ATN International, Inc. (Atlantic Tele-Network, Inc.) 10-Q Summary
Business Context and Reporting Period
This report covers the quarterly period ended June 30, 2001. ATN International, Inc. (ATN) operates primarily through its 80%-owned subsidiary, Guyana Telephone & Telegraph Company, Limited (GT&T), providing local, long-distance, and cellular services in Guyana. Other operations include Wireless World, LLC in the U.S. Virgin Islands, ATN (Haiti) S.A., and minority interests in Bermuda Digital Communications, Ltd. and LighTrade, Inc.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2001 | Six Months Ended June 30, 2001 |
|---|---|---|
| Total Revenues | $21,439,000 | $39,811,000 |
| Net Income | $3,105,000 | $5,871,000 |
| Diluted EPS | $0.62 | $1.17 |
| Operating Cash Flow | N/A | $5,596,000 |
| Cash and Equivalents (End of Period) | $5,148,000 | $5,148,000 |
| Total Debt (Current + Long-term) | $3,264,000 | $3,264,000 |
| Operating Margin (Telephone Ops) | 40.7% | 39.5% |
Note: Operating margin calculated as Income from telephone operations divided by Total revenues.
Material Changes vs. Prior Period
- Revenue Growth: Total revenues increased 12% ($2.4 million) for the quarter and 4% ($1.6 million) for the six months compared to the prior year. This was driven by an 18% increase in inbound international traffic and a 58% increase in local exchange revenues due to growth in fixed access lines (67,186 to 75,136) and cellular lines (5,044 to 13,428).
- Profitability: Net income for the quarter decreased slightly to $3.1 million from $3.2 million in the prior year. However, income from telephone operations increased 21% to $8.7 million for the quarter.
- Expense Efficiency: Telephone operating expenses as a percentage of revenue improved to 59% for the quarter (down from 62% in 2000), largely due to higher inbound traffic revenues which carry no direct operating expenses.
- Liquidity: Cash and cash equivalents declined significantly from $24.5 million at year-end 2000 to $5.1 million at June 30, 2001. This was driven by $19.6 million in net cash used for investing activities, including $8.9 million in capital expenditures and a $5.0 million investment in LighTrade, Inc.
Outlook, Risks, and Management Commentary
- Regulatory Risks: A critical risk involves the FCC's "Benchmark Order," which is scheduled to reduce the settlement rate for U.S.-Guyana traffic from 85 cents to 23 cents per minute on January 1, 2002. A new operating agreement with WorldCom extends the current rate only until December 31, 2001.
- Liquidity and Financing: Management secured a $1 million short-term credit facility in July 2001 and is seeking an additional $3-$4 million. The company notes that future expansion of GT&T may require significant external financing, particularly if tax and regulatory issues with the Guyana government are settled.
- Currency Risk: While most revenues are in hard currency, there is a risk regarding the liquidity of foreign currency markets in Guyana. Approximately $680,000 of cash balances were denominated in Guyana dollars as of June 30, 2001.
- Other Operations: Non-telephone operations (Haiti, Virgin Islands, call center) continue to generate operating losses, with expenses increasing 77% year-over-year for the six-month period due to start-up costs.
Investor Verification Checklist
- Verify the status of negotiations regarding the FCC Benchmark Order and the potential impact of the rate reduction to 23 cents per minute starting January 2002.
- Confirm the successful execution of the additional $3-$4 million credit facility mentioned in the liquidity section.
- Monitor the resolution of outstanding tax and regulatory proceedings with the Guyana government and the Public Utilities Commission (PUC).
- Assess the ability of GT&T to convert Guyana currency earnings into hard currency given the noted lack of liquidity in local foreign exchange markets.
- Review the progress and capital requirements for the Atlantic Tele-Center, Inc. call center development, which is currently incurring start-up losses.