ATN International, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2015. ATN provides wireless and wireline telecommunications, fiber transport, and, following its December 2014 acquisition of Ahana, U.S. solar power services. Figures below are in U.S. dollars; financial statements are unaudited.
Financial results
| Metric | Q1 2015 | Q1 2014 |
|---|---|---|
| Revenue | $85.3 million | $75.2 million |
| Operating income | $19.2 million | $16.2 million |
| Operating margin | 22.4% | 21.6% |
| Net income (loss) attributable to ATN shareholders | $(3.3) million | $7.8 million |
| Basic and diluted EPS | $(0.21) | $0.50 basic; $0.49 diluted |
| Operating cash flow | $35.5 million | $(9.0) million |
| Capital expenditures | $13.8 million | $8.7 million |
Revenue increased 13.5%. U.S. wireless revenue rose 26.2% to $35.8 million, while international wireless fell 8.5% to $21.2 million and wireline declined 4.4% to $20.6 million. Renewable energy contributed $5.3 million, compared with none in the prior-year quarter. Operating income improved, but a $19.9 million loss on deconsolidation of the Turks and Caicos subsidiary drove a continuing-operations loss of $0.9 million and an ATN-attributable net loss. The reported operating margin excludes this below-operating-income loss.
Balance sheet and liquidity
- At March 31, cash and cash equivalents were $380.3 million; cash, cash equivalents and restricted cash totaled approximately $385.9 million.
- Total debt was approximately $37.4 million, consisting primarily of debt assumed in the Ahana acquisition. ATN had no borrowings under its $225 million revolving credit facility and had approximately $10.6 million of outstanding letters of credit.
- ATN reported compliance with the credit facility’s financial covenants. Management said available cash and credit capacity should be sufficient for working capital and capital expenditures over the next 12 months.
- Operating cash flow improved substantially year over year, with accrued-tax movements and noncash loss adjustments among the significant drivers. Investing cash flow included a large release of restricted cash; these items affect comparability with the prior period.
Material changes, outlook and risks
- Turks and Caicos sale: The sale of substantially all assets of the retail wireless business closed March 23, 2015. ATN recorded a $19.9 million loss related to the sale and deconsolidation. The filing says the disposition was not a strategic shift, so historical results remained in continuing operations.
- Ahana solar acquisition: The acquired business contributed renewable energy revenue and added term debt. Its electricity is sold under long-term power purchase agreements, alongside sales of solar renewable energy credits.
- Capital spending outlook: ATN estimated 2015 telecommunications capital expenditures of $65–$75 million and approximately $30 million of renewable-energy investment. Q1 capital expenditures were $13.8 million.
- U.S. wireless: Network upgrades, higher data demand and growth in wholesale base stations supported Q1 revenue. ATN expected slower network expansion in 2015 and anticipated revenue pressure after agreeing to reduce rates for a major customer in exchange for a longer-term contract.
- Other operating outlook: Management expected international roaming revenue to continue declining, while renewable-energy revenue from the existing portfolio was expected to remain fairly consistent. Wireline performance in Guyana is exposed to possible changes to ATN’s exclusive service rights.
- Regulatory and other risks: Bermuda required ATN to surrender spectrum intended for next-generation services; its appeal remained pending, and the business impact was uncertain. The filing also cites competition, technology and network investment needs, regulation, foreign-exchange exposure in Guyana, weather events, supplier dependence, and access to capital as risks.
- Contingencies: ATN is involved in regulatory, legal and tax matters and said it could not predict the final outcome of certain proceedings. It warned that adverse outcomes could affect financial condition or operations.
Important facts for investors to verify
- How the major-customer rate reduction affects U.S. wireless revenue, margins and contract duration.
- The outcome of the Bermuda spectrum appeal and any effect on competitive position or service growth.
- Progress against 2015 telecommunications and renewable-energy capital spending estimates, and the resulting cash needs.
- Performance and cash generation of Ahana, including repayment terms and SREC exposure on acquired debt.
- Whether Guyana’s exclusive wireline rights, roaming trends, and other regulatory or legal matters change materially.