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Atlantic Tele-Network, Inc. Reports Second Quarter and Six Month 2014 Results

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Second Quarter Financial Highlights:

  • Revenues increased 16% to $83.3 million
  • Adjusted EBITDA was up 24% to $34.9 million
  • Operating income reached $21.6 million, up 36%
  • Net income attributable to ATN's stockholders was $11.5 million, or $0.72 per diluted share

BEVERLY, Mass., July 29, 2014 (GLOBE NEWSWIRE) -- Atlantic Tele-Network, Inc. (Nasdaq:ATNI), today reported results for the second quarter and six months ended June 30, 2014. Unless otherwise indicated, the discussion of the Company's results is focused on its continuing operations, and comparisons are to the same period in the prior year. Results for all periods presented reflect classification of the Company's U.S. retail wireless business operated under the "Alltel" name as discontinued operations as a result of the completion of the Company's sale of this business to AT&T Mobility LLC on September 20, 2013.

Second Quarter 2014 Financial Results

"This marked the second consecutive quarter in which we had very strong operating performance driven by exceptional results from our U.S. wireless operations," said Michael Prior, Chief Executive Officer. "Our U.S. wireless unit, which is predominantly a wholesale business, achieved year-on-year revenue growth of 41% for the quarter, well exceeding our expectations. Data volumes were higher than we expected, increasing more than 150% in this year's first half compared to the same period last year. This was a result of our capital spending on expansion in capacity, coverage and technologies, as well as the general growth in data volumes that the industry is experiencing. We expect to see modest year-on-year revenue growth in our domestic wireless operations in the second half of the year, based on our traffic forecast and anticipated rate declines. We believe this business is positioned well for opportunities to further enhance value over the longer term.

"In other areas, our international wireless business generated 3% year-on-year revenue growth. Our larger international markets were relatively flat, while some of our smaller markets continued to produce significant retail market share gains. The wireline segment also produced modest revenue growth and we expect our domestic wireline business to continue to show improvement in future periods now that our major network fiber builds are complete.

"Second quarter profitability gains were driven by the significant revenue growth of our domestic wireless operations," Mr. Prior added. "The capital spending commitment made last year and continuing into 2014 to further expand and upgrade our networks has enabled us to capture growing data traffic volume, and we are pleased with the early returns that we are seeing on these investments. Additionally, our substantial balance sheet capacity and positive operating cash flow provide the resources to support our organic growth and act upon acquisition or other investment opportunities that have the potential to create long-term value for our shareholders."

Second quarter revenues were $83.3 million, 16% above the $71.6 million reported for the second quarter of 2013. Adjusted EBITDA1 for the 2014 second quarter was $34.9 million, a 24% increase over the $28.1 million reported for the 2013 second quarter. Operating income was $21.6 million, up 36% compared to last year's $15.9 million. Net income from continuing operations attributable to ATN's stockholders was $11.5 million or $0.72 per diluted share, significantly ahead of the $6.4 million or $0.40 per diluted share reported in last year's second quarter.

Six Month 2014 Financial Results

Six month revenues were $158.4 million, 16% above the $136.5 million reported for the same period in 2013. Adjusted EBITDA was $63.1 million, up 23% from $51.2 million in the prior year period; operating income increased 35% to $37.9 million; and net income from continuing operations attributable to ATN's stockholders was $19.4 million, or $1.21 per diluted share, as compared with $11.2 million, or $0.71 per diluted share, in the first six months of the prior year.

Second Quarter 2014 Operating Highlights

U.S. Wireless

U.S. wireless revenues primarily consist of voice and data revenues from the Company's wholesale roaming operations. Total revenues from the U.S. wireless business were $37.5 million in the second quarter of 2014, an increase of 41% from the $26.6 million reported in the second quarter of 2013. This strong revenue performance was driven by increased data traffic across the Company's expanded domestic wireless network. Wholesale data prices are expected to decline later in 2014, which should result in a significantly lower rate of year-on-year revenue growth in coming quarters, even as data traffic and our network reach and capacity continue to grow. Data revenues accounted for 70% of U.S. wireless revenues in the 2014 second quarter, compared to 49% in the similar year-ago period. The Company ended the second quarter with 654 wholesale-only base stations in service compared to 572 at the end of last year's second quarter.

International Wireless

International wireless revenues include retail and wholesale voice and data wireless revenues from international operations in Bermuda and the Caribbean. International wireless revenues were $22.4 million, an increase of 3% over the $21.8 million reported in the second quarter of 2013, due to retail revenue growth in Guyana and in the Company's Island Wireless segment. This growth was offset in part by lower wholesale roaming revenues in many of our Island properties resulting from anticipated rate declines. We expect wholesale revenues to continue to decline in our international markets over time, while retail revenues continue to grow.

Wireline

Wireline revenues are generated by the Company's wireline operations in Guyana, including international telephone calls into and out of that country, by its integrated voice and data and wholesale transport operations in New England and New York State, and by its U.S. based wholesale long-distance voice services. Wireline revenues were $21.3 million, a 2% increase from the $20.9 million reported in the second quarter of 2013. The increase was primarily a result of higher wholesale long-distance voice service revenue, as well as increased domestic wholesale transport operations. Consistent with the trend of the past few quarters, in Guyana, increased data revenue was offset by declines in local and international voice revenue. Lower international voice revenue in Guyana coupled with increased operating expenses caused a significant year-on-year decline in Adjusted EBITDA in our International Integrated Telephony segment in the second quarter.

Reportable Operating Segments

The Company has four reportable segments: (i) U.S. Wireless; (ii) International Integrated Telephony, which operates in Guyana; (iii) Island Wireless, which generates its revenues and has its assets located in Bermuda and the Caribbean (including the U.S. Virgin Islands); and (iv) U.S. Wireline. Financial data on our reportable operating segments for the three months ended June 30, 2014 and 2013 are as follows (in thousands):

For the three months ending June 30, 2014:
U.S. Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling
Items 2
Total
Total Revenue $ 37,815 $ 21,397 $ 17,305 $ 6,752 $ -- $ 83,269
Adjusted EBITDA 26,104 8,994 5,159 220 (5,594) 34,883
Operating Income (Loss) 22,651 4,594 2,552 (966) (7,224) 21,607
For the three months ending June 30, 2013:
U.S. Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling
Items 2
Total
Total Revenue $ 26,844 $ 22,208 $ 16,962 $ 5,612 $ -- $ 71,626
Adjusted EBITDA 16,931 10,770 4,861 670 (5,130) 28,102
Operating Income (Loss) 12,934 6,235 2,301 (124) (5,439) 15,907

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents at June 30, 2014 were $348.8 million. In addition, the Company holds $58.8 million of restricted cash primarily related to proceeds from the sale of Alltel which are being held in an indemnity escrow as of June 30, 2014. Net cash provided by operating activities of continuing operations was $15.3 million for the first six months of 2014, which was impacted by $37.0 million in cash paid for income taxes, primarily related to the gain on the sale of Alltel. Capital expenditures were $25.1 million in the first six months of 2014. The Company expects full year 2014 capital expenditures in the range of $60.0 million to $65.0 million.

Conference Call Information

Atlantic Tele-Network will host a conference call on Wednesday, July 30, 2014 at 9:30 a.m. Eastern Time (ET) to discuss its 2014 second quarter results. The call will be hosted by Michael Prior, President and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: (877) 734-4582 and International: (678) 905-9376, conference ID 76078362. A replay of the call will be available at ir.atni.com beginning at 1:00 p.m. (ET) on Wednesday, July 30, 2014.

About Atlantic Tele-Network

Atlantic Tele-Network, Inc. (Nasdaq:ATNI), headquartered in Beverly, Massachusetts, provides telecommunications services to rural, niche and other under-served markets and geographies in the United States, Bermuda and the Caribbean. Through our operating subsidiaries, we provide both wireless and wireline connectivity to residential and business customers, including a range of mobile wireless solutions, local exchange services and broadband internet services and are the owner and operator of terrestrial and submarine fiber optic transport systems. For more information, please visit www.atni.com.

Cautionary Language Concerning Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the competitive environment in our key markets, demand for our services and industry trends; the outcome of regulatory matters; the pace of our network expansion and improvement, including our level of estimated future capital expenditures and our realization of the benefits of these investments; and management's plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) the general performance of our operations, including operating margins, revenues, and the future growth and retention of our subscriber base; (2) government regulation of our businesses, which may impact our FCC and other telecommunications licenses; (3) economic, political and other risks facing our foreign operations; (4) our ability to maintain favorable roaming arrangements; (5) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (6) the loss of or our inability to recruit skilled personnel in our various jurisdictions, including key members of management; (7) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals for the Company; (8) increased competition; (9) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (10) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (11) the occurrence of severe weather and natural catastrophes; (12) our continued access to capital and credit markets; and (13) our ability to realize the value that we believe exists in our businesses. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 17, 2014 and the other reports we file from time to time with the SEC. The Company undertakes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this news release also contains non-GAAP financial measures. Specifically, ATN has presented an Adjusted EBITDA measure. Adjusted EBITDA is defined as net income attributable to ATN stockholders before income from discontinued operations, gain on disposal of discontinued operations, interest, taxes, depreciation and amortization, transaction-related charges, impairment of intangible assets, gain on disposition of long-lived assets, other income or expense, and net income attributable to non-controlling interests. The Company believes that the inclusion of this non-GAAP financial measure helps investors to gain a meaningful understanding of the Company's core operating results and enhance comparing such performance with prior periods. ATN's management uses this non-GAAP measure, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measure included in this news release is not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measure used in this news release to the most directly comparable GAAP financial measure is set forth in the text of, and the accompanying tables to, this press release.

__________________________

1 See Table 4 for reconciliation of Net Income to Adjusted EBITDA.
2 Reconciling items are comprised of corporate general and administrative costs and transaction-related charges

Table 1
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Balance Sheets
(in Thousands)
June 30, December 31,
2014 2013
Assets:
Cash and cash equivalents $ 348,804 $ 356,607
Restricted cash 58,794 39,000
Assets of discontinued operations 169 4,748
Other current assets 76,281 71,648
Total current assets 484,048 472,003
Long-term restricted cash -- 39,000
Property, plant and equipment, net 253,027 254,632
Goodwill and other intangible assets, net 87,442 86,988
Other assets 6,247 7,096
Total assets $ 830,764 $ 859,719
Liabilities and Stockholders' Equity:
Accrued taxes $ 6,441 $ 36,081
Liabilities of discontinued operations 3,353 11,187
Other current liabilities 67,286 73,805
Total current liabilities 77,080 121,073
Deferred income taxes 25,428 26,007
Other long-term liabilities 16,655 12,784
Total long-term liabilities 42,083 38,791
Total liabilities 119,163 159,864
Total Atlantic Tele-Network, Inc.'s stockholders' equity 655,789 643,330
Non-controlling interests 55,812 56,525
Total equity 711,601 699,855
Total liabilities and stockholders' equity $ 830,764 $ 859,719
Table 2
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, Except per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 (a) 2014 2013 (a)
Revenues:
U.S. wireless $ 37,456 $ 26,589 $ 65,848 $ 47,802
International wireless 22,422 21,837 45,570 43,267
Wireline 21,283 20,877 42,813 41,441
Equipment and other 2,108 2,323 4,212 3,948
Total revenue 83,269 71,626 158,443 136,458
Operating expenses:
Termination and access fees 16,231 13,601 32,093 26,656
Engineering and operations 9,521 9,182 19,151 18,840
Sales, marketing and customer service 4,926 4,787 9,946 9,276
Equipment expense 3,273 2,834 5,988 5,501
General and administrative 14,435 13,120 28,133 25,029
Transaction-related charges 346 -- 367 63
Depreciation and amortization 12,930 12,195 24,910 24,183
Gain on disposal of long-lived assets -- -- -- (1,076)
Total operating expenses 61,662 55,719 120,588 108,472
Operating income 21,607 15,907 37,855 27,986
Other income (expense):
Interest expense, net (20) (2,722) (207) (4,986)
Other income (expense) 73 13 (36) 27
Other income (expense), net 53 (2,709) (243) (4,959)
Income from continuing operations before income taxes 21,660 13,198 37,612 23,027
Income tax expense 7,338 4,868 12,890 8,813
Income from continuing operations 14,322 8,330 24,722 14,214
Income from discontinued operations, net of tax -- 3,091 -- 7,125
Net income 14,322 11,421 24,722 21,339
Net income attributable to non-controlling interests, net of tax:
Continuing operations (2,809) (1,934) (5,368) (2,989)
Discontinued operations -- (630) -- (717)
Net income attributable to non-controlling interests, net (2,809) (2,564) (5,368) (3,706)
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 11,513 $ 8,857 $ 19,354 $ 17,633
Basic net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:
Income from continuing operations $ 0.72 $ 0.41 $ 1.22 $ 0.72
Income from discontinued operations -- 0.16 -- 0.41
Net income $ 0.72 $ 0.57 $ 1.22 $ 1.13
Diluted net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:
Income from continuing operations $ 0.72 $ 0.40 $ 1.21 $ 0.71
Income from discontinued operations -- 0.16 -- 0.41
Net income $ 0.72 $ 0.56 $ 1.21 $ 1.12
Weighted average common shares outstanding:
Basic 15,915 15,706 15,873 15,647
Diluted 16,023 15,821 15,986 15,756
a) All previously reported amounts have been reclassified to reflect the Company's Alltel business as a discontinued operation
Table 3
ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Cash Flow Statement
(in Thousands)
Six Months Ended June 30,
2014 2013
Net income $ 24,722 $ 21,339
Income from discontinued operations -- (7,125)
Depreciation and amortization 24,910 24,183
Gain on disposal of long-lived assets -- (1,076)
Change in prepaid and accrued taxes (23,952) (24,028)
Change in other operating assets and liabilities (13,056) (3,947)
Other non-cash activity 2,683 3,172
Net cash provided by operating activities of continuing operations 15,307 12,518
Net cash provided by (used in) operating activities of discontinued operations (3,255) 22,917
Net cash provided by operating activities 12,052 35,435
Capital expenditures, net (25,104) (39,696)
Proceeds from disposition of long-lived assets 1,371 1,500
Change in restricted cash 19,206 --
Net cash used in investing activities of continuing operations (4,527) (38,196)
Net cash used in investing activities of discontinued operations -- (12,487)
Net cash used in investing activities (4,527) (50,683)
Dividends paid on common stock (8,574) (3,919)
Distributions to non-controlling interests (6,081) (1,624)
Other (673) (3,480)
Net cash used in financing activities of continuing operations (15,328) (9,023)
Net cash used in financing activities of discontinued operations -- (938)
Net cash used in financing activities (15,328) (9,961)
Net change in cash and cash equivalents (7,803) (25,209)
Cash and cash equivalents, beginning of period 356,607 136,647
Cash and cash equivalents, end of period $ 348,804 $ 111,438
Cash paid for income taxes $ 36,976 $ 35,083
Table 4
ATLANTIC TELE-NETWORK, INC.
Reconciliation of Non-GAAP Measures
(In Thousands)
Reconciliation of Net Income to Adjusted EBITDA for the Three Months Ended June 30, 2013 and 2014
Three Months Ended June 30, 2013
U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 8,857
Net income attributable to non-controlling interests, net of tax 2,564
Income from discontinued operations, net of tax (3,091)
Income tax expense 4,868
Other income (13)
Interest expense, net 2,722
Operating income (loss) $ 12,934 $ 6,235 $ 2,301 $ (124) $ (5,439) $ 15,907
Depreciation and amortization 3,997 4,535 2,560 794 309 12,195
Adjusted EBITDA $ 16,931 $ 10,770 $ 4,861 $ 670 $ (5,130) $ 28,102
Three Months Ended June 30, 2014
U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 11,513
Net income attributable to non-controlling interests, net of tax 2,809
Income tax expense 7,338
Other income (73)
Interest expense, net 20
Operating income (loss) $ 22,651 $ 4,594 $ 2,552 $ (966) $ (7,224) $ 21,607
Depreciation and amortization 3,453 4,400 2,607 1,186 1,284 12,930
Transaction-related charges -- -- -- -- 346 346
Adjusted EBITDA $ 26,104 $ 8,994 $ 5,159 $ 220 $ (5,594) $ 34,883
Reconciliation of Net Income to Adjusted EBITDA for the Six Months Ended June 30, 2013 and 2014
Six Months Ended June 30, 2013
U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 17,633
Net income attributable to non-controlling interests, net of tax 3,706
Income from discontinued operations, net of tax (7,125)
Income tax expense 8,813
Other income (27)
Interest expense, net 4,986
Operating income (loss) $ 22,179 $ 12,568 $ 3,935 $ (532) $ (10,164) $ 27,986
Depreciation and amortization 8,080 8,925 5,155 1,436 587 24,183
Transaction-related charges -- -- -- -- 63 63
Gain on disposal of long-lived assets (1,076) -- -- -- -- (1,076)
Adjusted EBITDA $ 29,183 $ 21,493 $ 9,090 $ 904 $ (9,514) $ 51,156
Six Months Ended June 30, 2014
U.S Wireless International
Integrated
Telephony
Island Wireless U.S. Wireline Reconciling Items Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 19,354
Net income attributable to non-controlling interests, net of tax 5,368
Income tax expense 12,890
Other expense 36
Interest expense, net 207
Operating income (loss) $ 36,240 $ 10,229 $ 5,978 $ (2,040) $ (12,552) $ 37,855
Depreciation and amortization 6,756 8,713 5,215 2,327 1,899 24,910
Transaction-related charges -- -- -- -- 367 367
Adjusted EBITDA $ 42,996 $ 18,942 $ 11,193 $ 287 $ (10,286) $ 63,132

CONTACT: Michael T. Prior Chief Executive Officer 978-619-1300 Justin D. Benincasa Chief Financial Officer 978-619-1300

Source:Atlantic Tele-Network, Inc.