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ANNUAL REPORT 2020

2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

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Page 1: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

ANNUALREPORT2020

Page 2: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

Business efficiency is how much output a business produces for a unit of input. It is the opposite of waste. Efficiency measures how well a business converts inputs such

as capital, labor and materials into outputs like revenue, products and services.

EFFICIENCYFIT FOR

GROWTHQualities such as EFFICIENCY, CONFIDENCE,

and INNOVATION make a company fit for growth. An organization’s resources and investments toward its few differentiating capabilities are strengths that set it apart from competitors. When a company is managed this way it positions itself for expansion, acquisitions, and partnerships. As we look at the past, present, and future of Polar Communications, growing has and will

continue to be on our business radar.

Page 3: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

Confidence is the most important psychological contributor to performance in the business world. You may have all of the ability in the world

to accomplish a goal, but if you don’t believe you have that ability, you won’t use that ability to

its fullest extent in pursuit of success.

Implementing new ideas, improving services and creating dynamic products makes us

innovative. We continually change our business model and adjust our existing environment

to deliver better products and services.

INNOVATIONCONFIDENCE

Page 4: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

A MESSAGE FROM THE PRESIDENT & CEO

We are in uncertain times. Due to the Coronavirus pandemic, the Board of Directors has made the decision to postpone your Annual Members meeting. Our priority and concern are for the health and safety of our members and employees. A notice will be sent when a new date has been set.

The Board of Directors and the employees of Polar Communications would like to provide you with the 68th Annual Report to update you on your cooperative.

Late in 2018, the Federal Communications Commission (FCC) fully funded the Universal Service Program. In early 2019 the FCC released an Alternative Connect America Model (ACAM) Offer to cost-based companies. The details of this are discussed in the Secretary/Treasurers’ report on page 6. The impact of this decision increased our annual margin to $10,925,089 – the highest in the cooperative’s history.

Our theme for our annual meeting is “Fit for Growth”, and 2019 was a year of focusing on growth opportunities for the cooperative. In August 2019, Polar Communications announced the purchase of the Competitive Local Exchange Carrier (CLEC) in Northwood, North Dakota from MLGC, Inc. Northwood customers were transitioned to the Polar network on October 22, 2019. This summer, Polar will be upgrading the Northwood system to Fiber-to-the-Home.

In November of 2019, Polar was given another growth opportunity, a 21 million dollar grant/loan combination from the United States Department of Agriculture ReConnect program. The official announcement happened on January 7, 2020. This award will allow Polar to bring broadband services to under-served consumers in the rural Walsh and Grand Forks county areas. Construction of the network will take place in 2020 and 2021. Polar is excited to welcome these consumers to the state-of-the-art network that our cooperative customers rely on daily.

It was announced at the last annual meeting that Polar began offering Broadband Only. This product has seen tremendous growth in the past year. As you will see in the line graph on page 9 of this report, broadband lines are now close to surpassing voice lines. The need for reliable broadband has become

AMBER MEYERPresident

KARL BLAKECEO

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Page 5: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

evident with the COVID-19 pandemic. With students doing distance learning and businesses transitioning their workforce to tele-work, the Polar network, and all the Broadband Association of North Dakota’s member company networks, were ready to deliver.

On behalf of myself and the Board of Directors, we would like to extend our thanks and appreciation to the all the employees at Polar. Telecommunications is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’ dedication and resolve to connect school children and teleworkers to the network is second to none.

ANNUALMARGIN

$10,925,089 Northwood system upgrading to

Fiber-to-the-Home

FTTH

RECONNECT$21 million Grant/Loan

COVID-19Distance learning

& working

$2,000,000payout

CAPITALCREDITS

Fit For Growth

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Page 6: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

Enclosed you will find the annual financial report of Polar Communications.

The financial statements are included in this report on page 8 and 9. The annual margin for 2019 was $10,925,089 compared to $6,814,900 in 2018. Operating revenues increased, operating expenses decreased, and the non-operating margin increased.

On July 2, 2019, Polar Communications and Wolverton Telephone Company elected Alternative Connect America

Model Cost Model II (A-CAM II) support in North Dakota and Minnesota. This is an historic election for the company, shifting from investment-based support to model-based support. The impact on the company is an increase in support of $33,401,027 over ten years. This is the primary reason for the increase in operating revenues. Non-operating margins increased as one of the company’s outside affiliates also elected A-CAM II support.

The Board of Directors is pleased to inform you that it has approved a return of $2 million in capital credits to members, an increase of $500,000 over the prior year. The June payment will be $1.25 million, which is the twice the amount of the average payout. This is being done in an effort to ease the financial hardships caused by the Covid-19 pandemic. The dividend will be once again issued to you in the form of a bill credit. Please be assured that your patronage is always appreciated.

LORI DAHLSecretary/Treasurer

SHARI FLANDERSCFO

REPORT OF THE SECRETARY/TREASURER & CFO

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Nelson of Cavalier, and Brynn Wznick of Cavalier. Jacie Osier of Walcott was not present to receive her scholarship.

The 2019 Polar Leadership Scholarship was awarded to Alyssa Kemp of Cavalier.

The 2019 Foundation for Rural Service (FRS) Scholarships were awarded to Gracyn Cole of Park River and Paige Haakenson of Aneta.

The 2019 Business of The Year Award was presented to Kyle Gagner of Nodak Insurance Company-Kyle Gagner Agency of Cavalier.

Secretary-Treasurer Lori Dahl reported to the members.

Several prize drawings were held throughout the meeting.

Respectfully Submitted ByLori Dahl, Secretary

CONDENSED MINUTESThe Annual Members Meeting of Polar Communications was held on Thursday, June 6, 2019. A total of 131 members registered during the meeting. Members and guests were served a meal prior to the meeting.

Dan Stenvold, Mayor of Park River, welcomed the attendees to Park River and Father Jason Lefor gave the invocation. Randy Richards of Senator Cramer’s office addressed the membership.

President Amber Meyer conducted the meeting. General Manager/CEO Karl Blake and President Amber Meyer gave a joint presentation to the members. Three directors were re-elected to Polar’s board of directors: Amber Meyer (District 1), Jon McMillan (District 2), and Cindy Hejl (District 3). All three directors will serve a three-year term.

Attorney DuBois reported to the membership on by-law changes.

The 2019 John G. Walters Scholarships were presented to: Paige Haakenson of Aneta, Maris Miller of Park River, Jade

2019 Annual Meeting

7

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FINANCE REPORT & STATISTICS

OPERATING EXPENSES 2019 2018Operating Expenses $11,305,247 $11,531,676Depreciation & Amortization 5,975,005 5,849,528 Total Expenses $17,280,251 $17,381,204

Taxes 238,059 127,539

Net Operating Margin $5,9065,346 $3,556,485Non-Operating Margin $5,920,005 $4,292,589

Interest Expense $900,263 $1,034,173 Net Margins $10,925,089 $6,814,901

2019 2018OPERATING REVENUES

Local Service $2,298,612 $2,157,364Access Revenue 15,253,962 13,361,266DCN Contracted Circuits 1,180,990 1,047,499Internet Revenue 4,267,447 3,902,832Billing & Collection Revenue 23,163 26,460Other Revenue Less Uncollectible 399,482 569,807 Total Revenue $23,423,657 $21,065,228

Statement of Operations

LIABILITIES

Accounts Payable $4,698,643 $4,663,025Accrued Taxes & Other 533,370 441,734 Total Current & Accrued $5,232,013 $5,104,759Long Term Debt 10,978,597 15,649,638Deferred Taxes & Other 5,784,745 5,679,743Patronage Capital 25,737,734 20,366,758Other Equities 44,268,866 40,144,309 Total Liabilities & Capital $92,001,955 $86,945,207

2019 2018

ASSETS

Total Telephone Plant $105,826,051 $103,302,213Less Depreciation (69,468,194) (63,951,024) Net Telephone Plant $36,357,857 $39,351,189Cash & Equivalents 17,820,718 12,791,546Receivables 1,191,203 1,379,376Materials & Supplies 576,426 599,662 Total Current & Accrued $55,946,204 $54,121,773Investments in Affiliates 34,005,573 30,544,518Prepaid & Deferred 2,050,178 2,278,916 Total Assets $92,001,955 $86,945,207

2019 2018

Balance Sheet

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Page 9: 2020 Annual Report V5€¦ · GROWTH Qualities such as EFFICIENCY, CONFIDENCE, ... is part of the critical infrastructure sector, and during the current COVID-19 crisis, the employees’

Bandwidth Average Monthly Usage

Connections

201517,702 total

201617,758 total

201717,367 total

201817,079 total

201916,204 total

2,000

4,000

6,000

8,000

10,000

2,752

6,318

8,632

2,827

6,388 6,319 6,307 6,687

8,543 8,329 8,182 6,889

2,719 2,590 2,628

voice

video

broad-band

0 1 Gb 2 Gb 3 Gb 4 Gb 5 Gb 6 Gb 7 Gb 8 Gb

20152016201720182019

1.42 Gb

2.59 Gb

4.59 Gb

5.69 Gb

6.40 Gb

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BOARD OF DIRECTORS & CEO

JON MCMILLANVice President

JAMES LONGTINDirector

AMBER MEYERPresident

CHRIS NELSONDirector

CYNTHIA HEJLAsst. Secretary/Treasurer

GORDON JOHNSONDirector

LORI DAHLSecretary/Treasurer

WES WELCHDirector

BRIAN UDBYDirector

KARL BLAKECEO

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OUR TEAM

Karl BlakeTim Olson

Joan SwartzShari Flanders

Kyle Halvorson

Mike OttoTony Hensel

Jim PraskaKellen Arneson

Kristi GullicksonAngie Schroeder

| Chief Executive Officer| Chief Operations Officer| Chief Marketing Officer| Chief Financial Officer| Chief Business Development Officer| Outside Plant Supervisor| Network Operations Supervisor| Field Operations Supervisor| Controller| IT Supervisor| Customer Service Supervisor

Ashley SmithCaitlin Evenson

Carol LaHaiseChris ButtkeChuck Aaker

Craig ThorsellCurtis SimonDale Holand

Dave OfferdahlDennis Kubat

Donnie GordonEvan Sommer

Jason ParkerJenny French

Jessica BataJodi LaHaise

Jon RussellJulie Kohler

Julie ThompsonJustin Lindell

| Customer Service Representative| Accountant| Administrative Assistant| Area Service Representative| IT Specialist| Area Service Representative| Network Technician II| Network Technician II| Combination/Maintenance| Field Operations Technician I| Supply/Inventory| Network Technician III| Combination Technician| Accounts Payable | Customer Service Representative| Plant Records Specialist| Area Service Representative| Customer Service Representative| Customer Service Representative| Draftsperson

Justin LoftsgardKelly Houser

Kimberly LundquistKris Rainsberry

Kristin SheaKyle Ferguson

Lisa OlsonLola Hagen

Maci SchwalkMatthew Almen

Owen BakkenRandy Trosens

Robyn WatkinsRoger Hahn

Roger SetnessRyan Rosinski

Shelly DubSpencer Potts

Stacey LoftsgardWendy Machart

| Field Operation Technician II| Cable Splicer| Customer Service Rep.| Combination Technician| Account Executive| Field Operations Apprentice| Marketing| Receptionist/Cashier| Customer Service Rep.| Network Technician III| Network Technician II| Cable Splicer| Supply/Inventory| Network Technician I| Combination Technician| Network Technician III| Data Specialist| Field Operation Technician I| Plant Records Specialist| Data Specialist

Management Employees

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John G. Walters ScholarshipThis year Polar awarded five $1,000 scholarships in honor of former general manager John G. Walters. The awards are given to outstanding high school seniors whose parents or guardians are current customers of Polar Communications or its subsidiaries. Applicants are judged on essay content, grammar, academic achievement and community involvement.

SCHOLARSHIPS & YOUTH AWARDS

BRYNN KROKEMichigan, NDDakota Prairie High School

KAYLEE PASTOREKHoople, NDValley-Edinburg High School

JULIA SVEENEdinburg, NDPark River High School

KARINA WHALEYFordville, NDPark River High School

COLTEN EVANSONWalcott, NDRichland #44 High School

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Leadership ScholarshipThe Leadership Scholarship, sponsored by Polar, is awarded to a student who is involved in their school, serves their community,

achieves leadership roles in activities, functions or organizations, and strives to reach their highest potential. Applicants must be a senior in high school or freshman or sophomore in college, and their parents or guardians must be Polar customers.

The 2020 Polar Leadership Scholarship in the amount of $2,000 is being awarded to Evan Halvorson of Lawton, ND. Evan is a senior at Lakota High School.EVAN HALVORSON

Lawton, NDLakota High School

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BUSINESS OF THE YEARThe 2020 Polar Business of the Year is Farmers Union Oil - Cenex Lakota. Located at the corner of Highway 2 and Main Street in Lakota, North Dakota, Cenex is a locally owned cooperative. They offer a full-service convenience store, food court, fishing bait and tackle, fuel and lubricants, and most recently, groceries.

Manager Andrew Jorde has worked in the gas station business most of his life, beginning at the age of 14. Originally from Towner, North Dakota, he has been with the Lakota Cenex since 2013. Along with Andrew, 20 people are employed at the Lakota Cenex, from sales and deli associates to a driver who delivers bulk fuel and sets up and installs propane tanks.

The Lakota Cenex strives to offer services that keeps business in the community without interfering with other offerings in town. In the fall of 2019, the city of Lakota

lost their grocery store. Seeing a need, the Lakota Cenex began stocking a few grocery essentials. They originally thought the store closing would be temporary, but as time went on they learned the chances of it re-opening were slim. They have gradually increased their grocery supply going from 8 feet of shelving to 48 feet and a 3-door milk cooler. They have plans to increase their produce cooler from 4 feet to 12 feet. They provide fresh produce, dairy, meat and other household essentials, saving people a 30-minute trip to neighboring Devils Lake and making it easier for those who don’t travel.

The Lakota Cenex believes in actively participating in and giving back to the

community in which they live and work. They support projects within the city and donate to local groups and organizations. Providing and delivering pizzas has enhanced the concession stands at sporting events and supported the school and its students. They purchased and

donated an official scorer’s table for home basketball games and they sponsor a reading program for kindergarten and 1st grade students.

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Businesses are nominated by Polar employees based on the following criteria: business excellence, customer relations, community service, recognition of achievements and innovation of products and services. Polar values the relationships developed with all business customers. There are many great businesses that possess these qualities and more. To be able to honor them with such an award gives us great pleasure.

Technology plays a large role in the day-to-day operations of the business. The need for reliable and fast broadband Internet is critical. Their computers connect daily to the main office in Devils Lake where the server is located. Using a special machine, they can go throughout the store to enter supplies they need, then connect to the Internet for ordering. They use their Facebook page (Cenex C-Store Lakota) to keep customers informed of sales specials and to announce weather closings. Processing credit cards would not be possible without an online connection. Their 3-line phone system ensures they are always available for their customers.

Lakota Cenex embodies what it means to be a cooperative. By investing back into the community through jobs, service and involvement they serve their members and the city in which they live, work, and shop. The Lakota Cenex hopes to remain

a vibrant part of the community for many years to come.

We wish Farmers Union Oil - Cenex Lakota much future success!

Lakota Cenex Manager Andrew Jorde and Deli Supervisor Sandy Burt.

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PO Box 270 | 110 4th Street EastPark River, ND 58270701.284.7221 | 800.284.7222www.thinkpolar.com