atni_Current folio_10Q

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

Form 10-Q

 

 

 

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

 

For the quarterly period ended June 30, 2018

 

OR

 

 

 

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 001-12593

 


 

ATN INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

 

 

 

 

Delaware

 

47-0728886

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification Number)

 

500 Cummings Center

Beverly, MA 01915

(Address of principal executive offices, including zip code)

 

(978) 619-1300

(Registrant’s telephone number, including area code)

 


 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 definitions of “large accelerated filer,” “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 ☐

(Do not check if a smaller reporting company)

 

Emerging growth company ☐

 

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  ☒

 

As of August 8, 2018, the registrant had outstanding 15,957,354 shares of its common stock ($.01 par value).

 

 

 

1


 

ATN INTERNATIONAL, INC.

FORM 10-Q

 

Quarter Ended June 30, 2018

 

 

 

 

CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS 

3

 

 

 

PART I—FINANCIAL INFORMATION 

4

 

 

 

Item 1 

Unaudited Condensed Consolidated Financial Statements

4

 

 

 

 

Condensed Consolidated Balance Sheets at June 30, 2018 and December 31, 2017  

4

 

 

 

 

Condensed Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2018 and 2017

5

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three and Six Months Ended June 30, 2018 and 2017

6

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2018 and 2017

7

 

 

 

 

Notes to Unaudited Condensed Consolidated Financial Statements

8

 

 

 

Item 2 

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

31-58

 

 

 

Item 3 

Quantitative and Qualitative Disclosures About Market Risk

58

 

 

 

Item 4 

Controls and Procedures

59

 

 

 

PART II—OTHER INFORMATION 

59

 

 

 

Item 1 

Legal Proceedings

59

 

 

 

Item1A 

Risk Factors

59

 

 

 

Item 2 

Unregistered Sales of Equity Securities and Use of Proceeds

60

 

 

Item 6 

Exhibits

61

 

 

 

SIGNATURES 

62

 

 

 

CERTIFICATIONS

 

 

 

2


 

Cautionary Statement Regarding Forward-Looking Statements

 

This Quarterly Report on Form 10-Q (or the “Report”) contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the estimated timeline for the rebuilding of our   operations and revenues from our customers in the U.S. Virgin Islands following the hurricanes; our estimates of total losses due to the hurricanes and our estimated costs of restoring hurricane-damaged services; our ability to receive financial support from the government for our rebuild in the U.S. Virgin Islands and the timing of such support; the competitive environment in our key markets, demand for our services and industry trends; the pace of expansion and improvement of our telecommunications network and renewable energy operations including our level of estimated future capital expenditures and our realization of the benefits of these investments; the anticipated timing of our build schedule and energy production of our India renewable energy projects and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results.  Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) our ability to restore our networks and services to our customers in the U.S. Virgin Islands in an efficient and timely manner and to obtain governmental or other support necessary to fully restore services in the U.S. Virgin Islands; (2) our ability to execute planned network expansions and upgrades in our various markets; (3) the general performance of our operations, including operating margins, revenues, capital expenditures, and the future growth and retention of our major customers and subscriber base and consumer demand for solar power; (4) government regulation of our businesses, which may impact our Federal Communications Commission and other telecommunications licenses or our renewables business; (5) economic, political and other risks facing our operations; (6) our ability to maintain favorable roaming arrangements and satisfy the needs and demands of our major wireless customers; (7) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address  rapid and significant technological changes in the telecommunications industry; (8) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (9) our ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (10) increased competition; (11) our ability to expand our renewable energy business; (12) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (13) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (14) the occurrence of weather events and natural catastrophes; (15) our continued access to capital and credit markets; (16) the risk of currency fluctuation for those markets in which we operate; and (17) our ability to realize the value that we believe exists in our businesses.  These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 1, 2018 as may be updated by our Quarterly Reports on Form 10-Q and the other reports we file from time to time with the SEC.  Except as required by law, the Company undertakes no obligation and has no intention to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.

 

 

In this Report, the words “the Company”, “we,” “our,” “ours,” “us” and “ATN” refer to ATN International, Inc. and its subsidiaries. This Report contains trademarks, service marks and trade names that are the property of, or licensed by, ATN and its subsidiaries.

 

Reference to dollars ($) refer to U.S. dollars unless otherwise specifically indicated.

 

 

 

 

3


 

PART I—FINANCIAL INFORMATION

Item 1. Unaudited Condensed Consolidated Financial Statements

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 

 

December 31, 

 

 

 

    

2018

    

2017

    

 

ASSETS

 

 

 

 

 

 

 

 

Current Assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

167,107

 

$

207,956

 

 

Restricted cash

 

 

1,071

 

 

833

 

 

Short-term investments

 

 

1,595

 

 

7,076

 

 

Accounts receivable, net of allowances of $15.1 million and $15.0 million, respectively

 

 

51,365

 

 

43,529

 

 

Inventory, materials and supplies

 

 

7,789

 

 

15,398

 

 

Prepayments and other current assets

 

 

35,386

 

 

68,136

 

 

Total current assets

 

 

264,313

 

 

342,928

 

 

Fixed Assets:

 

 

 

 

 

 

 

 

Property, plant and equipment

 

 

1,255,975

 

 

1,169,806

 

 

Less accumulated depreciation

 

 

(553,007)

 

 

(526,660)

 

 

Net fixed assets

 

 

702,968

 

 

643,146

 

 

Telecommunication licenses, net

 

 

95,952

 

 

95,952

 

 

Goodwill

 

 

63,970

 

 

63,970

 

 

Customer relationships, net

 

 

10,403

 

 

11,734

 

 

Restricted cash

 

 

11,949

 

 

11,101

 

 

Other assets

 

 

39,444

 

 

36,774

 

 

Total assets

 

$

1,188,999

 

$

1,205,605

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

 

Current portion of long-term debt

 

$

11,268

 

$

10,919

 

 

Accounts payable and accrued liabilities

 

 

115,445

 

 

116,133

 

 

Dividends payable

 

 

2,712

 

 

2,724

 

 

Accrued taxes

 

 

10,238

 

 

6,751

 

 

Advance payments and deposits

 

 

17,727

 

 

25,178

 

 

Total current liabilities

 

 

157,390

 

 

161,705

 

 

Deferred income taxes

 

 

30,755

 

 

31,732

 

 

Other liabilities

 

 

41,612

 

 

37,072

 

 

Long-term debt, excluding current portion

 

 

139,733

 

 

144,873

 

 

Total liabilities

 

 

369,490

 

 

375,382

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

ATN International, Inc. Stockholders’ Equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value per share; 10,000,000 shares authorized, none issued and outstanding

 

 

 —

 

 

 —

 

 

Common stock, $0.01 par value per share; 50,000,000 shares authorized; 17,128,694 and 17,102,530 shares issued, respectively, 15,957,537 and 16,025,745 shares outstanding respectively

 

 

170

 

 

170

 

 

Treasury stock, at cost; 1,171,157 and 1,076,785 shares, respectively

 

 

(40,268)

 

 

(36,110)

 

 

Additional paid-in capital

 

 

172,170

 

 

167,973

 

 

Retained earnings

 

 

550,872

 

 

552,948

 

 

Accumulated other comprehensive income

 

 

141

 

 

3,746

 

 

Total ATN International, Inc. stockholders’ equity

 

 

683,085

 

 

688,727

 

 

Non-controlling interests

 

 

136,424

 

 

141,496

 

 

Total equity

 

 

819,509

 

 

830,223

 

 

Total liabilities and equity

 

$

1,188,999

 

$

1,205,605

 

 

 

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

4


 

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017

(Unaudited)

(In thousands, except per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended  June 30, 

 

Six months ended June 30, 

 

 

    

2018

    

2017

    

2018

    

2017

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

 

Wireless

 

$

50,496

 

$

56,546

 

$

101,043

 

$

115,471

 

Wireline

 

 

61,269

 

 

61,802

 

 

109,365

 

 

125,960

 

Renewable energy

 

 

6,023

 

 

4,897

 

 

11,855

 

 

9,929

 

Total revenue

 

 

117,788

 

 

123,245

 

 

222,263

 

 

251,360

 

OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated):

 

 

 

 

 

 

 

 

 

 

 

 

 

Termination and access fees

 

 

28,257

 

 

30,922

 

 

54,171

 

 

63,924

 

Engineering and operations

 

 

18,409

 

 

19,378

 

 

36,561

 

 

39,061

 

Sales, marketing and customer service

 

 

8,413

 

 

8,729

 

 

16,974

 

 

17,765

 

General and administrative

 

 

26,754

 

 

26,011

 

 

52,296

 

 

50,370

 

Transaction-related charges

 

 

438

 

 

148

 

 

465

 

 

826

 

Depreciation and amortization

 

 

21,913

 

 

22,254

 

 

43,217

 

 

44,747

 

(Gain) loss on disposition of long-lived assets

 

 

(2,333)

 

 

 —

 

 

(2,049)

 

 

1,111

 

Loss on damaged assets and other hurricane related charges, net of insurance recovery

 

 

184

 

 

 —

 

 

666

 

 

 —

 

Total operating expenses

 

 

102,035

 

 

107,442

 

 

202,301

 

 

217,804

 

Income from operations

 

 

15,753

 

 

15,803

 

 

19,962

 

 

33,556

 

OTHER INCOME (EXPENSE)

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

487

 

 

347

 

 

853

 

 

633

 

Interest expense

 

 

(2,327)

 

 

(2,153)

 

 

(4,532)

 

 

(4,469)

 

Loss on deconsolidation of subsidiary

 

 

 —

 

 

 —

 

 

 —

 

 

(529)

 

Other expenses

 

 

(1,045)

 

 

(492)

 

 

(1,798)

 

 

(973)

 

Other expense, net

 

 

(2,885)

 

 

(2,298)

 

 

(5,477)

 

 

(5,338)

 

INCOME BEFORE INCOME TAXES

 

 

12,868

 

 

13,505

 

 

14,485

 

 

28,218

 

Income tax provisions

 

 

2,088

 

 

2,596

 

 

6,008

 

 

5,724

 

NET INCOME

 

 

10,780

 

 

10,909

 

 

8,477

 

 

22,494

 

Net income attributable to non-controlling interests, net of tax expense of $0.3 million, $0.1 million, $0.6 million, and $0.4 million, respectively.

 

 

(3,564)

 

 

(5,026)

 

 

(6,816)

 

 

(9,751)

 

NET INCOME ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS

 

$

7,216

 

$

5,883

 

$

1,661

 

$

12,743

 

NET INCOME PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.45

 

$

0.36

 

$

0.10

 

$

0.79

 

Diluted

 

$

0.45

 

$

0.36

 

$

0.10

 

$

0.78

 

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

15,962

 

 

16,195

 

 

15,996

 

 

16,176

 

Diluted

 

 

16,010

 

 

16,274

 

 

16,046

 

 

16,263

 

DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK

 

$

0.17

 

$

0.34

 

$

0.34

 

$

0.68

 

 

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

 

 

5


 

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2018 AND 2017 (Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

2018

    

2017

 

2018

    

2017

Net income

 

$

10,780

 

$

10,909

 

$

8,477

 

$

22,494

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Foreign currency translation adjustment

 

 

(2,551)

 

 

302

 

 

(3,583)

 

 

2,232

Reclassifications of gains on sale of marketable securities to net income

 

 

 —

 

 

(755)

 

 

 —

 

 

(1,044)

Unrealized gain (loss) on securities

 

 

42

 

 

(90)

 

 

181

 

 

(130)

Projected pension benefit obligation, net of tax of $0.0 million, $0.0 million, $0.0 million, and $0.4 million, respectively

 

 

 —

 

 

 —

 

 

 —

 

 

513

Other comprehensive income (loss), net of tax

 

 

(2,509)

 

 

(543)

 

 

(3,402)

 

 

1,571

Comprehensive income

 

 

8,271

 

 

10,366

 

 

5,075

 

 

24,065

Less: Comprehensive income attributable to non-controlling interests

 

 

(3,564)

 

 

(5,026)

 

 

(6,816)

 

 

(9,751)

Comprehensive income (loss) attributable to ATN International, Inc.

 

$

4,707

 

$

5,340

 

$

(1,741)

 

$

14,314

 

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

6


 

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 31, 2018 AND 2017

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

Six Months Ended June 30,

 

2018

    

2017

Cash flows from operating activities:

 

 

 

 

 

Net income

$

8,477

 

$

22,494

Adjustments to reconcile net income to net cash flows provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

43,217

 

 

44,747

Provision for doubtful accounts

 

2,249

 

 

1,906

Amortization and write off of debt discount and debt issuance costs

 

393

 

 

279

Stock-based compensation

 

3,679

 

 

3,786

Unrealized loss on foreign currency

 

1,066

 

 

 —

Deferred income taxes

 

(1,279)

 

 

2,379

Loss on equity method investments

 

 —

 

 

2,033

(Gain) Loss on disposition of long-lived assets

 

(2,049)

 

 

1,111

Gain on sale of investments

 

 —

 

 

(1,055)

Loss on deconsolidation of subsidiary

 

 —

 

 

529

Other non-cash activity

 

177

 

 

509

Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions:

 

 

 

 

 

Accounts receivable

 

(10,605)

 

 

(6,062)

Materials and supplies, prepayments, and other current assets

 

1,254

 

 

(6,586)

Prepaid income taxes

 

 —

 

 

995

Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities

 

(2,137)

 

 

(3,331)

Accrued taxes

 

1,249

 

 

(7,876)

Other assets

 

(1,208)

 

 

2,887

Other liabilities

 

1,554

 

 

6,722

Net cash provided by operating activities

 

46,037

 

 

65,467

Cash flows from investing activities:

 

 

 

 

 

Capital expenditures

 

(40,594)

 

 

(78,559)

Hurricane rebuild capital expenditures

 

(66,654)

 

 

 —

Hurricane insurance proceeds

 

34,606

 

 

 —

Receipt of government grants

 

5,400

 

 

 —

Purchase of strategic investments

 

(2,000)

 

 

 —

Divestiture of businesses,  net of transferred cash of $0.0 million and $2.1 million, respectively

 

926

 

 

22,597

Purchases of spectrum licenses and other intangible assets, including deposits

 

 —

 

 

(36,832)

Proceeds from sale of investments

 

5,348

 

 

2,761

Proceeds from sale of assets

 

4,130

 

 

 —

Net cash used in investing activities

 

(58,838)

 

 

(90,033)

Cash flows from financing activities:

 

 

 

 

 

Dividends paid on common stock

 

(5,441)

 

 

(10,992)

Proceeds from new borrowings

 

 —

 

 

8,571

Distribution to non-controlling interests

 

(12,836)

 

 

(3,373)

Payment of debt issuance costs

 

 —

 

 

(326)

Proceeds from stock option exercises

 

 —

 

 

274

Principal repayments of term loan

 

(4,786)

 

 

(5,447)

Repurchase of common stock

 

(3,660)

 

 

(2,186)

Acquisition of businesses,  net of acquired cash of  $0.0 million

 

 —

 

 

(1,178)

Repurchases of non-controlling interests

 

(61)

 

 

(953)

Investments made by minority shareholders in consolidated affiliates

 

 —

 

 

122

Net cash used in provided by financing activities

 

(26,784)

 

 

(15,488)

Effect of foreign currency exchange rates on cash and cash equivalents

 

(178)

 

 

207

Net change in cash, cash equivalents, and restricted cash

 

(39,763)

 

 

(39,847)

Total cash, cash equivalents, and restricted cash, beginning of period

 

219,890

 

 

288,358

Total cash, cash equivalents, and restricted cash, end of period

$

180,127

 

$

248,511

Noncash investing activity:

 

 

 

 

 

Transfer from inventory, materials and supplies to property, plant and equipment

$

6,708

 

$

 —

Purchases of property, plant and equipment included in accounts payable and accrued expenses

$

13,266

 

$

13,107

 

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

 

 

7


 

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

1.ORGANIZATION AND BUSINESS OPERATIONS

 

The Company is a holding company that, through its operating subsidiaries, (i) provides wireless and wireline telecommunications services in North America, Bermuda and the Caribbean, (ii) develops, owns and operates commercial distributed generation solar power systems in the United States and India, and (iii) owns and operates terrestrial and submarine fiber optic transport systems in the United States and in the Caribbean. The Company was incorporated in Delaware in 1987 and began trading publicly in 1991. Since that time, the Company has engaged in strategic acquisitions and investments to grow its operations. The Company actively evaluates additional domestic and international acquisition, divestiture, and investment opportunities and other strategic transactions in the telecommunications, energy-related and other industries that meet its return-on-investment and other acquisition criteria.

 

The Company offers the following principal services:

 

·

Wireless.  In the United States, the Company offers wholesale wireless voice and data roaming services to national, regional, local and selected international wireless carriers in rural markets located principally in the Southwest and Midwest United States. The Company also offers wireless voice and data services to retail and wholesale customers in Bermuda, Guyana, the U.S. Virgin Islands, and the United States. 

 

·

Wireline.  The Company’s wireline services include local telephone and data services in Bermuda, the Cayman Islands, Guyana, the U.S. Virgin Islands, and the United States.  The Company’s wireline services also include video services in Bermuda, the Cayman Islands, and the U.S Virgin Islands.  The Company offers wholesale long‑distance voice services to telecommunications carriers.  Through March 8, 2017, the Company also offered facilities‑based integrated voice and data communications services and wholesale transport services to enterprise and residential customers in New England, primarily Vermont, and in New York State.

·

Renewable Energy.   In the United States, the Company provides distributed generation solar power to corporate and municipal customers. The Company also owns and develops projects in India providing distributed generation solar power to corporate customers.  

 

The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which the Company reports its revenue and the markets it served as of June 30, 2018:

 

 

 

 

 

 

 

 

 

Segment

   

Services

   

Markets

   

Tradenames

 

U.S. Telecom

 

Wireless

 

United States (rural markets)

 

Commnet, Choice, Choice NTUA Wireless, WestNet, Geoverse

 

 

 

Wireline

 

United States

 

Essextel, Deploycom

 

International Telecom

 

Wireline

 

Bermuda, Guyana, U.S. Virgin Islands, Cayman Islands

 

One, GTT+, Viya, Logic, Fireminds

 

 

 

Wireless

 

Bermuda, Guyana, U.S. Virgin Islands

 

One, GTT+, Viya

 

 

 

Video Services

 

Bermuda, U.S. Virgin Islands, Cayman Islands

 

One, Viya, Logic

 

Renewable Energy

 

Solar

 

United States (Massachusetts, California, and New Jersey), India

 

Ahana Renewables, Vibrant Energy

 

 

8


 

The Company actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, that meet its return on investment and other criteria. The Company provides management, technical, financial, regulatory, and marketing services to its subsidiaries and typically receives a management fee equal to a percentage of their respective revenue. Management fees from subsidiaries are eliminated in consolidation.

 

2. BASIS OF PRESENTATION

 

The accompanying condensed consolidated financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). The financial information included herein is unaudited; however, the Company believes such information and the disclosures herein are adequate to make the information presented not misleading and reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair statement of the Company’s financial position and results of operations for such periods. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. Results of interim periods may not be indicative of results for the full year.  These condensed consolidated financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2017, filed with the SEC on March 1, 2018.

 

The condensed consolidated financial statements include the accounts of the Company, its majority-owned subsidiaries and certain entities, which are consolidated in accordance with the provisions of the Financial Accounting Standards Board’s (“FASB”) authoritative guidance on the consolidation of variable interest entities, since it is determined that the Company is the primary beneficiary of these entities.

 

The Company’s effective tax rate for the three months ended June 30, 2018 and 2017 was 16.2% and 19.2%, respectively.  The effective tax rate for the three months ended June 30, 2018 was primarily impacted by the following items: (i) a $0.5 million benefit for the release of a capital loss valuation allowance due to a capital gain on a sale of a wireless license, and (ii) the mix of income generated among the jurisdictions in which the Company operates along with the exclusion of losses in jurisdictions where it cannot benefit from those losses as required by ASC 740-270-30-36(a), primarily in the U.S. Virgin Islands and India.   The effective tax rate for the three months ended June 30, 2017 was impacted by the following items:  (i) a benefit for the net capital loss due to the stock sales of our businesses in New England, New York and St. Maarten, and (ii) the mix of income generated among the jurisdictions in which it operates.  The Company’s effective tax rate for the six months ended June 30, 2018 and 2017 was 41.5% and 20.3%, respectively.  The effective tax rate for the six months ended June 30, 2018 was primarily impacted by the following items: (i) a $0.7 million provision for the intercompany sale of assets from the U.S. to the U.S. Virgin Islands,  (ii) a $0.5 million increase (net) in unrecognized tax benefits recognized discretely, (iii)  a $0.5 million benefit for the release of a capital loss valuation allowance due to a capital gain on a sale of a wireless license, and (iv) the mix of income generated among the jurisdictions in which it operates along with the exclusion of losses in jurisdictions where the Company cannot benefit from those losses as required by ASC 740-270-30-36(a), primarily in the U.S. Virgin Islands and India.   The effective tax rate for the six months ended June 30, 2017 was impacted by the following items:  (i) a benefit for the net capital loss due to the stock sales of our businesses in New England, New York and St. Maarten, and (ii) the mix of income generated among the jurisdictions in which the Company operates.  The Company’s effective tax rate is based upon estimated income before provision for income taxes for the year, composition of the income in different countries, and adjustments, if any, in the applicable quarterly periods for potential tax consequences, benefits and/or resolutions of tax contingencies. The Company’s consolidated tax rate will continue to be impacted by any transactional or one-time items in the future and the mix of income in any given year generated among the jurisdictions in which it operates.  The effective tax rate in 2018 could be affected by adjustments to the provisional amounts recorded under the guidance of SAB 118 for the one-time transition tax and the revaluation of deferred tax assets and liabilities due to the U.S. statutory rate change in 2017 however no change has been recorded as of June 30, 2018.  While the Company believes it has adequately provided for all tax positions, amounts asserted by taxing authorities could materially differ from our accrued positions as a result of uncertain and complex application of tax law and regulations.  Additionally, the recognition and measurement of certain tax benefits include estimates and judgment by management. Accordingly, the Company could record additional provisions or benefits for U.S. federal, state, and foreign tax matters in future periods as new information becomes available.

9


 

 

Recent Accounting Pronouncements 

In May 2014, the Financial Accounting Standards Board (“FASB”) issued ASU 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), and subsequently issued related updates, which provides a single, comprehensive revenue recognition model for all contracts with customers. The revenue standard is based on the principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The Company adopted this standard on January 1, 2018.  Refer to Note 3.

 

In January 2016, the FASB issued ASU 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which addresses certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The Company adopted this standard on January 1, 2018.  Upon adoption the Company held $20.1 million of equity investments that do not have readily determinable fair values.  As a result these investments are measured at cost less impairments, adjusted for observable price changes of similar investments of the same issuer.  The Company performs a qualitative impairment assessment of these investments quarterly by reviewing available information.  The Company has not adjusted the cost of these investments since acquisition.  Upon adoption, the Company held $0.6 million of equity investments with readily determinable fair values and reclassified $0.2 million of unrealized gains on this investment to retained earnings. 

 

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842)” and subsequently issued related updates (“ASU 2016-02”), which provide comprehensive lease accounting guidance.  The standard requires entities to recognize lease assets and liabilities on the balance sheet as well as disclosure of key information about leasing arrangements.  ASU 2016-02 will become effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.  The Company is in the process of implementing new systems, processes and controls to implement the guidance.  The Company will adopt the standard on January 1, 2019 by applying the new lease requirements at the effective date and recognize a cumulative-effect adjustment to the opening balance sheet retained earnings in the period of adoption with no adjustments to prior periods.  The adoption will result in right to use asset and liabilities being recorded on the Company’s balance sheet.  The Company is in the process of determining quantitative information related to the impact of the guidance.

 

In March 2016, the FASB issued ASU 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting” (“ASU 2016-09”). The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification on the statement of cash flows and forfeitures. The Company adopted ASU 2016-09 on January 1, 2017. The guidance requires the recognition of the income tax effects of awards in the income statement when the awards vest or are settled, thus eliminating additional paid-in capital pools. This had no impact on the Company’s historical results.  Also as a result of the adoption, the Company changed its policy election to account for forfeitures as they occur rather than on an estimated basis. The change resulted in the Company reclassifying $0.3 million from additional paid-in capital to retained earnings for the net cumulative-effect adjustment in stock compensation expense related to prior periods.

 

In August 2016, the FASB issued ASU 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments,” which provides further clarification on eight cash flow classification issues. The Company adopted this standard on January 1, 2018.  In November 2016, the FASB issued ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash,” (“ASU 2016-18”). The amendments in ASU 2016-18 are intended to reduce diversity in practice related to the classification and presentation of changes in restricted or restricted cash equivalents on the statement of cash flows. The amendments in ASU 2016-18 require that amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard on January 1, 2018. 

 

The Company’s statement of cash flows reports the cash effects during a period of an entity’s operations, its investing transactions, and its financing transactions.  The statement of cash flows explains the change during the period in the total cash which includes cash equivalents as well as restricted cash.  The Company applies the predominance

10


 

principle to classify separately identifiable cash flows based on the nature of the underlying cash flows.   Debt prepayment or extinguishment costs are classified as cash outflows from financing activities.  Contingent consideration payments made three months or less after a business combination are classified as investing activities and those made after that time are classified as financing activities.  Proceeds from the settlement of insurance claims are classified on the basis of the nature of the loss.  Prior to January 1, 2018, the Company classified all payments made in a business combination as investing activities and did not include restricted cash in total cash.  This change impacted the Company’s cash flows for the six months ended June 30, 2017 as indicated below (amounts in thousands):

 

 

 

 

 

 

 

 

Statement of Cash flows - Six months ended June 30, 2017

 

 

 

 

 

 

 

Reported

 

Change

 

Under previous guidance

Net cash provided by operating activities

$

65,467

$

 —

$

65,467

Net cash used in investing activities

 

(90,033)

 

588

 

(89,445)

Net cash used in financing activities

 

(15,488)

 

1,178

 

(14,310)

Effect of foreign currency exchange rates on total cash

 

207

 

 —

 

207

Net change in total cash

$

(39,847)

$

1,766

$

(38,081)

Total cash, beginning of period

 

288,358

 

(18,637)

 

269,721

Total cash, end of period

$

248,511

$

(16,871)

$

231,640

 

In October 2016 the FASB issued ASU 2016-16, “Accounting for Income Taxes: Intra-Entity Asset Transfers of Assets Other than Inventory”. The new standard eliminates all intra-entity sales of assets other than inventory, the exception under current standards that permits the tax effects of intra-entity asset transfers to be deferred until the transferred asset is sold to a third party or otherwise recovered through use. As a result, a reporting entity would recognize the tax expense from the sale of the asset in the seller’s tax jurisdiction when the transfer occurs. Any deferred tax asset that arises in the buyer’s jurisdiction would also be recognized at the time of the transfer. The new standard was effective for the Company on January 1, 2018. There was not a material impact to the Company’s consolidated financial statements upon adoption.

 

In January 2017, the FASB issued Accounting Standards Update 2017-04, “Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment,” or (“ASU 2017-04”). The amendments in ASU 2017-04 simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. In computing the implied fair value of goodwill under Step 2, an entity had to perform procedures to determine the fair value at the impairment testing date of its assets and liabilities. Instead, under the amendments in ASU 2017-04, an entity performs its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognizes an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value, but not more than the total amount of goodwill allocated to the reporting unit. ASU 2017-04 is effective for annual reporting periods, including interim periods within those periods, beginning after December 15, 2019, with early adoption permitted. The Company adopted this standard in the third quarter of 2017.

 

In March 2017, the FASB issued ASU 2017-07, “Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost”. The new guidance requires the service cost component to be presented separately from the other components of net benefit costs. Service cost will be presented with other employee compensation cost within income from operations. The other components of net benefit cost, such as interest cost, amortization of prior service cost and gains or losses are required to be presented in other income. The Company adopted this standard on January 1, 2018. 

 

The Company sponsors pension and other postretirement benefit plans for employees of certain subsidiaries. Net periodic pension expense consists of service cost, interest cost, expected return on plan assets, and amortization of actuarial gains and losses.  Service cost is recognized in operating income and all other components of pension expense are recognized in other income in the Company’s Statement of Operations. The Company recognizes a pension or other postretirement plan’s funded status as either an asset or liability in its consolidated balance sheet. Actuarial gains and losses are reported as a component of other comprehensive income and amortized through other income in subsequent periods.  Prior to January 1, 2018, all components of pension expense were recognized in operating income.  This change

11


 

impacted the Company’s Statement of Operations for the three and six months ended June 30, 2017 by increasing operating expenses $40 thousand and $80 thousand, respectively and decreasing other income by the same amount.  There was no impact on income before income taxes.  The Company elected the practical expedient allowing the use of the amounts disclosed for the various components of net benefit cost in the pension and other postretirement benefit plans footnote as the basis for the retrospective application.

 

In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815) – Targeted Improvements to Accounting for Hedging Activities” (“ASU 2017-12”). The standard: (a) expands and refines hedge accounting for both financial and non-financial risk components, (b) aligns the recognition and presentation of the effects of hedging instruments and hedge items in the financial statements, and (c) includes certain targeted improvements to ease the application of current guidance related to the assessment of hedge effectiveness. The guidance is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted, including the adoption in an interim period. If an entity early adopts in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The guidance related to cash flow and net investment hedges existing at the date of adoption should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The guidance related to presentation and disclosure should be applied prospectively. The Company is currently assessing the impact of ASU 2017-12 on its consolidated financial statements.

 

In February 2018, the FASB issued ASU 2018-02 “Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” (“ASU 2018-02”).  The standard gives entities the option to reclassify to retained earnings tax effects related to items in accumulated other comprehensive income that were impacted by the 2017 Tax Cuts and Jobs Act.  The guidance is effective for all entities for fiscal years beginning after December 31, 2018 and interim periods within those fiscal years.  Early adoption is permitted.  The guidance may be applied in the period of adoption or retrospectively to each impacted period.  The Company has elected to early adopt ASU 2018-02 on December 31, 2017 and recorded its impact in the period of adoption.  The impact of the adoption results in a $0.8 million reclassification from accumulated other comprehensive income to retained earnings, which is offset by an equivalent valuation allowance, with the net impact being zero.

 

 

3.  Revenue Recognition

 

The Company’s significant accounting policies are detailed in “Note 2 – Summary of Significant Accounting Policies” within Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2017.  The Company’s accounting policies are updated as a result of adopting ASC 606 on January 1, 2018.  The adoption of ASC 606 impacted the accounting for contract acquisition costs, multiyear retail wireless contracts with promotional discounts, and deferral of certain activation fees as further described below.

 

Revenue Recognition – The Company earns revenue from its telecommunication and renewable energy operations.  The Company recognizes revenue through the following steps:

 

-

Identification of the contract with a customer

-

Identification of the performance obligations in the contract

-

Determination of the transaction price

-

Allocation of the transaction price to the performance obligations in the contract

-

Recognize revenue when, or as, we satisfy performance obligations

 

Revenue Recognition- Telecommunications

 

Wireless revenue consists of wholesale and retail revenue.  Wholesale revenue is generated from providing mobile voice and data services to the customers of other wireless carriers, the provision of network switching services and certain transport services using the Company’s wireless networks.  The transaction price of some wholesale revenue contracts includes variable consideration in the form of volume discounts.  Management uses its judgment based on projected transaction volumes to estimate the transaction price and to allocate the transaction price to the performance

12


 

obligations in the contract.  Revenue is recognized over time as the service is rendered to the customer.  Retail revenue is generated from providing mobile voice and data services to subscribers as well as roaming services provided to other carriers’ customers roaming into our retail markets. This revenue is recognized over time as the service is rendered.  Lastly, wireless revenue includes revenues from equipment sold to customers which is recognized when the equipment is delivered to the customer. 

 

Management considers transactions where customers purchase subsidized or discounted equipment and mobile voice or data services to be a single contract.  For these contracts, the transaction price is allocated to the equipment and mobile service based on their standalone selling prices.  The standalone selling price is based on the amount the Company charges for the equipment and service to similar customers.  Equipment revenue is recognized when the equipment is delivered to customers and service revenue is recognized as service is rendered.

 

Wireline revenue is generated from access and usage fees for internet, voice and video services charged to subscribers as well as wholesale long-distance voice services provided to telecommunication carriers at contracted rates.  Revenue from these contracts is recognized over time as the service is rendered to the customer.

 

The Company’s wireless and wireline contracts occasionally include promotional discounts such as free service periods or discounted products.  If a contract contains a substantive termination penalty, the transaction price is allocated to the performance obligations based on standalone selling price resulting in accelerated revenue recognition and the establishment of a contract asset that will be recognized over the life of the contract.  If a contract includes a promotional discount but no substantive termination penalty the discount is recorded in the promotional period and no contract asset it established. The Company’s customers also have the option to purchase additional telecommunication services.  Generally, these options are not performance obligations and are excluded from the transaction price because they do not provide the customers with a material right. 

 

The Company may charge upfront fees for activation and installation of some of its products and services.  These fees are reviewed to determine if they represent a separate performance obligation.  If they are not a separate performance obligation, the contract price associated with them is recognized over the life of the customer.  If the fees represent a performance obligation they are recognized when delivered to the customer based on standalone selling price.

 

Sales and use and state excise taxes collected from customers that are remitted to the governmental authorities are reported on a net basis and excluded from the revenues and sales.

 

Revenue Recognition-Renewable Energy

 

Revenue from the Company’s Renewable Energy segment is generated from the sale of electricity through power purchase agreements (“PPA’s”) with various customers that generally range from 10 to 25 years.  The Company recognizes revenue at contractual PPA rates over time as electricity is generated and simultaneously consumed by the customer.  The Company’s Renewable Energy segment also generates revenue from the sale of Solar Renewable Energy Credits (“SRECs”).  Revenue is recognized over time as SRECs are sold through long-term purchase agreements at the contractual rate specified in the agreement.

 

Disaggregation

 

The Company's revenue is presented on a disaggregated basis in Note 12 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from wireline, wireless and renewable energy, as well as domestic versus international wireline and wireless services. This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

 

13


 

Contract Assets and Liabilities

 

The Company recognizes contract assets and liabilities on its balance sheet.  Contract assets represent unbilled amounts typically resulting from retail wireless contracts with both a multiyear service period and a promotional discount.  In these contracts the revenue recognized exceeds the amount billed to the customer.  The current portion of the contract asset is recorded in prepayments and other current asset and the noncurrent portion is included in other assets on our balance sheets.  Contract liabilities consist of advance payments and billings in excess of revenue recognized.  Retail revenue for postpaid customers is generally billed one month in advance and recognized over the period that the corresponding service is rendered to customers.  To the extent the service is not provided by the reporting date the amount is recognized as a contract liability.  Prepaid service, including mobile voice and data services, sold to customers is recorded as deferred revenue prior to the commencement of services. Contract liabilities are recorded in advanced payments and deposits on our balance sheets.  Contract assets and liabilities consisted of the following (amounts in thousands):

 

 

 

 

 

 

 

 

 

 

 

 

June 30, 2018

 

March 31, 2018

 

$ Change

 

% Change

Contract asset – current

$

1,434

$

1,309

$

125

 

10%

Contract asset – noncurrent

 

568

 

498

 

70

 

14%

Contract liabilities

 

(9,552)

 

(9,827)

 

275

 

-3%

Net contract liability

$

(7,550)

$

(8,020)

$

470

 

-6%

 

The contract asset-current is included in prepayments and other current assets, the contract asset – noncurrent is included in other assets, and the contract liabilities are included in advance payments and deposits on the Company’s balance sheet.  The decrease in our net contract liability was due to the timing of customer prepayments and contract billings.  In the second quarter of 2018, we recognized revenue of $8.5 million related to our March 31, 2018 contract liability and amortized $0.5 million of the March 31, 2018 contract asset into revenue.  The Company recognized revenue of $0.6 million in the second quarter of 2018 related to performance obligations that were satisfied or partially satisfied in previous periods.   

14


 

Contract Acquisition Costs

 

The Company pays sales commissions to its employees and agents for obtaining customer contracts.  These costs are incremental because they would not have been incurred if the contract was not obtained.  The Company recognizes an asset for these costs and subsequently amortizes the asset on a systematic basis consistent with the pattern of the transfer of the services to the customer.  The amortization period, which is between 2 and 6 years, considers both the original contract period as well as anticipated contract renewals as appropriate.  The amortization period also includes renewal commissions when those commissions are not commensurate with new commissions.  The Company estimates contract renewals based on its actual renewals in recent periods. When the expected amortization period is one year or less the Company utilizes the practical expedient and expenses the costs as incurred.  The June 30, 2018 balance sheet includes current contract acquisition costs of $1.3 million in prepayments and other current assets and long term contract acquisition costs of $0.9 million in other assets.  During the three and six months ended June 30, 2018 the Company amortized $0.3 million and $0.6 million, respectively, of contract acquisition cost.

 

Remaining Performance Obligations

 

Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear retail wireless contracts that include a promotional discount.  The transaction price allocated to unsatisfied performance obligations was $10.6 million at June 30, 2018.  The Company expects to satisfy the remaining performance obligations and recognize the transaction price within 24 months.  The Company has certain retail, wholesale, and renewable energy contracts where transaction price is allocated to remaining performance obligations.  However the company omits these contracts from the disclosure by applying the right to invoice, one year or less, and wholly unsatisfied performance obligation practical expedients.

 

 

Impacts of adoption in the current period

 

The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method.  The Company elected the practical expedient to apply the new guidance only to contracts that were not substantially complete at the adoption date.   The cumulative effect of adopting ASC 606 resulted in a contract asset of $1.6 million of which $1.2 million was recorded in prepayments and other current assets and $0.4 million was recorded in other assets, a contract liability of $0.2 million recorded in advance payments and deposits, contract acquisition costs of $1.5 million of which $0.9 million was recorded in prepayments and other current assets and $0.6 million was recorded in other assets, and a deferred tax liability of $0.3 million with the offset of $1.5 million recorded to retained earnings and $1.1 million recorded to minority interest.  The tables below identify changes to the Company’s financial statements as of June 30, 2018 and for the three months then ended as a result of the adoption of ASC 606 as compared to previous revenue guidance (amounts in thousands):

 

15


 

 

 

 

 

 

 

 

Balance Sheet – June 30, 2018

 

 

Reported

 

Change

 

Under previous guidance

Prepayments and other current assets

$

35,386

$

(2,757)

$

32,629

 

 

 

 

 

 

 

Total current assets

$

264,313

$

(2,757)

$

261,556

 

 

 

 

 

 

 

Other assets

$

39,444

$

(1,433)

$

38,011

 

 

 

 

 

 

 

Total assets

$

1,188,999

$

(4,190)

$

1,184,809

 

 

 

 

 

 

 

Advance payments and deposits

$

17,727

$

(299)

$

17,428

Accrued taxes

 

10,238

 

(142)

 

10,096

 

 

 

 

 

 

              - 

Total current liabilities

$

157,390

$

(441)

$

156,949

 

 

 

 

 

 

 

Deferred income taxes

$

30,755

$

(301)

$

30,454

 

 

 

 

 

 

 

Total liabilities

$

369,490

$

(742)

$

368,748

 

 

 

 

 

 

 

Retained earnings

$

550,872

$

(1,967)

$

548,905

Minority interest

$

136,424

$

(1,481)

$

134,943

 

 

 

 

 

 

 

Total equity

$

819,509

$

(3,448)

$

816,061

 

 

 

 

 

 

 

Total liabilities and equity

$

1,188,999

$

(4,190)

$

1,184,809

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2018

 

 

Six months ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

Change

 

Under previous guidance

 

 

Reported

 

Change

 

Under previous guidance

Wireless revenue

$

50,496

$

(204)

$

50,292

 

$

101,043

$

(337)

$

100,706

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total revenue

$

117,788

$

(204)

$

117,584

 

$

222,263

$

(337)

$

221,926

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales, marketing and customer service

$

8,413

$

240

$

8,653

 

$

16,974

$

618

$

17,592

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

$

102,035

$

240

$

102,275

 

$

202,301

$

618

$

202,919

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

$

15,753

$

(444)

$

15,309

 

$

19,962

$

(955)

$

19,007

Income before taxes

 

12,868

 

(444)

 

12,424

 

 

14,485

 

(955)

 

13,530

Income tax provision

 

2,088

 

(49)

 

2,039

 

 

6,008

 

(142)

 

5,866

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

$

10,780

$

(395)

$

10,385

 

$

8,477

$

(813)

$

7,664

Net income attributable  to non-controlling interests

 

(3,564)

 

154

 

(3,410)

 

 

(6,816)

 

335

 

(6,481)

Net income attributable to ATN International, Inc. stockholders

$

7,216

$

(241)

$

6,975

 

$

1,661

$

(478)

$

1,183

 

 

 

 

 

 

16


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Statement of Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended June 30, 2018

 

 

Six months ended June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reported

 

Change

 

Under previous guidance

 

 

Reported

 

Change

 

Under previous guidance

Net income

$

10,780

$

(395)

$

10,385

 

$

8,477

$

(813)

$

7,664

Other comprehensive loss, net of tax

 

(2,509)

 

              -

 

(2,509)

 

 

(3,402)

 

              -

 

(3,402)

Comprehensive loss

 

8,271

 

(395)

 

7,876

 

 

5,075

 

(813)

 

4,262

Less: Comprehensive income attributable to non-controlling interests

 

(3,564)

 

154

 

(3,410)

 

 

(6,816)

 

335

 

(6,481)

Comprehensive income (loss) attributable to ATN International, Inc.

$

4,707

$

(241)

$

4,466

 

$

(1,741)

$

(478)

$

(2,219)

 

 

 

 

 

 

 

 

 

Statement of Cash Flows - Six months ended June 30, 2018

 

 

 

 

 

 

 

 

 

Reported

 

Change (1)

 

Under previous guidance

Net income

$

8,477

$

(813)

$

7,664

 

 

 

 

 

 

 

Materials and supplies, prepayments and other current assets

$

1,254

$

(681)

$

573

Accrued taxes

 

1,249

 

142

 

1,391

Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities

 

(2,137)

 

68

 

(2,069)

Other assets

$

(1,208)

$

(342)

$

(1,550)

 

(1)

The adoption of ASC 606 had no impact on operating cash flows, investing cash flows, financing cash flows or net change in total cash.

 

 

 

 

 

 

4. USE OF ESTIMATES

 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. The most significant estimates relate to the allowance for doubtful accounts, useful lives of the Company’s fixed and finite-lived intangible assets, allocation of purchase price to assets acquired and liabilities assumed in business combinations, fair value of indefinite-lived intangible assets, goodwill, assessing the impairment of assets, revenue, and income taxes. Actual results could differ significantly from those estimates.

 

 

 

17


 

5. IMPACT OF HURRICANES IRMA AND MARIA

 

During September 2017, the Company’s operations and customers in the U.S. Virgin Islands were severely impacted by Hurricanes Irma and Maria (collectively, the “Hurricanes”).  Both the Company’s wireless and wireline networks and commercial operations were severely damaged by these storms.  As a result of the significant damage to the Company’s wireline network and the lack of consistent commercial power in the territory, the Company was unable to provide most of its wireline services, which comprise the majority of revenue in this business, since the Hurricanes and through much of the first six months of 2018.  Accordingly, revenue generated by the Company’s U.S. Virgin Islands operations decreased by $3.0 million and $16.2 million during the three and six months ended June 30, 2018 as compared to 2017 as a result of the Hurricanes and an additional $1.2 and $2.3 million for the three and six months ended June 30, 2018 as a result of the Company’s August 2017 sale of its operations in the British Virgin Islands.  However, the second quarter of 2018 was positively impacted by the recognition of $8.2 million in revenue funded the additional receipt of high-cost Universal Service Funds. 

 

Duri