ATN International(ATNI) - 2021 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements This section presents ATN International, Inc.'s unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and explanatory notes, for the periods ended September 30, 2021 Condensed Consolidated Balance Sheets The balance sheet shows a significant increase in total assets from $1.08 billion at year-end 2020 to $1.63 billion as of September 30, 2021, primarily driven by the Alaska Communications acquisition, which also substantially increased total liabilities | Balance Sheet Highlights (In Thousands) | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $249,705 | $240,065 | | Net Fixed Assets | $915,834 | $536,462 | | Total Assets | $1,627,384 | $1,083,711 | | Total Current Liabilities | $203,010 | $147,928 | | Long-term Debt | $345,073 | $69,073 | | Total Liabilities | $823,990 | $329,375 | | Total Equity | $731,574 | $754,336 | Condensed Consolidated Statements of Operations Q3 2021 total revenue increased 49.2% year-over-year to $166.8 million due to the Alaska Communications acquisition, but the company reported a net loss of ($2.6) million attributable to stockholders, driven by higher operating and interest expenses | Income Statement Highlights (In Thousands) | Q3 2021 | Q3 2020 | YTD 2021 | YTD 2020 | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $166,760 | $111,739 | $415,135 | $331,743 | | Income from Operations | ($982) | $9,557 | $5,271 | $23,879 | | Net Income (Loss) | ($4,475) | $6,191 | $3,089 | $16,931 | | Net Income (Loss) Attributable to ATN | ($2,619) | $2,661 | $2,103 | $6,393 | | Diluted EPS | ($0.22) | $0.17 | $0.08 | $0.40 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities decreased to $47.7 million for the nine months ended September 30, 2021, while investing activities surged to ($391.8) million, primarily due to the $340.2 million Alaska Communications acquisition, funded largely by $341.4 million from financing activities | Cash Flow Highlights (In Thousands) | Nine Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $47,716 | $71,591 | | Net cash used in investing activities | ($391,782) | ($61,973) | | Net cash provided by (used in) financing activities | $341,433 | ($35,664) | | Net change in cash, cash equivalents, and restricted cash | ($2,633) | ($26,133) | Notes to Unaudited Condensed Consolidated Financial Statements These notes provide critical context to the financial statements, detailing business segments, the significant Alaska Communications acquisition, revenue recognition, debt structure, government support, and legal contingencies - On July 22, 2021, the company completed the acquisition of Alaska Communications for approximately $339.5 million in cash, net of cash acquired. The transaction was funded through a new $220 million credit facility, contributions from investors, and existing cash[20][22] - In January 2021, the company completed the sale of 67% of its Vibrant solar business in India. The remaining 33% ownership interest is accounted for using the equity method[56][58] - The company has three reportable segments: International Telecom, US Telecom, and Renewable Energy (historical). The US Telecom segment now includes the results of Alaska Communications from the acquisition date[18][108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial performance, highlighting the transformative impact of the Alaska Communications acquisition, which significantly increased revenue and operating expenses in the US Telecom segment, leading to an operating loss despite revenue growth - The acquisition of Alaska Communications on July 22, 2021, is the primary driver of financial changes in the quarter, contributing $46.8 million in revenue to the US Telecom segment[131][149][151] - The company is building a portion of AT&T's FirstNet network, expecting to recognize $80-$85 million in construction revenue through 2022. This revenue is largely offset by construction costs[135] - Federal support revenue from the USF program for the company's Viya subsidiary in the US Virgin Islands was reduced from $16.4 million to $10.9 million annually, effective July 2021, with further reductions expected[138] | Key Financial Metrics (Q3 2021 vs Q3 2020, In Thousands) | Q3 2021 | Q3 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Total Revenue | $166,760 | $111,739 | 49.2% | | Income from Operations | ($982) | $9,557 | (110.3)% | | Net Loss Attributable to ATN | ($2,619) | $2,661 | (198.4)% | Quantitative and Qualitative Disclosures About Market Risk The company identifies market risks primarily related to foreign currency translation from operations in Guyana and India, and interest rate fluctuations affecting its $164.0 million variable rate debt, though a 10% rate increase is deemed immaterial - The company is exposed to foreign currency risk from its subsidiaries' functional currencies, mainly the Indian Rupee and the Guyana Dollar[213][214] - As of September 30, 2021, the company had $164.0 million of variable rate debt, exposing it to interest rate risk. However, the potential impact of a 10% rate increase is considered immaterial[216] Controls and Procedures Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2021, with no material changes to internal control over financial reporting identified - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[217] - There were no changes in internal control over financial reporting during the third quarter of 2021 that have materially affected, or are reasonably likely to materially affect, internal controls[217] PART II—OTHER INFORMATION Legal Proceedings The company is involved in several legal and regulatory proceedings, including challenges to its Guyana subsidiary's license, disputes over spectrum fees and tax assessments totaling $44.1 million, and a USAC audit inquiry into Alaska Communications' funding, with $14.5 million accrued for potential liabilities - The company's Guyana subsidiary, GTT, faces ongoing challenges to its exclusive license rights and disputes with the Guyana Revenue Authority over tax assessments totaling $44.1 million[118][121] - The Alaska Communications subsidiary is subject to a USAC audit and an FCC Enforcement Bureau inquiry regarding its participation in the Rural Health Care Support Program[123] - As of September 30, 2021, the company has accrued $14.5 million for probable adverse outcomes from various claims, legal actions, and regulatory proceedings[123] Risk Factors This section highlights the continued material adverse risk from the COVID-19 pandemic, impacting tourism-dependent markets, causing supply chain delays, and potentially affecting employee retention and labor availability due to federal vaccine mandates - The COVID-19 pandemic continues to pose a material risk, potentially impacting tourism-dependent Caribbean markets, causing supply chain disruptions for projects like FirstNet, and affecting customer ability to pay[221] - Federal vaccine mandates (OSHA ETS and Executive Order for government contractors) could result in employee attrition and difficulty securing future labor, potentially impacting operations and profit margins[221] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 58,378 shares of common stock for approximately $2.6 million during Q3 2021, with $26.1 million remaining available for future repurchases under the 2016 Repurchase Plan | Share Repurchases (Q3 2021) | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | July 2021 | 30,633 | $45.29 | | August 2021 | 27,528 | $44.30 | | September 2021 | 217 | $45.04 | | Total Q3 2021 | 58,378 | ~$44.80 | - As of September 30, 2021, approximately $26.1 million remained authorized for share repurchases under the company's 2016 Repurchase Plan[222] Other Information No other information was reported for this item during the period - None Exhibits This section lists the exhibits filed with the Form 10-Q, including the credit agreement for the Alaska acquisition and CEO/CFO certifications - Exhibits filed include the Credit Agreement related to the Alaska Communications acquisition and certifications from the CEO and CFO[227]