ATN International(ATNI) - 2019 Q2 - Quarterly Report

PART I—FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements Presents ATN International's unaudited condensed consolidated financial statements for Q2 and H1 2019 and 2018 Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total current assets | $250,229 | $275,765 | | Total assets | $1,146,976 | $1,107,304 | | Total current liabilities | $130,301 | $140,650 | | Total liabilities | $328,435 | $283,980 | | Total equity | $818,541 | $823,324 | Condensed Consolidated Statements of Operations Highlights (in thousands, except per share data) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $107,721 | $117,788 | $211,020 | $222,263 | | Income from Operations | $2,754 | $15,753 | $4,868 | $19,962 | | Net Income (Loss) Attributable to ATNI | $(856) | $7,216 | $(2,436) | $1,661 | | Diluted EPS | $(0.05) | $0.45 | $(0.15) | $0.10 | Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2019 | Six Months Ended June 30, 2018 | | :--- | :--- | :--- | | Net cash provided by operating activities | $18,522 | $46,037 | | Net cash used in investing activities | $(50,283) | $(58,838) | | Net cash used in financing activities | $(14,495) | $(26,784) | | Net change in cash, cash equivalents, and restricted cash | $(46,225) | $(39,763) | Note 1. Organization and Business Operations The company operates as a holding company with three segments: US Telecom, International Telecom, and Renewable Energy - The company manages its operations through three identified segments: US Telecom, International Telecom, and Renewable Energy[18][19][20] Operating Segments and Markets (as of June 30, 2019) | Segment | Services | Markets | | :--- | :--- | :--- | | US Telecom | Wireless, Wireline | United States | | International Telecom | Wireline, Wireless, Video | Bermuda, Cayman Islands, Guyana, US Virgin Islands | | Renewable Energy | Solar | India | Note 4. Leases Adopted ASC 842 on January 1, 2019, recognizing a $70.8 million operating lease ROU asset and liabilities - Upon adopting ASC 842 on January 1, 2019, the company recognized an operating lease right-of-use (ROU) asset of $70.8 million, a short-term lease liability of $8.2 million, and a long-term lease liability of $61.2 million[42] Lease Metrics as of June 30, 2019 | Metric | Value | | :--- | :--- | | Weighted Average Remaining Lease Term (Operating) | 7.1 years | | Weighted Average Remaining Lease Term (Financing) | 11.9 years | | Weighted Average Discount Rate (Operating) | 5.1% | Note 6. Impact of Hurricanes Irma and Maria Hurricanes Irma and Maria impacted US Virgin Islands operations; $34.6 million insurance recoveries received - The company received $34.6 million in insurance recoveries in February 2018 to aid recovery from the hurricanes[54] Hurricane Rebuild Expenditures (in millions) | Period | Expenditure | | :--- | :--- | | Six Months Ended June 30, 2019 | $0.1 | | Six Months Ended June 30, 2018 | $66.7 | Note 9. Long-Term Debt Entered a new $200 million revolving credit facility in April 2019, with no outstanding borrowings - The company entered into a new five-year, $200 million revolving credit facility on April 10, 2019. As of June 30, 2019, there were no borrowings, and availability was $192.0 million net of letters of credit[73][77] - The company was not in compliance with the Net Leverage Ratio covenant for its Viya Debt for the year ending December 31, 2018, and received a waiver from the lender[81] Note 14. Segment Reporting Details financial performance of US Telecom, International Telecom, and Renewable Energy segments, noting mixed results Segment Revenue (in thousands) - Six Months Ended June 30 | Segment | 2019 | 2018 | | :--- | :--- | :--- | | US Telecom | $47,906 | $58,783 | | International Telecom | $160,175 | $151,625 | | Renewable Energy | $2,939 | $11,855 | | Total Revenue | $211,020 | $222,263 | Segment Operating Income (Loss) (in thousands) - Six Months Ended June 30 | Segment | 2019 | 2018 | | :--- | :--- | :--- | | US Telecom | $(2,006) | $13,065 | | International Telecom | $24,935 | $21,211 | | Renewable Energy | $(16) | $3,863 | | Corporate and Other | $(18,045) | $(18,177) | | Total Operating Income | $4,868 | $19,962 | Note 15. Commitments and Contingencies Faces significant legal challenges in Guyana, including GTT's exclusive license and $44.1 million in disputed tax assessments - The Government of Guyana passed legislation in 2016 to introduce more competition, which could affect GTT's exclusive license. Discussions with the government are ongoing[112][113] - GTT is involved in several legal claims with the Guyana Revenue Authority regarding tax filings dating back to 1991, with disputed assessments totaling $44.1 million. The company has accrued $5.0 million for these matters as of June 30, 2019[118] Management's Discussion and Analysis of Financial Condition and Results of Operations Analyzes financial performance for Q2 and H1 2019 vs. 2018, focusing on segment performance, liquidity, and capital Results of Operations (Three Months Ended June 30, 2019 vs. 2018) Q2 2019 total revenue decreased 8.5% to $107.7 million, with operating income down 82.5% Consolidated Results of Operations - Q2 2019 vs Q2 2018 (in thousands) | Metric | Q2 2019 | Q2 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $107,721 | $117,788 | $(10,067) | (8.5)% | | Income from Operations | $2,754 | $15,753 | $(12,999) | (82.5)% | | Net Income (Loss) Attributable to ATNI | $(856) | $7,216 | $(8,072) | (111.9)% | - US Telecom revenue decreased by 12.9% to $26.4 million, primarily due to a $2.9 million decline in wireless revenue from reduced wholesale traffic and the sale of 100 cell sites in July 2018[144][145] - Renewable Energy revenue decreased by 76.7% to $1.4 million, primarily as a result of the November 2018 sale of the US Solar Operations[151] Results of Operations (Six Months Ended June 30, 2019 vs. 2018) H1 2019 total revenue decreased 5.1% to $211.0 million, with operating income down 75.6% Consolidated Results of Operations - H1 2019 vs H1 2018 (in thousands) | Metric | H1 2019 | H1 2018 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $211,020 | $222,263 | $(11,243) | (5.1)% | | Income from Operations | $4,868 | $19,962 | $(15,094) | (75.6)% | | Net Income (Loss) Attributable to ATNI | $(2,436) | $1,661 | $(4,097) | (246.7)% | - US Telecom revenue decreased by 18.5% to $47.9 million, leading to an operating loss of $2.0 million compared to an income of $13.1 million in H1 2018[213][217] - International Telecom revenue increased by 5.7% to $160.2 million, and operating income grew 17.9% to $25.0 million, largely due to increased broadband revenues[218][220] Liquidity and Capital Resources As of June 30, 2019, cash was $146.7 million, with operating cash flow at $18.5 million and capital expenditures at $35.4 million - Cash and cash equivalents decreased by $46.2 million during the first six months of 2019 to $146.7 million, primarily due to capital expenditures ($35.4 million), investments ($10.0 million), and dividends ($5.4 million), partially offset by cash from operations ($18.5 million)[270][271] Capital Expenditures by Segment (in thousands) - Six Months Ended June 30 | Segment | 2019 | 2018 | | :--- | :--- | :--- | | US Telecom | $6,368 | $7,266 | | International Telecom | $23,692 | $95,520 | | Renewable Energy | $817 | $1,388 | | Corporate and Other | $4,519 | $3,074 | | Total | $35,396 | $107,248 | - The company expects 2019 capital expenditures for the International Telecom segment to be approximately $50.0 million to $55.0 million[266] Quantitative and Qualitative Disclosures About Market Risk Primary market risks are foreign currency translation and interest rate sensitivity on $21.3 million of variable rate debt - The company is exposed to foreign currency risk from its operations in India (Indian Rupee) and Guyana (Guyana Dollar)[301] - As of June 30, 2019, the company had $21.3 million of variable rate debt outstanding, creating exposure to interest rate fluctuations[304] Controls and Procedures Disclosure controls and procedures were effective as of June 30, 2019, with no material changes in Q2 2019 - Based on an evaluation as of June 30, 2019, the CEO and CFO concluded that the company's disclosure controls and procedures were effective[305] - No changes in internal control over financial reporting occurred during Q2 2019 that have materially affected, or are reasonably likely to materially affect, internal controls[306] PART II—OTHER INFORMATION Legal Proceedings Refers to Note 15 for details on ongoing legal matters, including GTT's exclusive license and tax disputes in Guyana - The company is engaged in significant legal and regulatory proceedings in Guyana concerning the exclusivity of its telecommunications license and tax disputes. For full details, see Note 15[111][307] Risk Factors Refers to risk factors in the 2018 Annual Report on Form 10-K; no new or updated risks in this report - The report refers to the risk factors previously disclosed in the company's 2018 Annual Report on Form 10-K[308] Unregistered Sales of Equity Securities and Use of Proceeds Details the stock repurchase program, with $37.7 million remaining available and no shares repurchased during the quarter - As of June 30, 2019, $37.7 million remains authorized for share repurchases under the 2016 Repurchase Plan[309] - No shares were repurchased under the publicly announced plan during the quarter ended June 30, 2019[310] Exhibits Lists exhibits filed with Form 10-Q, including CEO and CFO certifications and Inline XBRL financial data files - The filing includes required CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[312]