------------------------------------------------------------------------
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, 1996
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)
Chase Financial Center
P.O. Box 1730
St. Croix, U.S. Virgin Islands 00821
(809) 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, 1996, the registrant had outstanding 12,272,500 shares of
its common stock ($.01 par value).
------------------------------------------------------------------------
<PAGE>
<TABLE>
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(Columnar Amounts in Thousands)
- -------------------------------------------------------------------------------
<CAPTION>
December 31, September 30,
1995 1996
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 18,822 $ 9,002
Accounts receivable, net 63,353 66,573
Materials and supplies 8,656 9,669
Prepayments and other current assets 5,781 6,908
-------- ---------
Total current assets 96,612 92,152
Fixed assets:
Property, plant and equipment 286,856 320,371
Less accumulated depreciation (101,729) (112,408)
Franchise rights and cost in excess of underlying
book value, less accumulated amortization 41,533 40,483
of $9,769,000 and $10,819,000 -------- ---------
Net fixed assets 226,660 248,446
Property costs recoverable from future revenues 20,000 22,245
Uncollected authorized rate increases 4,339 3,234
Other assets 16,263 14,659
-------- ---------
$363,874 $380,736
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable 6,969 17,502
Accounts payable 19,568 20,421
Accrued taxes 6,177 7,754
Advance payments and deposits 2,719 2,686
Other current liabilities 8,815 10,912
Current portion of long-term debt 17,872 13,436
-------- ---------
Total current liabilities 62,120 72,711
Deferred income taxes and tax credits 28,188 27,400
Long-term debt, excluding current portion 120,297 112,839
Pension and other long-term liabilities 9,457 9,011
Minority interest 12,856 14,716
Contingencies and commitments (Note C)
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;12,272,500 shares issued and outstanding 123 123
Paid-in capital 81,852 81,852
Retained earnings 48,981 62,084
-------- ---------
Total stockholders' equity 130,956 144,059
-------- ---------
$363,874 $380,736
======== =========
</TABLE>
See notes to consolidated condensed financial statements.
2
<PAGE>
<TABLE>
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Columnar Amounts in Thousands, Except Per Share Data)
- ----------------------------------------------------------------------------
<CAPTION>
(Unaudited) (Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ------------------
1995 1996 1995 1996
<S> <C> <C> <C> <C>
Telephone Operations:
Revenues:
Local exchange service $ 6,074 $ 6,317 $ 18,490 $ 18,906
Access charges 3,337 4,542 10,386 11,618
International long-distance rev. 35,651 38,786 89,972 112,259
Universal Service Fund 3,018 2,802 9,192 8,406
Billing and other revenues 1,073 1,418 3,291 3,722
Directory advertising 678 645 2,102 1,938
-------- -------- -------- --------
Total revenues 49,831 54,510 133,433 156,849
Expenses:
Plant specific operations 3,145 4,614 9,501 12,483
Plant nonspecific operations 5,350 6,013 15,809 16,148
Customer operations 1,364 1,612 4,247 4,836
Corporate operations 3,110 2,823 9,649 8,950
International long-distance exp. 22,736 25,503 52,547 71,797
Taxes other than income 776 778 2,343 2,406
------- ------- -------- --------
Total expenses 36,481 41,343 94,096 116,620
Income from telephone operations 13,350 13,167 39,337 40,229
Other Operations:
Revenues:
Cellular services 1,127 1,238 3,450 4,457
Product sales and rentals 1,159 1,287 3,515 3,931
-------- -------- -------- --------
Total revenues 2,286 2,525 6,965 8,388
Expenses of other operation 1,891 1,907 5,526 6,084
-------- -------- -------- --------
Income from other operations 395 618 1,439 2,304
Non-operating Revenues and Expenses:
Interest expense (3,112) (2,807) (9,471) (8,537)
Interest income 262 25 716 252
Other revenues and expenses (2,691) (1,895) (8,591) (8,801)
-------- -------- -------- --------
Non-operating revenues and exp., net (5,541) (4,677) (17,346) (17,086)
--------- -------- -------- --------
Income before income taxes and
minority interest 8,204 9,108 23,430 25,447
Income taxes 3,467 3,608 9,837 10,484
-------- ------- -------- --------
Income before minority interest 4,737 5,500 13,593 14,963
Minority interest (594) (588) (1,688) (1,860)
-------- -------- -------- --------
Net income $ 4,143 $ 4,912 $ 11,905 $ 13,103
======== ======== ======== ========
Net income per share $ 0.34 $ 0.40 $ 0.97 $ 1.07
======== ======== ======== ========
Weighted average shares outstanding 12,273 12,273 12,273 12,273
========= ======== ========= =========
</TABLE>
See notes to consolidated condensed financial statements.
3
<PAGE>
<TABLE>
ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Columnar Amounts in Thousands)
- --------------------------------------------------------------------------------
<CAPTION>
(Unaudited)
Nine Months Ended
September 30,
-----------------------
1995 1996
<S> <C> <C>
Net cash flows provided by operating activities $ 17,133 $ 25,056
Cash flows from investing activities:
Capital expenditures (9,771) (33,515)
--------- ---------
Net cash used in investing activities (9,771) (33,515)
Cash flows from financing activities:
Repayment of long-term debt (9,215) (13,229)
Issuance of long-term debt 4,750 1,335
Net borrowings (repayments) on notes payable 2,343 10,533
--------- ---------
Net cash flows provided (used) by financing activitie (2,122) (1,361)
--------- ---------
Net increase (decrease) in cash 5,240 (9,820)
Cash, Beginning of Period 17,515 18,822
--------- ---------
Cash, End of Period $22,755 $9,002
========== ==========
Supplemental cash flow information:
Interest paid $9,530 $8,542
========== =========
Income taxes paid $5,013 $9,621
========== =========
Depreciation and Amortization Expense $ 14,580 $ 14,518
========== =========
</TABLE>
See notes to consolidated condensed financial statements.
4
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three and Nine Months Ended September 30, 1995 and 1996
(Columnar Amounts in Thousands)
A. GENERAL
SIGNIFICANT ACCOUNTING POLICIES
The consolidated balance sheet of Atlantic Tele-Network, Inc. and subsidiaries
(the "Company") at December 31, 1995 has been taken from audited financial
statements at that date. All other consolidated condensed financial statements
contained herein have been prepared by the Company and are unaudited. The
consolidated condensed financial statements should be read in conjunction with
the consolidated financial statements and the notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995.
The unaudited interim consolidated condensed financial statements furnished
herein reflect all adjustments, which are, in the opinion of management,
necessary to fairly present the financial results for the interim periods
presented. The results for the three and nine months ended September 30, 1995
and 1996 are not necessarily indicative of the operating results for the full
year not yet completed.
B. PROPERTY COSTS RECOVERABLE FROM FUTURE REVENUES
On September 15, 1995, Hurricane Marilyn struck the Virgin Islands causing
extensive damage to the outside telephone plant of Vitelco. None of the damage
was covered by insurance. Vitelco's estimate of the historical cost of the
facilities damaged or destroyed by Hurricane Marilyn is approximately $27
million with associated accumulated depreciation of approximately $9 million.
These costs have been removed from the property accounts and along with certain
excess maintenance costs and costs of removal which are estimated at $5.7
million as of September 30, 1996 have been classified as property costs
recoverable from future revenues because the Company anticipates that future
revenue in an amount at least equal to the capitalized cost will result from
inclusion of these costs in allowable costs for rate making purposes. Due to
uncertainties in this estimation process, it is reasonably possible that
estimated costs of damaged or destroyed property as well as excess maintenance
costs and costs of removal will be revised in the near term. The Company has
received approval from the Federal Communications Commission to include the
interstate portion of these costs in its rate base and amortize them over a
five year period. However, the treatment by the Public Services Commission for
the intrastate telecommunications plant has not yet been determined. In order
to minimize the intrastate rate increases which might be required to enable
Vitelco to recover these costs, on May 6, 1996, Vitelco applied to the
Industrial Development Commission of the Virgin Islands for a 5-year exemption
from 90% of Virgin Islands income taxes and 100% of Virgin Islands gross
receipts and certain other taxes. This application is still pending, and its
ultimate outcome cannot be determined by management at this time.
5
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three and Nine Months Ended September 30, 1995 and 1996
(Columnar Amounts in Thousands)
C. CONTINGENCIES AND COMMITMENTS
The Company presently has no insurance coverage for its outside plant for
damages caused by wind storms. The Company is exploring alternatives to enable
it to insure this risk in whole or in part, but believes that such insurance
for outside plant is currently not available at reasonable rates.
On October 11, 1995, the Guyana Public Utilities Commission ("PUC") issued an
order that rejected the request of GT&T for substantial increases in all
telephone rates and temporarily reduced rates for outbound long-distance calls
to 87 countries. The order reduces these rates by 10%, and during off-peak
hours, by an additional 50% of the reduced rate. In most cases, the existing
rates are already less than GT&T's payment obligations to foreign carriers. The
rate reduction was implemented by GT&T effective October 22, 1995. The order
also calls for GT&T to deposit 15% of gross revenues into an escrow account
that would be earmarked for capital expenditures for a new telecommunications
expansion plan in Guyana to be developed by the PUC. The Company is unable to
determine whether the escrow payments will be a pretax charge to GT&T's income
or an increase in GT&T's rate base. GT&T has filed an appeal from the PUC order
to the High Court in Guyana. On December 1, 1995, the High Court issued an
order which effectively provides a stay on the requirement of depositing 15% of
gross revenues into the escrow account. This matter is still pending before the
courts and its ultimate outcome cannot be determined by management at this
time.
Upon the acquisition of GT&T in January 1991, GT&T entered into an agreement
with the government of Guyana to expand significantly GT&T's existing
facilities and telecommunications operations and to improve service within a
three-year period pursuant to an expansion and service improvement plan (the
Plan). At GT&T's request and with the consent of the government of Guyana, the
Plan was modified in certain respects and the date for completion of the Plan
was extended first to August 28, 1994 and then to February 28, 1995. The
government of Guyana has to date not accepted a request made by the Company and
GT&T in December 1994 to modify certain other aspects of the Plan. The
government has referred to the PUC the failure of GT&T to complete the Plan by
February 28, 1995. However, hearings on this subject before the PUC are
currently stayed pending GT&T's appeal from the PUC's October 11, 1995 order
discussed above. Failure to timely fulfill the terms of the Plan could result
in monetary penalties, cancellation of the License, or other action by the PUC
or the government which could have a material adverse affect on the Company's
business and prospects.
6
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Condensed
Financial Statements
Three and Nine Months Ended September 30, 1995 and 1996
(Columnar Amounts in Thousands)
D. LITIGATION SETTLEMENT
On February 7, 1996, the two principal shareholders and Co-Chief Executive
Officers of the Company entered into a Global Settlement Agreement and Release
pursuant to which they agreed to settle all then pending litigation between
them concerning the management of ATN and related matters. As part of the
settlement, the Company agreed to indemnify the officers over a period of time
for a portion (approximately $2,800,000 in the aggregate) of the fees and
expenses incurred by them in connection with the management dispute and related
litigation. The company has accrued $2.8 million for this indemnification
obligation in the first quarter of 1996. In addition, and as contemplated by
the settlement, the Board of Directors of the Company has determined to explore
possible means of enhancing stockholder value for ATN, including a possible
business combination involving ATN.
7
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion And Analysis Of Financial
Conditions and Results of Operations
Introduction
The Company's revenues and income from continuing operations are derived
principally from the operations of its telephone subsidiaries, Vitelco and
GT&T. Vitelco derives most of its revenues from local telephone and
long-distance access services. GT&T derives almost all of its revenues from
international telephone services. Other operations in the Company's
Consolidated Statements of Operations include: VitelCellular, which provides
cellular telephone service in the U.S. Virgin Islands; and Vitelcom, which
supplies customer premises equipment in the U.S. Virgin Islands.
The principal components of operating expenses for the Company's telephone
operations are plant specific operations expenses, plant non-specific
operations expenses, customer operations expenses, corporate operations
expenses, long-distance expenses and taxes other than income taxes. These
categories are consistent with FCC accounting practices. Plant specific
operations expenses relate to support and maintenance of telephone plant and
equipment and include vehicle expense, land and building expense, central
office switching expense and cable and wire expense. Plant non-specific
operations expenses consist of depreciation charges for telephone plant and
equipment and expenses related to telephone plant and network administration,
engineering, power, materials and supplies, provisioning and plant network
testing. Customer operations expenses relate to marketing, providing operator
services for call completion and directory assistance, and establishing and
servicing customer accounts. Corporate operations expenses include Vitelco's
and GT&T's expenses for executive management and administration, corporate
planning, accounting and finance, external relations, personnel, labor
relations, data processing, legal services, procurement and general insurance.
International long-distance expenses consist principally of charges from
international carriers for outbound international calls from Guyana and
payments to audiotext providers from whom GT&T derives international audiotext
traffic. Taxes other than income taxes include gross receipts taxes, property
taxes, and other miscellaneous taxes.
RESULTS OF OPERATIONS
Three and Nine Months ended September 30, 1995 and 1996
Revenues from telephone operations for the three months ended September 30,
1996 were $54.5 million as compared to $49.8 million for the corresponding
period of the prior year, an increase of $4.7 million (9%). Revenues from
telephone operations for the nine months ended September 30, 1996 were $156.8
million as compared to $133.4 million for the corresponding period of the prior
year, an increase of $23.4 million (17%). The increases were principally due to
a $2.6 and $23 million increase in audiotext traffic revenues at GT&T for the
three and nine months ended September 30, 1996 respectively. GT&T's audiotext
traffic increased sharply in the first 8 months of 1995 hitting a peak of 11.7
million minutes for the month of August. Since then audiotext traffic has held
relatively steady at about 10 million minutes per month. Audiotext is a highly
competitive business, and GT&T may experience significant increases or
decreases in the volume and profit margins of its audiotext traffic during the
remainder of 1996.
8
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion And Analysis Of Financial
Conditions and Results of Operations
Vitelco's telephone operations revenues increased $1.4 million and $240,000 for
the three and nine months ended September 30, 1996, respectively. These
increases in revenues over prior periods were due principally as a result of
Hurricane Marilyn which put approximately 37,800 of Vitelco's approximately
60,000 access lines out of service on September 15, 1995. Service was
substantially restored by May 1996. At September 30, 1996 Vitelco had 58,431
lines in service.
Consolidated telephone operating expenses increased $4.9 million (13%) and
$22.5 (24%) for the three and nine months ended September 30, 1996. This
increase was due principally to increases in audiotext and outbound traffic
expenses at GT&T of $2.8 million, and $19.2 million for the three and nine
months ended September 30, 1996 respectively due to increased traffic volume.
As a result of a rate decrease ordered by the Guyana PUC on October 11, 1995,
GT&T's outbound international traffic has increased by approximately 45% during
the first nine months of 1996 resulting in an approximately $500,000 per month
increase in outbound traffic expenses. An additional factor contributing to the
increase in consolidated telephone operating expenses was plant specific
expense which increased as a result of increased plant in service, although
certain expenses at Vitelco were reduced in the first quarter of 1996 as
Vitelco's work force was shifted from maintenance activities to repairing the
damage caused by Hurricane Marilyn.
Income from telephone operations decreased $183,000 for the three months ended
September 30, 1996 but was up $892,000 (2%) for the nine months ended September
30, 1996. These changes occurred principally as a result of factors affecting
revenues from telephone operations and consolidated telephone operating
expenses discussed above. GT&T's contribution to income from telephone
operations decreased by $114,000 (1%) for the three months ended September 30,
1996 but was up $1.9 million (7%) for the nine months ended September 30, 1996
while Vitelco's contribution to income from telephone operations decreased by
$69,000 and $998,000 for the same periods.
Income before minority interest increased $763,000 and $1.4 million for the
three and nine months ended September 30, 1996 respectively. The significant
factors that contributed to these increases were:
(i) the $183,000 decrease and $892,000 million increase in
income from telephone operations discussed above;
(ii) $223,000 and $865,000 increases in income from other
operations from increased cellular operations;
(iii) $68,000 and $470,000 decreases in net interest expense
due to reduced average debt;
(iv) a $796,000 decrease for the three months and a $210,000
increase for the nine months in other non operating revenues
and expenses. This was principally due to decrease of certain
corporate expenses in the second and third quarters of 1996 and
a non-recurring charge of $2.8 million in the first three
months of 1996 for the companies obligation to reimburse its
two Co-Chief Executive Officers for certain litigation expenses
in connection with a management dispute settled in February
1996.
The Company's effective tax rate for the three and nine months ended September
30, 1996 was 39.6% and 41.2% as compared to 42.3% and 42% for the corresponding
periods of the prior year.
9
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion And Analysis Of Financial
Conditions and Results of Operations
The minority interest in earnings consists primarily of the Guyana government's
20% interest in GT&T.
Regulatory Considerations
On October 11, 1995 the Guyana PUC issued an order which temporarily reduced
GT&T's rates for outbound international calls and required GT&T to deposit 15%
of its gross revenues into an escrow account that would be earmarked for
capital expenditures for a new telecommunications expansion plan in Guyana. The
temporary rate changes ordered by the PUC have been put into effect, although
GT&T has obtained a court order staying the escrow payment obligations. These
rate changes have resulted in an increase of approximately 45% in GT&T's
unprofitable outbound traffic which in turn has resulted in an increase in
GT&T's outbound traffic expenses of approximately $500,000 per month while at
the same time revenue declined approximately $200,000 per month during the
first nine months of 1996. If the PUC's escrow payment order had been in effect
for the first nine months of 1996 it would have required payments of
approximately $17.2 million. The Company is unable to determine whether the
escrow payments would be a pretax charge to GT&T's income or an increase in
GT&T's rate base.
Upon the acquisition of GT&T in January 1991, GT&T entered into an agreement
with the government of Guyana to expand significantly GT&T's existing
facilities and telecommunications operations and to improve service within a
three-year period pursuant to an expansion and service improvement plan (the
"Plan"). At GT&T's request and with the consent of the government of Guyana,
the Plan was modified in certain respects and the date for completion of the
Plan was extended first to August 28, 1994 and then to February 28, 1995. The
government of Guyana has to date not accepted a request made by the Company and
GT&T in December 1994 to modify certain other aspects of the Plan. The
government has referred to the PUC the failure of GT&T to complete the
Expansion Plan by February 28, 1995. However hearings on this subject before
the PUC are currently stayed pending GT&T's appeal from the PUC's October 11,
1995 order discussed above. Failure to timely fulfill the terms of the
Expansion Plan could result in monetary penalties, cancellation of the License,
or other action by the PUC or the government which could have a material
adverse affect on the Company's business and prospects.
Liquidity and Capital Resources
The Company depends upon funds received from subsidiaries to meet its capital
needs, including servicing existing debt and its ongoing program of seeking to
acquire telecommunications licenses and businesses. The major source of funds
for the Company has been advisory fees received from GT&T, and interest income
from advances to subsidiaries of the Company.
Other potential sources of funds to the Company are from repayment of loans to
subsidiaries or dividends from GT&T or ATN - VI. However, the RTFC Loan limits
the payment of dividends by ATN - VI unless ATN - VI meets certain financial
ratios (which were not met at September 30, 1996). Consequently ATN - VI was
restricted from paying dividends at that date. At September 30, 1996, the
Company also holds a note of ATN - VI in the amount of approximately $23
million which may be repaid by ATN - VI in whole or in part without regard to
the limit on the payment of dividends by ATN - VI.
10
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion And Analysis Of Financial
Conditions and Results of Operations
ATN - VI's ability to obtain funds to repay its note is dependent upon
dividends from Vitelco, and Vitelco is subject to restrictions on payment of
dividends under its loan agreement with the Rural Utility Service ("RUS") and
its 1989 and 1991 Settlement Agreements with the Public Service Commission
(PSC). Under Vitelco's Settlement Agreements with the PSC, which are currently
more restrictive than the RUS Loans, dividends by Vitelco are generally limited
to 60% of its net income, although additional amounts are permitted to be paid
for the sole purpose of servicing ATN - VI's debt to RTFC. At September 30,
1996, Vitelco was restricted from paying any dividends.
The RTFC Loan and RUS Loan agreements also require, among other things,
maintenance of minimum debt service and times interest earned coverage and
restrictions on issuance of additional long-term debt. As of September 30,
1996, the Company was in compliance with all covenants contained in its
long-term debt agreements.
Vitelco estimates that the total cost of repairing damage to its telephone
plant caused by Hurricane Marilyn will be approximately $42 million, of which
approximately $38.5 million was expended through September 30, 1996. Vitelco
financed these expenditures from its cash balances (which were $21.4 million as
of September 1, 1995), from cash flows from its operating activities, from $5
million of borrowings under a preexisting line of credit with RTFC and an
additional $6 million of borrowings under a new $15 million line of credit from
RTFC which Vitelco obtained after the hurricane. Vitelco has also applied to
the RUS for $35.1 million of long term financing. Borrowings under Vitelco's
preexisting line of credit are required to be repaid within 12 months of the
date of the borrowing, but may be repaid from the proceeds of borrowings under
the new $15 million line of credit. Borrowings under Vitelco's $15 million line
of credit will mature on March 31, 1997, at which date, if long-term loan funds
from RUS have not yet been made available to Vitelco, Vitelco will have the
option of rolling the outstanding amount borrowed under that line of credit
into a 15-year term loan from RTFC having terms substantially similar to those
contained in Vitelco's existing long-term loan from RTFC.
GT&T is not subject to any contractual restrictions on payment of dividends.
However, the capital needs of GT&T's Expansion Plan, the working capital
required for GT&T's rapid growth in audiotext traffic in 1995 and GT&T's own
debt service obligations have precluded GT&T from paying any significant funds
to the Company other than the advisory fees mentioned above. Because the
Company pays fees owing to audiotext traffic providers on a more rapid schedule
than it collects on its audiotext traffic, the Company had to invest increasing
amounts in the working capital related to its audiotext traffic during the
period that this traffic was growing at a rapid rate. The rate of growth in the
required working capital for this traffic decreased shortly after August, 1995
when the volume of audio text traffic peaked and then leveled off. As a result
of the reduced need by GT&T's audio text business for increasing amounts of
working capital, GT&T has been contributing significantly to the Company's
liquidity.
11
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Management Discussion And Analysis Of Financial
Conditions and Results of Operations
If and when the Company settles outstanding issues with the Guyana Government
and the PUC with regard to GT&T's Expansion Plan and its rates for service,
GT&T may require additional external financing to enable GT&T to further expand
its telecommunications facilities. If that portion of the PUC's October 11,
1995 order which requires GT&T to make escrow payments equal to 15% of its
revenues comes into effect, GT&T will most likely require external financing to
enable it to make such payments, and there can be no assurance that the Company
will be able to obtain any such financing.
The Company's short term bank credit facility, under which the Company has $5.5
million of loans outstanding, expired on October 1, 1996. The bank has verbally
agreed to renew this facility until October 1, 1997 and waive the prohibition
on borrowing under the facility during the first thirty days of the renewal
period.
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
anticipates that GT&T's foreign currency earnings will enable GT&T to service
its debt and pay its hard currency tax obligations. There are no Guyana legal
restrictions on the conversion of Guyana's currency into U.S. dollars or on the
expatriation of foreign currency from Guyana.
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, however, the Guyana dollar
declined in value to the current rate of approximately 142 to the U.S. dollar,
and has remained relatively stable at approximately that rate since 1994.
The effect of inflation on the Company's financial results of telephone
operations in the U.S. Virgin Islands has not been significant in recent years.
The effect of inflation on the cost of providing telephone service in the U.S.
Virgin Islands has generally been offset (without any increase in local
subscribers' rates) by increased revenues resulting from growth in the number
of subscribers and from regulatory cost recovery practices in determining
access revenues.
12
<PAGE>
Atlantic Tele-Network, Inc. and Subsidiaries
Part II- 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.
13
<PAGE>
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 12, 1996 /s/ Craig A. Knock
----------------------------
Craig A. Knock
Chief Financial Officer and Vice-President
signing both in his capacity as Vice-
President on behalf of the Registrant and as
Chief Financial Officer of the Registrant
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ACCOMPANYING FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
*** (COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA) ***
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 9,002
<SECURITIES> 0
<RECEIVABLES> 66,573
<ALLOWANCES> 0
<INVENTORY> 9,669
<CURRENT-ASSETS> 92,152
<PP&E> 360,854
<DEPRECIATION> 112,408
<TOTAL-ASSETS> 380,736
<CURRENT-LIABILITIES> 72,711
<BONDS> 112,839
0
0
<COMMON> 123
<OTHER-SE> 143,936
<TOTAL-LIABILITY-AND-EQUITY> 380,736
<SALES> 165,237
<TOTAL-REVENUES> 165,237
<CGS> 122,704
<TOTAL-COSTS> 122,704
<OTHER-EXPENSES> 8,801
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,537
<INCOME-PRETAX> 25,447
<INCOME-TAX> 10,484
<INCOME-CONTINUING> 13,103
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 13,103
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
