UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
________________________________________________________________________
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended September 30, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-19551
________________________________________________________________________
Atlantic Tele-Network, Inc.
(exact name of issuer as specified in its charter)
Delaware 47-072886
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
19 Estate Thomas/Havensight
P.O. Box 12030
St. Thomas, U.S. Virgin Islands 00801
(340) 777-8000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No ____
As of September 30, 2001, the registrant had outstanding 4,986,727 shares
of its common stock ($.01 par value).
________________________________________________________________________
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Columnar Amounts in Thousands)
- ---------------------------------------------------------------------------------------------------------------------
---------------------------------
December 31, September 30,
2000 2001
--------------- ---------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $24,495 $9,225
Marketable securities - 6,668
Accounts receivable, net 21,099 21,898
Materials and supplies 4,944 4,863
Prepayments and other current assets 2,507 5,085
------------- -------------
Total current assets 53,045 47,739
------------- -------------
Fixed assets:
Property, plant and equipment 90,546 105,004
Less accumulated depreciation (18,087) (24,531)
------------- -------------
Total fixed assets, net 72,459 80,473
------------- -------------
Uncollected surcharges, net of current portion 997 656
Investment in and advances to Bermuda Digital Communications, Ltd. 6,616 7,581
Investment in LighTrade, Inc. - 3,898
Other assets 4,853 3,396
------------- -------------
Total assets $137,970 $143,743
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $12,255 $6,036
Accrued taxes 5,427 8,066
Advance payments and deposits 1,433 1,577
Other current liabilities 4,681 5,423
Current portion of long-term debt 1,687 2,358
------------- -------------
Total current liabilities 25,483 23,460
Deferred income taxes 5,303 6,493
Long-term debt, excluding current portion 2,513 3,678
------------- -------------
Total liabilities 33,299 33,631
------------- -------------
Minority interests 21,202 20,514
------------- -------------
Contingencies and commitments (Note 7)
Stockholders' equity:
Preferred stock, par value $.01 per share; 10,000,000 shares authorized;
none issued and outstanding - -
Common stock, par value $.01 per share; 20,000,000 shares authorized;
5,151,424 shares issued; 4,986,527 and 4,986,727 outstanding, respectively 52 52
Treasury stock, at cost (1,621) (1,561)
Paid-in capital 55,867 55,787
Retained earnings 29,372 35,472
Other comprehensive loss (201) (152)
------------- -------------
Total stockholders' equity 83,469 89,598
------------- -------------
Total liabilities and stockholders' equity $137,970 $143,743
============= =============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
2
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(Columnar Amounts in Thousands, except per share data)
- ----------------------------------------------------------------------------------------------------------------------------------
Three months ended Sept. 30, Nine months ended Sept. 30,
2000 2001 2000 2001
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
Telephone operations
Revenues:
Local exchange service revenues $3,076 $5,070 $8,392 $13,000
International long-distance revenues 15,111 17,276 46,941 47,744
Other revenues 749 551 1,801 1,964
----------- ----------- ----------- -----------
Total revenues 18,936 22,897 57,134 62,708
----------- ----------- ----------- -----------
Operating expenses:
International long-distance expenses 5,114 4,527 17,395 12,720
Telephone operating expenses 5,511 6,695 16,012 19,709
General and administrative expenses 1,144 1,558 3,258 4,440
----------- ----------- ----------- -----------
Total operating expenses 11,769 12,780 36,665 36,869
----------- ----------- ----------- -----------
Income from telephone operations 7,167 10,117 20,469 25,839
----------- ----------- ----------- -----------
Other operations:
Revenues of other operations 1,098 1,165 2,765 3,432
Expenses of other operations 1,360 2,042 3,447 5,726
----------- ----------- ----------- -----------
Loss from other operations (262) (877) (682) (2,294)
----------- ----------- ----------- -----------
Other income (expense):
Interest expense (324) (199) (1,070) (545)
Interest income 554 336 1,700 1,261
Other income (expense), net 231 (230) 465 43
----------- ----------- ----------- -----------
Other income, net: 461 (93) 1,095 759
----------- ----------- ----------- -----------
Income before income taxes and minority interests 7,366 9,147 20,882 24,304
Income taxes 3,623 4,992 10,231 12,841
----------- ----------- ----------- -----------
Income before minority interests 3,743 4,155 10,651 11,463
Minority interests (603) (934) (1,678) (2,371)
----------- ----------- ----------- -----------
Net income $3,140 $3,221 $8,973 $9,092
=========== =========== =========== ===========
Net income per share:
Basic $0.63 $0.65 $1.84 $1.82
=========== =========== =========== ===========
Diluted $0.63 $0.64 $1.84 $1.81
=========== =========== =========== ===========
Weighted average common stock outstanding:
Basic 4,982 4,987 4,885 4,988
=========== =========== =========== ===========
Diluted 4,982 5,020 4,885 5,011
=========== =========== =========== ===========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
3
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 2001
(Columnar Amounts in Thousands)
- -----------------------------------------------------------------------------------------------------------------------
Nine months ended Sept. 30,
2000 2001
-------------------------------
(Unaudited)
Net cash flows provided by operating activities: $6,033 $15,156
------------ ------------
Cash flows from investing activities:
Purchase of marketable securities - (6,579)
Capital expenditures (7,528) (14,458)
Advances to (repayments from) Bermuda Digital Communications, Ltd. (471) 10
Investment in Lightrade, Inc. - (5,250)
------------ ------------
Net cash flows used in investing activities (7,999) (26,277)
------------ ------------
Cash flows from financing activities:
Issuance of long-term debt - 3,200
Repayment of long-term debt (2,550) (1,364)
Purchase of common stock (162) (68)
Cash paid in conjunction with Acquisition of Antilles Wireless (1,500) -
Dividends declared on common stock (2,620) (2,867)
Dividend to minority stockholder in GT&T (1,000) (3,050)
------------ ------------
Net cash flows used in financing activities (7,832) (4,149)
------------ ------------
Net change in cash and cash equivalents (9,798) (15,270)
Cash and cash equivalents, beginning of period 31,463 24,495
------------ ------------
Cash and cash equivalents, end of period $21,665 $9,225
============ ============
Supplemental cash flow information:
Interest paid $783 $321
============ ============
Income taxes paid $9,982 $10,363
============ ============
Supplemental non cash information:
Depreciation and Amortization Expense $5,131 $6,444
============ ============
Issuance of common stock in conjunction with acquisitions $3 -
============ ============
Additional paid in capital realized from issuance of Common Stock $1,413 -
============ ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
4
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three and Nine Months Ended September 30, 2000 and 2001
1. ORGANIZATION AND BUSINESS OPERATIONS
Atlantic Tele-Network, Inc. (the "Company" or "ATN"), a Delaware
corporation, is engaged principally through its 80%-owned subsidiary, Guyana
Telephone & Telegraph Company, Limited ("GT&T"), in providing
telecommunications services, including local telephone service, long-distance
services, and cellular service in the Cooperative Republic of Guyana
("Guyana") and international telecommunications service to and from Guyana.
The Company also owns the entire equity interest in Wireless World, LLC
("Wireless World"), which holds Multichannel Multipoint Distribution Service
("MMDS") and Local Multipoint Distribution Service ("LMDS") licenses for the
U.S. Virgin Islands and is engaged in the U.S. Virgin Islands in the Internet
service provider, specialized mobile radio and paging businesses and the
wireless cable television business. The Company owns an 80% interest in ATN
(Haiti) S.A. ("ATN (Haiti)"), which is engaged in dispatch radio, mobile
telecommunications, and paging in Haiti. Atlantic Tele-Center, Inc., a wholly
owned subsidiary of ATN, is currently developing a Web-enabled outsourcing
call center in Guyana to provide customer support to companies serving the
U.S. and other markets. The Company owns a 46% interest in Bermuda Digital
Communications, Ltd. ("BDC"), which provides cellular telephone services in
Bermuda under the name "Cellular One," and a significant minority interest in
LighTrade, Inc. which is developing a network of neutral switching or pooling
points to enable telecommunications carriers to interconnect quickly with each
other and create a standard location for trading bandwidth between cities. ATN
provides management, technical, financial, regulatory, and marketing services
to its subsidiaries and affiliates for a management fee equal to 6% of their
revenues.
2. BASIS OF PRESENTATION
The consolidated condensed balance sheet of ATN and subsidiaries at
December 31, 2000 has been taken from the audited financial statements at that
date. All of the other accompanying consolidated condensed financial
statements are unaudited. These consolidated condensed financial statements
have been prepared by the management of ATN in accordance with the rules and
regulations of the Securities and Exchange Commission ("SEC"). Accordingly,
certain information and footnote disclosures usually found in financial
statements prepared in accordance with accounting principles generally
accepted in the United States have been condensed or omitted. In the opinion
of the management of the Company, all adjustments (consisting only of normal
recurring adjustments) considered necessary for fair presentation of the
consolidated condensed financial statements have been included, and the
accompanying condensed consolidated financial statements present fairly the
financial position and the results of operations for the interim periods
presented. The consolidated condensed financial statements should be read in
conjunction with the consolidated financial statements and related footnotes
included in the Company's 2000 Annual Report on Form 10-K, as filed with the
SEC.
5
3. USE OF ESTIMATES
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
4. MARKETABLE SECURITIES
Marketable securities consist of investments in Government National
Mortgage Association pools of mortgages maturing during 2028. The Company
classifies its existing marketable securities as available-for-sale in
accordance with the provisions of SFAS No. 115, "Accounting for Certain
Investments in Debt and Equity Securities". These securities are carried at
fair market value, with unrealized gains and losses reported in stockholders'
equity as a component of other comprehensive income (loss). Gains or losses on
securities sold are based on the specific identification method.
5. NET INCOME PER SHARE
In accordance with SFAS No. 128, "Earnings Per Share," basic net income
per share is computed by dividing net income available to common shareholders
by the weighted-average number of common shares outstanding during the period
and does not include any other potentially dilutive securities. Diluted net
income per share gives effect to all potentially dilutive securities.
A reconciliation of basic net income per share to diluted net income per
share for the three and nine month periods ended September 30, 2000 and 2001
(in thousands, except per share data):
Three Months Ended
-----------------------------------------------------------------------------------------------
September 30, 2000 September 30, 2001
-----------------------------------------------------------------------------------------------
Weighted Net Weighted Net
Net Average Income Net Average Income
Income Shares Per Share Income Shares Per Share
----------- ----------- ----------- ---------- ----------- -----------
Basic net income $3,140 4,982 $0.63 $3,221 4,987 $0.65
Dilutive Securities:
Stock Options $0 0 $0.00 $0 33 ($0.01)
----------- ----------- ----------- ---------- ----------- -----------
Diluted net income $3,140 4,982 $0.63 $3,221 5,020 $0.64
=========== =========== =========== ========== =========== ===========
6
Nine Months Ended
-----------------------------------------------------------------------------------------------
September 30, 2000 September 30, 2001
-----------------------------------------------------------------------------------------------
Weighted Net Weighted Net
Net Average Income Net Average Income
Income Shares Per Share Income Shares Per Share
----------- ----------- ----------- ---------- ----------- -----------
Basic net income $8,973 4,885 $1.84 $9,092 4,988 $1.82
Dilutive Securities:
Stock Options $0 0 $0.00 $0 23 ($0.01)
----------- ----------- ----------- ---------- ---------- -----------
Diluted net income $8,973 4,885 $1.84 $9,092 5,011 $1.81
=========== =========== =========== ========== =========== ===========
6. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 133, SFAS
No. 137 and SFAS No. 138, "Accounting for Derivative Instruments and Hedging
Activities." These statements establish accounting and reporting standards for
derivative instruments including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 133, SFAS No. 137 and
SFAS No. 138 are not to be applied retroactively to financial statements of
prior periods. The Company has adopted these standards as of January 1, 2001
with no material impact to its financial position.
In June 2001, the Financial Accounting Standards Board ("FASB") issued
Statement No. 141, "Business Combinations," which establishes new accounting
and reporting standards for business combinations and supersedes Accounting
Principles Board (APB) Opinion No. 16. All business combinations initiated
after June 30, 2001 must now be accounted for using the purchase method of
accounting.
Also in June 2001, the FASB issued Statement No. 142, "Goodwill and Other
Intangible Assets," which establishes new accounting and reporting standards
for acquired goodwill and other intangible assets and supersedes APB Opinion
No. 17. It addresses how intangible assets that are acquired individually or
with a group of other assets (but not those acquired in a business
combination) should be accounted for upon acquisition and on an ongoing basis.
Goodwill and intangible assets that have indefinite useful lives will not be
amortized but rather will be tested at least annually for impairment.
Intangible assets that have finite useful lives (whether or not acquired in a
business combination) will continue to be amortized over their useful lives,
which are no longer limited to 40 years. The provisions of Statement No. 142
must be adopted on January 1, 2002 by the Company.
7
The Company recorded amortization expense related to goodwill arising
from business combinations of $180,000 for the nine months ended September 30,
2001 and is expected to record $240,000 of goodwill amortization expense for
the year ending December 31, 2001. The Company has not yet quantified the
impact of adopting Statement No. 142 on its consolidated financial statements.
7. CONTINGENCIES AND COMMITMENTS
The financial position and results of operations of the Company may be
affected by certain regulatory matters and litigation described in Note 11 to
the Consolidated financial statements included in the Company's 2000 Annual
Report on Form 10-K, as filed with the SEC. On June 8, 2001, GT&T executed a
new operating agreement with a subsidiary of WorldCom. The agreement is for an
initial term of one year from date of execution and continues thereafter
unless terminated by either party with at least six months advance written
notice. The agreement continues the current 85 cents per minute settlement
rate for traffic between the United States and Guyana until December 31, 2001
and provides that the parties will thereafter negotiate a new rate in
compliance with the FCC's "Benchmark Order" or any subsequent FCC orders. The
FCC's Benchmark Order is presently scheduled to reduce the rate to 23 cents
per minute for U.S.-Guyana traffic on January 1, 2002. There have been no
other material developments in any of the matters described in said Note.
The government of Guyana has announced its intention to reform and
modernize Guyana's telecommunications sector. The changes under consideration
include terminating the monopoly provisions of GT&T's license with appropriate
compensation to GT&T, rebalancing rates so that the rates for each service
represent the real economic cost of such services, and shifting from rate of
return regulation to incentive rate-cap regulation. GT&T expects to enter into
negotiations with the Guyana government on these issues in the near future.
The Company is unable at this time to assess the impact of the government's
reform proposals on the future financial position or results of operations of
the Company.
At September 30, 2001 the Company carried certain advances to an
unaffiliated entity at $900,000 (net of reserves). Additional reserves against
these advances may be required in the near term.
8
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion and Analysis of Financial
Conditions and Results of Operations
Forward Looking Statements and Analysts' Reports
This report contains forward looking statements within the meaning of the
federal securities laws, including statements concerning future rates,
revenues, costs, capital expenditures, and financing needs and availability
and statements of management's expectations and beliefs. Actual results could
differ materially from these statements as a result of many factors, including
future economic and political conditions in Guyana, the matters discussed in
the Regulatory Considerations section of Management's Discussion and Analysis
of Financial Condition and Results of Operations in this Report and matters
discussed in the Company's Form 10-K Annual Report for the fiscal year ended
December 31, 2000.
Investors should also be aware that while the Company does, from time to
time, communicate with securities analysts, it is against the Company's policy
to disclose to them any material non-public information or other confidential
information. Accordingly, shareholders should not assume that the Company
agrees with any statement or report issued by an analyst irrespective of the
content of the statement or report. Furthermore, the Company has a policy
against issuing or confirming financial forecasts or projections issued by
others. Thus, to the extent that reports issued by securities analysts contain
any projections, forecasts or opinions, such reports are not the
responsibility of the Company.
Introduction
Atlantic Tele-Network, Inc. (the "Company" or "ATN"), a Delaware
corporation, is engaged principally through its 80%-owned subsidiary, Guyana
Telephone & Telegraph Company, Limited ("GT&T"), in providing
telecommunications services, including local telephone service, long-distance
services, and cellular service in the Cooperative Republic of Guyana
("Guyana") and international telecommunications service to and from Guyana.
The Company also owns the entire equity interest in Wireless World, LLC
("Wireless World"), which holds Multichannel Multipoint Distribution Service
("MMDS") and Local Multipoint Distribution Service ("LMDS") licenses for the
U.S. Virgin Islands and is engaged in the U.S. Virgin Islands in the Internet
service provider, specialized mobile radio and paging businesses and the
wireless cable television business. The Company owns an 80% interest in ATN
(Haiti) S.A. ("ATN (Haiti)"), which is principally engaged in dispatch radio,
mobile telecommunications, and paging in Haiti. Atlantic Tele-Center, Inc., a
wholly owned subsidiary of ATN, is currently developing a Web-enabled
outsourcing call center in Guyana to provide customer support to companies
serving the U.S. and other markets. The Company owns a 46% interest in Bermuda
Digital Communications, Ltd. ("BDC"), which provides cellular telephone
services in Bermuda under the name "Cellular One," and a significant minority
interest in LighTrade, Inc. which is developing a network of neutral switching
or pooling points to enable telecommunications carriers to interconnect
quickly with each other and create a standard location for trading bandwidth
between cities. ATN provides management, technical, financial, regulatory, and
marketing services to its subsidiaries and affiliates for a management fee
equal to 6% of their revenues.
9
The principal components of operating expenses for the Company are
international long-distance expenses, telephone operating expenses, and
general and administrative expenses. International long-distance expenses
consist principally of charges from international carriers for outbound
international calls from Guyana and, in 2000, payments to audiotext providers
from whom GT&T derives international audiotext traffic. Telephone operating
expenses consist of plant specific operations, plant non-specific (which
includes depreciation and amortization), customer operations, corporate
operations expenses of GT&T, and taxes other than income taxes. General and
administrative expenses consist principally of expenses of the parent company.
The government of Guyana has announced its intention to reform and
modernize Guyana's telecommunications sector. The changes under consideration
include terminating the monopoly provisions of GT&T's license with appropriate
compensation to GT&T, rebalancing rates so that the rates for each service
represent the real economic cost of such services, and shifting from rate of
return regulation to incentive rate-cap regulation. GT&T expects to enter into
negotiations with the Guyana government on these issues in the near future.
The Company is unable at this time to assess the impact of the government's
reform proposals on the future financial position or results of operations of
the Company.
RESULTS OF OPERATIONS
Three and Nine months ended September 30, 2000 and 2001
The Company had net income of $3.2 million, or $0.65 basic per share and
$0.64 diluted per share, for the quarter ended September 30, 2001. This
compares to earnings of $3.1 million, or $0.63 per share basic and diluted,
for the quarter ended September 30, 2000. For the nine months ended September
30, 2001 the Company had net income of $9.1 million as compared to $9.0
million in the first nine months of last year. Basic and diluted net income
was $1.82 and $1.81, respectively for the nine months ended September 30, 2001
and $1.84 basic and diluted for the first nine months of last year.
Telephone operating revenues for the quarter ending September 30, 2001
were $22.9 million as compared to $18.9 million for the same period of 2000,
an increase of $4.0 million, or 21%. Telephone operating revenues were $62.7
million for the nine months ended September 30, 2001 as compared to $57.1
million for the nine months ended September 30, 2000, an increase of $5.6
million, or 10%. These increases in telephone operating revenues are partially
due to inbound international traffic which increased by $2.3 million, or 23%,
and $5.3 million, or 18%, for the three and nine months ended September 30,
2001. Additionally, telephone operating revenues increased due to increases of
$2.0 million, or 65%, and $4.6 million, or 55%, in local exchange revenues for
the three and nine months ended September 30, 2001 due to additional lines in
service and increased cellular telephone operations as fixed access lines
increased from 68,794 to 77,497 from September 30, 2000 to September 30, 2001
and cellular access lines increased from 5,828 to 25,862 for the same period.
10
Telephone operating expenses were approximately 56% and 59% of telephone
operating revenues for the three and nine months ended September 30, 2001,
respectively, as compared to 62% and 64% for the same periods of the prior
year. This proportional decrease is principally the result of increased
inbound international traffic revenues (which have no direct operating
expenses) and decreased audiotext revenues which have a significantly higher
cost. This decrease occurred despite increases of $507,000 and $1.7 million
for the three and nine months ended September 30, 2001 in customer service
expense due to increased cellular and fixed access lines in service in Guyana.
General and administrative expenses increased by $414,000 or 36% and $1.2
million, or 36% for the three and nine months ended September 30, 2001 as the
Company took a $500,000 charge against an investment in the third quarter and
expended approximately $600,000 in the second quarter relating to efforts by
the Company to become a Competitive Local Exchange Carrier in the U.S. Virgin
Islands.
Income from telephone operations was $10.1 million and $25.8 million for
the three and nine months ended September 30, 2001 as compared to $7.2 million
and $20.5 million for the corresponding periods of 2000. This represents
increases of $2.9 million, or 41%, and $5.4 million, or 26%, for the three and
nine months ended September 30, 2001 over the corresponding periods of the
prior year. These changes are principally a result of the factors affecting
revenues and operating expenses discussed above.
Other operations revenues and expenses represent the operations of ATN
(Haiti) S.A., Wireless World, LLC and Atlantic Tele-Center, Inc., each of
which had operating losses in the three and nine months ended September 30,
2001. Revenues of these operations were $1.2 million and $3.4 million for the
three and nine months ended September 30, 2001 as compared to $1.1 million and
$2.8 million for the same periods in 2000. This resulted in increases of
$67,000, or 6%, and $667,000, or 24%, for the three and nine months ended
September 30, 2001, which were primarily attributable to additional revenues
from Wireless World as the cable television business was integrated after the
purchase of Antilles Wireless Cable TV on March 31, 2000. Expenses of other
operations were $2.0 and $5.7 million for the three and nine months ended
September 30, 2001 as compared to $1.4 million and $3.4 million for the same
period of 2000. This resulted in increases of $682,000, or 50%, and $2.3
million, or 66%, for the three and nine months ended September 30, 2001. These
increases in expenses were primarily attributable to start up costs associated
with the development of Atlantic Tele-Center, Inc. and costs of upgrading
services at Wireless World, LLC.
Other income (expense), net consists principally of the Company's equity
in the income of BDC for the three and nine months ended September 30, 2001
and the Company's equity in startup losses of LighTrade since the Company's
investment in LighTrade in April 2001.
The Company's effective tax rate for the three and nine months ended
September 30, 2001 was 55% and 53% respectively as compared to 49% for the
corresponding periods of the prior year. The effective tax rate is higher
during 2001 as start-up costs incurred at Atlantic Tele-Center, Inc. and
LighTrade result in no tax benefits to the Company.
The minority interest in earnings consists primarily of the Guyana
government's 20% interest in GT&T.
11
Regulatory and Tax Issues
The Company is involved in a number of regulatory and tax proceedings.
See note 11 to the Company's Consolidated Financial Statements included in the
Company's 2000 Annual Report on Form 10-K, as filed with the SEC and note 7 to
the Consolidated Condensed Financial Statements included in this Report. A
material and adverse outcome in one or more of these proceedings could have a
material adverse impact on the Company's financial condition and future
operations.
Liquidity and Capital Resources
During the third quarter 2001, the Company obtained a $3.2 million term
loan and an additional $3.5 million short term facility.The Company also
repaid $1.4 million of long term debt during the nine months ended September
30, 2001. The Company believes it has adequate cash and credit facilities to
meet current operating and capital needs. The Company's current primary source
of funds at the parent company level is advisory fees and dividends from GT&T.
The tax and regulatory issues discussed in Note 11 to the Company's
Consolidated Financial Statements included in the Company's 2000 Annual Report
on Form 10-K could have a material adverse impact on the Company's liquidity.
GT&T is not subject to any contractual restrictions on the payment of
dividends.
The continued expansion of GT&T's network is dependent upon the ability
of GT&T to purchase equipment with U.S. dollars. A portion of GT&T's taxes in
Guyana may be payable in U.S. dollars or other hard currencies. The Company
believes that the majority of GT&T's revenues will continue to be denominated
in U.S. dollars or other hard currencies. However, as a result of the rate
increases currently sought by GT&T and the efforts of the U.S. FCC, AT&T and
carriers in other countries to reduce international accounting rates, it is
likely that an increasing portion of the Company's revenues will be earned in
Guyana currency. While there are no legal restrictions on the conversion of
Guyana currency into U.S. dollars or other hard currencies, or on the
expatriation of Guyana currency or foreign currency from Guyana, there is
little liquidity in the foreign currency markets in Guyana. While the Company
believes that it has, and will continue to have, adequate cash flows
denominated in hard currency to meet its current operating, debt service and
capital requirements, there can be no assurance that GT&T will be able to
convert its Guyana currency earnings into hard currency to meet such
obligations. At September 30, 2001, approximately $2.1 million of the
Company's total cash balances consisted of balances denominated in Guyana
dollars.
12
From time to time the Company explores opportunities to acquire
communications properties or licenses in the Caribbean and elsewhere. Such
acquisitions may require external financing. There can be no assurance as to
whether, when or on what terms the Company will be able to acquire any of the
businesses or licenses it is currently seeking.
Impact of Devaluation and Inflation
Although the majority of GT&T's revenues and expenditures are transacted
in U.S. dollars or other hard currencies, the results of operations
nevertheless may be affected by changes in the value of the Guyana dollar.
From February 1991 until early 1994, the Guyana dollar remained relatively
stable at the rate of approximately 125 to the U.S. dollar. In 1994, the
Guyana dollar declined in value to approximately 142 to the U.S. dollar, and
it remained relatively stable at approximately that rate through 1997. In
1998, the Guyana dollar declined in value to approximately 180 to the U.S.
dollar. Through September 30, 2001, the rate of exchange has remained
relatively constant at approximately 180 to the U.S. dollar.
The effect of devaluation and inflation on the Company's financial
results has not been significant in the periods presented.
13
Atlantic Tele-Network, Inc. and Subsidiaries
Other Information
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
Not applicable.
14
Atlantic Tele-Network, Inc. and Subsidiaries
Signatures
Pursuant to the Securities Act of 1934, the registrant has caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Atlantic Tele-Network, Inc.
Date: November 14, 2001 /s/ Cornelius B. Prior, Jr.
- ----------------------- --- -----------------------
Cornelius B. Prior, Jr.
Chief Executive Officer and Chairman
of the Board
Date: November 14, 2001 /s/ Steven M. Ross
- ----------------------- --- --------------
Steven M. Ross
Chief Accounting Officer
15