ATN International, Inc. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing. ATN operates communications businesses in the United States, Bermuda and the Caribbean, plus solar operations in India during 2020.
Financial performance and liquidity
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | $455.4 million | $438.7 million |
| Operating income | $9.2 million | $13.4 million |
| Operating margin | 2.0% | 3.0% |
| Net income (loss), consolidated | $(0.7) million | $2.0 million |
| Net income (loss) attributable to ATN stockholders | $(14.1) million; $(0.89) per diluted share | $(10.8) million; $(0.68) per diluted share |
| Cash from operating activities | $86.3 million | $87.9 million |
| Capital expenditures | $75.3 million | $72.7 million |
| Cash, cash equivalents and restricted cash | $105.0 million | $162.4 million |
| Debt, net of financing costs | $72.8 million | $86.4 million |
| Working capital | $92.1 million | $109.1 million |
Operating cash flow less capital expenditures was approximately $11.0 million. Cash declined by $57.4 million during the year. The company reported $184.0 million available under its $200 million revolving facility after outstanding letters of credit; no borrowings were outstanding on that facility at year-end. Approximately $39.7 million of cash was held by foreign subsidiaries and described as indefinitely invested outside the United States.
Material changes versus 2019
- Revenue rose 3.8%, but operating income fell 31.4%. The operating margin contracted about one percentage point.
- Communications revenue increased 1.3%. Fixed revenue grew 5.8%, led by broadband demand and US Connect America Fund support; Mobility revenue fell 2.2% and Carrier Services revenue fell 6.9%.
- International Telecom revenue rose 1.3% and segment operating income increased to $58.1 million from $46.9 million, helped by cost reductions that offset pandemic-related declines in roaming and other services.
- US Telecom revenue rose 12.6%, primarily from FirstNet construction and higher Fixed revenue, while segment operating income declined to $7.4 million from $8.1 million as construction costs increased.
- Renewable Energy recorded a $23.7 million segment operating loss, including a $21.5 million loss related to the Vibrant sale. The segment had a $7.2 million loss in 2019.
- Fourth-quarter revenue was $123.7 million, while operating loss was $14.7 million and loss attributable to ATN stockholders was $20.5 million. The filing attributes the annual result in part to the Vibrant disposition loss.
Outlook, risks and unusual items
- Capital spending: Management expected 2021 International Telecom capex of $45–$55 million and US Telecom capex of $40–$50 million, including $20–$30 million for FirstNet-related towers and backhaul. No clear consolidated revenue or earnings guidance is provided.
- FirstNet: ATN recorded $10.9 million of construction revenue in 2020 and expected a further $75 million through 2022, largely offset by construction costs and with minimal expected operating-income impact. The build schedule had been delayed; AT&T may have termination rights for specified performance failures.
- Alaska Communications transaction: Announced December 31, 2020, at approximately $340 million including assumed debt. ATN expected to own 51% with Freedom3 owning 49%. The transaction remained subject to shareholder and regulatory approvals; financing and integration are material execution risks.
- Vibrant divestiture: ATN completed the sale of 67% of Vibrant in January 2021, receiving approximately $21 million with up to $6.3 million of potential earn-out consideration, and retained 33%. Future results are to be accounted for under the equity method.
- US Virgin Islands funding: Viya historically received about $16.4 million annually in high-cost USF support. The FCC provisionally selected a competitor for new support; Viya challenged the decision. If unsuccessful, Viya’s support is scheduled to phase down and then end.
- Guyana regulation and litigation: New telecommunications laws and licenses introduced competition in 2020, and competitor license terms were not clear in the filing. GTT disputes tax assessments totaling $44.1 million; ATN had accrued $5.0 million for these matters. Related litigation remains pending.
- Debt covenant: Viya was not in compliance with its debt leverage covenant at year-end and received a lender waiver on February 25, 2021. ATN reported compliance with its parent revolving facility and One Communications covenants.
- COVID-19: Travel restrictions reduced roaming and affected tourism-dependent markets, while broadband demand strengthened. Management said 2020 financial statements were not materially affected overall, but the duration of impacts, customer payment capacity, costs and construction timing remained uncertain.
- Other notable items: ATN received $16.3 million of CARES Act funding for US network construction, recorded as a reduction to property and equipment. It spent $20.4 million on CBRS spectrum licenses. The reported 2020 effective tax rate was unusually high at 858.3%, largely reflecting low pretax income and the Vibrant loss without a tax benefit.
Key facts for investors to verify
- Whether ATN can restore parent-level earnings and operating margins after the Vibrant-related charge, and the outlook for recurring cash flow.
- The status, final financing and expected leverage consequences of the Alaska acquisition, as well as integration plans and realized benefits.
- The outcome of Viya’s USF appeal, the resulting funding path and implications for the US Virgin Islands business plan.
- FirstNet construction progress, cost recovery, site acceptance milestones and the transition from roaming revenue to lower-margin infrastructure services.
- The scope and potential financial outcome of Guyana tax and license disputes, including whether the $5.0 million accrual is adequate.
- Liquidity deployment, including the large 2020 cash decline, planned capex, debt covenant headroom and continued dividend capacity.