ATNI - Atlantic Tele-Network, Inc.

[no_thanks]

 

 

Really interesting write up at OTCAdventures on this one.  It looks kinda cheap, with a nice cash pile and competent capital allocators at the helm.  I would be really grateful to hear anyone's Pro's or Con's on it.

 

 

Thanks!

 

http://otcadventures.com/?p=1229

 

 

[Radio Free Cash Flow]

Author here. Thanks for posting.

 

As you said, ATNI looks kinda cheap. As in this is not a company that will double over the next year, but the current price offers the chance to invest alongside some very competent owner-operators at a price that is less than a conservative estimate of intrinsic value. I strongly expect that management will find a way to turn that new pile of cash into something immensely beneficial to shareholders, just like they did with Alltel. The cash, combined with the unused line of credit, gives ATNI over a half billion in firepower.

 

Management has a proven track record. They built book value by over 10% annually over the last 15 years while paying out a substantial portion of earnings in dividends, creating massive shareholder returns along the way.  Also, the now retired founder and father of the current CEO owns 35% of the company. I wish him many more years, but estate tax considerations could result in the sale of another large division or the entire company.

[no_thanks]

Results are out and look really solid to me.  I am getting EV/EBITDA of 4.7x for a nicely growing company. 

 

 

 

 

 

 

 

Atlantic Tele-Network, Inc. Reports Fourth Quarter and Full Year 2013 Results

 

Fourth Quarter 2013 Preliminary Financial Highlights:

 

  -- Revenues increased to $76.5 million

 

  -- Adjusted EBITDA was up 14% to $28.6 million

 

  -- Operating income was $16.3 million

 

  -- Net income from continuing operations attributable to ATN's stockholders

      was $16.2 million, or $1.02 per diluted share

Full Year 2013 Preliminary Financial Highlights:

 

  -- Gain on the sale of Alltel operations attributable to ATN's stockholders

      was $278.2 million, net of tax

 

  -- Revenues increased 5% to $292.3 million

 

  -- Adjusted EBITDA was up 16% to $114.7 million

 

  -- Operating income increased 14% to $64.4 million

 

  -- Net income from continuing operations attributable to ATN's stockholders

      was $29.0 million, or $1.83 per diluted share, inclusive of

      transaction-related and debt repayment charges of $12.8 million

BEVERLY, Mass., Feb. 25, 2014 (GLOBE NEWSWIRE) -- Atlantic Tele-Network, Inc. (Nasdaq:ATNI) today reported results for the fourth quarter and year ended December 31, 2013. Unless otherwise indicated, the discussion of the Company's results is focused on its continuing operations, and comparisons are to the same period in the prior year. The Company's results are preliminary and may be subject to adjustment as the results of its International Integrated Telephony segment are finalized. The Company currently does not expect such adjustment, if any, to be material to its consolidated results of operations. Results for all periods presented reflect classification of the Company's U.S. retail wireless business operated under the "Alltel" name as discontinued operations as a result of the completion of the Company's sale of this business to AT&T Mobility LLC on September 20, 2013.

 

Fourth Quarter 2013 Financial Results

 

"We ended 2013 with another quarter of solid revenue growth driven by the continued strong performance of our domestic wholesale wireless business and our Island wireless operations," said Michael Prior, Chief Executive Officer. "Higher data traffic across our expanded U.S. wholesale wireless network more than compensated for the sale of Midwest U.S. spectrum and related assets that took place in last year's fourth quarter. International wireless revenues benefitted from continued subscriber growth, particularly in our Island Wireless markets, and our wireline revenue remained stable with the comparable year-ago period. All of our business segments posted improved EBITDA performance reflecting an ability to increase volumes without a commensurate increase in costs."

 

Fourth quarter revenues were $76.5 million, 9% above the $69.9 million reported for the fourth quarter of 2012. Adjusted EBITDA(1) for the 2013 fourth quarter was $28.6 million, a 14% increase over the $25.1 million for the 2012 fourth quarter. Operating income was $16.3 million, compared to last year's $21.1 million, which benefitted from the net positive effect of an $11.6 million gain on disposal of long-lived assets and a $3.4 million intangible asset impairment charge. Net income from continuing operations attributable to ATN's stockholders was $16.2 million, or $1.02 per diluted share, and included a one-time income tax benefit of approximately $8.4 million. Net income from continuing operations attributable to ATN's stockholders in last year's fourth quarter was $7.5 million, or $0.48 per diluted share, which included the afore-mentioned gain on sale of long-lived assets and impairment charge.

 

Full Year 2013 Financial Results

 

Commenting on full year results, Mr. Prior stated, "2013 was a transformational year for ATN, as we completed the sale of our Alltel domestic retail wireless business. The pre-tax gain on the sale of $503 million allowed us to utilize $261 million of the net proceeds to retire all of the Company's long term debt in advance of redeploying the funds, and build our cash position to over $400 million at year-end. At the same time, we succeeded in growing our domestic and international wireless businesses, posting a 14% increase in operating income and 16% increase in Adjusted EBITDA. It will be challenging to replicate this rate of growth in 2014, but we see opportunities to improve these businesses over the longer term.

 

"Capital expenditures in our U.S. wholesale wireless operation continue to provide solid returns on our investments, and our 2014 plans call for additional capital outlays that, similar to 2013, will be heavily weighted to further expanding our U.S. Wireless network. At the same time, we continue to evaluate opportunities to re-invest the proceeds from the Alltel sale in acquisitions, ventures and projects that have the potential for significant growth in cash flow over the intermediate to long term.

 

"In September 2013, our Board of Directors approved ATN's 15(th) consecutive annual increase in the Company's dividend, to $0.27 per share per quarter," added Mr. Prior.

 

Revenues were $292.3 million, 5% above the $277.8 million reported for 2012. Adjusted EBITDA was $114.7 million, up 16% from $99.0 million in the prior year; operating income increased 14% to $64.4 million; and net income from continuing operations attributable to ATN's stockholders was $29.0 million, or $1.83 per diluted share. 2013 results included a $1.1 million gain on the sale of long-lived assets, $2.7 million of transaction-related charges and an income tax benefit of approximately $8.4 million related to an intercompany note receivable write down. In addition, 2013 results included a $5.4 million loss on interest rate swap contracts and a $4.7 million charge to interest expense for the write-off of deferred financing costs, both related to the prepayment of the Company's long term debt under its credit facility. In the comparable 2012 period, net income from continuing operations attributable to ATN's stockholders was $20.8 million, or $1.33 per diluted share, which included a gain on the sale of long-lived assets of $11.6 million and an intangible asset impairment charge of $3.4 million.

 

For 2013, net income from discontinued operations attributable to ATN's stockholders was $4.6 million, or $0.29 per diluted share, and the net gain attributable to ATN's stockholders on the disposal of the Alltel business was $278.2 million, or $17.59 per share

 

Fourth Quarter 2013 Operating Highlights

 

U.S. Wireless Revenues

 

U.S. wireless revenues primarily consist of voice and data revenues from the Company's wholesale roaming operations. Total revenues from the U.S. wireless business were $27.3 million in the fourth quarter of 2013, an increase of 10% from the $24.8 million reported in the fourth quarter of 2012. This strong revenue performance was driven by increased data traffic, which more than offset the sale of certain spectrum and related assets in the Midwest U.S. in the fourth quarter of 2012. Data revenues accounted for 61% of the U.S. wireless revenues in the fourth quarter, compared to 41% in the prior year. The Company ended the fourth quarter with 640 base stations in service compared to 569 base stations in service at the end of last year's fourth quarter.

 

International Wireless Revenues

 

International wireless revenues include retail and wholesale voice and data wireless revenues from international operations in Bermuda and the Caribbean. International wireless revenues were $24.8 million, an increase of 16% over the $21.3 million reported in the fourth quarter of 2012. The fourth quarter results included a benefit of approximately $1.8 million of previously unrecorded revenues that were related to earlier periods in 2013. The remainder of the increase was largely due to retail revenue growth within the Island Wireless segment. At the end of 2013, the Company had approximately 325,000 international wireless subscribers of which 88% were prepaid subscribers compared to 333,000 (88% prepaid) reported at the end of 2012.

 

Wireline Revenues

 

The Company's wireline revenues are generated by the Company's wireline operations in Guyana, including international telephone calls into and out of that country, by its integrated voice and data and wholesale transport operations in New England and New York State, and by its U.S.-based wholesale long-distance voice services. Wireline revenues were $21.6 million, a 1% increase from the $21.4 million recorded in the fourth quarter of 2012. The increase was primarily a result of higher wholesale long-distance voice service revenue, as well as increased broadband revenue in Guyana, partially offset by declines in local and international voice revenue in that market.

 

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 December 31, 2013 and 2012 are as follows (in thousands):

 

 

For the three months ended December 31, 2013:

---------------------------------------------------------------------------------

 

 

                      International

              U.S.      Integrated    Island    U.S.    Reconciling

            Wireless    Telephony    Wireless  Wireline  Items (2)    Total

----------  ---------  -------------  ---------  --------  -----------  ---------

 

Total

Revenue    $ 27,638      $ 24,970  $ 17,352  $ 6,565        $ --  $ 76,525

Adjusted

EBITDA        16,584        12,840      3,983      641      (5,453)    28,595

Operating

Income

(Loss)        12,978          8,341      1,384    (289)      (6,076)    16,338

----------  ---------  -------------  ---------  --------  -----------  ---------

 

For the three months ended December 31, 2012:

---------------------------------------------------------------------------------

 

 

                      International

                U.S.    Integrated    Island      U.S.  Reconciling

            Wireless      Telephony  Wireless  Wireline    Items (2)      Total

----------  ---------  -------------  ---------  --------  -----------  ---------

 

Total

Revenue    $ 25,135      $ 23,556  $ 15,855  $ 5,366        $ --  $ 69,912

Adjusted

EBITDA        15,324        10,769      2,958    (101)      (3,802)    25,148

Operating

Income

(Loss)        23,256          6,230    (3,015)    (826)      (4,525)    21,120

----------  ---------  -------------  ---------  --------  -----------  ---------

 

 

Balance Sheet and Cash Flow Highlights

 

Cash and cash equivalents at December 31, 2013 were $356.6 million. In addition, $78.0 million of the proceeds from the sale of Alltel are being held in escrow and are included in current and long-term restricted cash as of December 31, 2013. The Company repaid all outstanding debt ($261.0 million) under its credit facility during 2013. Net cash used in operating activities of continuing operations was $131.4 million, which included $256.8 million in cash paid for income taxes, primarily related to taxes owed on the gain on the sale of the Alltel business. Capital expenditures related to continuing operations were $69.3 million in 2013. The Company expects 2014 capital expenditures in the range of $65.0 to $70.0 million.

 

 

[Radio Free Cash Flow]

At the risk of starting an echo chamber in here, results were good! It demonstrates that the company's assets are strong and growing. Data traffic is only going to increase, both domestically and in the Caribbean.

 

The transitional post-Alltel period may be the best chance to invest in this very good business at such a low valuation.

[mankap]

They are sitting on lot of cash and generating additional cash.

Any chance that they will do a buyback

[no_thanks]

They are sitting on lot of cash and generating additional cash.

Any chance that they will do a buyback

 

"The pre-tax gain on the sale of $503 million allowed us to utilize $261 million of the net proceeds to retire all of the Company's long term debt in advance of redeploying the funds, and build our cash position to over $400 million at year-end"

 

Sounds to me like they are looking to buy something more than do a buyback, but I wasn't able to listen to the conference call this morning so I might of missed something. 

[siddharth18]

Seems like an attractive opportunity. Would like to know other members' thoughts - esp Packer16 - one of the more seasoned teleco player  ;)

[no_thanks]

Got a chance to read the conference call.  They are definitely looked to buy an asset, and not talking about buybacks: 

 

"Moving onto strategic investments, as I'd promised earlier, I'd say a few words about putting our balance sheet to work. At our size the over $400 million of cash we have sitting on the and unlevered balance sheet clearly is an important consideration for investors. How and when we deploy our balance sheet capacity will figure prominently in our company's longer-term growth prospects and stockholder returns.

 

While as a policy matter we do not comment on rumors or specific investment we are considering, I can say that we are active in the market for new opportunities and have been particularly active for many months now. We've gotten close to some investments from the very large to much smaller, but we have not found something yet that we can close on. And the main reason for this is price expectations or other issues that have arisen and caused an investment to fall outside our parameters.

 

In some cases we concluded that we just could not get a good enough handle on the risks and rewards involved. We just didn't know enough.

 

In terms of our process and our targets, we are being proactive and looking at certain sectors in companies rather than sitting back and waiting for the assets auctioned by bankers. That has its pros and cons, as you can waste time with unsophisticated transaction teams, but it helps inform our process overall and could help us find something better suited to our interests.

 

We are most interested in opportunities that have potential for long-term growth without putting us into symmetrical competition with the tier one operators. We are patient investors and we do like infrastructure and we're willing to venture into areas that are not seen by the broader market as timely, today. I know a likely response to that, that was a bit vague but I am trying to anticipate your questions by showing the level of detail we are willing to get into at this time.

 

So, in summary, for ATN overall this is another strong quarter, and more to the point, an excellent year. I'm very proud of the work our team has done. They've produced an excellent result out of a tough, long-term strategic situation with the sale of Alltel, and despite that transformational sale kept their eyes on operating our existing businesses and finding new ways to deliver value to stockholders.

 

And, as I said we're exploring interesting opportunities to deploy our resources in other areas that have the potential to add significant value. So, with that I'll turn the call back over to Justin."

[Packer16]

Given the only 20% discount to estimated IV, it appears ANTI is bet on what management will do with the cash.  There are other telcos that sell at a larger discount to IV like GNCMA or ALSK.

 

Packer

[siddharth18]

Has anything materially changed between March and now? Price has dropped by around 15%

[no_thanks]

US wireless profits are expected to remain flat for the next two quarters, due to a price decrease I believe.  That doesn't bother me at all, I am just waiting for and betting on them making a good acquisition, which you may or may not think is a good idea.  They could easily buy a business between 500M-1B without issuing equity, and have shown that they are solid managers.  I still like it, and was on the fence about buying more today, but decided to hold off. 

 

Love to hear anyone else's feedback...

[no_thanks]

Write Up that came out before their most recent earnings, which looked really good to me.  But I guess if the whole industry is trading at these low multiples, then it might just continue to hang around at the current price.  I think it is a good idea though.

 

2014-07_ATNI_Investment_Memo.pdf