ASH Cable declares $1 million+ net losses first year
The American Samoa Hawai’i Cable Limited Liability Company (ASH Cable), whose primary business activity is the operation of the only undersea fiber optic cable between Hawaii, American Samoa and the Independent State of Samoa recorded a net loss of over $1.159 million in 2010 after more than $2.5 million in depreciation. Before depreciation and interest deductions, the net profit from operations was more than $2.2 million.
The American Samoa Hawai’i Cable Limited Liability Company Consolidated Financial Statements for the Year ended December 31, 2010 was audited by the local firm of King Accountancy Corporation in June last year, which stated in its Independent Auditor’s Report that: “In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position” of the company.
According to the report, they do not express “an opinion on the effectiveness of the Company’s internal control over financial reporting”, as “the generally accepted auditing standards” of the US require that “we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements.”
Notes to the audited financial statements, issued by the local firm, indicate ASH Cable is "governed by an Operating Agreement dated May 22, 2008" and wholly owns its subsidiary Samoa American Samoa Cable LLC, which is registered in Samoa.
Furthermore, ASH Cable is taxed as a partnership, consequently "the Company pays no income tax. Taxable income and the resulting tax liability is reported by the members of the company."
The American Samoa Government owns 33% of ASH Cable with its partner Florida based, eLandia International, the parent company of local firm Blue Sky Communications (AST Telecom, LLC), owning the rest of the shares.
Samoa News understands that these are the first audited statements received by the Fono since ASH Cable was launched in the summer of 2009. It comes on the heels of complaints by several lawmakers that they have yet to get a clear financial picture of ASG's financial investment in the ASH Cable project. Lawmakers say they have not seen the May 22, 2008 Operating Agreement to date.
In summary, the audited statements report that ASH Cable with revenues of $3,617,741 and deferred revenues of $439,235 and after deducting $1,343,186 in operating expenses, realized a net profit of $2,274,555. However, after "paper losses" of $2,537,621 in depreciation and $43,891 in amortization and “non-operating” interest expenses of $852,353, ASH Cable declared a Net Loss of $1,159,290.
AUDITED STATEMENTS BREAKDOWN
The audited statements report that "the primary source of revenue is the sale of broadband capacity" on its fiber optic cable network. Capacity fees for 2010 totaled $3,617,741 with prepaid fees of $439,235 deferred until the month of the contracted broadband capacity.
ASH Cable did not enter into any lease agreements in 2010 but did enter into a Management Agreement with Blue Sky Communications (AST Telecom, LLC) "to provide operational and administrative management of ASH Cable for three years at $11,350 monthly (increased annually by 4.5%). Management fees for 2010 totaled $136,200.
ASH Cable also entered into a Marine Maintenance Agreement with Alcaltel-Lucent Submarine Networks for repair and maintenance of the undersea fiber optic cable through October 17, 2012 for $75,000 every three months.
ASH Cable has a ten year agreement (or upon retirement of the cable system, whichever comes first) with AT&T Corporation, for the use of AT&T's cable station at Keawaula, Hawaii, at $150,000 annually which will increase to $375,000 annually after 2015.
Although ASH Cable lists no major capital commitments in 2010 it does list future contractual agreements with the above, totaling $1,997,882 through 2015.
ASH Cable's major customers are affiliates of its two members and in 2010 it received $1,672,220 in revenue from affiliated companies.
With assets valued at over $21 million Net Book Value, after depreciation, ASH Cable secured two term loans from ANZ Amerika Samoa Bank in June 2009 over seven years, at 2% over ANZ's base rate (5.25% average in 2010). It paid interest only for the first seven months then $112,355 and $74,963 respectively per month after that. Balloon payments of approximately $4 million and $2 million are due on Jun 03, 2016.
Both loans are secured by the Company's current and fixed assets and guarantees by eLandia International and its subsidiary companies.