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, 2001
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)
19 Estate Thomas/Havensight
P.O. Box 12030
St. Thomas, U.S. Virgin Islands 00801
(340) 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, 2001, the registrant had outstanding 4,986,527 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,
2000 2001
------------ -------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $24,495 $16,634
Marketable securities - 6,080
Accounts receivable, net 21,099 16,262
Materials and supplies 4,944 5,132
Prepayments and other current assets 2,507 5,678
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Total current assets 53,045 49,786
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Fixed assets:
Property, plant and equipment 90,546 92,980
Less accumulated depreciation (18,087) (20,128)
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Total fixed assets, net 72,459 72,852
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Uncollected surcharges, net of current portion 997 883
Investment in and advances to Bermuda Digital Communications, Ltd. 6,616 7,653
Other assets 4,853 7,279
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Total assets $137,970 $138,453
============ =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $12,255 $8,238
Accrued taxes 5,427 9,592
Advance payments and deposits 1,433 1,494
Other current liabilities 4,681 3,820
Current portion of long-term debt 1,687 1,670
------------ -------------
Total current liabilities 25,483 24,814
Deferred income taxes 5,303 5,610
Long-term debt, excluding current portion 2,513 1,969
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Total liabilities 33,299 32,393
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Minority interests 21,202 20,822
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Contingencies and commitments (Notes 7 and 8)
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;
5,151,424 shares issued 4,986,527 outstanding 52 52
Treasury stock, at cost (1,621) (1,621)
Paid-in capital 55,867 55,867
Retained earnings 29,372 31,141
Accumulated foreign currency translation loss (201) (201)
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Total stockholders' equity 83,469 85,238
------------ -------------
Total liabilities and stockholders' equity $137,970 $138,453
============ =============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2000 AND 2001
(Columnar Amounts in Thousands, except per share data)
- ---------------------------------------------------------------------------------------------------------------------
Three months ended March 31,
----------------------------
2000 2001
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(Unaudited)
Telephone operations
Revenues:
Local exchange service revenues $2,541 $3,542
International long-distance revenues 16,117 14,087
Other revenues 478 743
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Total revenues 19,136 18,372
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Operating expenses:
International long-distance expenses 6,676 3,973
Telephone operating expenses 5,256 6,094
General and administrative expenses 1,128 1,303
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Total operating expenses 13,060 11,370
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Income from telephone operations 6,076 7,002
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Other operations:
Revenues of other operations 748 1,138
Expenses of other operations 916 1,853
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Loss from other operations (168) (715)
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Other income (expense):
Interest expense (435) (179)
Interest income 627 557
Other income (expense), net 46 277
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Other income (expense), net: 238 655
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Income before income taxes and minority interests 6,146 6,942
Income taxes 3,024 3,548
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Income before minority interests 3,122 3,394
Minority interests (476) (628)
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Net income $2,646 $2,766
============= ============
Net income per share:
Basic and diluted $0.56 $0.55
============= ============
Weighted average common stock outstanding:
Basic 4,721 4,987
============= ============
Diluted 4,721 4,994
============= ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2000 AND 2001
(Columnar Amounts in Thousands)
- --------------------------------------------------------------------------------------------------------------------
Three months ended March 31,
----------------------------
2000 2001
----------------------------
(Unaudited)
Net cash flows provided by operating activities: $9,718 $4,069
------------ ------------
Cash flows from investing activities:
Purchase of Marketable securities - (6,080)
Capital expenditures (1,888) (2,434)
Advances to Bermuda Digital Communications, Ltd. (182) (858)
------------ ------------
Net cash flows used in investing activities (2,070) (9,372)
------------ ------------
Cash flows from financing activities:
Repayment of long-term debt (865) (561)
Purchase of common stock (475) -
Cash paid in conjunction with Acquisition of Antilles Wireless (1,500) -
Dividends declared on common stock (875) (997)
Dividend to minority stockholder in GT&T 0 (1,000)
------------ ------------
Net cash flows used in financing activities (3,715) (2,558)
------------ ------------
Net change in cash and cash equivalents 3,933 (7,861)
Cash and cash equivalents, beginning of period 31,463 24,495
------------ ------------
Cash and cash equivalents, end of period $35,396 $16,634
============ ============
Supplemental cash flow information:
Interest paid $281 $112
============ ============
Income taxes paid $1,133 $2,386
============ ============
Supplemental non cash information:
Depreciation and Amortization Expense $1,473 $2,041
============ ============
Issuance of common stock in conjunction with acquisitions $3 -
============ ============
Additional paid in capital realized from issuance of Common Stock $1,389 -
============ ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three Months Ended March 31, 2000 and 2001
1. ORGANIZATION AND BUSINESS OPERATIONS
Atlantic Tele-Network, Inc. (the "Company" or "ATN"), a Delaware
corporation, is engaged principally through its 80%-owned subsidiary, Guyana
Telephone & Telegraph Company, Limited ("GT&T"), in providing
telecommunications services, including local telephone service, long-distance
services, and cellular service in the Cooperative Republic of Guyana
("Guyana") and international telecommunications service to and from Guyana.
The Company also owns the entire equity interest in Wireless World, LLC
("Wireless World"), which holds Multichannel Multipoint Distribution Service
("MMDS") and Local Multipoint Distribution Service ("LMDS") licenses for the
U.S. Virgin Islands and is engaged in the U.S. Virgin Islands in the Internet
service provider, specialized mobile radio and paging businesses and the
wireless cable television business. The Company owns an 80% interest in ATN
(Haiti) S.A. ("ATN (Haiti)"), a Haitian corporation (formerly named
Digicom S.A.) principally engaged in dispatch radio, mobile
telecommunications, and paging in Haiti. Atlantic Tele-Center, Inc., a wholly
owned subsidiary of ATN, is currently developing a Web-enabled outsourcing
call center in Guyana to provide customer support to companies serving the
U.S. and other markets. The Company owns a 46% interest in Bermuda Digital
Communications, Ltd. ("BDC"), a Bermuda corporation which operates under the
name "Cellular One" and is the sole cellular and PCS competitor in Bermuda to
the Bermuda Telephone Company. ATN provides management, technical, financial,
regulatory, and marketing services to its subsidiaries and affiliates for a
management fee equal to 6% of their revenues. Atlantic Tele-Network, Inc. and
Subsidiaries
2. BASIS OF PRESENTATION
The consolidated condensed balance sheet of ATN and subsidiaries at
December 31, 2000 has been taken from audited financial statements at that
date. All of the other accompanying consolidated condensed financial
statements are unaudited. These consolidated condensed financial statements
have been prepared by the management of ATN in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
certain information and footnote disclosures usually found in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. In the opinion of the management of
the Company, all adjustments (consisting only of normal recurring adjustments)
considered necessary for fair presentation of the consolidated condensed
financial statements have been included, and the accompanying condensed
consolidated financial statements present fairly the financial position and
the results of operations for the interim periods presented. The consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and related footnotes included in the
Company's 2000 Annual Report on Form 10-K, as filed with the SEC.
3. 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 date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
4.MARKETABLE SECURITIES
Marketable securities consist of investments in Government National
Mortgage Association pools of mortgages maturing during 2028. The Company
classifies its existing marketable securities as available-for-sale in
accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". These securities are carred at
fair market value, with unrealized gains and losses reported in stockholders'
equity as a component of other comprehensive income (loss). Gains or losses on
securities sold are based on the specific identification method.
5. NET INCOME PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share," basic net income
per share is computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding during the period
and does not include any other potentially dilutive securities. Diluted net
income per share gives effect to all potentially dilutive securities. There is
no difference between basic net income per share and diluted net income per
share for any period presented as the Company's only dilutive security, stock
options, was antidilutive to the calculation as of March 31, 2000 and
immaterial to the calculation as of March 31, 2001.
6. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 133, SFAS
No. 137 and SFAS No. 138, "Accounting for Derivative Instruments and Hedging
Activities." These statements establish accounting and reporting standards for
derivative instruments including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 133, SFAS No. 137 and
SFAS No. 138 are not to be applied retroactively to financial statements of
prior periods. The Company has adopted these standards as of January 1, 2001
with no material impact to its financial position.
7. CONTINGENCIES AND COMMITMENTS
The financial position and results of operations of the Company may be
affected by certain regulatory matters and litigation described in Note 11 to
the Consolidated financial statements included in the Company's 2000 Annual
Report on Form 10-K, as filed with the SEC. There have been no material
developments in any of the matters described in said Note.
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Conditions and Results of Operations
Forward Looking Statements and Analysts' Reports
This report contains forward looking statements within the meaning of the
federal securities laws, including statements concerning future rates,
revenues, costs, capital expenditures, and financing needs and availability
and statements of management's expectations and beliefs. Actual results could
differ materially from these statements as a result of many factors, including
future economic and political conditions in Guyana, the matters discussed in
the Regulatory Considerations section of Management's Discussion and Analysis
of Financial Condition and Results of Operations in this Report and matters
discussed in the Company's Form 10K Annual Report for the fiscal year ended
December 31, 2000.
Investors should also be aware that while the Company does, from time to
time, communicate with securities analysts, it is against the Company's policy
to disclose to them any material non-public information or other confidential
information. Accordingly, shareholders should not assume that the Company
agrees with any statement or report issued by an analyst irrespective of the
content of the statement or report. Furthermore, the Company has a policy
against issuing or confirming financial forecasts or projections issued by
others. Thus, to the extent that reports issued by securities analysts contain
any projections, forecasts or opinions, such reports are not the
responsibility of the Company.
Introduction
Atlantic Tele-Network, Inc. (the "Company" or "ATN"), a Delaware
corporation, is engaged principally through its 80%-owned subsidiary, Guyana
Telephone & Telegraph Company, Limited ("GT&T"), in providing
telecommunications services, including local telephone service, long-distance
services, and cellular service in the Cooperative Republic of Guyana
("Guyana") and international telecommunications service to and from Guyana.
The Company also owns the entire equity interest in Wireless World, LLC
("Wireless World"), which holds Multichannel Multipoint Distribution Service
("MMDS") and Local Multipoint Distribution Service ("LMDS") licenses for the
U.S. Virgin Islands and is engaged in the U.S. Virgin Islands in the Internet
service provider, specialized mobile radio and paging businesses and the
wireless cable television business. The Company owns an 80% interest in ATN
(Haiti) S.A. ("ATN (Haiti)"), a Haitian corporation (formerly named
Digicom S.A.) principally engaged in dispatch radio, mobile
telecommunications, and paging in Haiti. Atlantic Tele-Center, Inc., a wholly
owned subsidiary of ATN, is currently developing a Web-enabled outsourcing
call center in Guyana to provide customer support to companies serving the
U.S. and other markets. The Company owns a 46% interest in Bermuda Digital
Communications, Ltd. ("BDC"), a Bermuda corporation which operates under the
name "Cellular One" and is the sole cellular and PCS competitor in Bermuda to
the Bermuda Telephone Company. ATN provides management, technical, financial,
regulatory, and marketing services to its subsidiaries and affiliates for a
management fee equal to 6% of their revenues.
The principal components of operating expenses for the Company are
international long-distance expenses, telephone operating expenses, and
general and administrative expenses. 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. Telephone operating expenses
consist of plant specific operations, plant non-specific (which includes
depreciation and amortization), customer operations, corporate operations
expenses of GT&T, and taxes other than income taxes. General and
administrative expenses consist principally of expenses of the parent company.
RESULTS OF OPERATIONS
Three months ended March 31, 2000 and 2001
Net income for the first quarter of 2001 was $2.8 million, or $0.55 per
share as compared to net income of $2.6 million, or $0.56 per share in the
first quarter of 2000. The reduction of $.01 earning per share is attributable
to an increase of 266,000 in the average number of shares outstanding for the
first quarter of 2001 over the same period in 2000.
Telephone operating revenues for the quarter ending March 31, 2001 were
$18.4 million as compared to $19.1 million for the first quarter of 2000, a
decrease of $764,000 or 4%. Audiotext revenues declined by $3.5 million but
this decline was substantially offset by an increase in regular inbound
international traffic revenue of $1.2 million, or 13%, and an increase in
local exchange service revenue of $1.0 million, or 39%. Total operating
expenses were $11.4 million for the first quarter of 2001 compared with $13.1
million for the corresponding quarter of 2000, a decrease of $1.7 million or
13%. This decrease was due primarily to reductions in audiotext traffic which
resulted in reduced international long-distance expense.
Telephone operating expenses were approximately 62% of telephone
operating revenues for the three months ended March 31, 2001 as compared to
68% for the same period of the prior year. This decrease is principally the
result of increased inbound international traffic revenues (which have no
direct operating expenses) and decreased audiotext revenues which have a
significantly higher cost.
Income from telephone operations for the three months ended March 31,
2001 was $7.0 million as compared to $6.1 million for the corresponding period
of 2000. This represents an increase of $926,000 or 15% for the three months
ended March 31, 2001 over the corresponding period of the prior year. This
change is principally a result of the factors affecting revenues and operating
expenses discussed above.
Other operations revenues and expenses represent the operations of
ATN (Haiti) and Wireless World, LLC. Other income (expense), net consists
principally of the Company's equity in the income of BDC.
The Company's effective tax rate for the three months ended March 31,
2001 was 51% as compared to 49% for the corresponding period of the prior
year.
The minority interest in earnings consists primarily of the Guyana
government's 20% interest in GT&T.
Regulatory and Tax Issues
The Company is involved in a number of regulatory and tax proceedings.
See note 11 to the Company's Consolidated Financial Statements included in the
Company's 2000 Annual Report on Form 10-K, as filed with the SEC. A material
and adverse outcome in one or more of these proceedings could have a material
adverse impact on the Company's financial condition and future operations.
There have been no material developments in any of the matters described in
said Note.
Liquidity and Capital Resources
The Company believes its existing liquidity and capital resources are
adequate to meet current operating and capital needs, except that some
external financing will be required for Wireless World's expansion which is
currently underway. The Company's current primary source of funds at the
parent company level is advisory fees and dividends from GT&T. The tax and
regulatory issues discussed in Note 11 to the Company's Consolidated Financial
Statements included in the Company's 2000 Annual Report on Form 10-K could
have a material adverse impact on the Company's liquidity. GT&T is not subject
to any contractual restrictions on the payment of dividends.
If and when the Company settles outstanding tax and regulatory issues
with the Guyana government and the PUC, GT&T may require additional external
financing to enable GT&T to further expand its telecommunications facilities.
The Company has not estimated the cost to comply with the October 1997 PUC
order to increase the number of telephone lines in service described in Note
11 to the Company's Consolidated Financial Statements, which GT&T appealed on
the grounds that the PUC did not hear evidence or make findings as to the
financial feasibility of such an increase as required, in GT&T's opinion, by
Guyana law. The Company believes such a project would require significant
capital expenditures that would require external financing. There can be no
assurance that the Company will be able to obtain any such financing.
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
believes that the majority of GT&T's revenues will continue to be denominated
in U.S. dollars or other hard currencies. However, as a result of the rate
increases currently sought by GT&T and the efforts of the U.S. FCC, AT&T and
carriers in other countries to reduce international accounting rates, it is
likely that an increasing portion of the Company's revenues will be earned in
Guyana currency. While there are no legal restrictions on the conversion of
Guyana currency into U.S. dollars or other hard currencies, or on the
expatriation of Guyana currency or foreign currency from Guyana, there is
little liquidity in the foreign currency markets in Guyana. While the Company
believes that it has, and will continue to have, adequate cash flows
denominated in hard currency to meet its current operating, debt service and
capital requirements, there can be no assurance that GT&T will be able to
convert its Guyana currency earnings into hard currency to meet such
obligations. At March 31, 2001, approximately $5.0 million of the Company's
total cash balances consisted of balances denominated in Guyana dollars.
From time to time the Company explores opportunities to acquire
communications properties or licenses in the Caribbean and elsewhere. Such
acquisitions may require external financing. There can be no assurance as to
whether, when or on what terms the Company will be able to acquire any of the
businesses or licenses it is currently seeking.
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, the
Guyana dollar declined in value to approximately 142 to the U.S. dollar, and
it remained relatively stable at approximately that rate through 1997. In
1998, the Guyana dollar declined in value to approximately 180 to the U.S.
dollar. Through March 31, 2001 the rate of exchange has remained at
approximately 180 to the U.S. dollar.
The effect of devaluation and inflation on the Company's financial
results has not been significant in the periods presented.
Atlantic Tele-Network, Inc. and Subsidiaries
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.
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 8, 2001 /s/ Cornelius B. Prior, Jr.
- ----------------- --- -----------------------
Cornelius B. Prior, Jr.
Chief Executive Officer and Chairman
of the Board
Date: May 8, 2001 /s/ Steven M. Ross
- ----------------- --- --------------
Steven M. Ross
Chief Accounting Officer
