UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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
(Exact name of registrant as specified in its charter)
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(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 | ||
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.
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).
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.
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Large accelerated filer ◻ | | |
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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
As of May 10, 2023, the registrant had outstanding
ATN INTERNATIONAL, INC.
FORM 10-Q
Quarter Ended March 31, 2023
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 our expectations regarding the benefits of our acquisition of Alaska Communications; the impact of federal support program revenues; expectations regarding future revenue, operating income, EBITDA and capital expenditures; expectations regarding our ability to refinance our existing debt and/or obtain additional financing on or before the maturity of our 2019 CoBank Credit Facility; the competitive environment in our key markets, demand for our services and industry trends; our expectations regarding construction progress under our agreement as part of the FirstNet Transaction and the effect such progress will have on our financial results; expectations regarding litigation; 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) our ability to successfully transition our U.S. Telecom business away from wholesale wireless to other carrier and consumer-based services; (2) our ability to replace and remove all ZTE equipment in our U.S. network, as required by the FCC in a timely and cost-effective manner; (3) the general performance of our operations, including operating margins, revenues, capital expenditures, and the retention of and future growth of our subscriber base and average revenue per user; (4) our ability to realize cost synergies and expansion plans for our newly acquired Alaska Communications business; (5) our ability to satisfy the needs and demands of our major carrier customers; (6) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (7) government funding and subsidy program availability and regulation of our businesses, which may impact our revenue, expansion plans and operating costs; (8) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (9) economic, political and other risks and opportunities facing our operations, including those resulting from the pandemic, geopolitical tensions, including the invasion of Ukraine, and from inflation, including increased costs and supply chain disruptions; (10) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (11) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals; (12) the occurrence of weather events and natural catastrophes and our ability to secure the appropriate level of insurance coverage for our assets; (13) increased competition; (14) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (15) our continued access to capital and credit markets, including our ability to extend or refinance our current credit facility; 16) our ability to successfully recognize the expected benefits of our acquisition of Sacred Wind Enterprises. 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” in each of our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 15, 2023, and the other reports we file from time to time with the SEC. The Company undertakes no obligation and have 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.
References to dollars ($) refer to US dollars unless otherwise specifically indicated.
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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)
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| | March 31, | | December 31, | ||
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| 2023 |
| 2022 | ||
ASSETS | | | | | | |
Current Assets: | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Restricted cash | |
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Short-term investments | |
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Accounts receivable, net of allowances for credit losses of $ | |
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Customer receivable | | | | | | |
Inventory, materials and supplies | |
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Prepayments and other current assets | |
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Total current assets | |
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Fixed Assets: | | | | | | |
Property, plant and equipment | |
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Less accumulated depreciation | |
| ( | |
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Net fixed assets | |
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Telecommunication licenses, net | |
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Goodwill | |
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Intangible assets, net | |
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Operating lease right-of-use assets | |
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Customer receivable - long term | | | | | | |
Other assets | |
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Total assets | | $ | | | $ | |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY | | | | | | |
Current Liabilities: | | | | | | |
Current portion of long-term debt | | $ | | | $ | |
Current portion of customer receivable credit facility | | | | | | |
Accounts payable and accrued liabilities | |
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Dividends payable | |
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Accrued taxes | |
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Current portion of lease liabilities | | | | | | |
Advance payments and deposits | |
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Total current liabilities | |
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Deferred income taxes | |
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Lease liabilities, excluding current portion | | | | | | |
Other liabilities | |
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Customer receivable credit facility, net of current portion | | | | | | |
Long-term debt, excluding current portion | |
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Total liabilities | |
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Redeemable noncontrolling interests: | | | | | | |
Preferred redeemable noncontrolling interests | | | | | | |
Common redeemable noncontrolling interests | | | | | | |
Total redeemable noncontrolling interests | | | | | | |
ATN International, Inc. Stockholders’ Equity: | | | | | | |
Preferred stock, $ | |
| — | |
| — |
Common stock, $ | |
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Treasury stock, at cost; | |
| ( | |
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Additional paid-in capital | |
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Retained earnings | |
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Accumulated other comprehensive income | |
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Total ATN International, Inc. stockholders’ equity | |
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Noncontrolling interests | |
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Total equity | |
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Total liabilities, redeemable noncontrolling interests and equity | | $ | | | $ | |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
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ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(Unaudited)
(In Thousands, Except Per Share Data)
| | | | | | |
| | Three months ended March 31, | ||||
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| 2023 |
| 2022 | ||
REVENUE: | | | | | | |
Communication services | | $ | | | $ | |
Construction | | | | | | |
Other | |
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Total revenue | |
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OPERATING EXPENSES (excluding depreciation and amortization unless otherwise indicated): | | | | | | |
Cost of communication services and other | |
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Cost of construction revenue | | | | | | |
Selling, general and administrative | |
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Stock-based compensation | | | | | | |
Transaction-related charges | |
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Restructuring expenses | | | | | | — |
Depreciation and amortization | |
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Amortization of intangibles from acquisitions | | | | | | |
(Gain) Loss on disposition of long-lived assets | | | ( | | | |
Total operating expenses | |
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Income from operations | |
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OTHER INCOME (EXPENSE) | | | | | | |
Interest income | | | | | | |
Interest expense | |
| ( | |
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Other income | |
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Other income (expense) | |
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INCOME (LOSS) BEFORE INCOME TAXES | |
| ( | |
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Income tax (benefit) expense | |
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NET LOSS | |
| ( | |
| ( |
Net loss attributable to noncontrolling interests, net of tax benefit of $( | |
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NET LOSS ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS | | $ | ( | | $ | ( |
NET LOSS PER WEIGHTED AVERAGE SHARE ATTRIBUTABLE TO ATN INTERNATIONAL, INC. STOCKHOLDERS: | | | | | | |
Basic | | $ | ( | | $ | ( |
Diluted | | $ | ( | | $ | ( |
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | | | | | | |
Basic | |
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Diluted | |
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DIVIDENDS PER SHARE APPLICABLE TO COMMON STOCK | | $ | | | $ | |
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, 2023 AND 2022
(Unaudited)
(In Thousands)
| | | | | |
| Three months ended | ||||
| 2023 |
| 2022 | ||
Net loss | $ | ( | | $ | ( |
Other comprehensive income: | | | | | |
Foreign currency translation adjustment |
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Reclassification of loss on pension settlement | | | | | — |
Unrealized gain on derivatives | | — | | | |
Other comprehensive income, net of tax |
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Comprehensive loss |
| ( | |
| ( |
Less: Comprehensive loss attributable to noncontrolling interests |
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Comprehensive loss attributable to ATN International, Inc. | $ | ( | | $ | ( |
The accompanying condensed notes are an integral part of these condensed consolidated financial statements.
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ATN INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY
FOR THE THREE MONTHS ENDED MARCH 31 2023 AND 2022
(Unaudited)
(In Thousands, Except Per Share Data)
| | | | | | | | | | | | | | | | |
| Total Equity | |||||||||||||||
| | | | 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, 2022 | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | |
Purchase of |
| — | | ( | | — | | — | | — | | ( | | — | | ( |
Stock-based compensation |
| — | | — | | | | — | | — | | | | | | |
Dividends declared on common stock ($ | | — | | — | | — | | ( | | — | | ( | | — | | ( |
Repurchase of noncontrolling interests |
| — | | — | | ( | | — | | — | | ( | | ( | | ( |
Deemed dividend - redeemable preferred units | | — | | — | | — | | ( | | — | | ( | | — | | ( |
Deemed dividend - redeemable common units | | — | | — | | — | | ( | | — | | ( | | | | |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net loss |
| — | | — | | — | | ( | | — | | ( | | ( | | ( |
Other comprehensive income |
| — | | — | | — | | — | | | | | | — | | |
Total comprehensive income (loss) | | — | | — | | — | | ( | | |
| ( |
| ( |
| ( |
Balance, March 31, 2023 | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | |
| | | | | | | | | | | | | | | | |
Balance, December 31, 2021 | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | |
Purchase of |
| — | | ( | | — | | — | | — | | ( | | — | | ( |
Stock-based compensation | | — | | — | | | | — | | — | | | | | | |
Dividends declared on common stock ($ | | — | | — | | — | | ( | | — | | ( | | ( | | ( |
Repurchase of noncontrolling interests | | — | | — | | ( | | — | | — | | ( | | ( | | ( |
Accrued dividend - redeemable preferred units | | — | | — | | — | | ( | | — | | ( | | — | | ( |
Deemed dividend - redeemable common units | | — | | — | | — | | — | | — | | — | | — | | — |
Comprehensive income: | | | | | | | | | | | | | | | | |
Net income (loss) |
| — | | — | | — | | ( | | — | | ( | | | | ( |
Other comprehensive income (loss) |
| — | | — | | — | | — | | | | | | — | | |
Total comprehensive income (loss) | | — | | — | | — | | ( | | |
| ( |
| |
| ( |
Balance, March 31, 2022 | $ | | $ | ( | $ | | $ | | $ | | $ | | $ | | $ | |
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 THREE MONTHS ENDED MARCH 31, 2023 AND 2022
(In Thousands)
| | | | | |
| Three Months Ended March 31, | ||||
| 2023 |
| 2022 | ||
Cash flows from operating activities: | | | | | |
Net loss | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash flows provided by operating activities: | | | | | |
Depreciation and amortization | | | |
| |
Amortization of intangibles from acquisitions | | | | | |
Provision for doubtful accounts | | | |
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Amortization of debt discount and debt issuance costs | | | |
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(Gain) loss on disposition of long-lived assets | | ( | | | |
Stock-based compensation | | | |
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Deferred income taxes | | ( | |
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Loss on pension settlement | | | | | — |
Gain on equity investments | | ( | | | ( |
Changes in operating assets and liabilities, excluding the effects of acquisitions and dispositions: | | | | | |
Accounts receivable | | | |
| |
Customer receivable | | | | | ( |
Prepaid income taxes | | | |
| |
Accrued taxes | | | |
| |
Materials and supplies, prepayments, and other current assets | | ( | |
| ( |
Accounts payable and accrued liabilities, advance payments and deposits and other current liabilities | | ( | |
| ( |
Other assets | | | | | ( |
Other liabilities | | ( | |
| ( |
Net cash provided by operating activities |
| | |
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Cash flows from investing activities: | | | | | |
Capital expenditures |
| ( | |
| ( |
Government capital programs | | | | | |
Amounts disbursed | | ( | | | ( |
Amounts received | | | | | — |
Purchases of strategic investments | | ( | | | — |
Net cash used in investing activities |
| ( | |
| ( |
Cash flows from financing activities: | | | | | |
Dividends paid on common stock |
| ( | |
| ( |
Distributions to noncontrolling interests |
| — | |
| ( |
Payment of debt issuance costs |
| ( | |
| — |
Finance lease payment | | ( | | | ( |
Term loan - repayments |
| ( | |
| ( |
Revolving credit facility – borrowings | | | | | |
Revolving credit facility – repayments | | ( | | | ( |
Proceeds from customer receivable credit facility |
| | |
| |
Repayment of customer receivable credit facility | | ( | | | ( |
Purchases of common stock – stock- based compensation | | ( | | | ( |
Purchases of common stock – share repurchase plan | | ( | | | ( |
Repurchases of noncontrolling interests | | ( | | | ( |
Net cash provided by financing activities |
| | |
| |
Net change in cash, cash equivalents, and restricted cash |
| | |
| ( |
Total cash, cash equivalents, and restricted cash, beginning of period |
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Total cash, cash equivalents, and restricted cash, end of period | $ | | | $ | |
Noncash investing activity: | | | | | |
Purchases of property, plant and equipment included in accounts payable and accrued expenses | $ | | | $ | |
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 provides digital infrastructure and communications services in the United States and internationally, including in the Caribbean region, with a focus on smaller markets, many of which are rural or remote, with a growing demand for infrastructure investments, Through its operating subsidiaries, it primarily provides: (i) carrier and enterprise communications services, such as terrestrial and submarine fiber optic transport, and communications tower facilities; and (ii) fixed and mobile telecommunications connectivity to residential, business and government customers, including a range of high-speed internet and data services, fixed and mobile wireless solutions, and video and voice services.
At the holding company level, the Company oversees the allocation of capital within and among its subsidiaries, affiliates, new investments, and stockholders. The Company has developed significant operational expertise and resources that it uses to augment the capabilities of its individual operating subsidiaries in its local markets. The Company has built a platform of resources and expertise to support its operating subsidiaries and to improve their quality of service with greater economies of scale and expertise than would typically be available at the operating subsidiary level. The Company provides management, technical, financial, regulatory, and marketing services to its operating subsidiaries and typically receive a management fee calculated as a percentage of their revenues, which is eliminated in consolidation. The Company also actively evaluates potential acquisitions, investment opportunities and other strategic transactions, both domestic and international, and generally look for those that it believes fit the Company’s profile of telecommunications businesses and have the potential to complement its “glass and steel” and “first to fiber” approach in markets while generating steady excess cash flows over extended periods of time. The Company uses the cash generated from its operations to re-invest in organic growth in its existing businesses, to make strategic investments in additional businesses, and to return cash to its investors through dividends or stock repurchases.
As of March 31, 2023, the Company offered the following types of services to its customers:
● | Mobility Telecommunications Services. The Company offers mobile communications services over its wireless networks and related equipment (such as handsets) to both its business and consumer customers. |
● | Fixed Telecommunications Services. The Company provides fixed data and voice telecommunications services to business and consumer customers. These services include consumer broadband and high-speed data solutions for businesses. For some markets, fixed services also include video services and revenue derived from support under certain government programs. |
● | Carrier Telecommunication Services. The Company delivers services to other telecommunications providers such as the leasing of critical network infrastructure, such as tower and transport facilities, wholesale roaming, site maintenance and international long-distance services. |
● | Managed Services. The Company provides information technology services such as network, application, infrastructure and hosting services to both its business and consumer customers to complement its fixed services in its existing markets. |
As was previously disclosed, and effective January 27, 2021, the Company no longer provides distributed generation solar power to commercial and industrial customers. These operations were the only operations within the Company’s Renewable Energy segment. As such, the Company no longer identifies the Renewable Energy segment as
9
an operating segment and now has only
● | International Telecom. In the Company’s international markets, it offers fixed services, mobility services, carrier services and managed services to customers in Bermuda, the Cayman Islands, Guyana and the US Virgin Islands. |
● | US Telecom. In the United States, the Company offers fixed services, carrier services, and managed services to business and consumer customers in Alaska and the western United States. |
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, 2023:
| | | | | | |
Segment |
| Services |
| Markets |
| Tradenames |
International Telecom |
| Mobility Services |
| Bermuda, Guyana, US Virgin Islands |
| One, GTT, Viya |
| | Fixed Services |
| 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 Services |
| United States (rural markets) |
| Choice, Choice NTUA Wireless |
| | Fixed Services | | United States |
| Alaska Communications, Commnet, Choice, Choice NTUA Wireless, Sacred Wind Communications, Ethos |
| | Carrier Services | | United States | | Alaska Communications, Commnet, Essextel, Sacred Wind Communications |
|
| Managed Services |
| United States |
| Alaska Communications, Choice |
For further information about the Company’s financial segments and geographical information about its operating revenues and assets, see Note 13 to the Unaudited Condensed Consolidated Financial Statements included in this Report.
Liquidity
The Company’s 2019 CoBank Credit Facility matures on April 10, 2024, which is within twelve months of the issuance of these consolidated financial statements. At March 31, 2023, the Company owed $
10
cash equivalents and $
In light of the plans discussed above, management believes it is probable the Company will meet its obligations as they come due for a minimum of twelve months from the issuance date of these consolidated financial statements. However, if the Company were unable to refinance its existing debt, obtain additional financing, or implement the above plans, as needed, there could be an adverse impact on the Company’s operations.
Restructuring Expense
In connection with the repositioning of the Company’s legacy wholesale roaming operations in its US Telecom segment, the Company recorded a $
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, 2022, filed with the SEC on March 15, 2023.
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.
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3. REVENUE RECOGNITION AND RECEIVABLES
Revenue Accounted for in Accordance with Other Guidance
The Company records revenue in accordance with ASC 606 from contracts with customers and ASC 842 from lease agreements, as well as government grants. Lease revenue recognized under ASC 842 is disclosed in Note 4 and government grant revenue is disclosed in Note 9.
Timing of Revenue Recognition
Revenue accounted for in accordance with ASC 606 consisted of the following for the periods presented below.
| | | | | | |
| Three months ended | | ||||
| | March 31, 2023 | | March 31, 2022 | ||
Services transferred over time | | | | | | |
US Telecom | $ | | $ | | ||
International Telecom | | | | | ||
Total | | | | | ||
Goods and services transferred at a point in time | | | | | | |
US Telecom | | | | | ||
International Telecom | | | | | ||
Total | | | | | ||
Total revenue accounted for under ASC 606 | | | | | | |
Contract Assets and Liabilities
The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from consumer Mobility 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. Mobility and Fixed revenue for postpaid customers is generally billed
In July 2019, the Company entered into a Network Build and Maintenance Agreement with AT&T Mobility, LLC (“AT&T”) and subsequently entered into amendments in August 2020, May 2021 and August 2022 (the “FirstNet Agreement”). In connection with the FirstNet Agreement, the Company is building a portion of AT&T’s network for the First Responder Network Authority in or near the Company’s current operating areas in the western United States (the “FirstNet Transaction”). 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 the good or service in a separate transaction with similar customers in similar circumstances. The current portion of receivables under this agreement is recorded in customer receivable and the long-term portion is recorded in customer receivable long-term on the Company’s balance sheet.
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Contract assets and liabilities consisted of the following (amounts in thousands):
| | | | | | | | | | | |
| March 31, 2023 | | December 31, 2022 | | | $ Change | | % Change | |||
Contract asset – current | $ | | | $ | | | $ | | | | % |
Contract asset – noncurrent | | | | | | | | ( | | ( | % |
Contract liability – current | | ( | | | ( | | | | | | % |
Contract liability – noncurrent | | ( | | | ( | | | | | | % |
Net contract liability | $ | ( | | $ | ( | | $ | | | | % |
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 recognition of deferred revenue. During the three months ended March 31, 2023, the Company recognized revenue of $
Contract Acquisition Costs
The March 31, 2023 balance sheet includes contract acquisition costs of $
Remaining Performance Obligations
Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear Mobility contracts, which include a promotional discount, Managed Services contracts, and the Company’s Carrier Services construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $
The Company has certain Mobility, Fixed, and Carrier Services contracts where the 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, Construction, and Other revenue. Communication Services revenue is further disaggregated into business and consumer Mobility, business and consumer Fixed, Carrier Services, and Other services. Other revenue is further disaggregated into Managed Services revenue.
Receivables
The Company records 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. The Company’s allowance for uncollectible
13
accounts receivable is based on management’s assessment of the collectability of assets pooled together with similar risk characteristics.
At March 31, 2023, the Company had gross accounts receivable of $
| | | | | | |
| | Three months ended | ||||
|
| March 31, 2023 |
| March 31, 2022 | ||
| | | | | | |
Balance at beginning of period |
| $ | | | $ | |
Current period provision for expected losses |
| | | | | |
Write-offs charged against the allowance |
| | ( | | | ( |
Recoveries collected | | | | | | |
Balance at end of period | | $ | | | $ | |
4. LEASES
Lessee Disclosure
The Company has operating and financing leases for towers, land, corporate offices, retail facilities, and data transport capacity. The lease terms are generally between three and
Supplemental lease information
The components of lease expense were as follows (in thousands):
| | | | | |
| Three months ended | ||||
| March 31, 2023 |
| March 31, 2022 | ||
Operating lease cost: | | | | | |
Operating lease cost | $ | | | $ | |
Short-term lease cost | | | | | |
Variable lease cost | | | | | |
Total operating lease cost | $ | | | $ | |
| | | | | |
Finance lease cost: | | | | | |
Amortization of right-of-use asset | $ | | | $ | |
Variable costs | | | | | |
Interest costs | | | | | |
Total finance lease cost | $ | | | $ | |
During the three months ended March 31, 2023 and 2022, the Company paid $
14
million of lease right of use assets, $
At March 31, 2023, finance leases with a cost of $
At December 31, 2022, finance leases with a cost of $
The weighted average remaining lease terms and discount rates as of March 31, 2023 and December 31, 2022 are noted in the table below:
| | | | | |
| March 31, 2023 | | December 31, 2022 | ||
Weighted-average remaining lease term | | | | | |
Operating leases | | | | ||
Financing leases | | | | ||
| | | | | |
Weighted-average discount rate | | | | | |
Operating leases | | | | ||
Financing leases | | | |
Maturities of lease liabilities as of March 31, 2023 were as follows (in thousands):
| | | | | |
| Operating Leases | | Financing Leases | ||
2023 (excluding the three months ended March 31, 2023) | | | | | |
2024 | | | | | |
2025 | | | | | |
2026 | | | | | |
2027 | | | | | |
Thereafter | | | | | |
Total lease payments | | | | | |
Less imputed interest | | ( | | | ( |
Total | $ | | | $ | |
15