Form 8-K ATLANTIC TELE NETWORK For: Apr 27

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  April 27, 2016

 

 

ATLANTIC TELE-NETWORK, INC.

(Exact name of registrant as specified in its charter)

 

 

600 Cummings Center

Beverly, MA 01915

(Address of principal executive offices and zip code)

 

(978) 619-1300
(Registrant’s telephone number, including area code)

 

N/A
(Former name or former address, if changed since last report.)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o     Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

Item 2.02                                           Results of Operations and Financial Condition.

 

On April 27, 2016, Atlantic Tele-Network, Inc. (the “Company”) issued a press release announcing financial results for the three months ended March 31, 2016.  A copy of the press release is furnished herewith as Exhibit 99.1.

 

Exhibit 99.1 is furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.

 

Item 9.01                                           Financial Statements and Exhibits.

 

(d)                                               Exhibits

 

99.1                                              Press Release of the Company, dated April 27, 2016.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

	ATLANTIC TELE-NETWORK, INC.
	By:	/s/ Justin D. Benincasa
		Justin D. Benincasa
		Chief Financial Officer
Dated April 27, 2016

 

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EXHIBIT INDEX

 

Exhibit Number		Description of Exhibit
99.1		Press Release of the Company, dated April 27, 2016.

 

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Exhibit 99.1

 

 

NEWS RELEASE

 

 

ATN Reports

First Quarter 2016 Results

 

First Quarter 2016 Financial Highlights:

 

·                  Revenues: $89.7 million, up 5%

·                  Adjusted EBITDA(1): $34.1 million, unchanged

·                  Operating income: $15.9 million including $3.7 million of transaction-related charges

·                  Net income attributable to ATN’s stockholders: $6.1 million, or $0.38 per diluted share including transaction-related charges of $3.7 million, or approximately $0.16 per diluted share

·                  Cash flow from operating activities: $28.3 million

 

Beverly, MA (April 27, 2016) — ATN (NASDAQ: ATNI), today reported results for the first quarter ended March 31, 2016. 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 recently announced a change in its segment reporting structure and an unaudited recast of financial information for the last eight quarterly periods can be found in the Company’s Form 8-K filing, dated April 12, 2016.

 

First Quarter 2016 Financial Results and Business Review

 

“First quarter results represented the continued execution of our strategic growth plan,” said Michael Prior, Chief Executive Officer.  “As expected, consolidated revenue and EBITDA results were affected by the ongoing transition of our U.S. wholesale wireless business to a long term, alternative outsourced model. The revenue impact of this transition was partially offset by growth in rural retail wireless within our wholesale network footprint, and wireline gains in our International Telecom segment. We reported modestly higher year-on-year adjusted EBITDA improvement in each of our business segments.  Transaction-related expenses, mainly related to renewables, reduced both operating and net income.

 

 

“We continue to advance in expanding the scope of our operations and investing our balance sheet to increase returns.  This quarter, however, largely reflects the cost of those activities with the benefits expected in future periods as the planned investments move forward.

 

“We are working diligently on securing the necessary regulatory approvals for the two pending telecom acquisitions we announced last year, and expect to complete the Bermuda transaction shortly.

 

“In April, our subsidiary Ahana Renewables completed the purchase of the development business of Armstrong Energy Global, a developer and owner of solar farms in India. Together with Armstrong, we have established Vibrant Energy, which will oversee the development, construction and operations of photovoltaic solar projects in Southern India.  We currently expect Vibrant Energy to have 20 - 25 MW on line and generating revenue by early in the fourth quarter of this year, 45 MW by January 2017, and we are targeting the development of at least 250MW in solar energy projects in that market through the end of 2018,” concluded Mr. Prior.

 

First quarter 2016 revenues were $89.7 million, a 5% increase from the $85.3 million reported for the first quarter of 2015.  This was the result of a 9% increase in our U.S. Telecom segment revenues, a 1% increase in International Telecom segment revenues and a 6% increase in Renewable Energy segment revenues.

 

Adjusted EBITDA(1) for the first quarter was $34.1 million, which was flat to the prior year.  First quarter Adjusted EBITDA(1) for U.S. Telecom increased 1% over the prior year. International Telecom Adjusted EBITDA(1) increased 8% over the prior year, and Adjusted EBITDA(1) for Renewable Energy increased 8% over the prior year.  Offsetting individual segment gains were incremental overhead costs incurred in preparation for the pending acquisitions.

 

Operating income for the first quarter was $15.9 million, down 17% compared to last year’s $19.2 million in the same period.  Operating income for this period was negatively impacted by $3.7 million of transaction-related charges incurred this quarter, most of which stem from our investment activities in India.  We expect high transaction-related charges to continue in the current quarter. In the second quarter of 2016 we expect transaction related charges of $7.5 million to $9.0 million, reflecting the accounting treatment of certain elements of the India purchase, as well as banker fees related to any telecom acquisitions that close.

 

Net income attributable to ATN’s stockholders for the first quarter was $6.1 million or $0.38 per diluted share, a significant increase over the prior year due to the Q1 2015 $19.9 million loss related to the deconsolidation of the non-controlling interest from the sale of our holdings in Turks and Caicos.

 

First Quarter 2016 Operating Highlights

 

The Company has three reportable segments: (i) U.S. Telecom; (ii) International Telecom; and (iii) Renewable Energy, consistent with how management views the structure and manages business operations in 2016.

 

U.S. Telecom

 

U.S. Telecom revenues consist of wireless revenues from our voice and data wholesale roaming operations and our smaller retail operations in the southwestern U.S. states and wireline revenues from our wholesale transport operations in the Northeastern United States.  Total U.S. Telecom segment revenues were $46.2 million in the first quarter of 2016, a 9% increase from the $42.4 million reported in the first quarter of 2015.  Wireless revenues, which represented 85% of this segment’s revenues for both the first quarter of 2016 and 2015, increased by 10% in the first quarter of 2016 compared with the first quarter of 2015.  This increase

 

(1)  See Table 4 for reconciliation of Net Income to Adjusted EBITDA.

 

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was the result of increased wholesale roaming revenues due to growth in data traffic volumes partially offset by rate declines, network expansions and increased wireless revenues in our retail operations.  Wireline revenues in the U.S. Telecom segment were $6.0 million and flat to the prior year.  The Company ended the first quarter of 2016 with 883 domestic base stations in service compared to 836 at the end of last year’s first quarter.

 

U.S. Telecom Adjusted EBITDA(1) of $22.4 million in the first quarter of 2016 represented a 1% increase over the prior year $22.3 million.  Current year revenue increases in this segment were partially offset by increases in roaming costs and other direct expenses associated with our wireless retail operations.  In addition, the prior year benefited from expense offsets related to a transition services agreement associated with the sale of a subsidiary.

 

For full year 2016, we reaffirm our expectation that U.S. wireless business revenues will range from $140 million to $150 million and that Adjusted EBITDA(1) margins will be 50% to 55%. Adjusted for the new reporting segments that became effective in 2016, this is equivalent to revenue guidance for U.S. Telecom of $165 million to $175 million and mid-40s% Adjusted EBITDA(1) margins.

 

International Telecom

 

International Telecom revenues consist of wireline revenues from our operations in the Caribbean and retail and wholesale voice and data wireless revenues from operations in Bermuda and the Caribbean including the USVI. International Telecom revenues were $37.9 million in the first quarter of 2016, a 1% increase from the $37.7 million reported in the first quarter of 2015.  The increase was due to growth in wireline broadband revenues partially offset by a decline in wireless revenues due to the sale of the Turks and Caicos operations at the end of the first quarter of 2015.

 

International Telecom Adjusted EBITDA(1) of $14.1 million in the first quarter increased 8% from $13.1 million in the prior year.  The increase in Adjusted EBITDA(1) reflects economies of scale benefits, expense efficiencies realized in some smaller operations, and the benefit from the sale of our Turks and Caicos operations at the end of the first quarter of 2015.

 

Renewable Energy

 

Renewable energy segment revenues are generated principally by the sale of energy and solar renewable energy credits from our 28 commercial solar projects in the United States.  For the first quarter of 2016, revenues from our renewable energy business were $5.6 million, up 6% from the $5.3 million in the prior year mostly due to the impact of heavy snowfall in Massachusetts on last year’s energy production.

 

Reportable Operating Segments

 

Financial data on our reportable operating segments for the three months ended March 31, 2016 and 2015 are as follows (in thousands):

 

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For the three months ended March 31, 2016:

 

		U.S. Telecom			International Telecom			Renewable Energy			Reconciling Items			Total
Revenue
Wireless		$	39,464		$	19,414		$	—		$	—		$	58,878
Wireline		6,046			16,399			—			—			22,445
Renewable Energy		—			—			5,589			—			5,589
Equipment and Other		688			2,086			—			—			2,774
Total Revenue		$	46,198		$	37,899		$	5,589		$	—		$	89,686
Adjusted EBITDA		22,400			14,078			4,242			(6,618		)	34,102
Operating Income (Loss)		16,746			7,737			63			(8,653		)	15,893

 

For the three months ended March 31, 2015:

 

		U.S. Telecom			International Telecom			Renewable Energy			Reconciling Items			Total
Revenue
Wireless		$	35,843		$	21,172		$	—		$	—		$	57,015
Wireline		5,993			14,600			—			—			20,593
Renewable Energy		—			—			5,289			—			5,289
Equipment and Other		540			1,907			—			—			2,447
Total Revenue		$	42,376		$	37,679		$	5,289		$	—		$	85,344
Adjusted EBITDA		22,278			13,090			3,917			(5,204		)	34,081
Operating Income (Loss)		16,775			6,179			2,652			(6,455		)	19,151

 

Balance Sheet and Cash Flow Highlights

 

Cash and cash equivalents at March 31, 2016 were $391.1 million.  In addition, the Company held $5.6 million of restricted cash primarily related to our renewable energy business.  Net cash provided by operating activities was $28.3 million for the first quarter of 2016, compared with net cash provided by operating activities of $35.5 million for the first quarter of 2015.  The decrease was due to legal and other transaction related expenses in the first quarter of 2016 and current year changes in working capital.  Capital expenditures were $16.4 million for the first quarter of 2016, and the Company expects full year 2016 capital expenditures for the telecom businesses to be in the range of $65 million to $75 million and in addition, capital expenditures for Renewable Energy to be in the range of $40 million to $50 million.

 

Conference Call Information

 

ATN will host a conference call on Thursday, April 28, 2016 at 9:30 a.m. Eastern Time (ET) to discuss its first quarter 2016 results. The call will be hosted by Michael Prior, President and Chief Executive Officer, and Justin Benincasa, Chief Financial Officer. The dial-in numbers are US/Canada: (877) 734-4582 and International: (678) 905-9376, conference ID 91134710. A replay of the call will be available at ir.atni.com beginning at 1:00 p.m. (ET) on Thursday, April 28, 2016.

 

About ATN

 

ATN (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 and owns and operates solar power systems in select locations in the United States.

 

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Through our operating subsidiaries, we (i) 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, (ii) provide distributed solar electric power to corporate, utility and municipal customers and (iii) are the owner and operator of terrestrial and submarine fiber optic transport systems. For more information, please visit www.atni.com.

 

Cautionary Language Concerning Forward Looking Statements

 

This press release contains forward-looking statements relating to, among other matters, our future financial performance and results of operations; the competitive environment in our key markets, demand for our services and industry trends; the outcome of regulatory matters; the pace of our network expansion and improvement, including our level of estimated future capital expenditures and our realization of the benefits of these investments; and management’s plans and strategy for the future. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events or results.  Actual future events and results could differ materially from the events and results indicated in these statements as a result of many factors, including, among others, (1)  the general performance of our operations, including operating margins, revenues, and the future growth and retention of our subscriber base and consumer demand for solar power; (2) government regulation of our businesses, which may impact our FCC and other telecommunications licenses or our renewables business; (3) economic, political and other risks facing our operations; (4) our ability to maintain favorable roaming arrangements; (5) our ability to efficiently and cost-effectively upgrade our networks and IT platforms to address rapid and significant technological changes in the telecommunications industry; (6) the loss of or an inability to recruit skilled personnel in our various jurisdictions, including key members of management; (7) our ability to find investment or acquisition or disposition opportunities that fit our strategic goals for the Company; (8) increased competition; (9) our ability to operate in the renewable energy industry; (10) our reliance on a limited number of key suppliers and vendors for timely supply of equipment and services relating to our network infrastructure; (11) the adequacy and expansion capabilities of our network capacity and customer service system to support our customer growth; (12) the occurrence of weather events and natural catastrophes; (13) our continued access to capital and credit markets; (14) our ability to realize the value that we believe exists in our businesses; and (15) our ability to receive requisite regulatory consents and approvals and satisfy other conditions needed to complete our proposed acquisitions. 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, 2015, filed with the SEC on February 29, 2016 and the other reports we file from time to time with the SEC.  The Company undertakes no obligation and has no intention to update these forward-looking statements to reflect actual results, changes in assumptions or changes in other factors that may affect such forward-looking statements.

 

Use of Non-GAAP Financial Measures

 

In addition to financial measures prepared in accordance with generally accepted accounting principles (GAAP), this news release also contains non-GAAP financial measures. Specifically, ATN has presented an Adjusted EBITDA measure and a net income measure exclusive of the results of loss on the deconsolidation of subsidiaries. Adjusted EBITDA is defined as net income attributable to ATN stockholders before income from discontinued operations, gain on disposal of discontinued operations, interest, taxes, depreciation and amortization, transaction-related charges, other income or expense, and net income attributable to non-controlling interests. Net income attributable to ATN stockholders excluding loss on deconsolidation of subsidiary and the related earnings per diluted share is defined as net income attributable to ATN stockholders less the loss and tax impact of the deconsolidation of the subsidiary.  The Company believes that the inclusion of these non-GAAP financial measures helps investors gain a meaningful understanding of the Company’s core operating results and enhances comparing such performance with prior periods. 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

 

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GAAP. Reconciliations of these non-GAAP financial measures used in this news release to the most directly comparable GAAP financial measure is set forth in the text of, and the accompanying tables to, this press release.

 

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Table 1

 

ATLANTIC TELE-NETWORK, INC.

Unaudited Condensed Consolidated Balance Sheets

(in Thousands)

 

		March 31,			December 31,
		2016			2015
Assets:
Cash and cash equivalents		$	391,102		$	392,045
Restricted cash		846			824
Other current assets		86,772			75,623
Total current assets		478,720			468,492
Long-term restricted cash		4,802			5,477
Property, plant and equipment, net		375,295			373,503
Goodwill and other intangible assets, net		89,820			90,043
Other assets		9,376			7,489
Total assets		$	958,013		$	945,004
Liabilities and Stockholders’ Equity:
Current portion of long-term debt		$	6,341		$	6,284
Taxes payable		12,881			9,181
Other current liabilities		68,262			68,890
Total current liabilities		87,484			84,355
Long-term debt, net of current portion		$	24,983		$	26,575
Deferred income taxes		45,406			45,406
Other long-term liabilities		35,909			26,944
Total long-term liabilities		106,298			98,925
Total liabilities		193,782			183,280
Total Atlantic Tele-Network, Inc.’s stockholders’ equity		681,218			680,299
Non-controlling interests		83,013			81,425
Total equity		764,231			761,724
Total liabilities and stockholders’ equity		$	958,013		$	945,004

 

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Table 2

 

ATLANTIC TELE-NETWORK, INC.

Unaudited Condensed Consolidated Statements of Operations

(in Thousands, Except per Share Data)

 

		Three Months Ended
		March 31,
		2016			2015
Revenues:
Wireless		$	58,878		$	57,015
Wireline		22,445			20,593
Renewable energy		5,589			5,289
Equipment and other		2,774			2,447
Total revenue		89,686			85,344
Operating expenses:
Termination and access fees		20,913			20,197
Engineering and operations		9,837			7,656
Sales, marketing and customer service		5,154			5,261
Equipment expense		3,259			3,828
General and administrative		16,421			14,321
Transaction-related charges		3,655			179
Depreciation and amortization		14,554			14,751
Total operating expenses		73,793			66,193
Operating income		15,893			19,151
Other income (expense):
Interest expense, net		(478		)	(614		)
Loss on deconsolidation of subsidiary		—			(19,937		)
Other income		14			32
Other expense, net		(464		)	(20,519		)
Income (loss) from continuing operations before income taxes		15,429			(1,368		)
Income tax expense (benefit)		4,631			(486		)
Net income (loss) from continuing operations		10,798			(882		)
Income from discontinued operations, net of tax		—			390
Net income (loss)		10,798			(492		)
Net income attributable to non-controlling interests, net		(4,678		)	(2,777		)
Net income (loss) attributable to Atlantic Tele-Network, Inc. stockholders		$	6,120		$	(3,269	)
Basic net income (loss) per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:
Income from continuing operations		$	0.38		$	(0.23	)
Income from discontinued operations		—			0.02
Net income		$	0.38		$	(0.21	)
Diluted net income (loss) per weighted average share attributable to Atlantic Tele-Network, Inc. stockholders:
Income from continuing operations		$	0.38		$	(0.23	)
Income from discontinued operations		—			0.02
Net income		$	0.38		$	(0.21	)
Weighted average common shares outstanding:
Basic		16,092			15,939
Diluted		16,198			15,939

 

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Table 3

 

ATLANTIC TELE-NETWORK, INC.

Unaudited Condensed Consolidated Cash Flow Statement

(in Thousands)

 

		Three Months Ended March 31,
		2016			2015
Net income (loss)		$	10,798		$	(492	)
Depreciation and amortization		14,554			14,751
Loss on deconsolidation of business		—			19,937
Change in prepaid and accrued income taxes		4,363			5,952
Change in other operating assets and liabilities		(3,304		)	(6,546		)
Other		1,918			1,263
Net cash provided by operating activities of continuing operations		28,329			34,865
Net cash provided by operating activities of discontinued operations		—			589
Net cash provided by operating activities		28,329			35,454
Capital expenditures		(16,445		)	(13,812		)
Acquisition of business, net of acquired cash of $6,571		—			(2,600		)
Net proceeds from sale of assets		—			5,873
Purchase of securities		(2,000		)	—
Change in restricted cash		653			39,635
Net cash provided by (used in) investing activities		(17,792		)	29,096
Dividends paid on common stock		(5,145		)	(4,618		)
Distributions to non-controlling interests		(3,036		)	(3,066		)
Other		(3,299		)	(2,749		)
Net cash used in financing activities		(11,480		)	(10,433		)
Net change in cash and cash equivalents		(943		)	54,117
Cash and cash equivalents, beginning of period		392,045			326,216
Cash and cash equivalents, end of period		$	391,102		$	380,333

 

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Table 4

 

ATLANTIC TELE-NETWORK, INC.

Reconciliation of Non-GAAP Measures

(In Thousands)

 

Reconciliation of Net Income to Adjusted EBITDA for the Three Months Ended March 31, 2016 and 2015

 

Three Months Ended March 31, 2016

 

		U.S. Telecom			International Telecom			Renewable Energy			Reconciling Items			Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders														$	6,120
Net income attributable to non-controlling interests, net of tax														4,678
Income tax expense														4,631
Other income														(14		)
Interest expense, net														478
Operating income (loss)		$	16,746		$	7,737		$	63		$	(8,653	)	$	15,893
Depreciation and amortization		5,654			6,341			1,207			1,352			14,554
Transaction-related charges		—			—			2,972			683			3,655
Adjusted EBITDA		$	22,400		$	14,078		$	4,242		$	(6,618	)	$	34,102

 

Three Months Ended March 31, 2015

 

		U.S. Telecom			International Telecom			Renewable Energy			Reconciling Items			Total
Net loss attributable to Atlantic Tele-Network, Inc. stockholders														$	(3,269	)
Net income attributable to non-controlling interests, net of tax														2,777
Income tax benefit														(486		)
Other income														(32		)
Income from discontinued operations, net of tax														(390		)
Loss on deconsolidation of subsidiary														19,937
Interest expense, net														614
Operating income (loss)		$	16,775		$	6,179		$	2,652		$	(6,455	)	$	19,151
Depreciation and amortization		5,503			6,911			1,204			1,133			14,751
Transaction-related charges		—			—			61			118			179
Adjusted EBITDA		$	22,278		$	13,090		$	3,917		$	(5,204	)	$	34,081

 

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Table 5

 

ATLANTIC TELE-NETWORK, INC.

Reconciliation of Non-GAAP Measures

(In Thousands)

 

Reconciliation of Net Income Attributable to Atlantic Tele-Network, Inc. Stockholders and Earnings Per Share to Net Income Attributable to Atlantic Tele-Network, Inc. Stockholders Excluding Loss on Deconsolidation of Subsidiary and Diluted Earnings Per Share for the Three Months Ended March 31, 2016 and 2015

 

Three Months Ended March 31, 2016

 

		Total
Net income attributable to Atlantic Tele-Network, Inc. stockholders		$	6,120
Adjustments: None		—
Net income attributable to Atlantic Tele-Network, Inc. stockholders excluding loss on deconsolidation of subsidiary		$	6,120
Diluted net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholder		$	0.38
Adjustments: None		—
Diluted net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholder excluding loss on deconsolidation of subsidiary		$	0.38

 

Three Months Ended March 31, 2015

 

		Total
Net loss attributable to Atlantic Tele-Network, Inc. stockholders		$	(3,269	)
Loss on deconsolidation of subsidiary		19,937
Income tax expense adjustment		—
Net income attributable to Atlantic Tele-Network, Inc. stockholders excluding loss on deconsolidation of subsidiary		$	16,668
Diluted net loss per weighted average share attributable to Atlantic Tele-Network, Inc. stockholder		$	(0.21	)
Adjustments: loss on deconsolidation of subsidiary		1.25
Diluted net income per weighted average share attributable to Atlantic Tele-Network, Inc. stockholder excluding loss on deconsolidation of subsidiary		$	1.04

 

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