MI-Connection annual audit report clean
by Staff Writer
by Katie Orlando
Dixon Hughes Goodman representatives gave MI-Connection board of directors a clean annual audit report at their monthly meeting Oct. 27.
The audit found no significant deficiencies, weaknesses or problems with management, audit partner April Bell said. It did find opportunities for growth, in the possibility of penetrating underserved markets, benefiting from increased use of MI-Connection services and the sound economic footing of Davidson and Mooresville, the system’s owners.
MI-Connection’s liabilities total $87,985,867. The company decreased its deficit from more than $15 million at the beginning of fiscal year 2011 to about $14.3 at the end of the fiscal year, June 30.
Numbers could fluctuate in terms of MI-Connection’s total inventory, which Bell said is valued at the lower end of cost or market value. If the company does not stay on top of inventory, some assets become outdated or unusable, losing inventory value. Board member Brett Ellis said the board would look into analyzing inventory to keep the value accurate and make sure inventory is still useful.
MI-Connection’s cash flow has increased over the last three years, generating $3 million in 2011, and has been managed well, Bell said.
In 2011, the company started repaying the principle on its debt, instead of just interest, and is paying its debt on schedule. While it will take time and strong profits to bring MI-Connection into the black, it did decrease its net debt this year.
MI-Connection’s revenue for fiscal year 2011 totaled more than $15 million, General Manager Alan Hall said. With operating expenses around $13 million, MI-Connection’s earnings before interest, depreciation and amortization and not including debt service were $2.4 million, Hall said.
Quarterly financial report
At the end of the first quarter of fiscal year 2012, MI-Connection reported more subscription gains than all its previous fiscal year. The company has seen significant growth across all of its services, with data subscriptions 2,257 percent higher than the first quarter of last fiscal year. MI-Connection now provides voice services for 2,782 customers, video services to 12,286 customers and data services to 10,076 customers.
The subscription gains are not yet reflected, however, in the revenue numbers, Ellis reported.
Revenues are slightly down, lower than last quarter in video and miscellaneous categories.
“Financial results lag operating results in a subscription business,” Ellis said.
Meaning, consistent subscription gains do not immediately mean more money.
With subscriber growth, revenue growth will be slow. The average revenue per customer was $86.84 in the first quarter, down 27 cents from last quarter, because of promotions that help MI-Connection sign up new subscribers. These promotions will expire in six months to two years, but there will always be new specials to attract business.
“When those promotions roll off, hopefully those customers will stay on because we gave them good service,” Ellis said.
Internet, phone and cable bundles, while often sold at discounts, tend to retain customers, so the board was not worried about losing subscribers once promotions expire.
“I believe, fundamentally, we’re growing,” board Chairman John Venzon said. “The financial numbers don’t reflect that growth (yet).”
Transition Manager David Auger was hesitant to project a date to officially transition MI-Connection operations in-house from Virginia-based Bristol Virginia Utilities. But the two issues holding the transition back have been resolved, he said. MI-Connection and Bristol resolved a database issue on Oct. 20, and Auger is waiting on confirmation of a resolution of an outstanding vendor contract.
Auger and his transition team are finalizing a new operating agreement, which he expects to present at the next board meeting.
Job descriptions for open positions have been developed and will be posted internally next week. Auger is working to establish local banking agreements, map internal payroll and transition benefits.
To operate MI-Connection locally, the company must set up a local bank account with local signatories. The board approved a resolution giving Venzon authority to implement the change in banking procedures, open an account and sign checks. The board must still approve any banking actions, and Venzon said the board will adopt a policy for signing checks and handling money.
Board member Dawn Huston invited board members to join her on the marketing committee. Research results will be available in November that will guide MI-Connection’s upcoming marketing efforts. The next MI-Connection board meeting date will be announced later this month.