiberComm, LC does not make its required payments on this note.

 

Note 10 – Restricted Stock Units (RSU)

 

Our BOD adopted the 2017 Omnibus Stock Plan effective May 25, 2017. The shareholders of the Company approved the Plan at the May 25, 2017 Annual Meeting of Shareholders. The Plan enables the Company to grant stock incentive awards to current and new employees, including officers, and to Board members and service providers. The Plan permits stock incentive awards in the form of options (incentive and non-qualified), stock appreciation rights, restricted stock, RSUs, performance stock, performance units, and other awards in stock or cash. The Plan permits the issuance of up to 625,000 shares of our Common Stock in any of the above stock awards. As of March 31, 2021, 569,392 shares remain available to be issued under the Plan.

 

Starting in 2017 and each subsequent year following 2017, our BOD and Compensation Committee granted awards to the Company’s executive officers under the Plan. We recognize share-based compensation expense for these RSUs over the vesting period of the RSUs which is determined by our BOD. Forfeitures of RSU’s are accounted for as they occur. Each executive officer received or may receive time-based RSUs and performance-based RSUs. The time-based RSUs are computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and will vest over a three-year period based on the executive officer being employed by the Company on the vesting date. The performance-based RSUs are also computed as a percentage of the executive officer’s base salary based on the closing price of Company common stock on a date set by the BOD, and will vest over a three-year period based on the Company attaining an average Return on Invested Capital (ROIC) over that three-year period. The ROIC target is set by the BOD. Executive officers may earn more or less performance-based RSU’s based on if the actual ROIC over the time period is more or less than target. Upon vesting of either time-based or performance-based RSUs, the executive officers will be able to receive Common Stock in the Company in exchange for the RSUs.

 

27


 

Table of Contents

 

RSUs currently issued and outstanding are as follows:

 

 

Restricted Stock Units Issued/(Forfeited)

   

Time-Based RSU's

 

Targeted  Performance-Based RSU's

 

Closing Stock Price

 

Vesting Date

Balance at December 31, 2019

 

8,379

 

9,781 

 

 

 

 

 

 Issued

 

4,163

 

  - 

 

 $

16.64

 

12/8/2022

 Issued

 

  - 

 

6,461 

 

 $

16.64

 

12/31/2022

 Exercised

 

(2,062)

 

(2,082)

 

 $

19.00

 

12/31/2019

 Exercised

 

 (1,588)

 

  - 

 

 $

19.44

 

12/11/2020

 Forfeited

 

 (1,254)

 

(4,549)

         

Balance at December 31, 2020

 

7,638 

 

9,611 

 

 

 

 

 

 Issued

 

3,364

 

 5,247

 

 $

21.90

 

12/31/2023

 Exercised

 

 

(1,588)

 

$

23.67

 

12/31/2020

Balance at March 31, 2021

 

11,002 

 

13,270

         

 

 

Note 11 – Segment Information  

               

We operate in the Communications Segment and have no other significant business segments. The Communications Segment consists of voice, data and video communication services delivered to the customer over our local communications network. No single customer accounted for a material portion of our consolidated revenues.

 

The Communications Segment operates the following communications companies and has investment ownership interests as follows:

 

Communications Segment

 

    ● 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;

 

28


 

Table of Contents

 

         Western Telephone Company, a wholly-owned subsidiary of Nuvera; and

         Hutchinson Telecommunications, Inc., a wholly-owned subsidiary of HTC, located in Litchfield and Glencoe, Minnesota;

 

● Our investments and interests in the following entities include some management responsibilities:

      FiberComm, LC – 20.00% subsidiary equity ownership interest. FiberComm, LC is located in Sioux City, Iowa;

      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

      SM Broadband, LLC (SMB) – 9.09% subsidiary equity ownership interest. SMB provides network connectivity for regional businesses.

 

Note 12 – Commitments and Contingencies

 

We are involved in certain contractual disputes in the ordinary course of business. We do not believe the ultimate resolution of any of these existing matters will have a material adverse effect on our financial position, results of operations or cash flows. We did not experience any changes to material contractual obligations in the first three months of 2021. Refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 for the discussion relating to commitments and contingencies.

 

Note 13 – Broadband Grants

 

In November 2017, the Company was awarded a broadband grant from the Minnesota Department of Employment and Economic Development (DEED). The grant provided up to 42.6% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company was eligible to receive $736,598 of the $1,727,998 total project costs. The Company provided the remaining 57.4% matching funds. Construction and expenditures for these projects began in 2018. We have received $650,208 for these projects as of March 31, 2021.  

 

In January 2020, the Company was awarded a broadband grant from DEED. The grant will provide up to 36.5% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company is eligible to receive $730,000 of approximately $2,000,000 total project costs. The Company will provide the remaining 63.5% matching funds. Construction and expenditures for these projects began in the spring of 2020. We have not received any funds for these projects as of March 31, 2021.

 

29


 

Table of Contents

 

On January 29, 2021, the Company was awarded five broadband grants from the DEED. The grants will provide up to 35.4% of the total cost of building fiber connections to homes and businesses for improved high-speed internet in unserved or underserved communities and businesses in the Company’s service area. The Company is eligible to receive $1,918,037 of the approximately $5,419,617 total project costs. The Company will provide the remaining 64.6% matching funds. Construction and expenditures for these projects began in the spring of 2021. We have not received any funds for these projects as of March 31, 2021.     

 

Note 14 – Subsequent Events

 

We have evaluated and disclosed subsequent events through the filing date of this Quarterly Report on Form 10-Q.

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Forward Looking Statements

 

From time to time, in reports filed with the SEC, in press releases, and in other communications to shareholders or the investing public, we may make forward-looking statements concerning possible or anticipated future financial performance, business activities or plans. These statements generally are identified by the words “believes,” “expects,” “anticipates,” “estimates,” “projects,” “intends,” “plans,” “may,” “will,” “would,” “seeks,” “targets,” “continues,” “should,” “will be,” “will continue,” or similar expressions. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of Nuvera and its subsidiaries to be different from those expressed or implied in the forward-looking statements. These risks and uncertainties may include, but are not limited to: i) unfavorable general economic conditions that could negatively affect our operating results; ii) substantial regulatory change and increased competition; iii) our possible pursuit of acquisitions could be expensive or not successful; iv) we may not accurately predict technological trends or the success of new products; v) shifts in our product mix may result in declines in our operating profitability; vi) possible consolidation among our customers; vii) a failure in our operational systems or infrastructure could affect our operations; viii) data security breaches; ix) possible replacement of key personnel; x) elimination of governmental network support we receive; xi) our current debt structure may change due to increases in interest rates or our ability to comply with lender loan covenants and xii) possible customer payment defaults. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the federal securities laws. Shareholders and the investing public should understand that these forward-looking statements are subject to risks and uncertainties which could affect our actual results and cause actual results to differ materially from those indicated in the forward-looking statements.

 

In addition, forward-looking statements speak only as of the date they are made, which is the filing date of this Form 10-Q. With the exception of the requirements set forth in the federal securities laws or the rules and regulations of the SEC, we do not undertake any obligation to update or review any forward-looking information, whether as a result of new information, future events or otherwise.

 

30


 

Table of Contents

 

Critical Accounting Policies and Estimates

 

Management’s discussion and analysis of financial condition and results of operations stated in this Form 10-Q, are based upon Nuvera’s consolidated unaudited financial statements that have been prepared in accordance with GAAP, rules and regulations of the SEC and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. We presently give accounting recognition to the actions of regulators where appropriate. The preparation of our financial statements requires our management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. Actual results may differ from these estimates. Our senior management has discussed the development and selection of accounting estimates and the related Management Discussion and Analysis disclosure with our Audit Committee. For a summary of our significant accounting policies, see Note 1 – “Summary of Significant Accounting Policies” to the Consolidated Financial Statements contained in our Annual Report on Form 10-K for the year ended December 31, 2020, which is incorporated herein by reference.

 

Results of Operations

 

Overview

 

Nuvera has a state-of-the-art; fiber-rich communications network and offers a diverse array of communications products and services. We provide local voice service and network access to other communications carriers for connections to our networks. In addition, we provide long distance service, broadband Internet access, video services, and managed and hosted solutions services.

 

Our operations consist primarily of providing services to customers for a monthly charge. Because many of these services are recurring in nature, backlog orders and seasonality are not significant factors. Our working capital requirements include financing the construction of our networks. We also require capital to maintain our networks and infrastructure; fund the payroll costs of our highly skilled labor force; maintain inventory to service capital projects, our network and our telephone equipment customers; pay dividends and provide for the carrying value of trade accounts receivable, some of which may take several months to collect in the normal course of business.

 

Impact of COVID-19 on Our Business

 

Through March 31, 2021, the COVID-19 pandemic has had significant impacts on our business. We continue to operate with some modifications because, based on the various published standards to date, the work our employees are performing, particularly with respect to providing communication services required by our customers is critical, essential and life-sustaining.

 

We took actions intended to protect our employees and our customers that adversely affected our results.

 

31


 

Table of Contents

 

      First, we restricted public access to our offices and halted all customer in-location service installations and performed those installations remotely, which resulted in lower sales and installations through the third quarter of 2020. Many of our locations have re-opened to the public but with restrictions which has caused lower customer traffic and lower sales;

 

    Second, many of our customers either closed their locations or operated at significantly diminished capacity as a result of local and national actions taken, such as stay-at-home mandates that reduced business activity, which negatively impacted sales and increased our customer churn for our legacy voice and video products;

 

   Third, the COVID-19 pandemic has increased traffic on our networks as the State of Minnesota had issued executive orders requiring remote-learning for schools, the shutdown of non-essential businesses and a work-from home order for many workers in multiple industries;

 

    Fourth, although we have seen an increase in customers for our internet product including increased demand for higher bandwidth speeds that increase has not been able to offset the loss in customers we have experienced in our legacy voice and video products. We also expect that due to the number of job losses due to the COVID-19 pandemic that a number of our customers may have difficulty in paying for their existing services which will affect our ability to ultimately collect from and retain those customers; and

 

    Fifth, social actions taken to mitigate the effects of the pandemic produced increased costs for us through significant demand for personal protection equipment and sanitation products to protect our employees and customers.

 

In the first quarter of 2021 many of the markets in which we operate have begun to ease restrictions that were in place earlier in 2020 and a number of United States residents, including, a portion of our customers have been vaccinated in the period. This had two effects.

 

      The first was to improve the outlook in the sales and installation of our internet products; and

 

      The second was that the increased traffic on our networks has somewhat eased as we had made substantial investments in 2020 to accommodate the increased traffic we had seen on our networks due to the pandemic.

 

In the first quarter of 2021 viral infections have begun to decrease as vaccinations have become available to United States residents. However, we cannot predict when and if these vaccinations will completely eliminate the risks from Covid-19. As a result, there remains significant uncertainty concerning the magnitude of the impact and duration of the COVID-19 pandemic. Factors deriving from the COVID-19 response that have or may negatively impact sales and gross margins in the future include, but are not limited to: limitations on the ability of our suppliers and content providers to manufacture, or procure from manufactures, the products and services we sell, or to meet delivery and installation requirements and commitments; limitations on the ability of our employees to perform their work due to illness caused by the pandemic or local, state, or federal orders requiring employees to remain at home; limitations on the ability of carriers to deliver our products or our inability to install our products; limitations on the ability of our customers to conduct business and purchase our products and services; and limitations on the ability of our customers to pay us on a timely basis.

 

32


 

Table of Contents

 

In the first quarter of 2021, we have seen an increase in our revenues due to internet growth mentioned above, however, we continue to see an accelerated loss in our voice service and video service customers as those customers make choices about their entertainment needs and personal finances in light of the Covid-19 pandemic. We have also experienced increased costs in the first quarter of 2021 which have affected our margins.  

 

With respect to liquidity, we continue to evaluate costs and spending across our organization. This includes evaluating discretionary spending and non-essential capital investment expenditures. As of March 31, 2021, we have our entire $10M bank revolver available for use in the event that the need arises. We will continue to actively monitor the situation and may take further actions that alter our operations as may be required by federal, state or local authorities or that we determine are in the best interests of our employees, customers, suppliers and shareholders.

 

The full extent to which the COVID-19 pandemic and the various responses to it impacts our business, operations and financial results will depend on numerous evolving factors that we may not be able to accurately predict, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; the availability and cost to access the capital markets; the effect on our customers and customer demand for and ability to pay for our services; disruptions or restrictions on our employees’ ability to work and travel; interruptions or restrictions related to the provision of our services, including impacts on content delivery networks and; and any stoppages, disruptions or increased costs associated with our operations. During the COVID-19 crisis, we may not be able to provide the same level of customer service and product installation, that our customers are used to which could negatively impact their perception of our service resulting in an increase in service cancellations. If we need to access the capital markets, there can be no assurance that financing may be available on attractive terms, if at all. We will continue to actively monitor the issues raised by the COVID-19 pandemic and may take further actions that alter our operations as may be required by federal, state or local authorities, or that we determine are in the best interests of our employees, customers, partners and stockholders.  While we are unable to determine or predict the nature, duration or scope of the overall impact the COVID-19 pandemic will have on our business, results of operations, liquidity or capital resources, we believe that it is important to share where our company stands today, how our response to COVID-19 is progressing and how our operations and financial condition may change as the fight against COVID-19 progresses.