Atlantic Tele-Network, Inc. Reports Second Quarter 2012 Results

Atlantic Tele-Network, Inc. (NASDAQ: ATNI), today reported results for the second quarter ended June 30, 2012.

Second Quarter/First Half 2012 Financial Results

"Profitability significantly increased in the second quarter primarily as a result of the anticipated expense reductions and the operating efficiencies we achieved in our U.S. retail wireless business. Additionally, our results for the period benefitted from higher international wireless revenues, which partially offset lower U.S. retail wireless revenues that resulted from the net subscriber attrition we experienced during the transition period last year,” said Michael T. Prior, Chief Executive Officer. “In fact, this marks the first quarter since the Alltel acquisition was completed in April 2010 that we experienced an overall net gain in subscribers, and while there is still work to be done to attract more postpaid customers, we are pleased to have reached this milestone. The positive trends of our U.S. prepaid subscribers and the initial response to our Walmart retail launch is encouraging. In the third quarter, however, we will experience a high percentage of contract expirations, which combined with seasonality, are likely to result in somewhat lower subscriber levels for the period.

"Our international wireless business continued to perform well in the second quarter with operating results benefitting from higher revenues and further expense synergies following our May 2011 merger in Bermuda. U.S. wholesale revenues were stable year-on-year and increased 9% sequentially due to seasonal factors,” Mr. Prior said.

Total revenues for the second quarter were $185.3 million, a 4% decrease from the $193.8 million reported for the second quarter of 2011, reflecting lower U.S. retail wireless revenues, partially offset by higher international wireless revenues and equipment sales.

Adjusted EBITDA1 for the 2012 second quarter was $49.7 million, 55% above the $32.0 million reported in the 2011 second quarter, led by the strong performance of our U.S. Wireless and Island Wireless segments, where adjusted EBITDA increased by $18.4 million and $2.8 million, respectively, partially offset by a decrease of $2.6 million in the International Integrated Telephony segment. Second quarter 2011 U.S. Wireless segment results were impacted by significant costs associated with the transition of the acquired Alltel wireless assets and other one-time items, totaling approximately $14.8 million. Total operating income for the second quarter of 2012 was $23.1 million, a 267% increase over the $6.3 million reported in last year's second quarter. Net income attributable to ATN's stockholders was $10.5 million, or $0.67 per diluted share, more than five times the $1.8 million, or $0.12 per diluted share, reported in last year’s second quarter.

“First half 2012 results illustrate the solid earnings capability of our diversified portfolio of telecom service assets. We continue to deleverage while also maintaining a high level of investment in our networks. This strategy has provided us with an even stronger balance sheet and offers us the flexibility to rapidly increase internal and external investments as the circumstances and opportunities arise,” Mr. Prior said.

Total revenues for the first six months of 2012 were $368.2 million compared to $381.9 in last year’s first half, a decrease of 4%. Adjusted EBITDA was $94.8 million, up 41% year-over-year; operating income increased 147% to $41.2 million; and net income attributable to ATN’s stockholders was $19.9 million, or $1.27 per diluted share, more than three times the $6.3 million or $0.41 per diluted share reported for last year’s first half.

Second Quarter 2012 Operating Highlights

U.S. Wireless Service Revenues

U.S. wireless service revenues include voice and data service revenues from the Company's prepaid and postpaid retail operations as well as its wholesale roaming operations. Total service revenues from the U.S. wireless businesses were $135.6 million compared to $147.3 million in the second quarter of 2011.

U.S. Retail wireless service revenues were $84.1 million, 12% below the $95.4 million reported in the 2011 second quarter. This decrease was due to net subscriber attrition that the Company experienced during the post-acquisition period in 2011. At the end of the 2012 second quarter, the Company had approximately 584,000 U.S. retail subscribers, a decrease of 9% from the approximately 639,000 subscribers the Company had at the end of last year’s second quarter. This quarter marked the first in which the Company experienced net subscriber additions since acquiring its U.S. retail wireless business in April 2010. The Company is entering a period of higher than normal contract expirations, which in conjunction with a seasonal decline in subscriber additions, will likely lead to somewhat lower subscriber levels for the third quarter of 2012. Of the total subscribers at June 30, 2012, approximately 442,000 were postpaid subscribers and approximately 142,000 were prepaid subscribers. Additional operating data on the Company’s U.S. retail wireless business can be found in Table 4 of this release.

U.S. Wholesale wireless revenues were $51.6 million, comparable to the $51.9 million reported in the second quarter of 2011. Data revenues accounted for 51% of wholesale wireless revenues for the quarter, compared to 42% a year earlier. Data volume growth has continued to largely offset the impact of the decline in the minutes of use for voice traffic, consistent with industry trends.

International Wireless Revenues

International wireless revenues include retail and wholesale voice and data wireless revenues from international operations in Bermuda and the Caribbean, including the U.S. Virgin Islands. International wireless revenues were $20.3 million, an increase of 10% over the $18.4 million reported in the second quarter of 2011. This increase primarily resulted from the Company’s merger of its Bermuda operations with another wireless carrier in May 2011 and subscriber growth in the U.S. Virgin Islands.

Wireline Revenues

Wireline revenues are generated by the Company's wireline operations in Guyana, including international telephone calls into and out of that country, its integrated voice and data operations in New England and its wholesale transport operations in New York State. Wireline revenues were $20.9 million, essentially level with the amount reported in the second quarter of 2011.

Reportable Operating Segments

The Company has four reportable segments: i) U.S. Wireless, ii) International Integrated Telephony, which operates in Guyana, iii) Island Wireless, which generates its revenues and has its assets located in Bermuda and the Caribbean (including the U.S. Virgin Islands) and iv) U.S. Wireline. Financial data on our reportable operating segments for the three months ended June 30, 2012 are as follows (in thousands):

U.S. Wireless

International
Integrated
Telephony

Island WirelessU.S. WirelineReconciling Items 1Total
Total Revenue $ 142,482 $ 23,219 $ 14,831 $ 4,761 $ - $ 185,293
Adjusted EBITDA 42,302 8,631 3,070 27 (4,374 ) 49,656
Operating Income (Loss) 23,978 4,141 287 (666 ) (4,666 ) 23,074

(1) Reconciling items are comprised of corporate general and administrative costs and acquisition-related charges.

Balance Sheet and Cash Flow Highlights

Cash and cash equivalents at June 30, 2012 were $79.8 million. Long-term debt was $258.2 million. For the second quarter, net cash provided by operating activities was $58.6 million and $79.6 million for the first half of 2012. Second quarter capital expenditures were $13.2 million, and $32.3 million for the first half of 2012. The Company expects full year 2012 capital expenditures in the range of $80 to $95 million, of which $45 to $55 million is expected to be allocated to the U.S. Wireless segment.

Conference Call Information

Atlantic Tele-Network will host a conference call on Thursday, August 2, 2012 at 9:30 a.m. Eastern Time (ET) to discuss its 2012 second quarter results. The call will be hosted by Michael Prior, President and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: 877-734-4582

About Atlantic Tele-Network

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

Cautionary Language Concerning Forward Looking Statements

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the competitive environment in our key markets, demand for our services and industry trends; the outcome of regulatory matters; our continued access to the credit and capital markets; the pace of our network expansion and improvement, including our level of estimated future capital expenditures and our realization of the benefits of these investments; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results. Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1) the general performance of our operations, including operating margins, wholesale revenues, and the future retention and turnover of our subscriber base; (2) our ability to maintain favorable roaming arrangements; (3) increased competition; (4) economic, political and other risks facing our foreign operations; (5) the loss of certain FCC and other licenses, USF funds or other regulatory changes affecting our businesses; (6) rapid and significant technological changes in the telecommunications industry; (7) any loss of any key members of management; (8) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure and retail wireless business; (9) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (10) the occurrence of severe weather and natural catastrophes; (11) our continued access to capital and credit markets; and (12) our ability to realize the value that we believe exists in our businesses. These and other additional factors that may cause actual future events and results to differ materially from the events and results indicated in the forward-looking statements above are set forth more fully under Item 1A “Risk Factors” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2011, filed with the SEC on March 15, 2012 and in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2012, filed with the SEC on May 10, 2012. The Company undertakes no obligation to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.

Use of Non-GAAP Financial Measures

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this news release also contains non-GAAP financial measures. Specifically, ATN has presented Adjusted EBITDA and ARPU measures. Adjusted EBITDA is defined as net income attributable to ATN, Inc. stockholders before interest, taxes, depreciation and amortization, acquisition related charges, impairment of intangible assets, gain on disposition of long-lived assets, other income or expense, bargain purchase gain, net income attributable to non-controlling interests, and equity in earnings of unconsolidated affiliates. ARPU, or monthly average revenue per subscriber/unit, is computed by dividing total retail service revenues per period by the weighted average number of subscribers with service during that period, and then dividing that result by the number of months in the period. The Company believes that the inclusion of these non-GAAP financial measures helps investors to gain a meaningful understanding of the Company's core operating results and enhance comparing such performance with prior periods, without the distortion of the recent increased expenses associated with the Alltel transaction. ATN’s management uses these non-GAAP measures, in addition to GAAP financial measures, as the basis for measuring our core operating performance and comparing such performance to that of prior periods. The non-GAAP financial measures included in this news release are not meant to be considered superior to or a substitute for results of operations prepared in accordance with GAAP. Reconciliations of the non-GAAP financial measures used in this news release to the most directly comparable GAAP financial measures are set forth in the text of, and the accompanying tables to, this press release.

1 See Table 5 for reconciliation of Net Income to Adjusted EBITDA.

Table 1

ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Balance Sheets
(in Thousands)
June 30, December 31,
20122011
Assets:
Cash and cash equivalents $ 79,837 $ 48,735
Other current assets 130,922 135,165
Total current assets 210,759 183,900
Property, plant and equipment, net 456,239 483,203
Goodwill and other intangible assets, net 182,114 186,871
Other assets 27,700 19,757
Total assets $ 876,812 $ 873,731
Liabilities and Stockholders’ Equity:
Current portion of long-term debt $ 15,680 $ 25,068
Other current liabilities 118,611 120,710
Total current liabilities 134,291 145,778
Long-term debt, net of current portion 258,235 257,146
Other liabilities 115,556 118,277
Total liabilities 508,082 521,201
Total Atlantic Tele-Network, Inc.’s stockholders’ equity 309,817 294,266
Non-controlling interests 58,913 58,264
Total equity 368,730 352,530
Total liabilities and stockholders’ equity $ 876,812 $ 873,731

Table 2

ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Statements of Operations
(in Thousands, Except per Share Data)
Three Months Ended Six Months Ended
June 30, June 30,
20122011 (a)20122011 (a)
Revenues:
U.S. wireless:
Retail $ 84,062 $ 95,410 $ 170,812 $ 195,079
Wholesale 51,569 51,870 98,952 96,567
International wireless 20,315 18,434 39,270 32,497
Wireline 20,889 20,886 42,437 41,557
Equipment and other 8,458 7,153 16,712 16,208
Total revenue 185,293 193,753 368,183 381,908
Operating expenses:
Termination and access fees 38,951 54,539 79,434 106,313
Engineering and operations 21,945 21,897 43,281 43,802
Sales, marketing and customer service 31,203 36,079 63,377 67,908
Equipment expense 21,989 18,486 42,340 40,069
General and administrative 21,549 30,775 44,907 56,390
Acquisition-related charges - 316 5 567
Depreciation and amortization 26,582 25,384 53,606 50,192
Total operating expenses 162,219 187,476 326,950 365,241
Operating income 23,074 6,277 41,233 16,667
Other income (expense):
Interest income (expense), net (3,927 ) (4,150 ) (7,806 ) (7,842 )
Other income (expense) (331 ) 4 (295 ) 599
Equity in earnings of unconsolidated affiliates 930 239 2,331 755
Other income (expense), net (3,328 ) (3,907 ) (5,770 ) (6,488 )
Income before income taxes 19,746 2,370 35,463 10,179
Income taxes 7,979 1,052 14,759 4,882
Net income 11,767 1,318 20,704 5,297
Net loss (income) attributable to non-controlling interests, net of tax (1,237 ) 497 (853 ) 1,015
Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 10,530 $ 1,815 $ 19,851 $ 6,312

Net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:

Basic $ 0.68 $ 0.12 $ 1.28 $ 0.41
Diluted $ 0.67 $ 0.12 $ 1.27 $ 0.41
Weighted average common shares outstanding:
Basic 15,535 15,394 15,495 15,389
Diluted 15,609 15,497 15,581 15,478
a) Certain reclassifications have been made to prior period amounts to conform to the current presentation

Table 3

ATLANTIC TELE-NETWORK, INC.
Unaudited Condensed Consolidated Cash Flow Statement
(in Thousands)
Six Months Ended June 30,
20122011
Net income $ 20,704 $ 5,297
Depreciation and amortization 53,606 50,192
Change in working capital (2,459 ) (18,410 )
Other 7,757 5,950
Net cash provided by operating activities 79,608 43,029
Capital expenditures (32,272 ) (45,428 )
Other - 4,554
Net cash used by investing activities (32,272 ) (40,874 )
Borrowings under credit facility 321,378 23,096
Principal repayments of long-term debt (327,487 ) (6,516 )
Dividends paid on common stock (7,119 ) (6,771 )
Distributions to non-controlling interests (929 ) (1,608 )
Other (2,077 ) (909 )
Net cash used by financing activities (16,234 ) 7,292
Net change in cash and cash equivalents 31,102 9,447
Cash and cash equivalents, beginning of period 48,735 37,330
Cash and cash equivalents, end of period $ 79,837 $ 46,777

Table 4

ATLANTIC TELE-NETWORK, INC.
Operating Data for U.S. Retail Wireless Operations
Three Months Ended:JUN 2011SEP 2011DEC 2011MAR 2012JUN 2012

Beginning Subscribers

674,080

638,839

592,620

579,716

578,585

Prepay169,673145,854123,157121,688130,981
Postpay504,407492,985469,463458,028447,604
Gross Additions38,85930,01846,75754,83755,448
Prepay13,9519,78422,63932,37231,868
Postpay24,90820,23424,11822,46523,580
Net Additions(35,241)(46,219)(12,904)(1,131)4,962
Prepay(23,819)(22,697)(1,469)9,29310,471
Postpay(11,422)(23,522)(11,435)(10,424)(5,509)
Ending Subscribers638,839592,620579,716578,585583,547
Prepay145,854123,157121,688130,981141,452
Postpay492,985469,463458,028447,604442,095
ATLANTIC TELE-NETWORK, INC.
U.S. Retail Wireless Operations Key Performance Indicators
Three Months Ended:JUN 2011SEP 2011DEC 2011MAR 2012JUN 2012
Average Subscribers (weighted monthly) 655,292 618,862 583,470 578,531 580,441
Monthly Average Revenues per Subscriber/Unit (ARPU)
● Subscriber ARPU $47.90 $47.51 $48.56 $49.36 $47.63
● Postpaid Subscriber ARPU $54.47 $52.68 $54.43 $54.15 $53.96
Monthly Postpay Subscriber Churn 2.42% 2.97% 2.55% 2.41% 2.18%
Monthly Blended Subscriber Churn 3.73% 4.05% 3.40% 3.22% 2.90%

Table 5

ATLANTIC TELE-NETWORK, INC.
Reconciliation of Non-GAAP Measures
(In Thousands)
Reconciliation of Net Income to Adjusted EBITDA for the Three Months Ended June 30, 2011 and 2012
Three Months Ended June 30, 2011

U.S Wireless

International
Integrated
Telephony

Island Wireless

U.S. Wireline

Reconciling Items

Total

Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 1,815
Net income attributable to non-controlling interests, net of tax (497 )
Income taxes 1,052
Equity in earnings of unconsolidated affiliates (239 )
Other income (4 )
Interest expense, net 4,150
Operating income (loss) $ 6,507 $ 6,640 $ (2,440 ) $ 51 $ (4,481 ) $ 6,277
Depreciation and amortization 17,363 4,557 2,453 791 220 25,384
Acquisition-related charges - - 218 - 98 316
Adjusted EBITDA $ 23,870 $ 11,197 $ 231 $ 842 $ (4,163 ) $ 31,977
Three Months Ended June 30, 2012

U.S Wireless

International
Integrated
Telephony

Island Wireless

U.S. Wireline

Reconciling Items

Total

Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 10,530
Net loss attributable to non-controlling interests, net of tax 1,237
Income taxes 7,979
Equity in earnings of unconsolidated affiliates (930 )
Other income 331
Interest expense, net 3,927
Operating income (loss) $ 23,978 $ 4,141 $ 287 $ (666 ) $ (4,666 ) $ 23,074
Depreciation and amortization 18,324 4,490 2,783 693 292 26,582
Adjusted EBITDA $ 42,302 $ 8,631 $ 3,070 $ 27 $ (4,374 ) $ 49,656
Reconciliation of Net Income to Adjusted EBITDA for the Six Months Ended June 30, 2011 and 2012
Six Months Ended June 30, 2011

U.S Wireless

International
Integrated
Telephony

Island Wireless

U.S. Wireline

Reconciling Items

Total

Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 6,312
Net income attributable to non-controlling interests, net of tax (1,015 )
Income taxes 4,882
Equity in earnings of unconsolidated affiliates (755 )
Other income (599 )
Interest expense, net 7,842
Operating income (loss) $ 16,934 $ 12,884 $ (4,103 ) $ 11 $ (9,059 ) $ 16,667
Depreciation and amortization 34,771 9,104 4,323 1,577 417 50,192
Acquisition-related charges - - 218 - 349 567
Adjusted EBITDA $ 51,705 $ 21,988 $ 438 $ 1,588 $ (8,293 ) $ 67,426
Six Months Ended June 30, 2012

U.S Wireless

International
Integrated
Telephony

Island Wireless

U.S. Wireline

Reconciling Items

Total

Net income attributable to Atlantic Tele-Network, Inc. stockholders $ 19,851
Net loss attributable to non-controlling interests, net of tax 853
Income taxes 14,759
Equity in earnings of unconsolidated affiliates (2,331 )
Other income 295
Interest expense, net 7,806
Operating income (loss) $ 42,900 $ 10,377 $ (1,324 ) $ (1,089 ) $ (9,631 ) $ 41,233
Depreciation and amortization 37,026 9,017 5,569 1,438 556 53,606
Acquisition-related charges - - - - 5 5
Adjusted EBITDA $ 79,926 $ 19,394 $ 4,245 $ 349 $ (9,070 ) $ 94,844

Contacts:

Atlantic Tele-Network, Inc.
Michael T. Prior, 978-619-1300
Chief Executive Officer
or
Justin D. Benincasa, 978-619-1300
Chief Financial Officer
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