UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-K
(Mark One) [X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF
1934 [NO FEE REQUIRED]
For the transition period from to.
Commission file number 0-19551
__________________
Atlantic Tele-Network, Inc.
(Exact name of registrant as specified in its charter)
19 Estate Thomas
Delaware Havensite
State or other jurisdiction of P.O. Box 12030
incorporation or organization) St. Thomas, U.S. Virgin Islands
(Address of principal executive offices)
47-0728886 00801
(IRS Employer Identification No.) (Zip Code)
(340) 777-8000
(Registrant's telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, Par Value American Stock Exchange
$.01 per Share
Securities registered pursuant to Section 12(g) of the Act:
Title of each class None __________________ 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 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 [_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. [_]
The aggregate market value of the shares of all classes of voting stock
of the registrant held by non-affiliates of the registrant on March 20, 2002,
was approximately $24,975,902 computed upon the basis of the closing sales
price of the Common Stock on that date. For purposes of this computation,
shares held by directors (and shares held by any entities in which they serve
as officers) and officers of the registrant have been excluded. Such exclusion
is not intended, nor shall it be deemed, to be an admission that such persons
are affiliates of the registrant.
As of March 20, 2002, there were outstanding 4,995,559 shares of Common
Stock, $.01 par value, of the registrant.
Documents Incorporated by Reference
Portions of the proxy statement to be filed with the Securities and
Exchange Commission pursuant to Regulation 14A for the registrant's 2001
annual meeting of stockholders are incorporated by reference into Part III of
this Form 10-K.
ATLANTIC TELE-NETWORK, INC.
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2001
Page
PART I
Item 1. Business 2
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a vote of Security Holders 8
Executive Officers of the Registrant 9
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 7a. Quantitative and Qualitative Disclosures about Market Risk 17
Item 8. Financial Statements and Supplementary Data 18
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 18
PART III
Item 10. Directors and Executive Officers of the Registrant 19
Item 11. Executive Compensation 19
Item 12. Security Ownership of Certain Beneficial Owners and
Management 19
Item 13. Certain Relationships and Related Transactions 19
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8K 20
SIGNATURES 21
Index to Combined and Consolidated Financial Statements F-1
1
PART I
Item 1. Business
Introduction
Atlantic Tele-Network, Inc. (the "ATN" or the "Company") is a holding
company with the following operating subsidiaries and affiliates:
|X| Guyana Telephone & Telegraph Company, Ltd. ("GT&T"), the national and
international telephone company in the Republic of Guyana. The Company has
owned 80% of the stock of GT&T since January 1991. Substantially all of the
Company's consolidated revenues and operating income in 2001 was derived from
GT&T operations.
|X| Wireless World L.L.C. and V.I. Access, L.L.C. (collectively,
"Wireless World"), wholly-owned subsidiaries of the Company. Wireless World is
the largest internet access service provider in the U.S. Virgin Islands and
also provides wireless-cable-T.V. services. Wireless World acquired its
internet service business in 1999 and its T.V. business in March 2000.
Wireless World is currently in the process of upgrading its T.V. service from
a 15 channel analog to a 100 plus channel digital service.
|X| Atlantic Tele-Center, Inc. ("ATC"), a wholly-owned subsidiary
established in 2000 which is in the process of developing a calling center
business in Guyana to provide customer assistance, telemarketing and other
call center services primarily to businesses located in the United States.
|X| Bermuda Digital Communications, Ltd. ("BDC"), which provides cellular
telephone services under the name "Cellular One" in Bermuda. The Company
acquired a 30% interest in BDC in 1998 and increased its interest to 46%
during 2000.
|X| ATN (Haiti) S.A. ("ATN-Haiti") and Transnet, S.A. ("Transnet"), which
have provided dispatch radio paging, internet access and data transmission
services in Haiti. The Company acquired a 75% interest (since increased to
80%) in ATN-Haiti's predecessor, Digicom S.A. in 1998 and acquired a 95%
interest in Transnet S.A. in July 2000 (since decreased to 80%). During 2001,
the Company wrote-off its investment in ATN-Haiti. The Company has curtailed
operations of both of these entities pending a sale of their assets.
The Company was established in 1987 as a holding company to acquire the
Virgin Islands Telephone Corporation from ITT Corporation. In November 1991,
the Company became a public company. On December 30, 1997, the Company was
split into two separate public companies. One, a new company, Emerging
Communications, Inc., contained all of the Company's telephone operations in
the U.S. Virgin Islands and was spun off to Jeffrey J. Prosser and the public
stockholders of the Company. The other, the Company, continued to own GT&T. In
connection with the transaction, the number of outstanding shares of the
Company's capital stock was reduced by 60% (in effect, a reverse stock split
of 1:2.5).
The Company from time to time evaluates opportunities for establishing or
acquiring other telecommunications business in the Caribbean area and
elsewhere, and may make investments in such businesses in the future.
Cornelius B. Prior, Jr., Chairman of the Board and Chief Executive
Officer of the Company, is the owner of approximately 62% of the outstanding
common stock of the Company.
2
GT&T
General. GT&T supplies all public telecommunications service in Guyana.
GT&T is the successor to the Guyana Telecommunication Corporation ("GTC"), a
corporation wholly owned by the government of Guyana, which prior to 1991 had
been the exclusive provider of telecommunications services in Guyana for more
than 20 years.
International Traffic. GT&T's revenues and earnings have been highly
dependent upon international long-distance calls originating outside of Guyana
and collect calls from Guyana to foreign points. The following table sets
forth data with respect to the volume of GT&T's international traffic for the
past three years:
International Traffic
(in thousands of minutes)
1999 2000 2001
--------------------------------------------------------------
Inbound Paid
and Outbound collect 59,509 (51%) 64,097 (67%) 73,991 (76%)
Audiotext 41,500 (35%) 12,975 (13%) 3,689 (4%)
Total Inbound 101,009 (86%) 77,072 (80%) 77,680 (80%)
------- --- ------ --- ------ ---
Outbound 16,061 (14%) 19,004 (20%) 19,553 (20%)
------ --- ------ --- ------ ---
Total 117,070 (100%) 96,076 (100%) 97,233 (100%)
======= ==== ====== ==== ====== ====
GT&T has agreements with foreign telecommunications administrations and
private carriers covering all international calls into or out of Guyana. These
agreements include negotiated "settlement rates" which govern the rates of
payment by GT&T to the foreign carriers for the use of their facilities in
connecting international calls billed in Guyana, and by the foreign carriers
to GT&T for the use of its facilities in connecting international calls billed
abroad.
The different classes of international traffic described in the above
table have during the past three years produced significantly different profit
margins for GT&T. In the case of regular inbound traffic and outbound collect
traffic, GT&T receives a "settlement rate" payment from the foreign
telecommunications carrier generally equal to one-half of the applicable
"accounting rate" (e.g., in the case of traffic from the United States, until
January 1, 2002, GT&T received 85 cents per minute), and GT&T has no
significant direct expenses associated with such traffic except for
international transmission systems costs which are applicable to all of GT&T's
international traffic. In the case of audiotext traffic, GT&T pays a fee or
commission to the audiotext traffic provider at rates which are negotiated
from time to time and are typically more than half of the amount received by
GT&T from the foreign carrier. In the case of outbound international traffic,
GT&T must generally pay the foreign carrier a settlement rate payment equal to
one-half of the applicable international accounting rate, and GT&T collects
from its subscriber a rate which is regulated by the PUC. During the past
three years, amounts collected by GT&T for outbound international traffic have
in the aggregate slightly exceeded the payments due to foreign carriers for
such traffic.
Effective January 1, 2002, the settlement rate for U.S. - Guyana traffic
was reduced from 85 cents per minute to 23 cents per minute. This has
significantly reduced GT&T's profit margin on inbound traffic from the United
States but has increased its margin on outbound traffic to the United States.
See "Regulation" and "Managements' Discussion and Analysis of Financial
Condition and Results of Operations - Introduction."
In the past, a significant portion of GT&T's international traffic
revenues arose from the provision by GT&T of telecommunications services to
audiotext providers in a number of foreign countries. However, the volume and
profit margins of this traffic sharply declined in the past three years due to
increased competition from domestic audiotext traffic, other terminating
country carriers and from the internet, so that audiotext traffic no longer
contributes significantly to the revenues or operating profits of the Company.
Domestic Service. At December 31, 2001, GT&T had 79,913 fixed subscriber
access lines in service. This number of access lines represents approximately
10 lines per 100 inhabitants and an increase of approximately 11% over lines
in service at December 31, 2000. Of all fixed lines in service, 85% were in
the largest urban areas, consisting of Georgetown, Linden, New Amsterdam,
Diamond and Beterverwagting. During 2001, GT&T extended service to a number of
small communities. However, most rural areas still do not have telephone
service.
3
GT&T's revenues for fixed access domestic service are derived from
installation charges for new lines, monthly line rental charges, monthly
measured service charges based on the number and duration of calls and other
charges for maintenance and other customer services. For each category of
revenues, rates differ for residential and commercial customers. Residential
and commercial customers have contributed approximately equally to GT&T's
revenues from local service. As of the end of 2001, GT&T's basic monthly
charge per access line was $1.40 for residential customers and $5.55 for
business customers, and the average monthly bill for residential and business
service (excluding charges for international calls and cellular service) was
$7.62 and $15.45, respectively.
GT&T currently provides mobile cellular telephone service in the
Georgetown, Guyana area and along substantially all of Guyana's coastal plain.
Cellular subscribers are offered various calling plans and are charged a
monthly fee plus airtime based on the selected plan. In May 2001, the Guyana
PUC approved a GT&T proposal to reduce cellular charges and initiate a
"calling party pays" system in which a land line caller to a cellular
telephone (rather than the cell phone subscriber) will pay the air time
charges for an incoming call to a cell phone. As a result of the new rates and
the introduction of prepaid calling cards, cellular customers and revenues
increased dramatically and are continuing to increase. GT&T's current average
monthly revenue per cellular subscriber is approximately $26.59, including
monthly rental and airtime charges. As of December 31, 2001, GT&T had
approximately 39,206 active mobile cellular subscribers as compared to 7,881
at December 31, 2000.
As a result of the increases in the number of fixed subscriber access
lines and the dramatic increase in cellular subscriber and revenues in the
second half of 2001, GT&T's local service revenues increased from
approximately $8.7 million in 1999 to $11.7 million in 2000 and $18.5 million
in 2001.
Expansion. Since the Company acquired its interest in GT&T in January
1991, GT&T has significantly expanded and rebuilt its telecommunications
network. The number of fixed access lines has increased from approximately
13,000 working lines in January 1991 to 79,913 lines at December 31, 2001.
Substantially all of GT&T's access lines are now digitally switched lines.
GT&T first introduced mobile cellular service in 1992. As is noted above, this
service has grown dramatically since May 2001 and is currently the fastest
growing part of the Company's business.
GT&T is linked with the rest of the world principally through the
Americas II undersea fiber optic cable, which was commissioned in October
2000, and over 1,200 circuits on an Intelsat satellite. GT&T has two Intelsat
B earth stations, one of which is currently used to provide service through an
Intelsat satellite to a number of localities in the interior of Guyana. This
earth station and the Intelsat satellite may also be used in the future to
provide a second satellite link from Guyana for international traffic.
GT&T owns capacity in four international fiber optic cables - the
Americas I cable, which runs from Brazil to Trinidad, the United States Virgin
Islands and the United States mainland, the Columbus II cable, which runs from
the Caribbean region to the Azores, the Antilles cable from Trinidad to
Tortola and the Americas II cable which runs from Brazil through the Caribbean
to the United States with a branch to the Guyanas.
GT&T utilizes Northern Telecom fixed wireless access technology to
provide services to about 3,600 of its subscribers. The normal land line rates
apply to GT&T's fixed wireless network services.
GT&T has installed over 450 public telephones in locations across the
country providing telecommunications for both local and international calls in
areas that had not previously enjoyed service. Currently, in addition to the
public telephones, GT&T maintains three public "telephone centers" at which
the public can, upon payment of the charges in cash to GT&T personnel who
staff these centers, use an ordinary residential-type telephone to make
international and domestic calls.
4
Other Services. GT&T is also licensed to provide various
telephone-related services that extend beyond basic telephone service,
including yellow pages and other directory services, and it has an exclusive
license to sell, lease or service various kinds of telecommunications
equipment. Under its license from the Government of Guyana (the "License"),
GT&T's rates for most of these services must be specified in a tariff approved
by the PUC. See "Business--Regulation."
Significant Revenue Sources. Certain carriers and audiotext providers
accounted for more than 10% of GT&T's total revenues in 1999, 2000, and 2001.
See Note 2 to the Consolidated Financial Statements included in this Report.
Competition. Pursuant to its License from the government of Guyana, GT&T
has the exclusive right to provide, and is the sole provider of, local,
domestic long-distance and international telephone service in Guyana, except
for cellular radio telephone service. GT&T also has the exclusive franchise to
provide telephone directories and directory advertising and to supply a wide
variety of telecommunications equipment in Guyana. GT&T's revenues from
directory advertising and the sale of telecommunications equipment have not
been significant to the Company. The exclusivity provisions of GT&T's license
are currently the subject of negotiations with the government of Guyana. See
"GT&T-Regulation-Recent Developments."
One other company is currently providing cellular service and two other
companies have been licensed to provide such service.
Regulation. GT&T is subject to regulation in Guyana under the provisions
of its License and under the Guyana Public Utilities Commission Act of 1999
("PUC law") and the Guyana Telecommunications Act 1990 ("Telecommunications
Law"). GT&T also has certain significant rights and obligations under the
agreement (the "GT&T Agreement") pursuant to which the Company acquired its
interest in GT&T in 1991.
License. The License, which was issued on December 19, 1990 pursuant to
the GT&T Agreement, granted to GT&T an exclusive franchise to provide in
Guyana (i) for a period of 20 years (renewable for an additional 20 years at
the option of GT&T), public telephone, radio telephone (except private radio
telephone systems which do not interconnect with GT&T's network) and pay
station telephone services and national and international voice and data
transmission, sale of advertising in any directories of telephone subscribers
and switched or non-switched private line service; and (ii) for a period of 10
years (renewable for an additional 10 years on a non-exclusive basis at the
option of GT&T) supply of terminal and customer premises equipment and
telefax, telex and telegraph service and telefax network service (without
prejudice to the right of any other person to undertake any of the following
activities: (a) sale of telefax or teleprinter machines, (b) maintenance of
telefax or teleprinter equipment, or (c) operation of any facility for the
sending or receiving of telefax copies or teleprinter messages). In addition,
GT&T was granted a non-exclusive license to provide, for a period of 20 years
(renewable for an additional 20 years at the option of GT&T), cellular radio
telephone service.
GT&T Agreement. Under the GT&T Agreement, GT&T undertook to complete a
substantial Expansion Plan by a date which, after giving effect to certain
agreed upon extensions, was February 28, 1995, and GT&T was entitled to a
specified minimum return. Subject to certain limitations applicable to the
years 1991-1994, GT&T is entitled, pursuant to the GT&T Agreement, to a
minimum return of 15% per annum on its capital dedicated to public use ("rate
base"). Absent mutual agreement by the government of Guyana and the Company
(and there has been no such agreement) on a rate of return methodology, rates
are to be calculated on the basis of GT&T's entire property, plant and
equipment pursuant to a rate of return methodology consistent with the
practices and procedures of the United States Federal Communications
Commission. GT&T believes that its rate base at December 31, 2001 was
approximately $100 million, although the PUC in various orders or staff
reports has thrown out or challenged several million dollars of franchise
rights and working capital which are included in the foregoing figure.
Under the GT&T Agreement, upon non-renewal or termination of the License,
the government of Guyana will be entitled to purchase the Company's interest
in GT&T or the assets of GT&T upon such terms as may be agreed to by the
Company and the government or, absent such agreement, as may be determined by
arbitration before the International Center for the Settlement of Investment
Disputes.
5
PUC Law and Telecommunications Law. The PUC Law and the
Telecommunications Law provide the general framework for the regulation of
telecommunications services in Guyana. The Public Utilities Commission of
Guyana ("PUC") is an independent statutory body with the principal
responsibility for regulating telecommunications services in Guyana. The PUC
has authority to set rates and has broad powers to monitor GT&T's compliance
with the License and to require GT&T to supply it with such technical,
administrative and financial information as it may request. The PUC also has
broad authority to review and amend any GT&T program for development and
expansion of facilities or services.
Although, under the current PUC Law and predecessor statutes which have
been in effect since 1990, the PUC is obligated to honor the provisions of the
GT&T Agreement which guarantees GT&T at least 15% per annum return on its rate
base, in the Company's opinion, the PUC has consistently failed to do so. For
a description of recent actions of the PUC, see Note 11 to the Consolidated
Financial Statements included in this Report.
Recent Developments. The Government of Guyana has announced its intention
to introduce competition into 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 these services, and
shifting rates from rate of return regulation to incentive rate-cap
regulation. In February 2002, GT&T began negotiations with the Government on
these issues and all other outstanding issues between the Company and the
Government.
FCC Matters. In 1997, the U.S. Federal Communications Commission ("FCC")
issued a Report and Order in a rule making proceeding in which it adopted
mandatory international accounting and settlement rate benchmarks for many
countries. The FCC adopted a mandatory settlement rate benchmark of $.23 per
minute for low-income countries such as Guyana and required that settlement
rates between the U.S. and low-income countries be reduced to $.23 per minute
by January 1, 2002. The settlement rate in effect prior to January 1, 2002 was
$.85 per minute, and revenues from this traffic provided a significant subsidy
to GT&T's local operations and network expansion. In 2001, the Company made an
application to the Staff of the FCC for a limited waiver of the FCC's order,
and that application was denied by the Staff. The Company is currently seeking
to appeal the Staff's determination to the FCC. See "Management Discussion and
Analysis of Financial Condition and Results of Operations - Introduction."
Wireless World
Wireless World provides internet access services throughout the U.S.
Virgin Islands under the names viaccess.net and islandsvi.net. Wireless World
currently has about 9,900 subscribers and is the largest provider of internet
access services in the U.S. Virgin Islands. Wireless World holds exclusive
MMDS and non-exclusive LMDS licensed for the U.S.V.I. and provides "wireless
cable T.V." services to approximately 1,400 subscribers (including hotel rooms
and equivalent subscribers on the island of St. Thomas.
Wireless World also provides paging services and SMR services in the U.S.
Virgin Islands and currently has 661 and 79 current subscribers, respectively,
to these services.
Wireless World is currently in the process of converting its T.V. service
from a 15 channel analog service to a 100 plus channel digital service and is
offering a wireless high speed internet access service ("WDSL").
Wireless World is also seeking to enter the telephone business in the
U.S. Virgin Islands as a competitive local exchange carrier to Innovative
Telephone Company ("Innovative", formerly named the Virgin Islands Telephone
Company, which until the reorganization of the Company in December 1997 was a
subsidiary of the Company). Wireless World is seeking to provide wireless
service using its MMDS frequencies and over wire lines using facilities leased
from Innovative and constructed by Wireless World. During 2001, the Virgin
Islands Public Services Commission upheld Innovative's contention that it is
entitled to a rural telephone company exemption from many of the provisions of
the Federal Communications Act and established by arbitration a form of
interconnection agreement which, in the Company's opinion, made it unfeasible
for Wireless World to provide service as a competitive local exchange carrier
for the foreseeable future. Wireless World has appealed the PSC's decision to
the Courts.
6
ATC
ATC, a wholly-owned subsidiary of the Company, is developing a call
center business in Guyana. ATC will provide telemarketing and customer support
services, via voice and data, including order taking services, billing inquiry
services, technical support services and the like, to client companies and
organizations which are expected to be located in and serving primarily the
U.S. market. Guyana has an English speaking population with a high literacy
rate, and a minimum hourly wage rate of U.S. $0.69. ATC's trained agents will
work from client supplied data readily accessible to them on ATC's computer
network. To date, ATC has established one location for its operations in
Beterverwagting, Guyana, has installed a computer network sufficient for 88
agents to work simultaneously with the capability to expand to 500 agents and
has approximately 50 trained agents and supervisors and another 25 persons in
training. ATC expects to employ more than 200 agents by December 31, 2002.
ATC will communicate with its clients and its client's customers in the
U.S. and elsewhere via GT&T's circuits in the recently opened Americas II
fiber optic under-sea cable and in Intelsat satellites. ATN has established a
point of presence in Miami, Florida to facilitate this communication. As of
December 31, 2001, ATN has invested approximately $3.4 million in ATC. The
Government of Guyana has granted ATC a five year tax exemption beginning in
2001.
ATN-Haiti and Transnet
ATN-Haiti has 13 tower sites which enable it to provide coverage to all
major cities and a majority of the countryside in Haiti. ATN-Haiti currently
provides paging and dispatch radio services throughout these areas. Transnet
S.A. currently provides dial-up internet access services in Haiti through
satellite links to the United States. At December 31, 2001 the Company
wrote-off its investment in ATN-Haiti and is in the process of curtailing the
operations of both ATN (Haiti) and Transnet pending sale of their assets.
BDC
BDC provides cellular telephone service in Bermuda under the name
"Cellular One". BDC is a cellular and PCS competitor in Bermuda to the Bermuda
Telephone Company. BDC commenced operations in July 1999. At December 31, 2001
it had about 12,230 subscribers, representing about 50% of the cellular market
in Bermuda. BDC upgraded its service from analog to TDMA digital service
during 2001 and was the first to introduce prepaid calling cards in Bermuda.
Taxation - United States
As a U.S. corporation, the Company is subject to U.S. federal income tax
on its worldwide net income, currently at rates up to 35%. GT&T is a
controlled foreign corporation ("CFC") for purposes of the Subpart F
provisions of the Internal Revenue Code of 1986, as amended (the "Code").
Under those provisions, the Company may be required to include in income
certain earnings and profits ("E&P") of a CFC subsidiary at the time such E&P
are earned by the subsidiary, or at certain other times prior to their being
distributed to the Company. At present, no material amount of such subsidiary
E&P is includible in the U.S. taxable income of the Company before being
distributed to it. Pursuant to the foreign tax credit provisions of the Code,
and subject to complex limitations contained in those provisions, the Company
would be entitled to credit foreign withholding taxes on dividends or interest
received, and foreign corporate income taxes of its subsidiaries paid with
respect to income distributed as dividends or deemed distributed under Subpart
F from such subsidiaries, against the Company's U.S. federal income tax.
A U.S. corporation is classified as a Personal Holding Company ("PHC") if
(a) more than 50% of its capital stock is owned directly or indirectly by or
for five or fewer individuals (or pension plans); and (b) at least 60% of its
adjusted ordinary gross income consists of certain types of income
(principally passive income, including interest and dividends) included in the
Code definition of "PHC Income." For any taxable year that a corporation is a
PHC, the "undistributed personal holding company income" of such corporation
for that year (i.e., the net income of the corporation as reflected on its
U.S. corporate income tax return, with certain adjustments, minus, in general,
federal income tax and dividends distributed or deemed distributed for this
purpose) would be subject to an additional PHC tax of 39.6%. The Company
currently satisfies the above ownership criterion but the Company believes
that it does not satisfy the income criterion for classification as a PHC.
7
Taxation - Guyana
GT&T's worldwide income is subject to Guyanese tax at an overall rate of
45%. The GT&T Agreement provides that the repatriation of dividends to the
Company and the payment of interest on GT&T debt denominated in foreign
currency are not subject to withholding taxes. It also provides that fees
payable by GT&T to the Company or any of its subsidiaries for management
services they are engaged to render shall be payable in foreign currency and
that their repatriation to the United States shall not be subject to currency
restrictions or withholding or other Guyana taxes. GT&T has a number of tax
issues pending before the Guyana revenue authorities or the Guyana courts. See
Note 11 to the Consolidated Financial Statements included in this Report.
Employees
As of December 31, 2001, GT&T employed approximately 665 persons of whom
approximately 475 are represented by the Guyana Postal and Telecommunications
Workers Union. GT&T's current contract with this union expires on September
30, 2002. The Company and its other subsidiaries employed a total of
approximately 185 persons at December 31, 2001. The Company considers its
employee relations to be satisfactory.
Item 2. Properties
At December 31, 2001, GT&T utilized approximately 254,000 square feet of
building space on approximately 41 acres of land in various locations
throughout Guyana, all of which is owned by GT&T. In addition, GT&T leases
approximately 3,000 square feet of office space in Georgetown, Guyana. For
additional information, see "Business--GT&T - Expansion." GT&T carries
insurance against damage to equipment and buildings, but not to outside plant.
The Company and its other subsidiaries leases approximately 45,000 square feet
of building space in various locations.
Item 3. Legal Proceedings
GT&T is involved in various regulatory and court proceedings in Guyana
which are discussed in Item 1. "GT&T -- Regulation" and Note 11 to the
Consolidated Financial Statements included in this Report.
The Company is involved in various other litigation, the ultimate
disposition of which, in the opinion of the Company's management, will not
have a material adverse effect on the financial position or operations of the
Company.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the
fourth quarter of 2001.
8
Executive Officers of the Registrant
Set forth below are the executive officers of the Company as of the date
hereof:
Name Age Position
Cornelius B. Prior, Jr. 68 Chief Executive Officer, Chairman of
the Board and Secretary of the Company;
Chairman of the Board of GT&T
Christopher J. Kolm 46 Chief Operating Officer
Lewis A. Stern 67 Vice President - Finance
Steven M. Ross 42 Acting Chief Financial Officer,
Treasurer and Chief Accounting Officer
Lawrence M. Fuccella 38 Vice President - Special Projects
Richard A. Hanscom 60 Vice President - Technology and Engineering
Larry G. Stewart 42 Vice President - Corporate Development
Sonita Jagan 36 General Manager - GT&T
Cornelius B. Prior, Jr. has been Chief Executive Officer and Chairman of
the Board of the Company since December 30, 1997. From June 30, 1987 to
December 1997 he was Co-Chief Executive Officer and President of the Company.
He was Chairman of the Board of Virgin Islands Telephone Corporation from June
1987 to March 1997 and became Chairman of the Board of GT&T in April 1997.
From 1980 until June 1987, Mr. Prior was a managing director and stockholder
of Kidder, Peabody & Co. Incorporated, where he directed the
Telecommunications Finance Group.
Christopher J. Kolm joined the company on March 19th, 2001 as Chief
Operating Officer. For the past ten years, Mr. Kolm has held several positions
including Vice President-International Business Development for SBC
Communications, Inc. in San Antonio, Texas, Director of Business Development
for Pacific Bell, San Francisco, and Senior Manager-Product Development with
MCI in Washington D.C. He has a Master of Business Administration degree in
International Business from George Washington University, in Washington D.C.
Lewis A. Stern joined the Company in March 2000 and was appointed as Vice
President - Finance and Chief Financial Officer on March 10, 2000. For more
than five years prior to his joining the Company Mr. Stern was a partner
through a professional corporation in the law firm of Fried Frank, Harris,
Shriver and Jacobson. Mr. Stern is a graduate of Yale College and the Yale Law
School.
Steven M. Ross joined the Company in August 1993 as assistant controller.
He was appointed Acting Chief Financial Officer, Chief Accounting Officer and
Controller in July 1999. Mr. Ross was appointed Treasurer on March 10, 2000.
Mr. Ross graduated from West Virginia University in 1981 receiving a B.S.B.A.,
majoring in accounting, and holds a Master of Professional Accountancy from
West Virginia University.
Lawrence M. Fuccella became a Vice President of the Company in 1998. Mr.
Fuccella joined GT&T as assistant finance controller in July 1992 after
receiving his MBA from Virginia Commonwealth University. He became finance
controller of GT&T in 1993. Since 1994 he has been Special Projects Director
with responsibility for managing the Company's audiotext operations and its
relationships with foreign telecommunications administrations.
Richard A. Hanscom, Sr. was appointed as Vice President - Technology and
Engineering of the Company in March 2000. He has 39 years of experience in the
telecommunications industry. He joined ITT in 1974, and was working at Vitelco
when the Company acquired it in 1987 and has held various management positions
with the company since that time. He has a degree in Electrical Engineering
from Rochester Institute of Technology.
Lawrence G. Stewart joined the company on November 26, 2001, as Vice
President of Corporate Development. Mr. Stewart came to ATN from a PCS
wireless company based in Atlanta, GA, where he was Vice President, Sales &
Marketing. For the previous ten years, Mr. Stewart held key management
positions with BellSouth's wireless groups, and helped develop BellSouth
international operations in Latin America, Europe, and Asia/Pacific. Mr.
Stewart holds a B.A. from the University of Virginia, and an MBA from the
University of North Carolina - Chapel Hill.
Sonita Jagan was appointed General Manager of GT&T on February 24, 2000.
Ms. Jagan joined GT&T in March 1993 as Assistant Financial Controller, she was
promoted to Financial Controller in 1994 and was further promoted to General
Manager - Internal Affairs in June 1999. Ms. Jagan received a Bachelor of Arts
in Administration and Commerce from the University of Western Ontario, Canada.
9
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock, $.01 par value, is listed on the American
Stock Exchange ("AMEX") under the symbol "ANK". The following table sets forth
quarterly market price ranges for the Company's Common Stock in 2000 and 2001:
2000 Quarters High Low
1st................................................ 15.00 8.6875
2nd 12.50 8 .875
3rd 12.875 9 .25
4th 11.5625 9 .75
2001 Quarters High Low
1st................................................ 16.50 10.50
2nd 16.25 13.00
3rd 13.95 13.00
4th 14.20 12.85
The approximate number of holders of record of Common Stock as of March
11, 2002 was 65.
Dividends
The Company has paid quarterly dividends on its common stock since
January 1999. Dividends were paid at the rate of $0.15 per share per quarter
from January 1999 through January 2000 and at the rate of $0.175 per share per
quarter from April 2000 through January 2001. In March 2001 the Board of
directors increased the quarterly dividend to $0.20 per share commencing April
2001. Dividends have been paid at the rate of $0.20 per share per quarter from
April 2001 through January 2002, and on March 1, 2002 the Board of directors
declared a dividend at the same rate per share payable on April 12, 2002 for
shareholders of record on March 28, 2002.
The declaration and payment of dividends on the Common Stock is at the
discretion of the Board of Directors of the Company. The continuation or
modification of the Company's current dividend policy will be dependent upon
future results of operations, financial condition, capital requirements,
contractual restrictions, regulatory actions, and profitability of the Company
and its subsidiaries and other factors deemed relevant at that time by the
Board of Directors.
10
Item 6. Selected Financial Data
SELECTED HISTORICAL FINANCIAL DATA
The following selected historical financial data have been derived from
and are qualified by reference to, the audited combined and consolidated
financial statements of the Company. The selected historical combined and
consolidated financial data should be read in conjunction with the audited
consolidated financial statements and related notes thereto of the Company for
the years ended December 31, 1999, 2000 and 2001. As is discussed in Note A
and in Management's Discussion and Analysis of Financial Condition and Results
of Operations, the Company's results of operations in several of the years
shown below were significantly affected by one time items. The data shown
below identifies these items for the years 1998 - 2001 and shows as Normalized
Income what the income of the Company would have been had these one time items
not occurred. All dollar amounts are in thousands, except per share data.
--------------------------------------------------------------------
--------------------------------------------------------------------
1997 1998 1999 2000 2001
------------ ---------- ---------- ----------- ------------
------------ -----------------------------------------------------
Statement of Operations Data: Combined Consolidated
------------ -----------------------------------------------------
Telephone operations
Revenues:
International long-distance revenues $113,865 $84,028 $73,737 $62,370 $62,467
Local exchange service revenues 2,933 9,444 8,692 11,724 18,538
Other revenues 817 1,172 1,602 2,480 2,657
------------ ---------- ---------- ----------- ------------
------------ ---------- ---------- ----------- ------------
Total revenue 117,615 94,644 84,031 76,574 83,662
Total operating expenses 99,473 63,095 60,165 47,670 49,911
------------ ---------- ---------- ----------- ------------
------------ ---------- ---------- ----------- ------------
Income from telephone operations 18,142 31,549 23,866 28,904 33,751
Loss from other operations - (373) (599) (1,239) (6,488)
Other income (expense), net (1,117) 2,930 (28) 1,491 (437)
------------ ---------- ---------- ----------- ------------
------------ ---------- ---------- ----------- ------------
Income before income taxes
and minority interest 17,025 34,106 23,239 29,156 26,826
Income taxes 7,718 15,913 11,898 14,403 14,557
------------ ---------- ---------- ----------- ------------
------------ ---------- ---------- ----------- ------------
Income before minority
interest 9,307 18,193 11,341 14,753 12,269
Minority interest (1,372) (2,281) (1,676) (2,428) (3,078)
------------ ---------- ---------- ----------- ------------
------------ ---------- ---------- ----------- ------------
Net Income $7,935 $15,912 $9,665 $12,325 $9,191
============ ========== ========== =========== ============
============ ========== ========== =========== ============
One Time Items (Note A) (5,314) 325 - 5,155
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
Normalized Income $10,598 $9,990 $12,325 $14,346
========== ========== =========== ============
========== ========== =========== ============
Reported Income per share
Basic net income per share $3.25 $2.05 $2.51 $1.84
========== ========== =========== ============
========== ========== =========== ============
Diluted net income per share $3.23 $2.05 $2.51 $1.83
========== ========== =========== ============
========== ========== =========== ============
Pro Forma Net Income Per Share (Note B) $1.69
============
============
Normalized Income per share
Basic normalized income per share $2.16 $2.12 $2.51 $2.88
========== ========== =========== ============
========== ========== =========== ============
Diluted normalized income per share $2.15 $2.12 $2.51 $2.86
========== ========== =========== ============
========== ========== =========== ============
Dividends per share $0.15 $0.60 $0.70 $0.80
========== ========== =========== ============
========== ========== =========== ============
Balance Sheet Data (Consolidated at year end):
Cash and Marketable Securities $15,803 $35,116 $31,463 $24,495 $23,921
Fixed Assets, net 36,042 46,431 56,165 72,459 81,952
Total assets 108,049 126,260 131,162 137,970 142,006
Short-term debt (including current portion of
long-term debt) 3,298 3,403 3,410 1,687 2,402
Long-term debt, net 14,536 11,394 7,969 2,513 5,582
Stockholders' equity 54,244 68,874 74,777 83,469 88,943
Note A One time items for 1998 consist of: (i) settlement with a net
income impact of $2.0 million by a foreign telecommunications carrier for
interuption of traffic to Guyana in 1995, (ii) settlement with a net income
impact of $2.3 million of a claim arising from the cancellation of an
insurance policy and (iii) an increase in net income of the Company of $1.0
million arising from the devaluation of the Guyana dollar from 142:1 to 180:1.
The one time items for 1998, 1999 and 2001 are described in Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Note B Historical per share, Normalized Income and Normalized Income per
share amounts for 1997 have not been presented, as this information is not
considered meaningful.
11
Item 7. Management's Discussion and Analysis of Financial Condition 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 "GT&T- Regulation" section of this Report and in Note 11 to the
Consolidated Financial Statements included in this Report.
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
The Company's revenues and income from operations are derived principally
from the operations of its telephone subsidiary, GT&T. GT&T has derived most
of its revenues from international telephone services. In 1997, the FCC issued
a report and order setting maximum international settlement rates for
telecommunications traffic between the U.S. and many countries. This order
became effective with respect to traffic between the U.S. and Guyana on
January 1, 2002 and required that from that date the settlement rate for
traffic between the U.S. and Guyana be reduced from $.85 per minute to $.23
per minute. The international settlement rate is the amount which GT&T
receives from U.S. carriers for inbound traffic from the United States and
which GT&T pays to U.S. carriers for traffic from Guyana to the United States.
Since the volume of inbound traffic from the United States to Guyana is
traditionally 3-4 times the volume of outbound traffic from Guyana to the
United States, the reduction in the international settlement rate for
U.S.-Guyana traffic is currently having an adverse impact on GT&T's operating
profits. GT&T also has significantly more inbound than outbound traffic from
several other countries where the current settlement rates for traffic to and
from Guyana are higher than $.23 per minute. GT&T anticipates that, over time,
international settlement rates generally will decline.
On December 31, 2001, GT&T filed an application with the Guyana PUC
seeking additional local revenues in light of the reduction in international
settlement rates for U.S.-Guyana traffic. On February 18, 2002, the PUC issued
an order awarding GT&T an interim rate increase of about 30% in GT&T's rates
for local service, which have been the lowest in the Western Hemisphere, and
reducing GT&T's rate for outbound calls from Guyana to the U.S. by
approximately 30%. The PUC indicated that it would continue to hold hearings
on the appropriate permanent increase in rates with the objective of
establishing permanent rates by June 2002. The PUC's interim rate order is
designed to increase GT&T's revenues from local service by about $2.7 million
per year. At the date of this report, the reduction in U.S.-Guyana settlement
rates has not resulted in any apparent reduction in the prices paid by
consumer's calls from the U.S. to Guyana. Accordingly, the volume of traffic
from the U.S. to Guyana has remained about the same as last year. At the
current level of traffic, the settlement rate reduction is costing GT&T about
$1.7 million per month in reduced operating profits. GT&T expects that, as the
reduced settlement rates are reflected in lower consumer prices in the U.S.,
increased volumes of international traffic between the U.S. and Guyana, along
with the increased rates for local services authorized by the Guyana PUC,
should enable GT&T to recover about half of these lost operating profits.
The Government of Guyana has announced its intention to introduce
competition into 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 these services, and shifting
rates from rate of return regulation to incentive rate-cap regulation. In
February 2002, GT&T began negotiations with the Government on these issues and
all other outstanding issues between the Company and the Government..
12
The Company's consolidated financial statements include in addition to
GT&T the subsidiaries and affiliate listed in Note 1 to the Consolidated
Financial Statements included in this Report.
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, international long-distance expenses, taxes other than
income taxes and general and administrative expenses. 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 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.
General and administrative expenses consist principally of parent company
overheads and amortization.
For accounting purposes, the December 1997 split up transaction of the
Company into two separate publicly held companies (the Company and the
Emerging Communications, Inc.) was treated as a non pro rata split off of a
business in which the split off entity is to be accounted for at fair value.
The Company was considered to be the split off entity since Emerging
Communications, Inc. had the greater market capitalization and greater asset
value immediately after the transaction, retained more of the pre-transaction
top management of the Company and had greater net income in 1997. Accordingly,
the balance sheet of the Company at December 31, 1997 was adjusted to fair
value as evidenced by the market capitalization of the Company immediately
after the consummation of the transaction. This adjustment included an
approximately $60 million reduction in the Company's consolidated net fixed
assets, and an approximately $45 million reduction in the Company's
consolidated stockholders' equity. The fair value adjustment reduced the
carrying value on the Company's consolidated financial statements of its fixed
assets significantly below their historical cost and replacement value.
Therefore, depreciation expense for periods after December 31, 1997 is not a
reliable indicator of the Company's cost of replenishing its assets.
The combined selected financial data included in this report have been
derived from combined financial statements relating to Atlantic Tele-Network,
Inc.'s business and operations in Guyana including its majority owned
subsidiary, GT&T, and ATN's activities as the parent company of all of its
subsidiaries during the year ended December 31, 1997. These combined financial
statements do not reflect the fair valuation adjustment arising from the split
up transaction. Moreover, the combined statement of operations includes
interest income from indebtedness of subsidiaries which were transferred with
such indebtedness to Emerging Communications, Inc. in the split up transaction
and certain expenses for the period from May 1, 1997 to December 31, 1997
which were reimbursed by Emerging Communications, Inc. as part of the split up
transaction.
Critical Accounting Policies
The Company's critical accounting policies are disclosed in the Notes to
the Consolidated Financial Statements. These policies address such matters as
revenue recognition, depreciation and asset impairment recognition. While the
estimates and judgments associated with the application of these policies may
be affected by different assumptions or conditions, the Company believes the
estimates and judgments associated with the reported amounts are appropriate
in the circumstances.
13
From the period from inception of GT&T's operations through December 31,
2001, the majority of GT&T's cash receipts and expenditures have been in U.S.
dollars or other hard currencies. Accordingly, the U.S. dollar has been GT&T's
functional currency. With the decline in international settlement rates,
the expansion of GT&T's cellular business and the increases that GT&T has
received and hopes to receive in its rates for local service, the Guyana
dollar may become GT&T's functional currency in the future. If this were to
occur, a decline in value of the Guyana dollar in relation to the U.S. dollar
would give rise to an adverse impact on the Company's reported consolidated
results of operations.
RESULTS OF OPERATIONS
Years Ended December 31, 2000 and 2001
Net income for 2001 was $9.2 million, or $1.84 per share basic and $1.83
per share diluted, as compared to $12.3 million, or $2.51 per share, for 2000.
Net income for 2001 includes $5.2 million of write-offs, net of tax benefit
which represents: (i) $3.2 million write off, net of tax benefit of $1.8
million, of the Company's equity interest in LighTrade; (ii) $1.4 million
write off, net of tax benefit of $1.6 million, for the Company's interest in
its subsidiary, ATN (Haiti); and (iii) $455,000, net of tax benefit of
$245,000, reserve against an advance made to a telecom company the Company was
looking at acquiring. After excluding these charge offs, the Company's net
income would have been $14.3 million or $2.88 per share basic and $2.87 per
share diluted.
Telephone operating revenues for the year ended December 31, 2001 were
$83.7 million as compared to $76.6 million for 2000 an increase of
$7.1 million or 9.3%. This increase in revenues was primarily due to a $6.8
million, or 58% increase in local exchange revenues. The increase of $4.3
million in local exchange service revenues was a result of increased cellular
revenue as cellular lines in service increased from 7,881 at December 31, 2000
to 39,206 at December 31, 2002, an increase of 31,325 or 397%. The balance of
the increase in local exchange service revenues was a result of increased
fixed access lines in service which rose from 71,738 at December 31, 2000 to
79,913 at December 31, 2001, an increase of 8,175 lines or 11%.
International long distance revenues in 2001 were $62.5 million
essentially the same amount as in 2000, as increases in revenues from inbound
and outbound traffic, other than audiotext, offset an expected decline in
audiotext traffic. In 2001, audiotext traffic was not a significant
contributor to the Company's revenues or operating profits.
Operating expenses were $49.9 million for 2001 as compared to $47.7
million for 2000. This represents an increase of $2.2 million or 5%. This
increase was due principally to an increase in telephone operating expenses of
$4.7 million or 21% and an increase in general and administrative of $1.3
million or 28%. Offsetting these increases was a decrease in international
long distance expense of $3.7 million or 18%. The $4.7 million increase in
telephone operating expense was primarily due to the increases in cellular
lines in service, increased legal expense and increases in wages and
electricity costs. The $1.3 million increase in general and administrative
expenses was due to recognition of the $700,000 reserve ($455,000 net of tax
benefit, referred to above) against an advance made to a telecom company that
the Company was looking at acquiring in 2000, with the remaining increase
attributable to legal and consulting expense. The $3.7 million decrease in
international long-distance expenses was primarily attributable to a decrease
in audiotext payments as minutes of audiotext decreased from 13.0 million in
2000 to 3.7 million in 2001. Telephone operating expenses were approximately
60% of telephone operating revenues in 2001 as compared to approximately 62%
of telephone operating revenues in 2000.
Other operations revenues and expenses represent the operations of ATN
(Haiti), Transnet, Wireless World, LLC and Atlantic Tele-Center, Inc., each of
which had operating losses in the twelve months ended December 31, 2001. As
has been mentioned elsewhere in this Report, the Company is in the process of
curtailing the operations of ATN (Haiti) and Transnet and is seeking to sell
assets of these two entities.
14
Losses from other operations were $6.5 million for 2001 as compared to
$1.2 million for 2000. Revenues of these operations were $4.5 million for 2001
as compared to $3.8 million for 2000. In 2001, other operations included an
impairment charge of $3.0 million representing a write-off of the Company's
remaining investment in ATN (Haiti) as of December 31, 2001. Revenues of other
operations were $4.5 million for 2001 as compared to $3.8 million for 2000.
This resulted in an increase of $661,000, or 17%, over 2000, 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 $7.9 million for
2001 as compared to $5.1 million for 2000. This resulted in increases of $2.9
million, or 57% over 2000. This increase in expenses was due to an increase of
$1.3 million in start up costs associated with the development of Atlantic
Tele-Center, Inc. and a $1.7 million increase in costs incurred at Wireless
World, LLC. These increases were partially offset by a decrease of $193,000 at
ATN (Haiti) as operations were reduced in anticipation of selling or closing
this entity.
Income from operations before interest expense, income taxes and minority
interest for 2001 was $26.8 million as compared to $29.2 million for 2000.
This represents a decrease of $2.4 million or 9% and is principally a result
of the factors affecting revenues and operating expenses discussed above.
Other income (expense), net for 2000 included interest income and expense
as well as the Company's equity in the earnings of Bermuda Digital
Communications. During 2001 the Company took write-offs of $3.3 million, net
of tax, to write off an equity interest in LighTrade, Inc., which is also
included in other income (expense), net.
The Company's effective tax rate for the year ended December 31, 2001 was
46.5% as compared to 49.4% for 2000. The decrease in the effective tax rate
was due to the tax effect of the write off at ATN (Haiti) which had previously
incurred losses which had no tax benefit in previous years.
The minority interest in earnings consists primarily of the Guyana
government's 20% interest in GT&T.
Years Ended December 31, 1999 and 2000
Telephone operating revenues for the year ended December 31, 2000 were
$76.6 million as compared to $84.0 million for 1999. Net income for 2000 was
$12.3 million, or $2.51 per share, as compared to $9.7 million, or $2.05 per
share, for 1999.
Operating results for 1999 includes $710,000 of revenue recognized from
the settlement of a dispute with an international telecommunications carrier
resulting in a net gain of $293,000, or $.06 per share. After excluding this
one time item, the Company's core operating revenues and earnings for 1999
were $83.3 million and $9.4 million, respectively, or $1.99 per share.
Excluding the one-time item in 1999 discussed above, core revenues in
2000 decreased by $6.7 million or 8.1%. This decrease in revenues was
attributable primarily to the decline in audiotext traffic through 2000.
Audiotext traffic declined to 13.0 million minutes in 2000 as compared to 41.5
million minutes in 1999, a decline of 28.5 million minutes (69%). Offsetting
the decrease in audiotext traffic, regular inbound international minutes
increased from 59.5 million minutes in 1999 to 64.1 million minutes in 2000.
This increase in regular inbound traffic resulted in an increase of $8.3
million in revenue over 1999.
Local exchange service revenues increased by $3.0 million or 35% during
2000 as a result of increased cellular revenue and increased lines in service
which rose to 71,738 at December 31, 2000 from 64,034 lines in service at
December 31, 1999, an increase of 7,704 lines or 12%.
International long-distance inbound revenues other than audiotext
increased to $45.5 million in 2000 from $37.2 million in 1999. Excluding the
$710,000 of revenue recognized from the settlement mentioned above, this
represents an increase of $9.0 million or 24% and is due to the increase in
inbound minutes of traffic mentioned above. Management believes that this
increase in inbound telephone traffic other than audiotext is indirectly the
result of the increase in temporary rates for outbound long-distance traffic
granted by the PUC in early 1998. Because a substantial portion of GT&T's
international traffic, other than audiotext, consists of personal calls
between Guyanese expatriates and their friends and families in Guyana,
management believes that an increase in rates for outbound calls results not
only in a decrease in the volume of outbound calls but an increase in the
volume of inbound calls.
15
International long-distance outbound revenues increased from
$12.7 million in 1999 to $14.5 million in 2000, an increase of $1.9 million or
15% as traffic increased from 16.1 million minutes to 19.0 million minutes
from 1999 to 2000. These increases in outbound traffic and the resultant
revenues are due primarily to the 12% increase in lines in service discussed
above.
Telephone operating expenses were $47.8 million for 2000 as compared to
$60.2 million for 1999. This represents a decrease of $12.5 million or 21% in
telephone operating expense. This decrease was due principally to a decrease
in audiotext traffic expense at GT&T of $13.5 million due to decreased traffic
volumes. Offsetting this decrease was an increase of $1.2 million in plant
nonspecific operations due to increased operating expenses. Core telephone
operating expenses were approximately 62% of core telephone operating revenues
in 2000 as compared to approximately 72% of core telephone operating revenues
in 1999 (excluding from core operating revenues in 1999 the effects of the
one-time item discussed above).
Other operations revenues and expenses represent the operations of ATN
(Haiti) S.A. and Wireless World, LLC. and were not material in 1999 and 2000.
The Company acquired a 75% interest in Digicom on June 2, 1998 and an
additional 5% in December of 1999. Wireless World, LLC. commenced operations
with the acquisition of VI Access on October 5, 1999. Effective March 31,
2000, Wireless World acquired the assets and business of Antilles Wireless
Cable T.V. Company ("Antilles Wireless"). Antilles Wireless held LMDS and MMDS
licenses for the U.S. Virgin Islands and provided wireless cable T.V. services
there. Effective June 20, 2000, Wireless World acquired the "islands.vi"
internet access business of Cobex International Inc., an internet service
provider in the U.S. Virgin Islands. ATC was engaged in pre-operating
activities and generated no revenues during the fourth quarter of 2000.
Income from operations before interest expense, income taxes and minority
interest for 2000 was $29.2 million as compared to $23.2 million for 1999.
This represents an increase of $5.9 million or 25% and is principally a result
of the factors affecting revenues and operating expenses discussed above.
The Company's effective tax rate for the year ended December 31, 2000 was
49.4% as compared to 51.2% for 1999.
The minority interest in earnings consists primarily of the Guyana
government's 20% interest in GT&T.
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
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
The Company believes its existing liquidity and capital resources are
adequate to meet current operating and capital needs. The Company's 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
Consolidated Financial Statements included in this Report 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. As a result of
the rate increases recently awarded to and currently sought by GT&T and the
order of the U.S. FCC which reduced the settlement rate for U.S. - Guyana
traffic and the general trend toward lower international settlement 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
currently 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 December 31, 2001, approximately $2.6 million of the Company's
total cash balances consisted of balances denominated in Guyana dollars.
16
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 such
businesses or licenses.
Inflation
The Company does not believe that inflation has had a significant impact
on its consolidated operations in any of the years 1997 through 2001.
New Accounting Pronouncements
There are a number of new accounting pronouncements which may apply to
the Company. See Note 2 to the Company's Consolidated Financial Statements
included in this Report.
Item 7a. Quantitative and Qualitative Disclosures about Market Risk
The Company is exposed to minimal market risks. Although the majority of
GT&T's revenues and expenditures are currently transacted in U.S. dollars or
other hard currencies, the results of future 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. It remained relatively stable
at approximately that rate through 1997. From December 31, 1997, through
December 31, 1998 the Guyana dollar further declined in value to approximately
$180 to the U.S. dollar. Through December 31, 2001, the value of the Guyana
dollar has remained stable at approximately $180 to the U.S. dollar. The
effect of the devaluation of the Guyana dollar on the Company's consolidated
financial results has not been significant in the periods presented, except
that, as is previously discussed in the comparison of 1999 and 1998 operating
results, the Company recognized a net gain of $1.0 million in 1998 as a result
of the devaluation of the Guyana dollar during 1998.
A substantial majority of the Company's consolidated cash balances are
kept in U.S. dollar denominated short term investments, and GT&T generally
endeavors to maintain a balance between its Guyana dollar cash deposits and
local receivables which are denominated in Guyana dollars, and its local tax
and other payables which are also denominated in the Guyana dollar.
Under generally accepted international accounting principles, which, in
the Company's view, are statutorily applicable to the rate making process in
Guyana, GT&T's functional currency has been the U.S. dollar because the
majority of GT&T's revenues and expenditures has been transacted in U.S.
dollars. Accordingly, in the Company's view, GT&T is currently entitled to its
agreed upon minimum 15% return on rate base computed in U.S. dollars on a U.S.
dollar historical cost rate base. Accordingly, devaluations of the Guyana
dollar should have had no long term impact on the value of GT&T's earnings in
U.S. dollars. The Guyana Public Utility Commission has not approved or
disapproved this position of the Company. Moreover, with the decline in
international settlement rates and the increases which GT&T hopes to have in
local revenues, the Guyana dollar may become GT&T's functional currency at some
time in the future. See "Critical Accounting Policies" above.
17
Item 8. Financial Statements and Supplementary Data
Consolidated financial statements of the Company and its subsidiaries are
submitted as a separate section of this Annual Report. See Index to
Consolidated Financial Statements and Schedule which appears on page F-1
hereof.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
PART III
Item 10. Directors and Executive Officers of the Registrant
The information required by this item will be included in the Company's
definitive proxy statement for its 2002 Annual Meeting of Stockholders (the
"Proxy Statement"), and such information is incorporated herein by reference,
except that the information regarding the Company's executive officers called
for by this item is included in Part I under the heading "Executive Officers
of the Registrant."
Item 11. Executive Compensation
The information required by this item will be included in the Proxy
Statement, and such information is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this item will be included in the Proxy
Statement, and such information is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions
The information required by this item will be included in the Proxy
Statement, and such information is incorporated herein by reference.
19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a) 1. Financial Statements
Combined and consolidated financial statements of the Company and its
subsidiaries are submitted as a separate section of this Annual Report. See
Index to Financial Statements and Schedules which appears on page F-1 hereof.
2. Financial Statement Schedules
Financial statement schedules for the Company and its subsidiaries are
submitted as a separate section of this Annual Report. See Index to Financial
Statements and Schedules which appears on page F-1 hereof.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the last quarter of 2001.
(c) Exhibits
Exhibit No. Description
3. (a) Restated Certificate of Incorporation of the Company. 1
(b) By-Laws of the Company.
(c) Amendment to the By Laws of the Company
Exhibit No. Description
10.
(a) 1998 Stock Option Plan 2
(b) Amendments adopted March 10, 2000 to 1998 Stock Option Plan 2
(c) Directors' Remuneration Plan 2
21. Subsidiaries of the Company.
Exhibit No. Description
23.1
Consent of Arthur Andersen LLP
99.1 Letter of Quality Assurance by Arthur Andersen LLP
1.Filed as an exhibit on Form 8-K dated February 16, 1996 and
incorporated herein by reference.
2. Filed as an exhibit to the Company's Annual Report on Form 10K for
1999 and incorporated herein by reference.
20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
ATLANTIC TELE-NETWORK, INC.
March 28, 2002
By:/s/ Cornelius B. Prior, Jr.
Cornelius B. Prior, Jr.
Chief Executive Officer, Chairman of the
Board and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ Cornelius B. Prior, Jr. Chief Executive Officer, March. 28, 2002
Chairman of the Board
/s/ Steven M. Ross Acting Chief Financial Officer,
Officer, Treasurer and Chief
Accounting Officer March 28, 2002
/s/ James B. Ellis Director March 28, 2002
/s/ Ernst Burri Director March 28, 2002
/s/ Henry Wheatley Director March 28, 2002
21
Exhibit 3-c
REVISION OF BY-LAWS
Resolved, that Sections 1, 4 and 5 of Article IV of the By-Laws of this
Corporation be revised to read as follows:
SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the Chairman of
the Board, the President, one or more Vice-Presidents, the Chief Financial
Officer, the Treasurer and the Secretary. If the Board of Directors wishes, it
may also elect other officers (including one or more Assistant Treasurers and
one or more Assistant Secretaries) as may be necessary or desirable for the
business of the Corporation. Any two or more offices may be held by the same
person, and no officer except the Chairman of the Board need be a director.
Each officer shall hold office until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall have
resigned or have been removed, as hereinafter provided in these By-Laws.
SECTION 4. Chairman of the Board. The Chairman of the Board shall be the
chief executive officer of the Corporation. He shall perform all duties
incident to the office of chief executive officer and such other duties as may
from time to time be assigned to him by the Board of Directors.
SECTION 5. [This section is intentionally omitted]
22
Exhibit 21
Subsidiaries of the Company
Jurisdiction of Incorporation
Guyana Telephone and Telegraph Company Limited Guyana
Atlantic Tele-Center, Inc. Guyana
ATN (Haiti), Inc. Delaware
Transnet S.A. Haiti
ATN (Haiti) S.A. Haiti
Wireless World, LLC. United States Virgin Islands
Call Home Telecom, LLC. United States Virgin Islands
VI Access, LLC. United States Virgin Islands
23
Exhibit 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports dated February 27, 2002, included in this Annual Report on Form 10-K,
into ATLANTIC TELE-NETWORK, INC's previously filed Registration Statement
(File No. 333-62416). It should be noted that we have not audited any
financial statements of the Company subsequent to December 31, 2001 or
performed any audit procedures subsequent to the date of our reports.
/s/Arthur Andersen LLP
Atlanta, Georgia
March 26, 2002
24
Exhibit 99.1
March 28, 2002
Securities and Exchange Commission
Division of Corporation Finance
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Arthur Andersen LLP (AA)
The purpose of this letter is to address the requirements of the
Securities and Exchange Commission (SEC) with respect to issuers that include
accountants reports from AA issued after March 14, 2002 in filings with the
SEC.
In connection with the audit of the consolidated financial statements of
Atlantic Tele-Network, Inc. and subsidiaries (the "Company") as of December
31, 2001 and for the year then ended, AA has issued a report to the
shareholders and directors of the Company dated February 27, 2002. The Report
is included in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2001.
In accordance with the requirements of the SEC, the Company has received
the following written representations from AA:
We have audited the consolidated financial statements of Atlantic
Tele-Network, Inc. and subsidiaries as of December 31, 2001 and for the year
then ended and have issued our report thereon dated February 27, 2002. We
represent that this audit was subject to our quality control system for the
United States accounting and auditing practice to provide reasonable assurance
that the engagement was conducted in compliance with professional standards,
that there was appropriate continuity of Arthur Andersen personnel working on
the audit and availability of national office consultation. Availability of
personnel at foreign affiliates of Arthur Andersen is not relevant to this
audit.
ATLANTIC TELE-NETWORK, INC.
By: /s/ Steven M. Ross
Acting Chief Financial Officer,
Treasurer and Chief Accounting Officer
25
Atlantic Tele-Network, Inc. and Subsidiaries
Consolidated Financial Statements
AND FINANCIAL STATEMENT SCHEDULES
December 31, 1999, 2000, and 2001
INDEX
Report of Independent Public Accountants....................................F-2
Financial statements
Consolidated Balance Sheets--December 31, 2000 and 2001...................F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999, 2000, and 2001.........................................F-4
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1999, 2000, and 2001.........................................F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999, 2000, and 2001.........................................F-6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS..................................F-7
FINANCIAL STATEMENT SCHEDULES
Schedule II--Valuation and Qualifying Accounts for the Years Ended
December 31, 1999, 2000, and 2001.................................F-24
Report of Independent Public Accountants as to Schedules..........F-25
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Atlantic Tele-Network, Inc.:
We have audited the accompanying consolidated balance sheets of ATLANTIC
TELE-NETWORK, INC. (a Delaware corporation) AND SUBSIDIARIES as of
December 31, 2000 and 2001, and the related consolidated statements of
operations, stockholders' equity, and cash flows for each of the three years
in the period ended December 31, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Atlantic
Tele-Network, Inc. and subsidiaries as of December 31, 2000 and 2001, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States.
\s\ ARTHUR ANDERSEN LLP
Atlanta, Georgia
February 27, 2002
F-2
Atlantic Tele-Network, Inc. and Subsidiaries
Consolidated Balance sheets
December 31, 2000 and 2001
(In Thousands, Except Share Data)
2000 2001
---- ----
Assets
Current assets:
Cash and cash equivalents $ 24,495 $ 17,536
Marketable securities 0 6,385
Accounts receivable, net 21,099 16,561
Materials and supplies 4,944 4,498
Prepayments and other current assets 2,507 2,784
----- -----
Total current assets 53,045 47,764
====== ======
fixed assets:
Property, plant, and equipment (Note 5) 90,546 107,603
Less accumulated depreciation (18,087) (25,651)
------- -------
Net fixed assets 72,459 81,952
------ ------
Investment in and advances to Bermuda Digital Communications, Ltd. 6,616 6,700
----- -----
Other assets 5,850 5,590
----- -----
Total assets $137,970 $142,006
======== ========
Liabilities and stockholders' equity
Current liabilities:
Current portion of long-term debt $ 1,687 $ 2,402
Accounts payable and accrued liabilities 12,255 7,876
Accrued taxes 5,427 4,082
Advance payments and deposits 1,433 1,800
Other current liabilities 4,681 4,147
----- -----
Total current liabilities 25,483 20,307
Deferred income taxes 5,303 5,953
Long-term debt, excluding current portion 2,513 5,582
----- -----
Total liabilities 33,299 31,842
------ ------
Minority interests 21,202 21,221
------ ------
COMMITMENTS AND CONTINGENCIES (Note 11)
Stockholders' equity:
Preferred stock, $.01 par value per share; 10,000,000 shares authorized,
none issued and outstanding 0 0
Common stock, $.01 par value per share; 20,000,000 shares authorized; 5,151,424
issued and 4,986,527 and 4,995,595 shares outstanding in 2000 and 2001, respectively 52 52
Treasury stock, at cost (1,539) (1,501)
Additional paid-in capital 55,785 55,787
Retained earnings 29,372 34,571
Accumulated other comprehensive loss (201) 34
---- --
Total stockholders' equity 83,469 88,943
------ ------
Total liabilities and stockholders' equity $137,970 $142,006
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
F-3
Atlantic Tele-Network, Inc. and Subsidiaries
Consolidated statements of operations
for the years ended December 31, 1999, 2000, and 2001
(In Thousands, Except Share Data)
1999 2000 2001
---- ---- ----
Telephone operations:
Operating revenues:
International long-distance revenues $73,737 $62,370 $62,467
Local exchange service revenues 8,692 11,724 18,538
Other revenues 1,602 2,480 2,657
----- ----- -----
Total operating revenues 84,031 76,574 83,662
====== ====== ======
Operating expenses:
International long-distance expenses 33,319 20,358 16,655
Plant-specific operations 5,099 5,425 5,739
Plant-nonspecific operations 7,211 8,444 10,124
Customer operations 2,705 3,156 5,186
Corporate operations 4,857 4,969 5,628
General and administrative expenses 6,138 4,482 5,732
Taxes other than income taxes 836 836 847
--- --- ---
Total operating expenses 60,165 47,670 49,911
------ ------ ------
Income from telephone operations 23,866 28,904 33,751
------ ------ ------
Other operations:
Revenues of other operations 1,741 3,826 4,487
Expenses of other operations 2,340 5,065 (7,938)
Asset write-down 0 0 (3,037)
- - ------
Loss from other operations (599) (1,239) (6,488)
---- ------ ------
Other income (expense):
Interest expense (1,875) (1,480) (576)
Interest income 2,321 2,297 1,557
Other income (expense), net (474) 674 1,832
Loss on investment, net 0 0 (3,250)
Other income (expense), net (28) 1,491 (437)
--- ----- ----
Income before income taxes and minority interests 23,239 29,156 26,826
------ ------ ------
Income taxes 11,898 14,403 14,557
------ ------ ------
Income before minority interests 11,341 14,753 12,269
Minority interests (1,676) (2,428) (3,078)
------ ------ ------
Net income $ 9,665 $12,325 $ 9,191
======== ======= =======
Net income per share:
Basic $2.05 $2.51 $1.84
===== ===== =====
Diluted $2.05 $2.51 $1.83
===== ===== =====
Weighted average common sHARES outstanding:
Basic 4,705 4,912 4,987
===== ===== =====
Diluted 4,715 4,913 5,013
===== ===== =====
The accompanying notes are an integral part of these consolidated
financial statements.
F-4
Atlantic Tele-Network, Inc. and Subsidiaries
Consolidated statements of stockholders' equity
for the years ended December 31, 1999, 2000, and 2001
(In Thousands, Except Share Data)
Accumulated
Treasury Additional Other Total
Common Stock, at Paid-In Retained Comprehensive Stockholders'
Stock cost Capital Earnings (Loss) Income Equity
----- ---- ------- -------- ------------- ------
Balance, December 31, 1998 $49 $ (555) $54,195 $15,185 $ 0 $68,874
Purchase of 190,700 shares 0 (1,795) 0 0 0 (1,795)
of common stock
Reissuance of 100,000 shares
of common stock for acquisition 0 932 68 0 0 1,000
Dividends on common stock 0 0 0 (2,810) 0 (2,810)
Net income 0 0 0 9,665 0 9,665
Other comprehensive loss 0 0 0 0 (157) (157)
- - - - ---- ----
BALANCE, December 31, 1999 49 (1,418) 54,263 22,040 (157) 74,777
=== ==== == ====== ====== ====== ==== ======
Purchase of 57,000 shares
of common stock 0 (529) 0 0 0 (529)
Issuance of 242,424 shares of
common stock for acquisition 3 0 1,388 0 0 1,391
Reissuance of 40,000 shares
of common stock for acquisition 0 367 25 0 0 392
Award of 17,713 shares of common
stock under Directors
Remuneration Plan 0 0 150 0 0 150
Reissuance of 4,403 shares of
common stock under Directors
Remuneration Plan 0 41 (41) 0 0 0
Cash paid in Acquisition of
Antilles Wireless (Note 3) 0 0 0 (1,500) 0 (1,500)
Dividends on common stock 0 0 0 (3,493) 0 (3,493)
Net income 0 0 0 12,325 0 12,325
Other comprehensive loss 0 0 0 0 (44) (44)
- - - - --- ---
BALANCE, December 31, 2000 52 (1,539) 55,785 29,372 (201) 83,469
== ====== ====== ====== ==== ======
Purchase of 4,900 shares of
common stock 0 (67) 0 0 0 (67)
Reissuance of 13,750 shares
of common stock for
exercise of stock options 0 105 2 0 0 107
Dividends on common stock 0 0 0 (3,992) 0 (3,992)
Net income 0 0 0 9,191 0 9,191
Other comprehensive income 0 0 0 0 235 235
- - - - --- ---
BALANCE, December 31, 2001 $52 $(1,501) $55,787 $34,571 $34 $88,943
=== ======= ======= ======= === =======
The accompanying notes are an integral part of these consolidated
financial statements.
F-5
Atlantic Tele-Network, Inc. and Subsidiaries
Consolidated statements of cash flows
for the years ended December 31, 1999, 2000, and 2001
(In Thousands, Except Share Data)
1999 2000 2001
---- ---- ----
Cash flows from operating activities:
Net income $ 9,665 $12,325 $9,191
Adjustments to reconcile net income to net cash flows provided by
Depreciation and amortization 5,731 8,113 9,398
Deferred income taxes 1,939 2,400 650
Minority interests 1,676 2,428 3,078
Equity in losses (earnings) of Bermuda Digital Communications, Ltd. 454 (345) (1,228)
Loss on Investment 0 0 5,000
Asset write down 0 0 3,037
Changes in operating assets and liabilities:
Accounts receivable, net 3,936 (587) 4,632
Materials and supplies, prepayments, and other current assets (2,750) 1,447 1,132
Uncollected surcharges 3,646 303 157
Accounts payable and accrued liabilities (3,187) 4,350 (4,379)
Accrued taxes 62 (2,396) (1,345)
Other 1,412 (225) (874)
----- ---- ----
Net cash flows provided by operating activities 22,584 27,813 28,449
====== ====== ======
Cash flows from investing activities:
Capital expenditures (14,521) (18,298) (21,406)
Proceeds from sale of property, plant, and equipment 0 0 1,050
Purchase of marketable securities, net 0 0 (6,351)
Investment in LighTrade, Inc. 0 0 (5,250)
Acquisitions, net of cash received (875) (1,025) 0
Investment in and advances to Bermuda Digital Communications, Ltd. (750) (1,160) 0
Distribution to minority shareholders 0 (1,597) (3,050)
Other investments (2,068) 0 (126)
------ - ----
Net cash flows used in investing activities (18,214) (22,080) (35,133)
======= ======= =======
Cash flows from financing activities:
Repayment of long-term debt (3,418) (7,179) (1,916)
Issuance of long-term debt 0 0 5,700
Purchase of common stock (1,795) (529) (67)
Cash paid in Acquisition of Antilles Wireless 0 (1,500) 0
Dividends paid on common stock (2,810) (3,493) (3,992)
------ ------ ------
Net cash flows (used in) provided by financing activities (8,023) (12,701) (275)
====== ======= ====
Net change in cash and cash equivalents (3,653) (6,968) (6,959)
====== ====== ======
Cash and cash equivalents, beginning of year 35,116 31,463 24,495
====== ====== ======
Cash and cash equivalents, end of year $31,463 $24,495 $17,536
======= ======= =======
Supplemental cash flow information:
Interest paid $ 1,860 $ 1,440 $ 584
======== ======== ========
Income taxes paid $11,836 $16,799 $15,902
======= ======= =======
Noncash activities:
Issuance of common stock--Antilles Wireless acquisition $0 $1,391 $0
== ====== ==
Issuance of common stock--VI Access, Inc. acquisition $1,000 $0 $0
====== == ==
Issuance of common stock--Cobex International Inc. $0 $392 $0
== ==== ==
The accompanying notes are an integral part of these consolidated
financial statements.
F-6
Atlantic Tele-Network, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1999, 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 wholly owns Wireless World, LLC ("Wireless World"), which holds
Multichannel Multipoint Distribution Service ("MMDS") and Local Multipoint
Distribution Service ("LMDS") licenses for the United States ("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)") and an 80% interest in Transnet, S.A.
("Transnet"), Haitian corporations which have been principally engaged in
dispatch radio, mobile telecommunications, paging, and internet access and
data services in Haiti (see Note 3). 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"), a Bermuda corporation which operates under the
name "Cellular One" and is the sole cellular and PCS competitor in Bermuda to
the Bermuda Telephone Company. ATN provides management, technical, financial,
regulatory, and marketing services for its subsidiaries and affiliates for a
management fee equal to 6% of their revenues.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying consolidated balance sheets as of December 31, 2000 and
2001 and the results of operations and cash flows for the three years in the
period ended December 31, 2001 include the accounts of the Company and its
majority-owned subsidiaries, GT&T, Transnet S.A., and ATN (Haiti), and its
wholly owned subsidiaries, Wireless World and Atlantic Tele-Center, Inc.
Investments in affiliated entities in which the Company has at least 20%
ownership and less than 50% ownership and does not have management control are
accounted for using the equity method of accounting. All material intercompany
transactions and balances have been eliminated in consolidation.
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 dates
of the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ significantly from
those estimates.
Cash and Cash Equivalents
For purposes of the statements of cash flows, the Company considers all
investments with an original maturity of three months or less to be cash
equivalents. As of December 31, 2000 and 2001, $4.9 million and $2.6 million,
respectively, of the Company's cash was denominated in the Guyanese dollar.
There are no significant restrictions on the Company's use of this cash or its
ability to convert this cash to U.S. dollars.
F-7