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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 March 31, 2021

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
(State or other jurisdiction of
incorporation or organization)

47-0728886
(I.R.S. Employer
Identification No.)

500 Cummings Center, Suite 2450
Beverly, Massachusetts
(Address of principal executive offices)

01915
(Zip Code)

(978619-1300

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $.01 per share

ATNI

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit 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  

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 May 10, 2021, the registrant had outstanding 15,921,222 shares of its common stock ($.01 par value).

1

ATN INTERNATIONAL, INC.

FORM 10-Q

Quarter Ended March 31, 2021

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 March 31, 2021 and December 31, 2020

4

Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020

5

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

6

Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020

7

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

8

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2

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

30-50

Item 3

Quantitative and Qualitative Disclosures About Market Risk

50

Item 4

Controls and Procedures

50

PART II—OTHER INFORMATION

51

Item 1

Legal Proceedings

51

Item 1A

Risk Factors

51

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

51

Item 5

Other Information

52

Item 6

Exhibits

52

SIGNATURES

54

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, including the impact of the novel coronavirus pandemic on the economies of the markets we serve, our business and operations; expectations regarding future revenue, operating income, EBITDA and capital expenditures; the competitive environment in our key markets, demand for our services and industry trends; our liquidity; 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) 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; (2) our ability to maintain favorable roaming arrangements, receive roaming traffic and satisfy the needs and demands of our major wireless customers; (3) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (4) government regulation of our businesses, which may impact our FCC and other telecommunications licenses; (5) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (6) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic; (7) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (8) our ability to successfully complete our pending acquisition of Alaska Communications and recognize the expected benefits of such acquisition; (9) our ability to find investment or acquisition or disposition opportunities that fit the strategic goals of the Company; (10) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for these assets; (11) increased competition; (12) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (13) our continued access to capital and credit markets; (14) the impact of our investments and acquisitions; and (15) the risk of currency fluctuation for those markets in which we operate. 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, 2020, filed with the SEC on March 1, 2021, and the other reports we file from time to time with the SEC. 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, except as required by law.

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 US 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)

March 31, 

December 31, 

    

2021

    

2020

ASSETS

Current Assets:

Cash and cash equivalents

$

91,259

$

103,925

Restricted cash

 

1,072

 

1,072

Accounts receivable, net of allowances for credit losses of $13.0 million and $12.1 million, respectively

 

41,600

 

44,152

Customer receivable

2,365

1,227

Inventory, materials and supplies

 

6,185

 

5,504

Prepayments and other current assets

 

52,796

 

49,450

Assets held for sale

34,735

Total current assets

 

195,277

 

240,065

Fixed Assets:

Property, plant and equipment

 

1,264,279

 

1,252,780

Less accumulated depreciation

 

(736,208)

 

(716,318)

Net fixed assets

 

528,071

 

536,462

Telecommunication licenses, net

 

114,083

 

114,083

Goodwill

 

60,690

 

60,691

Customer relationships, net

 

5,560

 

5,913

Operating lease right-of-use assets

 

61,762

 

63,235

Customer receivable - long term

21,056

9,614

Other assets

 

71,223

 

53,648

Total assets

$

1,057,722

$

1,083,711

LIABILITIES AND EQUITY

Current Liabilities:

Current portion of long-term debt

$

3,750

$

3,750

Current portion of Customer receivable credit facility

1,101

Accounts payable and accrued liabilities

 

74,529

 

96,205

Dividends payable

 

2,708

 

2,703

Accrued taxes

 

8,495

 

7,501

Current portion of lease liabilities

12,446

12,371

Advance payments and deposits

 

24,727

 

24,681

Liabilities held for sale

 

 

717

Total current liabilities

 

127,756

 

147,928

Deferred income taxes

 

8,171

 

10,675

Lease liabilities, excluding current portion

50,902

51,082

Other liabilities

 

50,738

 

50,617

Customer receivable credit facility, net of current portion

9,713

Long-term debt, excluding current portion

 

68,173

 

69,073

Total liabilities

 

315,453

 

329,375

Commitments and contingencies (Note 14)

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; 17,449,541 and 17,383,898 shares issued, respectively, 15,920,141 and 15,898,477 shares outstanding, respectively

 

172

 

172

Treasury stock, at cost; 1,529,400 and 1,485,421 shares, respectively

 

(61,677)

 

(59,456)

Additional paid-in capital

 

186,930

 

187,754

Retained earnings

 

516,897

 

516,901

Accumulated other comprehensive income

 

269

 

278

Total ATN International, Inc. stockholders’ equity

 

642,591

 

645,649

Non-controlling interests

 

99,678

 

108,687

Total equity

 

742,269

 

754,336

Total liabilities and equity

$

1,057,722

$

1,083,711

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 MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

(In Thousands, Except Per Share Data)

Three months ended March 31, 

    

2021

    

2020

REVENUE:

Communication services

$

110,636

$

107,904

Other

 

13,874

 

3,001

Total revenue

 

124,510

 

110,905

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

Cost of services

 

49,507

 

46,602

Cost of construction revenue

12,606

Selling, general and administrative

 

37,693

 

34,427

Transaction-related charges

 

730

 

44

Depreciation and amortization

 

20,508

 

22,518

Loss on disposition of long-lived assets

117

15

Total operating expenses

 

121,161

 

103,606

Income from operations

 

3,349

 

7,299

OTHER INCOME (EXPENSE)

Interest income

(6)

243

Interest expense

 

(1,147)

 

(1,156)

Other income (expense)

 

2,375

 

(2,901)

Other income (expense), net

 

1,222

 

(3,814)

INCOME BEFORE INCOME TAXES

 

4,571

 

3,485

Income tax provisions

 

295

 

1,109

NET INCOME

 

4,276

 

2,376

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

 

(1,570)

 

(3,390)

NET INCOME (LOSS) ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS

$

2,706

$

(1,014)

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

Basic

$

0.17

$

(0.06)

Diluted

$

0.17

$

(0.06)

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING:

Basic

 

15,902

 

16,001

Diluted

 

15,952

 

16,001

DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK

$

0.17

$

0.17

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 MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

(In Thousands)

Three months ended
March 31, 

2021

    

2020

Net income

$

4,276

$

2,376

Other comprehensive income (loss):

Foreign currency translation adjustment

 

(40)

 

(4,425)

Unrealized gain (loss) on derivatives

31

(177)

Other comprehensive income (loss), net of tax

 

(9)

 

(4,602)

Comprehensive income

 

4,267

 

(2,226)

Less: Comprehensive income attributable to non-controlling interests

 

(1,570)

 

(3,390)

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

$

2,697

$

(5,616)

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

6

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(In Thousands, Except Per Share Data)

    

    

    

    

    

Accumulated

    

Total

    

    

Treasury

Additional

Other

ATNI

Non-

Common

Stock,

Paid In

Retained

Comprehensive

Stockholders’

Controlling

Total

Stock

at cost

Capital

Earnings

Income/(Loss)

Equity

Interests

Equity

Balance, December 31, 2020

$

172

$

(59,456)

$

187,754

$

516,901

$

278

$

645,649

$

108,687

$

754,336

Purchase of 43,978 shares of common stock

 

(2,221)

(2,221)

(2,221)

Stock-based compensation

 

1,262

1,262

74

1,336

Dividends declared on common stock ($0.17 per common share)

 

(2,710)

(2,710)

(2,710)

Distributions to non-controlling interests

 

(1,530)

(1,530)

Repurchase of non-controlling interests

(2,086)

(2,086)

(9,123)

(11,209)

Comprehensive income:

Net income

 

2,706

2,706

1,570

4,276

Other comprehensive loss

 

(9)

(9)

(9)

Total comprehensive income

 

2,697

 

1,570

 

4,267

Balance, March 31, 2021

$

172

$

(61,677)

$

186,930

$

516,897

$

269

$

642,591

$

99,678

$

742,269

Balance, December 31, 2019

$

172

$

(51,129)

$

188,471

$

541,890

$

(3,282)

$

676,122

$

129,961

$

806,083

Issuance of 62,892 shares of common stock upon exercise of stock options

 

(3,229)

(3,229)

(3,229)

Stock-based compensation

 

1,196

1,196

(36)

1,160

Dividends declared on common stock ($0.17 per common share)

 

(2,715)

(2,715)

(2,715)

Distributions to non-controlling interests

 

(4,220)

(4,220)

Repurchase of non-controlling interests

(1,774)

(1,774)

Comprehensive income (loss):

Net income (loss)

 

(1,014)

(1,014)

3,390

2,376

Other comprehensive income

 

(4,602)

(4,602)

(4,602)

Total comprehensive income (loss)

 

(5,616)

 

3,390

 

(2,226)

Balance, March 31, 2020

$

172

$

(54,358)

$

189,667

$

538,161

$

(7,884)

$

665,758

$

127,321

$

793,079

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

7

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020

(Unaudited)

(In Thousands)

Three Months Ended March 31,

2021

    

2020

Cash flows from operating activities:

Net income

$

4,276

$

2,376

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

Depreciation and amortization

20,508

 

22,518

Provision for doubtful accounts

1,122

 

1,260

Amortization of debt discount and debt issuance costs

168

 

126

Stock-based compensation

1,336

 

1,160

Deferred income taxes

(2,504)

 

(1,135)

(Gain) loss on equity investments

(2,188)

1,775

Loss on disposition of long-lived assets

117

15

Unrealized (gain) loss on foreign currency

(81)

739

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

Accounts receivable

1,430

 

(10,887)

Customer receivable

(12,579)

Materials and supplies, prepayments, and other current assets

(253)

 

431

Prepaid income taxes

 

399

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

(7,648)

 

(4,055)

Accrued taxes

1,810

 

355

Other assets

(242)

298

Other liabilities

51

 

84

Net cash provided by operating activities

 

5,323

 

15,459

Cash flows from investing activities:

Capital expenditures

 

(19,495)

 

(14,061)

Reimbursable capital expenditures

(6,185)

Receipt of government grants

3,292

Divestiture of businesses, net of transferred cash of $0.9 million

18,597

Purchases of strategic investments

(4,155)

(2,768)

Net cash used in investing activities

 

(7,946)

 

(16,829)

Cash flows from financing activities:

Dividends paid on common stock

 

(2,703)

 

(2,721)

Distributions to non-controlling interests

 

(3,530)

 

(4,220)

Payment of debt issuance costs

 

53

 

(1,010)

Principal repayments of term loan

 

(938)

 

(938)

Purchases of common stock – stock-based compensation

 

(1,677)

 

(1,625)

Purchases of common stock – share repurchase plan

(540)

(1,600)

Repurchases of non-controlling interests

(11,522)

(1,774)

Customer receivable credit facility borrowing

 

10,814

 

Net cash used in financing activities

 

(10,043)

 

(13,888)

Effect of foreign currency exchange rates on cash and cash equivalents

 

 

(115)

Net change in cash, cash equivalents, and restricted cash

 

(12,666)

 

(15,373)

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

 

104,997

 

162,358

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

$

92,331

$

146,985

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

$

10,075

$

8,393

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

8

ATN INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND BUSINESS OPERATIONS

The Company strives to be a leading platform for the operation of, and investment in, smaller and specialty market communications services and technology companies.  The Company has a long track record of delivering critical infrastructure-based solutions to underserved markets. The Company’s majority-owned operating subsidiaries provide facilities-based communications services, along with related information technology solutions, in the United States, Bermuda, and the Caribbean. The Company also has non-controlling investments in several communications and technology companies, and it continues to consider opportunities to make controlling and minority investments in businesses that it believes have the potential for generating substantial and relatively steady cash flows over extended periods of time or have technologies or business models that might prove valuable to the Company’s main operating subsidiaries or create significant longer term growth potential for the Company as a whole.

At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company also has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries. Over the past ten years, the Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service, and customer acquisition, retention, and satisfaction while maintaining optimal operating efficiencies. The Company has a number of shared service functions, including billing, network and engineering and customer service, and the parent company also employs personnel with specialized skills that provide greater economies of scale and expertise than would typically be available at the operating subsidiary level.

The Company was incorporated in Delaware in 1987, began trading publicly in 1991 and spun off more than half of its operations to stockholders in 1998. The Company actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally looks for those that it believes have the potential for generating steady excess cash flows over extended periods of time. In addition, the Company considers non-controlling investments in earlier stage businesses that it considers strategically relevant, and which may offer long-term growth potential for us, either individually, or as research and development businesses that can support the Company’s operating subsidiaries in new technology, product, and service development and offerings. The Company has used the cash generated from its established operating units, and any asset sales, to re-invest in its existing businesses, to make strategic investments in additional businesses, and to return cash to the Company’s investors. The Company provides management, technical, financial, regulatory, and marketing services to its subsidiaries and typically receives a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Notes 1 and 14 to the Consolidated Financial Statements included in this Report.

Through March 31, 2021, the Company had identified three operating segments to manage and review its operations and to facilitate investor presentations of its results. These three operating segments are as follows:

International Telecom. Businesses contained in the Company’s international telecom segment offer a mix of fixed data, internet and voice services (“Fixed”) as well as retail mobility (“Mobility”) services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. The Company offers fixed video services in Bermuda, the Cayman Islands, and the US Virgin Islands and managed information technology services (“Managed Services”) to enterprise customers in all its markets. The Company also offers services to other telecom providers (“Carrier Services”), such as international long-distance, transport and access services, and roaming from such telecom providers’ customers traveling in its network service areas.

US Telecom. In the United States, primarily in the Southwest, the Company offers Carrier Services, including wholesale roaming services, the leasing of critical network infrastructure such as towers and transport facilities, and site maintenance. The Company also provides Fixed, Mobility, and Managed

9

Services to its retail and enterprise customers, and private network services to enterprise customers, municipalities and other service providers.

Renewable Energy. In India, the Company provided distributed generation solar power to commercial and industrial customers through January 27, 2021. See Sale of Renewable Energy Operations for further details

The following chart summarizes the operating activities of the Company’s principal subsidiaries, the segments in which it reports its revenue and the markets it served during the three months ended March 31, 2021:

Segment

   

Services

   

Markets

   

Tradenames

International Telecom

 

Mobility

 

Bermuda, Guyana, US Virgin Islands

 

One, GTT+, Viya

 

Fixed

 

Bermuda, Cayman Islands, Guyana, US Virgin Islands

 

One, Logic, GTT+, Viya

Carrier Services

Bermuda, Guyana, US Virgin Islands

One, GTT+, Viya

Managed Services

Bermuda, Cayman Islands, US Virgin Islands, Guyana

Fireminds, One, Logic, GTT+, Viya

US Telecom

 

Mobility

 

United States (rural markets)

 

Choice, Choice NTUA Wireless, Geoverse

Fixed

United States

Commnet, Choice, Choice NTUA Wireless, Deploycom

Carrier Services

United States

Commnet, Essextel

 

Managed Services

 

United States

 

Choice

Renewable Energy (1)

Solar

India

Vibrant Energy

(1)See Sale of Renewable Energy Operations for further details.

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. In addition, the Company considers non-controlling investments in earlier stage businesses that it considers strategically relevant, and which may offer long-term growth potential for the Company, either individually, or as research and development businesses that can support the Company’s operating subsidiaries in new product and service development and offerings. 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 revenues which is eliminated in consolidation. For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Consolidated Financial Statements included in this Report.

COVID-19

The Company is continuing to monitor and assess the effects of the ongoing COVID-19 pandemic on its commercial operations, the safety of its employees and their families, its sales force and customers and any potential impact on the Company’s revenue in 2021.

The preparation of the condensed consolidated financial statements requires the Company to make estimates, judgments and assumptions that may affect the reported amounts of assets, liabilities, equity, revenues and expenses and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates estimates, judgments and methodologies. The Company assessed certain accounting matters and estimates that generally require consideration of forecasted financial information in context with the information and estimates reasonably available to the Company and the unknown future impacts of COVID-19 as of March 31, 2021 and through the date of this report. The accounting

10

matters assessed included, but were not limited to, the Company’s allowance for credit losses, the carrying value of the Company’s goodwill and other long-lived assets, financial assets, valuation allowances for tax assets and revenue recognition. The Company assessed the impacts of COVID-19 on its consolidated financial statements as of and for the three months ended March 31, 2021, in particular the impacts on lines of revenues, operating expenses as well as the deferral and savings on other operating expenses and capital expenditures. During the three months ended March 31, 2021, while the Company’s International Telecom segment experienced strengthened demand for both its Mobility and Fixed services, its Carrier Services revenue declined as a result of a reduction in roaming revenue due to pandemic-related travel and stay-at-home restrictions in these markets as compared to the same period in 2020. Such restrictions also resulted in decreased Mobility and Carrier Services revenues within the Company’s US Telecom segment during the three months ended March 31, 2021 as compared to the same period of 2020. However, in response to certain anticipated impacts, the Company was able to implement operating expense savings during 2020 and the first quarter of 2021, particularly with respect to the Company’s International Telecom segment, that when coupled with Company-wide travel expense savings and capital expenditure deferrals, acted to offset much of the revenue loss or additional credit loss allowances caused by anticipated customer non-payment activity in the year. As a result, the Company’s assessment did not indicate that there was a material impact to the Company’s consolidated financial statements as of and for the three months ended March 31, 2021. However, the Company’s future assessments of the impacts of COVID-19 for the remainder of 2021 or the Company’s ability to realize continued operational expense savings, as well as other factors, could result in material impacts to the Company’s consolidated financial statements in future reporting periods. For example, the local economies of many of the Company’s Caribbean markets are tourism-dependent and the decline in global travel activity resulting from COVID-19 may continue to impact the Company’s revenue and cash flows for certain services in these markets as the Company’s retail and enterprise customers may be unable to pay for services, and the Company’s international roaming revenue may decline. Apart from government issued travel restrictions, we currently cannot assess how COVID-19 may influence our subscribers’ procurement behavior for our services or how that behavior will impact our revenues in the foreseeable future.

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 the periods described therein. 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, 2020, filed with the SEC on March 1, 2021.

The condensed consolidated financial statements include the accounts of the Company, its subsidiaries in which the Company holds controlling interests 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.

Presentation of Revenue

Effective January 1, 2020, the Company changed its presentation of revenue in the Condensed Consolidated Statement of Operations and in the Selected Segment Financial Information tables. This change is intended to better align the Company’s financial performance with the views of management and industry competitors, and to facilitate a more constructive dialogue with the investment community.

Specifically, the previously disclosed revenue categories of wireless and wireline revenue are being represented as Mobility, Fixed and Carrier Services revenue within the Company’s segment information and are included within communications services revenue within its Statements of Operations. Managed services revenue, which was previously

11

a component of wireline revenue, along with revenue from the Company’s Renewable Energy operations, is now included in other revenue. Construction revenue is also included as a component of other revenue.

Presentation of Operating Expenses

Effective January 1, 2021, the Company changed its presentation of operating expenses in the Condensed Consolidated Statement of Operations by combining the previously disclosed Termination and Access Fees with Engineering and Operations as the newly represented Cost of Services. In addition, the previously disclosed Sales, Marketing and Customer Service expenses are now combined with the previously disclosed General and Administrative expenses within the newly represented Selling, general and administrative expenses. The change in presentation was made to better align the Company’s results with industry standards.  Cost of construction services continues to be broken out separately and all depreciation and amortization continues to be shown separately.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments” (“ASU 2016-13”).  ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosure relating to the credit quality of trade and other receivables, including information relating to management’s estimate of credit allowances. The Company adopted ASU 2016-13 using the modified retrospective approach on its January 1, 2020 effective date. Refer to Note 3 of the Condensed Consolidated Financial Statements in this Report.

On December 18, 2019, the FASB issued new guidance that simplifies the accounting for income taxes. Amendments include the removal of certain exceptions to the general principles of ASC 740, Income taxes. The Company adopted this guidance in 2021 using a prospective method. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements; however, the impact in future periods will be dependent on the extent of future events and circumstances.

3. REVENUE RECOGNITION AND RECEIVABLES

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 assets and the noncurrent portion is included in other assets on the Company’s 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 the Company’s balance sheets.

In July 2019, August 2020 and May 2021, the Company entered into a Network Build and Maintenance Agreement (the “FirstNet Agreement”) with AT&T Mobility, LLC (“AT&T”) and the First and Second Amendments to the FirstNet Agreement, respectively (the “FirstNet Transaction”). In connection with the FirstNet Transaction, the Company will build a portion of AT&T’s network for the First Responder Network Authority (“FirstNet”) as well as a commercial wireless network in or near the Company’s current operating area in the Southwestern United States. The FirstNet Transaction includes construction and service performance obligations. The Company allocated the transaction price of the FirstNet Agreement to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for

12

the good or service in a separate transaction with similar customers in similar circumstances. The current portion receivables under this agreement are recorded in Customer receivable and the long-term portion is recorded in Customer receivable long-term on the Company’s balance sheet.

The Company has certain wholesale roaming agreements that contain stand ready performance obligations and management allocates transaction value to performance obligations based on the standalone selling price. The standalone selling price is the estimated price the Company would charge for the good or service with similar customers in similar circumstances. Management determined the performance obligations were obligations to make the service continuously available and will recognize revenue evenly over the service period.

Contract assets and liabilities consisted of the following (amounts in thousands)

March 31, 2021

December 31, 2020

$ Change

% Change

Contract asset – current

$

3,044

$

2,478

$

566

23

%

Contract asset – noncurrent

1,141

910

231

25

%

Contract liability – current

(17,159)

(18,544)

1,385

7

%

Contract liability – noncurrent

(2,255)

(2,193)

(62)

(3)

%

Net contract liability

$

(15,229)

$

(17,349)

$

2,120

12

%

The contract asset – current is included in prepayments and other current assets and the contract asset – noncurrent is included in other assets on the Company’s balance sheet. The contract liability – current is included in advance payments and deposits and the contract liability – noncurrent is included in other liabilities on the Company’s balance sheet. The decrease in the Company’s net contract liability was due to the timing of customer prepayments, contract billings, and the FirstNet Transaction. During the three months ended March 31, 2021, the Company recognized revenue of $15.1 million related to its December 31, 2020 contract liability and amortized $0.7 million of the December 31, 2020 contract asset into revenue. The Company did not recognize any revenue in the three months ended March 31, 2021 related to performance obligations that were satisfied or partially satisfied in previous periods.

Contract Acquisition Costs

The March 31, 2021 balance sheet includes current contract acquisition costs of $1.7 million in prepayments and other current assets and long term contract acquisition costs of $1.5 million in other assets. During the three months ended March 31, 2021, the Company amortized $0.6 million 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, which include a promotional discount, and the Company’s construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $273 million and $299 million at March 31, 2021 and December 31, 2020, respectively. The Company expects to satisfy approximately 60% of the remaining performance obligations and recognize the transaction price within 24 months and the remainder thereafter.

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 its disclosure by applying the right to invoice, one year or less, and wholly unsatisfied performance obligation practical expedients.

Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 13 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision makers for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services and other revenue. Communication Services

13

revenue is further disaggregated into Mobility, Fixed, Carrier Services, and other services. Other revenue is further disaggregated into renewable energy, managed services and construction revenue. This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Receivables

The Company adopted ASU 2016-13 on January 1, 2020. The standard requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expected to occur over the life of the assets. The estimate of credit losses is based on all relevant information including historical information, current conditions, and reasonable and supportable forecasts that affect the collectability of the amounts. The Company adopted ASU 2016-13 using the modified retrospective approach, however, there was no impact of adoption on retained earnings.

The standard impacted the Company’s calculation of credit losses from trade receivables. Historically, the Company recorded credit losses subsequent to the initial revenue transaction. After adoption of ASU 2016-13, the Company will record an estimate of future credit losses in conjunction with the revenue transaction based on the information available including historical experience and management’s expectations of future conditions. Those estimates will be updated as additional information becomes available. Our allowance for uncollectible accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics. There was no significant impact to the Company’s operating results due to the adoption of this standard.

At March 31, 2021, the Company had gross accounts receivable of $78.0 million and an allowance for credit losses of $13.0 million. The receivable under the FirstNet Agreement totaled $23.4 million of which $2.4 million was current and $21.0 million was long-term. At December 31, 2020, the Company had gross accounts receivable of $67.1 million and an allowance for credit losses of $12.1 million. The receivable under the FirstNet Agreement totaled $10.8 million of which $1.2 million was current and $9.6 million was long-term. The Company monitors receivables through the use of historical operating data adjusted for expectation of future performance as appropriate. Activity in the allowance for credit losses is below:

    

Three months ended March 31, 2021

Three months ended March 31, 2020

Balance at beginning of period

 

$

12,121

$

12,724

Current period provision for expected losses

 

1,122

1,260

Write-offs charged against the allowance

 

(354)

(1,525)

Recoveries collected

124

208

Balance at end of period

$

13,013

$

12,667

14

4. LEASES

The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity. The lease terms are generally between 3 and 10 years, some of which include additional renewal options.

Supplemental lease information

The components of lease expense were as follows (in thousands):

March 31, 2021

March 31, 2020

Operating lease cost:

Operating lease cost

$

4,225

$

4,047

Short-term lease cost

408

543

Variable lease cost

1,065

803

Total operating lease cost

$

5,698

$

5,393

Finance lease cost:

Amortization of right-of-use asset

$

574

$

571

Variable costs

196

272

Total finance lease cost

$

770

$

843

During each of the three month periods ended March 31, 2021 and 2020, the Company paid $3.5 million for operating lease liabilities. During the three months ended March 31, 2021, the Company recorded $2.2 million of operating lease liabilities arising from ROU assets. During the three months ended March 31, 2020 the Company did not record any additional lease liabilities arising from ROU assets.

At March 31, 2021, finance leases with a cost of $26.5 million and accumulated amortization of $10.1 million were included in property, plant and equipment. During the three months ended March 31, 2021, the Company paid $0.1 million for finance lease liabilities and recorded $1.1 million of additional finance lease liabilities. At March 31, 2021, finance leases had a lease liability of $2.2 million, of which $0.4 million was current. At December 31, 2020, finance leases with a cost of $25.4 million and accumulated amortization of $9.5 million were included in property, plant and equipment

The weighted average remaining lease terms and discount rates as of March 31, 2021 and December 31, 2020 are noted in the table below:

March 31, 2021

December 31, 2020

Weighted-average remaining lease term

Operating leases

5.8 years

5.9 years

Financing leases

10.6 years

10.9 years

Weighted-average discount rate

Operating leases

4.9%

5.0%

Financing leases

4.2%

3.3%

15

Maturities of lease liabilities as of March 31, 2021 were as follows (in thousands):

Operating Leases

Financing Leases

2021 (excluding the three months ended March 31, 2021)

$

11,043

$

377

2022

14,479

502

2023

12,086

502

2024

11,033

380

2025

8,133

281

Thereafter

13,638

522

Total lease payments

70,412

2,564

Less imputed interest

(9,619)

(339)

Total

$

60,793

$

2,225

Maturities of lease liabilities as of December 31, 2020 were as follows (in thousands):

Operating Leases

Financing Leases

2021

$

14,877

$

334

2022

14,202

333

2023

11,799

333

2024

10,633

211

2025

7,816

Thereafter

13,094

Total lease payments

72,421

1,211

Less imputed interest

(10,097)

(82)

Total

$

62,324

$

1,129

As of March 31, 2021, the Company did not have any material operating or finance leases that have not yet commenced.

5. 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 credit losses, 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. See Note 1 for a discussion of the impact of COVID-19 on the use of these estimates.

6. DISPOSITIONS

Disposition of International Solar Business

On November 19, 2020, the Company entered into an agreement to sell 67% of the outstanding equity interests of its India solar operations that owns and operates distributed generation solar power projects under the Vibrant name in India, or the Vibrant Transaction. The Company will retain a 33% ownership interest in the India solar operations subsequent to the transaction. The sale agreement contains representations, warranties and covenants of the parties that are customary for transactions of this type. The sale was completed in January 2021. The post-sale results of the

16

Company’s ownership interest in Vibrant are recorded through the equity method of accounting within the Corporate and Other operating segment. As such, the Company’s consolidated financial statements will not include revenue and operating expenses from Vibrant, but instead, “other income (expense)” within the Corporate and Other operating segment will include its share of Vibrant’s profits or losses. The Company will continue to present the historical results of its Renewable Energy segment for comparative purposes.

The table below identifies the assets and liabilities transferred (in thousands):

Consideration Received

$

35,218

Assets and liabilities disposed

Current assets

4,899

Property, plant and equipment

45,891

Other assets

439

Current liabilities

(759)

Net assets disposed

$

50,470

Consideration less net assets disposed

(15,252)

Foreign currency losses reclassified from accumulated other comprehensive income

6,258

Loss on sale

21,510

Transaction costs

1,283

Loss on sale including transaction costs

$

(22,793)

The Company reported a loss on sale of $21.5 million during the year ended December 31, 2020 and Vibrant’s assets and liabilities were reported as held for sale at December 31, 2020. The Company recorded transaction costs of $1.3 million on the Vibrant Transaction, of which $0.7 million was recorded during the year ended December 31, 2020 and $0.6 million was recorded during the three months ended March 31, 2021. The consideration received includes $19.5 million of cash, $3.9 million of receivables related to the amounts held in escrow and earn out consideration, and $11.8 million of an equity method investment in Vibrant. The Company is finalizing working capital adjustments and the purchase price escrow will be held in escrow for a period of twelve months after the closing to secure the Company’s indemnification obligations. The Company has 24 months after the close of the transaction to satisfy the conditions necessary to receive the earn out consideration.

The Vibrant Transaction does not qualify as discontinued operations because the disposition was not a strategic shift which will have a major effect on the Company’s operations, the historical results and financial position of the operations are presented within continuing operations.

7. FAIR VALUE MEASUREMENTS AND INVESTMENTS

In accordance with the provisions of fair value accounting, a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability, and defines fair value based upon an exit price model.

17

The fair value measurement guidance establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The guidance describes three levels of inputs that may be used to measure fair value:

Level 1

Quoted prices in active markets for identical assets or liabilities as of the reporting date. Active markets are those in which transactions for the asset and liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. Level 1 assets and liabilities include money market funds, debt and equity securities and derivative contracts that are traded in an active exchange market.

Level 2

Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 2 assets and liabilities include debt securities with quoted prices that are traded less frequently than exchange-traded instruments and derivative contracts whose value is determined using a pricing model with inputs that are observable in the market or can be derived principally from or corroborated by observable market data. This category generally includes corporate obligations and non-exchange traded derivative contracts.

Level 3

Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments and intangible assets that have been impaired whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.

Assets and liabilities of the Company measured at fair value on a recurring basis as of March 31, 2021 and December 31, 2020 are summarized as follows (in thousands):

March 31, 2021

Significant Other

Quoted Prices in

Observable

Unobservable

Active Markets

Inputs

Inputs

Description

(Level 1)

(Level 2)

(Level 3)

Total

Certificates of deposit

$

$

380

$

$

380

Money market funds

2,955

2,955

Other investments

2,110

2,110

Interest rate swap