------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended March 31, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19551
Atlantic Tele-Network, Inc.
(exact name of issuer as specified in its charter)
Delaware 47-072886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Chase Financial Center
P.O. Box 1730
St. Croix, U.S. Virgin Islands 00821
(809) 777-8000
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 [X] No [ ]
As of March 31, 1997, the registrant had outstanding 12,272,500 shares of
its common stock ($.01 par value).
------------------------------------------------------------------------
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Columnar Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------------
December 31, March 31,
ASSETS 1996 1997
(Unaudited)
----------- -----------
Current assets:
Cash $ 11,540 $ 12,465
Accounts receivable, net 63,660 60,117
Materials and supplies 9,658 9,391
Prepayments and other current assets 4,110 3,719
----------- -----------
Total current assets 88,968 85,692
Fixed assets:
Property, plant and equipment 328,895 333,301
Less accumulated depreciation (117,031) (121,428)
Franchise rights and cost in excess of underlying book value, less
accumulated amortization of $11,170,000 and $11,520,000 40,132 39,782
----------- -----------
Net fixed assets 251,996 251,655
Property costs recoverable from future revenues 22,905 22,391
Uncollected authorized rate increases 3,119 3,018
Other assets 15,846 16,469
----------- -----------
$ 382,834 $ 379,225
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable $ 17,153 $ 16,810
Accounts payable 25,021 20,661
Accrued taxes 2,457 2,079
Advance payments and deposits 2,701 2,865
Other current liabilities 8,231 6,792
Current portion of long-term debt 12,942 12,936
----------- -----------
Total current liabilities 68,505 62,143
Deferred income taxes and tax credits 33,066 32,969
Long-term debt, excluding current portion 109,737 107,522
Pension and other long-term liabilities 6,702 6,578
Minority interest 15,033 15,340
Contingencies and commitments (Note D)
Stockholders' equity:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized; - -
none issued and outstanding
Common stock, par value $.01 per share; 20,000,000 shares authorized;
12,272,500 shares issued and outstanding 123 123
Paid-in capital 81,852 81,852
Retained earnings 67,816 72,698
----------- -----------
Total stockholders' equity 149,791 154,673
----------- -----------
$ 382,834 $ 379,225
=========== ===========
See notes to consolidated condensed financial statements.
2
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Columnar Amounts in Thousands, Except Per Share Data)
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
1996 1997
Telephone Operations:
Revenues:
Local exchange service $ 6,311 $ 7,283
Access charges 3,364 4,192
International long-distance revenues 35,241 30,862
Universal Service Fund 2,802 3,591
Billing and other revenues 1,029 1,530
Directory advertising 649 487
----------- -----------
Total revenues 49,396 47,945
Expenses:
Plant specific operations 3,717 3,821
Plant nonspecific operations 4,923 6,443
Customer operations 1,594 1,614
Corporate operations 2,921 2,989
International long-distance expenses 22,305 20,254
Taxes other than income 916 894
----------- -----------
Total expenses 36,376 36,015
Income from telephone operations 13,020 11,930
Other Operations:
Revenues:
Cellular services 1,638 1,149
Product sales and rentals 1,286 1,030
----------- -----------
Total revenues 2,924 2,179
Expenses of other operations 2,074 1,860
----------- -----------
Income from other operations 850 319
Non-operating Revenues and Expenses:
Interest expense (2,868) (2,572)
Interest income 142 89
Other revenues and expenses (4,442) (1,668)
----------- -----------
Non-operating revenues and expenses, net (7,168) (4,151)
----------- -----------
Income before income taxes and minority interest 6,702 8,098
Income taxes 2,924 2,909
----------- -----------
Income before minority interest 3,778 5,189
Minority interest (592) (307)
----------- -----------
Net income $ 3,186 $ 4,882
=========== ===========
Net income per share $ 0.26 $ 0.40
=========== ===========
Weighted average shares outstanding 12,273 12,273
=========== ===========
See notes to consolidated condensed financial statements.
3
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Columnar Amounts in Thousands)
- ----------------------------------------------------------------------------------------------------------
(Unaudited)
Three Months Ended
March 31,
-------------------------------
1996 1997
Net cash flows provided by operating activities $ 20,670 $ 8,570
Cash flows from investing activities:
Capital expenditures (12,207) (5,081)
----------- -----------
Net cash used in investing activities (12,207) (5,081)
Cash flows from financing activities:
Repayment of long-term debt (6,187) (2,221)
Net borrowings (repayments) on notes 3,975 (343)
----------- -----------
Net cash flows provided (used) by financing activities (2,212) (2,564)
----------- -----------
Net increase in cash 6,251 925
Cash, Beginning of Period 18,822 11,540
----------- -----------
Cash, End of Period $ 25,073 $ 12,465
=========== ===========
Supplemental cash flow information:
Interest paid $ 2,796 $ 2,606
=========== ===========
Income taxes paid $ $416 $ 2,219
=========== ===========
Depreciation and Amortization Expense $ $4,525 $ 6,003
=========== ===========
See notes to consolidated condensed financial statements.
4
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three Months Ended March 31, 1996 and 1997
(Columnar Amounts in Thousands)
A. GENERAL
SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet of Atlantic Tele-Network, Inc. and
subsidiaries (the "Company") at December 31, 1996 has been taken from audited
financial statements at that date. All other consolidated condensed financial
statements contained herein have been prepared by the Company and are
unaudited. The consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1996.
The unaudited interim consolidated condensed financial statements
furnished herein reflect all adjustments, which are, in the opinion of
management, necessary to fairly present the financial results for the interim
periods presented. The results for the three months ended March 31, 1996 and
1997 are not necessarily indicative of the operating results for the full year
not yet completed.
B. PROPERTY COSTS RECOVERABLE FROM FUTURE REVENUES
On September 15, 1995, Hurricane Marilyn struck the Virgin Islands
causing extensive damage to the outside telephone plant of Vitelco. None of
the damage was covered by insurance. The historical cost of the facilities
damaged or destroyed by Hurricane Marilyn was approximately $26.3 million with
associated accumulated depreciation of approximately $9.1 million. These costs
have been removed from the property accounts and along with certain excess
maintenance costs and costs of removal of $7.1 million have been classified as
property costs recoverable from future revenues because the Company
anticipates that future revenue in an amount at least equal to the capitalized
cost will result from inclusion of these costs in allowable costs for rate
making purposes. Vitelco has received approval from the Federal Communications
Commission to include the interstate portion of these costs in its rate base
and amortize them over a five year period. Vitelco has applied to the
Industrial Development Commission of the Virgin Islands for a 5-year exemption
from 90% of Virgin Islands income taxes and 100% of Virgin Islands gross
receipts and certain other taxes to assist in recovering the intrastate
portion of the costs described above. This application is still pending before
the IDC.
5
C. REGULATORY MATTERS
In October 1995, the Guyana Public Utilities Commission ("PUC") issued an
order that rejected the request of GT&T for substantial increases in all
telephone rates and temporarily reduced rates for outbound long-distance calls
to certain countries. In most cases, the existing rates were already less than
GT&T's payment obligations to foreign carriers. In January 1997, on an appeal
by GT&T, the Guyana High Court voided the PUC's order in regard to rates and
the rates were returned to the rates in existence in October 1995. The lost
revenue was approximately $10 million for the period when the order was
effective. Effective May 1, 1997, GT&T put into effect a surcharge on long
distance rates designed to recover these lost revenues over a period of 18
months. The PUC has appealed the January 1997 decision of the Guyana High
Court to the Guyana Court of Appeals, and in May 1997 the Consumer Advisory
Bureau (a non-governmental group in Guyana) sought an injunction from the
Guyana High Court restoring telephone rates to those imposed by the PUC in its
October 1995 order. At the date of the report, the PUC's appeal and the
Consumer Advisory Bureau's application are still pending.
In January 1997, the PUC ordered GT&T to cease paying advisory fees to
the Company and to recover from the Company approximately $25 million of fees
paid by GT&T to the Company since January 1991. GT&T has appealed the PUC's
order to the Guyana High Court and obtained a stay of the PUC's order pending
determination of that appeal.
At December 31, 1996, GT&T owed the Company approximately $23 million for
advances made from time to time for working capital and capital expenditure
needs of GT&T. GT&T's indebtedness to the Company was evidenced by a series of
promissory notes. In March 1997, the PUC voided all of the promissory notes
then outstanding for failure to comply with certain provisions of the PUC law.
The PUC ordered that no payments be made on any of the outstanding notes, and
that GT&T recover from ATN all amounts theretofore paid. The order also
provided that the Commission would be willing to authorize the payment of any
amounts properly proven to the satisfaction of the PUC to be due and payable
from GT&T to ATN. GT&T has appealed the PUC's order to the Guyana High Court
and obtained a stay of the PUC's order pending determination of that appeal.
In late April 1997, the PUC applied to the Guyana High Court for orders
prohibiting GT&T from paying any monies to the Company on account of
intercompany debt, advisory fees or otherwise pending the determination of
GT&T's appeals from the January 1997 and March 1997 orders mentioned above. At
the date of this report, the PUC's application is still pending.
6
D. CONTINGENCIES AND COMMITMENTS
The Company presently has no insurance coverage for its outside plant for
damages caused by wind storms. The Company is exploring alternatives to enable
it to insure this risk in whole or in part, but believes that such insurance
for outside plant is currently not available at reasonable rates.
Upon the acquisition of GT&T in January 1991, GT&T entered into an
agreement with the government of Guyana to expand significantly GT&T's
existing facilities and telecommunications operations and to improve service
within a three-year period pursuant to an expansion and service improvement
plan (the "Plan"). The Plan was modified in certain respects and the date for
completion of the Plan was extended to February 1995. The government has
referred to the PUC the failure of GT&T to complete the Plan by February 1995.
However, all proceedings by the PUC with respect to GT&T's obligations under
its Expansion Plan were stayed by the Guyana High Court during GT&T's appeal
to the Court from the PUC's October, 1995 order with regard to telephone rates
discussed above. As a result of the High Court's decision in January 1997 on
this appeal, the stay is no longer in effect. The PUC has scheduled a hearing
on this matter for July 1997. Failure to timely fulfill the terms of the Plan
could result in monetary penalties, cancellation of the License, or other
action by the PUC or the government which could have a material adverse affect
on the Company's business and prospects.
E. SPLIT-UP TRANSACTION
On January 29, 1997, the Company announced that its Board of Directors
and its two principal stockholders had approved the terms of the split-up of
the Company into two separate public companies. One, a new company, will
contain all of the Company's Virgin Islands operations. The other will
continue the Company's Guyana operations. As a condition to the transaction,
the new company is required to raise in excess of $17.4 million which will be
paid to the Company in repayment of certain intercompany indebtedness and will
be used by the Company to redeem a portion of the stock held by one of the
principal stockholders. The split-up is subject to the execution of definitive
documentation, the receipt of certain regulatory approvals, including a ruling
from the Internal Revenue Service that the distribution of shares of the new
company will be tax free for federal income tax purposes to the Company and
its stockholders under Section 355 of the Internal Revenue Code of 1986, as
amended, and an opinion from an investment banking firm as to the fairness of
the split-up from a financial point of view to the public stockholders of the
Company.
7
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Conditions and Results of Operations
Introduction
The Company's revenues and income from continuing operations are derived
principally from the operations of its telephone subsidiaries, Vitelco and
GT&T. Vitelco derives most of its revenues from local telephone and
long-distance access services. GT&T derives almost all of its revenues from
international telephone services. Other operations in the Company's
Consolidated Statements of Operations include: VitelCellular, which provides
cellular telephone service in the U.S. Virgin Islands; and Vitelcom, which
supplies customer premises equipment in the U.S. Virgin Islands.
The principal components of operating expenses for the Company's
telephone operations are plant specific operations expenses, plant
non-specific operations expenses, customer operations expenses, corporate
operations expenses, long-distance expenses and taxes other than income taxes.
These categories are consistent with FCC accounting practices. Plant specific
operations expenses relate to support and maintenance of telephone plant and
equipment and include vehicle expense, land and building expense, central
office switching expense and cable and wire expense. Plant non-specific
operations expenses consist of depreciation charges for telephone plant and
equipment and expenses related to telephone plant and network administration,
engineering, power, materials and supplies, provisioning and plant network
testing. Customer operations expenses relate to marketing, providing operator
services for call completion and directory assistance, and establishing and
servicing customer accounts. Corporate operations expenses include Vitelco's
and GT&T's expenses for executive management and administration, corporate
planning, accounting and finance, external relations, personnel, labor
relations, data processing, legal services, procurement and general insurance.
International long-distance expenses consist principally of charges from
international carriers for outbound international calls from Guyana and
payments to audiotext providers from whom GT&T derives international audiotext
traffic. Taxes other than income taxes include gross receipts taxes, property
taxes, and other miscellaneous taxes.
RESULTS OF OPERATIONS
Three Months ended March 31, 1996 and 1997
Revenues from telephone operations for the period ended March 31, 1997
were $47.9 million as compared to $49.4 million for the corresponding period
of the prior year, a decrease of $1.5 million (3%). Vitelco's telephone
operations revenues increased $2.8 million (21%) for the three months ended
March 31, 1997, principally as a result of the recovery from Hurricane Marilyn
in September 1995 and an approximately $789,000 increase in Universal Service
Fund revenues because of increased investment. At March 31, 1997 Vitelco had
60,397 lines in service compared to 45,940 at the corresponding date in the
prior year. This revenue increase was more than offset by a decrease of $4.4
million from the corresponding period in the prior year in international long
distance revenues at GT&T. Revenues from international inbound traffic
decreased $5.8 million principally due to lower audiotext revenues, as a
result of reduced traffic, a shift in traffic mix to lower rate countries, and
chargebacks from certain foreign carriers. Offsetting this was an increase of
$1.4 million in unprofitable international outbound revenues. In January 1997,
the Guyana High Court voided a Guyana PUC order of October 1995 which had
substantially reduced outbound rates in 1996, and permitted GT&T to restore
its rates for outbound traffic to their pre-October 1995 level. Effective May
1997 GT&T instituted a surcharge on its outbound traffic to recover over 18
months approximately $10 million of revenues lost as a result of the PUC's
improper October 1995 order. Both of these actions should have the affect of
reducing the volume of unprofitable outbound traffic and increasing the volume
of inbound international traffic to Guyana for the remainder of 1997.
8
Consolidated telephone operating expenses decreased $361,000 for the
three months ended March 31, 1997. The decrease in expenses is principally due
to a $2.1 million decrease in international outbound expenses as a result of
lower audiotext traffic and associated expenses. This decrease was
substantially offset by increased depreciation and plant specific expenses at
Vitelco and GT&T due to increased plant in service.
Overall, income from telephone operations decreased $1.1 million (8%) for
the three months ended March 31, 1997. The decrease occurred principally
because of decreased audiotext traffic at GT&T. These revenue decreases at
GT&T were partially offset by decreased international long distance expenses.
Accordingly, GT&T's contribution to income from telephone operations decreased
$2.7 million (31%) for the three months ended March 31, 1997. This was offset
by an approximately $1.6 million increase in the contribution to income from
telephone operations at Vitelco discussed above.
During 1996, audiotext traffic fluctuated between approximately 9 million
and 11 million minutes per month. In the first quarter of 1997, it averaged
8.8 million minutes per month. Audiotext is a highly competitive business, and
GT&T may experience significant increases or decreases in the volume of its
audiotext traffic during the remainder of 1997. Profit margins from this
traffic have decreased principally due to a shift in traffic mix to less
profitable countries, reductions in some accounting rates, chargebacks from
certain foreign carriers, and an increase in the value of the U.S. dollar
against the SDR (Special Drawing Rights, which are based on exchange rates for
U.S., German, British, French, and Japanese currencies) in which a substantial
part of GT&T's audiotext revenues are denominated.
Income before income taxes and minority interest increased $1.4 million
for the three months ended March 31, 1997. The significant factors which
contributed to this change for the three months ended March 31, 1997 were:
(i) the $1.1 million decrease in income from telephone operations
discussed above;
(ii) a $531,000 decrease in income from other operations as a result
of decreased cellular operations;
(iii) a $243,000 decrease in net interest expense due to reduced debt;
(iv) a $2.8 million decrease in other revenues and expenses. This
was principally due to a non-recurring charge of $2.8 million in
the first three months of 1996 for the Company's obligation to
reimburse its two Co-Chief Executive Officers for certain
litigation expenses in connection with a management dispute
settled in February 1996.
9
The Company's effective tax rate for the three months ended March 31,
1997 was 35.9% as compared to 43.6% for the corresponding period of the prior
year. The decrease is due principally to the proportionally lower earnings of
GT&T.
The minority interest in earnings consists primarily of the Guyana
government's 20% interest in GT&T.
Regulatory Considerations
In October 1995, the Guyana Public Utilities Commission ("PUC") issued an
order that rejected the request of GT&T for substantial increases in all
telephone rates and temporarily reduced rates for outbound long-distance calls
to certain countries. In most cases, the existing rates were already less than
GT&T's payment obligations to foreign carriers. In January 1997, on an appeal
by GT&T, the Guyana High Court voided the PUC's order in regard to rates and
the rates were returned to the rates in existence in October 1995. The lost
revenue was approximately $10 million for the period when the order was
effective. Effective May 1, 1997, GT&T put into effect a surcharge on long
distance rates designed to recover these lost revenues over a period of 18
months. The PUC has appealed the January 1997 decision of the Guyana High
Court of Appeals, and in May 1997 the Consumer Advisory Bureau (a non
governmental group in Guyana) sought an injunction from the Guyana High Court
restoring telephone rates to those imposed by the PUC in its October 1995
order. At the date of this report, the PUC's appeal and the Consumer Advisory
Bureau's application are still pending.
In January 1997, the PUC ordered GT&T to cease paying advisory fees to
the Company and to recover from the Company approximately $25 million of fees
paid by GT&T to the Company since January 1991. GT&T has appealed the PUC's
order to the Guyana High Court and obtained a stay of the PUC's order pending
determination of that appeal.
At December 31, 1996, GT&T owed the Company approximately $23 million for
advances made from time to time for working capital and capital expenditure
needs of GT&T. GT&T's indebtedness to the Company was evidenced by a series of
promissory notes. In March 1997, the PUC voided all of the promissory notes
then outstanding for failure to comply with certain provisions of the PUC law.
The PUC ordered that no payments be made on any of the outstanding notes, and
that GT&T recover from ATN all amounts theretofore paid. The order also
provided that the Commission would be willing to authorize the payment of any
amounts properly proven to the satisfaction of the PUC to be due and payable
from GT&T to ATN. GT&T has appealed the PUC's order to the Guyana High Court
and obtained a stay of the PUC's order pending determination of that appeal.
10
In late April 1997, the PUC applied to the Guyana High Court for orders
prohibiting GT&T from paying any monies to the Company on account of
intercompany debt, advisory fees or otherwise pending the determination of
GT&T's appeals from the two orders mentioned above. At the date of this
report, the PUC's application is still pending.
Upon the acquisition of GT&T in January 1991, GT&T entered into an
agreement with the government of Guyana to expand significantly GT&T's
existing facilities and telecommunications operations and to improve service
within a three-year period pursuant to an expansion and service improvement
plan (the "Plan"). The Plan was modified in certain respects and the date for
completion of the Plan was extended to February 1995. The government has
referred to the PUC the failure of GT&T to complete the Plan by February 1995.
However, all proceedings by the PUC with respect to GT&T's obligations under
its Expansion Plan were stayed by the Guyana High Court during GT&T's appeal
to the Court from the PUC's October, 1995 order with regard to telephone rates
discussed above. As a result of the High Court's decision in January 1997 on
this appeal, the stay is no longer in effect. The PUC has scheduled a hearing
on this matter for July 1997. Failure to timely fulfill the terms of the Plan
could result in monetary penalties, cancellation of the License, or other
action by the PUC or the government which could have a material adverse affect
on the Company's business and prospects.
Liquidity and Capital Resources
The Company depends upon funds received from subsidiaries to meet its
capital needs, including servicing existing debt and its ongoing program of
seeking to acquire telecommunications licenses and businesses. The major
sources of funds for the Company has been advisory fees received from GT&T and
interest payments by GT&T and ATN-VI on intercompany debt. The PUC orders in
January and March 1997 discussed above under "Regulatory Considerations" could
have a material adverse impact on the Company's liquidity.
Other potential sources of funds to the Company are from repayment of
loans to subsidiaries or dividends from GT&T or ATN - VI. However, the RTFC
Loan limits the payment of dividends by ATN - VI unless ATN - VI meets certain
financial ratios (which were not met at March 31, 1997). Consequently ATN - VI
was restricted from paying dividends at that date. At March 31, 1997, the
Company also holds a note of ATN - VI in the amount of approximately $23
million which may be repaid by ATN - VI in whole or in part without regard to
the limit on the payment of dividends by ATN - VI.
11
ATN - VI's ability to service its debt is dependent on funds from its
parent or its subsidiaries . The RUS loan and applicable RUS regulations
restrict Vitelco's ability to pay dividends based upon certain net worth tests
except for limited dividend payments authorized when specific security
instrument criteria are unable to be met. Settlement agreements made in 1989
and 1991 with the U.S. Virgin Islands Public Service Commission (PSC) also
contain certain restrictions on dividends by Vitelco which, in general, are
more restrictive than those imposed by the RUS. Dividends by Vitelco are
generally limited to 60% of its net income, although additional amounts are
permitted to be paid for the sole purpose of servicing ATN-VI's debt to the
RTFC. Under the above restrictions, at March 31, 1997, Vitelco's dividend
paying capacity was approximately $1.0 million in excess of the amounts
permitted for servicing ATN-VI debt.
The RTFC Loan and RUS Loan agreements also require, among other things,
maintenance of minimum debt service and times interest earned coverage and
restrictions on issuance of additional long-term debt. As of March 31, 1997,
the Company was in compliance with all covenants contained in its long-term
debt agreements.
At March 31, 1997, Vitelco had outstanding $5 million of borrowings under
a $5 million line of credit with the RTFC expiring in March 2000, and an
additional $6 million under a $15 million line of credit with the RTFC
expiring in October 1997. These borrowings were incurred to finance part of
the costs of repairing damage to Vitelco's telephone plant caused by Hurricane
Marilyn in September 1995. Vitelco has also received approval from the RUS for
$35.7 million of long-term financing, which may be used to repay Vitelco's
outstanding line of credit borrowings from the RTFC. Borrowings under
Vitelco's $5 million line of credit are required to be repaid within 12 months
of the date of the borrowing, but may be repaid from the proceeds of
borrowings under the $15 million line of credit. Borrowings under Vitelco's
$15 million line of credit will mature on October 31, 1997, at which date, if
long-term loan funds from RUS have not yet been made available to Vitelco,
Vitelco will have the option of rolling the outstanding amount borrowed under
that line of credit into a 15-year term loan from RTFC having terms
substantially similar to those contained in Vitelco's existing long-term loan
from RTFC.
GT&T is not subject to any contractual restrictions on payment of
dividends. However, GT&T's own capital needs and debt service obligations have
precluded GT&T from paying any significant funds to the Company other than the
advisory fees and interest on intercompany debt mentioned above.
If and when the Company settles outstanding issues with the Guyana
Government and the PUC with regard to GT&T's Expansion Plan and its rates for
service, GT&T may require additional external financing to enable GT&T to
further expand its telecommunications facilities. There can be no assurance
that the Company will be able to obtain any such financing.
The Company's short term bank credit facility, under which the Company
has $5.5 million of loans outstanding, expired on October 1, 1994. The bank
has orally agreed to renew this facility until October 1, 1997 and to waive
the prohibition on borrowing under the facility during the first thirty days
of the renewal period.
12
The continued expansion of GT&T's network is dependent upon the ability
of GT&T to purchase equipment with U.S. dollars. A portion of GT&T's taxes in
Guyana may be payable in U.S. dollars or other hard currencies. The Company
anticipates that GT&T's foreign currency earnings will enable GT&T to service
its debt and pay its hard currency tax obligations. There are no Guyana legal
restrictions on the conversion of Guyana's currency into U.S. dollars or on
the expatriation of foreign currency from Guyana.
Impact of Devaluation and Inflation
Although the majority of GT&T's revenues and expenditures are transacted
in U.S. dollars or other hard currencies, the results of operations
nevertheless may be affected by changes in the value of the Guyana dollar.
From February 1991 until early 1994, the Guyana dollar remained relatively
stable at the rate of approximately 125 to the U.S. dollar. In 1994, however,
the Guyana dollar has declined in value to the current rate of approximately
142 to the U.S. dollar, and it has remained relatively stable at approximately
that rate since 1994.
The effect of inflation on the Company's financial results of telephone
operations in the U.S. Virgin Islands has not been significant in recent
years. The effect of inflation on the cost of providing telephone service in
the U.S. Virgin Islands has generally been offset (without any increase in
local subscribers' rates) by increased revenues resulting from growth in the
number of subscribers and from regulatory cost recovery practices in
determining access revenues.
13
Atlantic Tele-Network, Inc. and Subsidiaries
Part II- Other Information
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
14
Atlantic Tele-Network, Inc. and Subsidiaries
Signatures
Pursuant to the Securities Act of 1934, the registrant has caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Atlantic Tele-Network, Inc.
---------------------------
Date: May 14, 1997 /s/ Craig A. Knock
- ------------------ -------------------
Craig A. Knock
Chief Financial Officer and Vice-President
signing both in his capacity as Vice-
President on behalf of the Registrant and
as Chief Financial Officer of the Registrant
15
5
3-MOS
DEC-31-1997
MAR-31-1997
12,465
0
60,117
0
9,391
85,692
373,083
121,428
379,225
62,143
107,522
0
0
123
154,550
379,225
50,124
50,124
37,875
37,875
1,668
0
2,572
8,098
2,909
4,882
0
0
0
4,882
.40
.40
