Atlantic Tele-Network, Inc. Reports Second Quarter and Six Month 2014 Results

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| Source: Atlantic Tele-Network, Inc.

Second Quarter Financial Highlights:

  • Revenues increased 16% to $83.3 million
  • Adjusted EBITDA was up 24% to $34.9 million
  • Operating income reached $21.6 million, up 36%
  • Net income attributable to ATN's stockholders was $11.5 million, or $0.72 per diluted share

BEVERLY, Mass., July 29, 2014 (GLOBE NEWSWIRE) -- Atlantic Tele-Network, Inc. (Nasdaq:ATNI), today reported results for the second quarter and six months ended June 30, 2014. Unless otherwise indicated, the discussion of the Company's results is focused on its continuing operations, and comparisons are to the same period in the prior year. Results for all periods presented reflect classification of the Company's U.S. retail wireless business operated under the "Alltel" name as discontinued operations as a result of the completion of the Company's sale of this business to AT&T Mobility LLC on September 20, 2013.

Second Quarter 2014 Financial Results

"This marked the second consecutive quarter in which we had very strong operating performance driven by exceptional results from our U.S. wireless operations," said Michael Prior, Chief Executive Officer. "Our U.S. wireless unit, which is predominantly a wholesale business, achieved year-on-year revenue growth of 41% for the quarter, well exceeding our expectations. Data volumes were higher than we expected, increasing more than 150% in this year's first half compared to the same period last year. This was a result of our capital spending on expansion in capacity, coverage and technologies, as well as the general growth in data volumes that the industry is experiencing. We expect to see modest year-on-year revenue growth in our domestic wireless operations in the second half of the year, based on our traffic forecast and anticipated rate declines. We believe this business is positioned well for opportunities to further enhance value over the longer term.

"In other areas, our international wireless business generated 3% year-on-year revenue growth. Our larger international markets were relatively flat, while some of our smaller markets continued to produce significant retail market share gains. The wireline segment also produced modest revenue growth and we expect our domestic wireline business to continue to show improvement in future periods now that our major network fiber builds are complete. 

"Second quarter profitability gains were driven by the significant revenue growth of our domestic wireless operations," Mr. Prior added. "The capital spending commitment made last year and continuing into 2014 to further expand and upgrade our networks has enabled us to capture growing data traffic volume, and we are pleased with the early returns that we are seeing on these investments. Additionally, our substantial balance sheet capacity and positive operating cash flow provide the resources to support our organic growth and act upon acquisition or other investment opportunities that have the potential to create long-term value for our shareholders."

Second quarter revenues were $83.3 million, 16% above the $71.6 million reported for the second quarter of 2013. Adjusted EBITDA1 for the 2014 second quarter was $34.9 million, a 24% increase over the $28.1 million reported for the 2013 second quarter. Operating income was $21.6 million, up 36% compared to last year's $15.9 million. Net income from continuing operations attributable to ATN's stockholders was $11.5 million or $0.72 per diluted share, significantly ahead of the $6.4 million or $0.40 per diluted share reported in last year's second quarter.

Six Month 2014 Financial Results

Six month revenues were $158.4 million, 16% above the $136.5 million reported for the same period in 2013. Adjusted EBITDA was $63.1 million, up 23% from $51.2 million in the prior year period; operating income increased 35% to $37.9 million; and net income from continuing operations attributable to ATN's stockholders was $19.4 million, or $1.21 per diluted share, as compared with $11.2 million, or $0.71 per diluted share, in the first six months of the prior year.

Second Quarter 2014 Operating Highlights

U.S. Wireless

U.S. wireless revenues primarily consist of voice and data revenues from the Company's wholesale roaming operations. Total revenues from the U.S. wireless business were $37.5 million in the second quarter of 2014, an increase of 41% from the $26.6 million reported in the second quarter of 2013. This strong revenue performance was driven by increased data traffic across the Company's expanded domestic wireless network.  Wholesale data prices are expected to decline later in 2014, which should result in a significantly lower rate of year-on-year revenue growth in coming quarters, even as data traffic and our network reach and capacity continue to grow. Data revenues accounted for 70% of U.S. wireless revenues in the 2014 second quarter, compared to 49% in the similar year-ago period. The Company ended the second quarter with 654 wholesale-only base stations in service compared to 572 at the end of last year's second quarter.

International Wireless

International wireless revenues include retail and wholesale voice and data wireless revenues from international operations in Bermuda and the Caribbean. International wireless revenues were $22.4 million, an increase of 3% over the $21.8 million reported in the second quarter of 2013, due to retail revenue growth in Guyana and in the Company's Island Wireless segment. This growth was offset in part by lower wholesale roaming revenues in many of our Island properties resulting from anticipated rate declines. We expect wholesale revenues to continue to decline in our international markets over time, while retail revenues continue to grow.

Wireline

Wireline revenues are generated by the Company's wireline operations in Guyana, including international telephone calls into and out of that country, by its integrated voice and data and wholesale transport operations in New England and New York State, and by its U.S. based wholesale long-distance voice services. Wireline revenues were $21.3 million, a 2% increase from the $20.9 million reported in the second quarter of 2013. The increase was primarily a result of higher wholesale long-distance voice service revenue, as well as increased domestic wholesale transport operations. Consistent with the trend of the past few quarters, in Guyana, increased data revenue was offset by declines in local and international voice revenue. Lower international voice revenue in Guyana coupled with increased operating expenses caused a significant year-on-year decline in Adjusted EBITDA in our International Integrated Telephony segment in the second quarter.

Reportable Operating Segments

The Company has four reportable segments: (i) U.S. Wireless; (ii) International Integrated Telephony, which operates in Guyana; (iii) Island Wireless, which generates its revenues and has its assets located in Bermuda and the Caribbean (including the U.S. Virgin Islands); and (iv) U.S. Wireline. Financial data on our reportable operating segments for the three months ended June 30, 2014 and 2013 are as follows (in thousands):

For the three months ending June 30, 2014:
 
  U.S. Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling
Items 2
Total
             
Total Revenue  $ 37,815  $ 21,397  $ 17,305  $ 6,752  $ --   $ 83,269
Adjusted EBITDA  26,104  8,994  5,159  220  (5,594)  34,883
Operating Income (Loss)  22,651  4,594  2,552  (966)  (7,224)  21,607
             
For the three months ending June 30, 2013:
 
  U.S. Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling
Items 2
Total
             
Total Revenue  $ 26,844  $ 22,208  $ 16,962  $ 5,612  $ --   $ 71,626
Adjusted EBITDA  16,931  10,770  4,861  670  (5,130)  28,102
Operating Income (Loss)  12,934  6,235  2,301  (124)  (5,439)  15,907

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents at June 30, 2014 were $348.8 million. In addition, the Company holds $58.8 million of restricted cash primarily related to proceeds from the sale of Alltel which are being held in an indemnity escrow as of June 30, 2014. Net cash provided by operating activities of continuing operations was $15.3 million for the first six months of 2014, which was impacted by $37.0 million in cash paid for income taxes, primarily related to the gain on the sale of Alltel. Capital expenditures were $25.1 million in the first six months of 2014. The Company expects full year 2014 capital expenditures in the range of $60.0 million to $65.0 million.

Conference Call Information

Atlantic Tele-Network will host a conference call on Wednesday, July 30, 2014 at 9:30 a.m. Eastern Time (ET) to discuss its 2014 second quarter results. The call will be hosted by Michael Prior, President and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: (877) 734-4582 and International: (678) 905-9376, conference ID 76078362. A replay of the call will be available at ir.atni.com beginning at 1:00 p.m. (ET) on Wednesday, July 30, 2014.

About Atlantic Tele-Network

Atlantic Tele-Network, Inc. (Nasdaq:ATNI), headquartered in Beverly, Massachusetts, provides telecommunications services to rural, niche and other under-served markets and geographies in the United States, Bermuda and the Caribbean. Through our operating subsidiaries, we provide both wireless and wireline connectivity to residential and business customers, including a range of mobile wireless solutions, local exchange services and broadband internet services and are the owner and operator of terrestrial and submarine fiber optic transport systems. For more information, please visit www.atni.com.

Cautionary Language Concerning Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the competitive environment in our key markets, demand for our services and industry trends; the outcome of regulatory matters; the pace of our network expansion and improvement, including our level of estimated future capital expenditures and our realization of the benefits of these investments; 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, and the future growth and retention of our subscriber base; (2) government regulation of our businesses, which may impact our FCC and other telecommunications licenses; (3) economic, political and other risks facing our foreign operations; (4) our ability to maintain favorable roaming arrangements; (5) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address  rapid and significant technological changes in the telecommunications industry; (6) the loss of or our inability to recruit skilled personnel in our various jurisdictions, including key members of management; (7) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals for the Company; (8) increased competition; (9) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (10) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (11) the occurrence of severe weather and natural catastrophes; (12) our continued access to capital and credit markets; and (13) our ability to realize the value that we believe exists in our businesses. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 17, 2014 and the other reports we file from time to time with the SEC. The Company undertakes no obligation 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.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this news release also contains non-GAAP financial measures. Specifically, ATN has presented an Adjusted EBITDA measure. Adjusted EBITDA is defined as net income attributable to ATN stockholders before income from discontinued operations, gain on disposal of discontinued operations, interest, taxes, depreciation and amortization, transaction-related charges, impairment of intangible assets, gain on disposition of long-lived assets, other income or expense, and net income attributable to non-controlling interests. The Company believes that the inclusion of this non-GAAP financial measure helps investors to gain a meaningful understanding of the Company's core operating results and enhance comparing such performance with prior periods. ATN's management uses this non-GAAP measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measure included in this news release is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measure used in this news release to the most directly comparable GAAP financial measure is set forth in the text of, and the accompanying tables to, this press release.

__________________________

1 See Table 4 for reconciliation of Net Income to Adjusted EBITDA.
2 Reconciling items are comprised of corporate general and administrative costs and transaction-related charges

Table 1
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Balance Sheets
(in Thousands)
     
  June 30, December 31,
  2014 2013
Assets:    
Cash and cash equivalents  $ 348,804  $ 356,607
Restricted cash  58,794  39,000
Assets of discontinued operations  169  4,748
Other current assets  76,281  71,648
     
Total current assets  484,048  472,003
     
Long-term restricted cash  --   39,000
Property, plant and equipment, net  253,027  254,632
Goodwill and other intangible assets, net  87,442  86,988
Other assets  6,247  7,096
     
Total assets  $ 830,764  $ 859,719
     
Liabilities and Stockholders' Equity:    
Accrued taxes  $ 6,441  $ 36,081
Liabilities of discontinued operations  3,353  11,187
Other current liabilities  67,286  73,805
     
Total current liabilities  77,080  121,073
     
Deferred income taxes  25,428  26,007
Other long-term liabilities  16,655  12,784
     
Total long-term liabilities  42,083  38,791
     
Total liabilities  119,163  159,864
     
Total Atlantic Tele-Network, Inc.'s stockholders' equity  655,789  643,330
Non-controlling interests  55,812  56,525
     
Total equity  711,601  699,855
     
Total liabilities and stockholders' equity  $ 830,764  $ 859,719
         
Table 2
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, Except per Share Data)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
  2014 2013 (a) 2014 2013 (a)
Revenues:        
U.S. wireless  $ 37,456  $ 26,589  $ 65,848  $ 47,802
International wireless  22,422  21,837  45,570  43,267
Wireline  21,283  20,877  42,813  41,441
Equipment and other  2,108  2,323  4,212  3,948
Total revenue  83,269  71,626  158,443  136,458
         
Operating expenses:        
Termination and access fees  16,231  13,601  32,093  26,656
Engineering and operations  9,521  9,182  19,151  18,840
Sales, marketing and customer service  4,926  4,787  9,946  9,276
Equipment expense  3,273  2,834  5,988  5,501
General and administrative  14,435  13,120  28,133  25,029
Transaction-related charges  346  --   367  63
Depreciation and amortization  12,930  12,195  24,910  24,183
Gain on disposal of long-lived assets  --   --   --   (1,076)
Total operating expenses  61,662  55,719  120,588  108,472
         
Operating income  21,607  15,907  37,855  27,986
         
Other income (expense):        
Interest expense, net  (20)  (2,722)  (207)  (4,986)
Other income (expense)  73  13  (36)  27
Other income (expense), net  53  (2,709)  (243)  (4,959)
         
Income from continuing operations before income taxes  21,660  13,198  37,612  23,027
Income tax expense  7,338  4,868  12,890  8,813
         
Income from continuing operations  14,322  8,330  24,722  14,214
         
Income from discontinued operations, net of tax  --   3,091  --   7,125
         
Net income  14,322  11,421  24,722  21,339
         
Net income attributable to non-controlling interests, net of tax:        
Continuing operations  (2,809)  (1,934)  (5,368)  (2,989)
Discontinued operations  --   (630)  --   (717)
Net income attributable to non-controlling interests, net  (2,809)  (2,564)  (5,368)  (3,706)
         
Net income attributable to Atlantic Tele-Network, Inc. stockholders  $ 11,513  $ 8,857  $ 19,354  $ 17,633
         
Basic net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:        
Income from continuing operations  $ 0.72  $ 0.41  $ 1.22  $ 0.72
Income from discontinued operations  --   0.16  --   0.41
Net income  $ 0.72  $ 0.57  $ 1.22  $ 1.13
         
Diluted net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:        
Income from continuing operations  $ 0.72  $ 0.40  $ 1.21  $ 0.71
Income from discontinued operations  --   0.16  --   0.41
Net income  $ 0.72  $ 0.56  $ 1.21  $ 1.12
         
Weighted average common shares outstanding:        
Basic  15,915  15,706  15,873  15,647
Diluted  16,023  15,821  15,986  15,756
         
a)  All previously reported amounts have been reclassified to reflect the Company's Alltel business as a discontinued operation
     
Table 3
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Cash Flow Statement
(in Thousands)
     
  Six Months Ended June 30,
  2014 2013
     
Net income  $ 24,722  $ 21,339
Income from discontinued operations  --   (7,125)
Depreciation and amortization  24,910  24,183
Gain on disposal of long-lived assets  --   (1,076)
Change in prepaid and accrued taxes  (23,952)  (24,028)
Change in other operating assets and liabilities  (13,056)  (3,947)
Other non-cash activity  2,683  3,172
     
Net cash provided by operating activities of continuing operations  15,307  12,518
Net cash provided by (used in) operating activities of discontinued operations  (3,255)  22,917
Net cash provided by operating activities  12,052  35,435
     
Capital expenditures, net  (25,104)  (39,696)
Proceeds from disposition of long-lived assets  1,371  1,500
Change in restricted cash  19,206  -- 
     
Net cash used in investing activities of continuing operations  (4,527)  (38,196)
Net cash used in investing activities of discontinued operations  --   (12,487)
Net cash used in investing activities  (4,527)  (50,683)
     
Dividends paid on common stock  (8,574)  (3,919)
Distributions to non-controlling interests  (6,081)  (1,624)
Other  (673)  (3,480)
     
Net cash used in financing activities of continuing operations  (15,328)  (9,023)
Net cash used in financing activities of discontinued operations  --   (938)
Net cash used in financing activities  (15,328)  (9,961)
     
Net change in cash and cash equivalents  (7,803)  (25,209)
     
Cash and cash equivalents, beginning of period  356,607  136,647
     
Cash and cash equivalents, end of period  $ 348,804  $ 111,438
     
     
Cash paid for income taxes  $ 36,976  $ 35,083
             
Table 4
ATLANTIC TELE-NETWORK, INC.
Reconciliation of Non-GAAP Measures
(In Thousands)
             
 
Reconciliation of Net Income to Adjusted EBITDA for the Three Months Ended June 30, 2013 and 2014
             
Three Months Ended June 30, 2013
  U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
             
Net income attributable to Atlantic Tele-Network, Inc. stockholders            $ 8,857
Net income attributable to non-controlling interests, net of tax            2,564
Income from discontinued operations, net of tax            (3,091)
Income tax expense            4,868
Other income            (13)
Interest expense, net            2,722
Operating income (loss)  $ 12,934  $ 6,235  $ 2,301  $ (124)  $ (5,439)  $ 15,907
Depreciation and amortization  3,997  4,535  2,560  794  309  12,195
Adjusted EBITDA  $ 16,931  $ 10,770  $ 4,861  $ 670  $ (5,130)  $ 28,102
 
             
Three Months Ended June 30, 2014
  U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
             
Net income attributable to Atlantic Tele-Network, Inc. stockholders            $ 11,513
Net income attributable to non-controlling interests, net of tax            2,809
Income tax expense            7,338
Other income            (73)
Interest expense, net            20
Operating income (loss)  $ 22,651  $ 4,594  $ 2,552  $ (966)  $ (7,224)  $ 21,607
Depreciation and amortization  3,453  4,400  2,607  1,186  1,284  12,930
Transaction-related charges  --   --   --   --   346  346
Adjusted EBITDA  $ 26,104  $ 8,994  $ 5,159  $ 220  $ (5,594)  $ 34,883
 
             
 
Reconciliation of Net Income to Adjusted EBITDA for the Six Months Ended June 30, 2013 and 2014
             
Six Months Ended June 30, 2013
  U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
             
Net income attributable to Atlantic Tele-Network, Inc. stockholders            $ 17,633
Net income attributable to non-controlling interests, net of tax            3,706
Income from discontinued operations, net of tax            (7,125)
Income tax expense            8,813
Other income            (27)
Interest expense, net            4,986
Operating income (loss)  $ 22,179  $ 12,568  $ 3,935  $ (532)  $ (10,164)  $ 27,986
Depreciation and amortization  8,080  8,925  5,155  1,436  587  24,183
Transaction-related charges  --   --   --   --   63  63
Gain on disposal of long-lived assets  (1,076)  --   --   --   --   (1,076)
Adjusted EBITDA  $ 29,183  $ 21,493  $ 9,090  $ 904  $ (9,514)  $ 51,156
 
             
Six Months Ended June 30, 2014
  U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
             
Net income attributable to Atlantic Tele-Network, Inc. stockholders            $ 19,354
Net income attributable to non-controlling interests, net of tax            5,368
Income tax expense            12,890
Other expense            36
Interest expense, net            207
Operating income (loss)  $ 36,240  $ 10,229  $ 5,978  $ (2,040)  $ (12,552)  $ 37,855
Depreciation and amortization  6,756  8,713  5,215  2,327  1,899  24,910
Transaction-related charges  --   --   --   --   367  367
Adjusted EBITDA  $ 42,996  $ 18,942  $ 11,193  $ 287  $ (10,286)  $ 63,132
 
Michael T. Prior
Chief Executive Officer
978-619-1300
	
Justin D. Benincasa
Chief Financial Officer
978-619-1300