Growth in Wireline revenue, led by Broadband
revenue growth of 19.4%
Over $134.2 of net debt reductions on a
year-to-date basis
AWN transaction closed and monthly preferred
distribution payments have commenced
Guidance affirmed for the year, with free
cash flow at the high end of range
Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK)
today reported financial results for its third quarter ended
September 30, 2013.
“We are pleased to report steady performance to our business
plan. Another quarter of solid broadband revenue performance has
driven total wireline revenue growth, representing an important way
we create value. Consistent with the other mechanism in our plan to
create value by strengthening our balance sheet, we achieved
meaningful de-leveraging and strong cash flows in this quarter.
Closing the AWN transaction allows us to direct our capital more
efficiently to further broadband growth,” said Anand Vadapalli,
President and Chief Executive Officer of ACS.
Year-Over-Year Financial Highlights for the Quarter:
The third quarter represents the first reporting period
following the Alaska Wireless Network, LLC (“AWN”) close and we
encourage readers to review our press release schedules for
description of changes in mapping of certain revenue categories.
Further, we are providing additional supplemental information for
readers to understand the AWN preferred distribution structure and
its impact to our results.
- Wireline revenues include business and
wholesale, consumer and access revenues. We are focused on
achieving growth in wireline revenues by driving broadband revenue
performance. Wireline revenues were $50.1 million which increased
by $0.6 million, or 1.2%.
- Business and wholesale revenue
increased $0.9 million, or 3.7%, which was driven by broadband
revenue growth of 17.0%.
- Consumer revenue increased $0.5
million, or 5.3%, with broadband revenue growth of 21.3%.
- Access revenue declined, as expected,
$0.9 million, or 5.7%, due to lower switched, special and other
access revenue.
- Wireless and backhaul revenue was $33.8
million and, as expected, declined year-over-year.
- Retail service revenue declined $1.0
million, or 5.5%.
- As expected, foreign roaming revenue
declined $13.3 million, as roaming revenue moved to AWN.
- CETC revenue increased 3.2%. CETC is
now a pass-through under the AWN structure and has no impact on
Adjusted EBITDA.
- Adjusted EBITDA was $24.8 million and
free cash flow was $3.5 million. The decline in Adjusted EBITDA
compared to last year was anticipated following the close of AWN.
- The AWN preferred distribution
contributed $9.6 million to Adjusted EBITDA.
- Free cash flow was impacted by higher
levels of capital spending associated with the summer build
season.
- Net debt, which represents total debt
less cash and cash equivalents, stands at $404.4 million. This
represents a decrease of $134.2 million, or 24.9%, since December
31, 2012, evidencing commitment to deleveraging.
Sequential Metric Highlights: Third Quarter 2013 Compared to
Second Quarter 2013
- Business broadband connections
increased by 112, or 0.6%, to 19,216 and business broadband ARPU
remained relatively flat at $175.00.
- Consumer broadband connections
increased by 506, or 1.3%, to 38,117 and consumer broadband ARPU
declined slightly by 1.2% to $48.63.
- Consumer access lines declined by
1,716, or 3.3%, to 50,722 and business access lines decreased by
446, or 0.6%, to 80,071.
- Wireless connections declined by 2,305,
or 2.0%, to 112,114. Connections were impacted by 782 fewer
lifeline customers associated with continued compliance with new
certification rules, and 2,453 fewer post-pay connections of which
714 were non-revenue-generating-internal-use connections that were
disconnected as part of the AWN transaction, partially offset by an
increase of 930 in prepaid connections.
- Wireless broadband ARPU increased 7.5%.
Retail wireless ARPU declined slightly to $52.08.
“This is the first quarter of results following the close of the
AWN transaction, and we have provided additional information in
this press release to enable readers to evaluate our performance
under this new operating structure. During our upcoming conference
call we will walk the readers through this information. Our path to
deliver shareholder value is growing wireline and total broadband
revenue, while strengthening the business through debt reductions.
Our financial results are in-line with our expectations, with solid
free cash flow generation for the year,” said Wayne Graham, Chief
Financial Officer of ACS.
Guidance for the year is as follows:
Total revenue guidance is unchanged and
expected to be $340 - $350 million.
Adjusted EBITDA guidance is unchanged and
expected to be $105 - $110 million.
Capital spending, previously targeted to be
around $50 million, is now expected to be moderately lower.
Previous Free Cash Flow guidance of $20 - $25
million is unchanged and we are comfortable with the high end of
the range.
Guidance for 2014, with a full-year without
the transition period of pre- and post-AWN ownership, will be
provided when we report fourth quarter 2013 results.
Conference Call
The company will host a conference call and live webcast today
at 5:00 p.m. Eastern time to discuss these results. Parties in the
United States and Canada can access the call at 1-877-941-0843.
Parties outside the United States and Canada can access the call at
1-480-629-9722. The live webcast of the conference call will be
accessible from the "Events Calendar" section of the company's
website (www.alsk.com).
The webcast will be archived for a period of 90 days. A
telephonic replay of the conference call will also be available two
hours after the call and will run until December 31, 2013, at
midnight Eastern time. To hear the replay, parties in the United
States and Canada can call 1-800-406-7325 and enter pass code
4645116. Parties outside the United States and Canada can call
1-303-590-3030 and enter pass code 4645116.
About Alaska Communications
Alaska Communications is a leading provider of advanced
broadband solutions for businesses and consumers in Alaska. We
operate a highly reliable, advanced statewide data and voice
network with the latest technology and the most diverse undersea
fiber optic system connecting Alaska to the contiguous United
States. For more information, visit www.alaskacommunications.com or
www.alsk.com.
Non-GAAP Measures
In an effort to provide investors with additional information
regarding the Company's results as determined by GAAP, the Company
also discloses certain non-GAAP information which management
utilizes to assess performance and believes provides useful
information to investors. The Company has disclosed Adjusted EBITDA
as net income before interest, loss on extinguishment of debt,
depreciation and amortization, loss on sale of short-term
investments, gain or loss on asset purchases or disposals, earnings
on equity method investments, gains and distributions related to
AWN, amortization of deferred AWN service revenue, provisions for
taxes, stock-based compensation, and AWN transaction-related costs,
and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by
Operating Revenues. Additionally, the Company has disclosed Free
cash flow as Adjusted EBITDA, less capital expenditures that create
an obligation to pay (“incurred capital expenditures”), less
amortization of deferred AWN capacity revenue, less AWN
transaction-related capital costs, less cash interest expense.
These measures are provided because the Company believes they are
important indicators regarding our ability to make principal
payments on debt and fund working capital. Adjusted EBITDA,
Adjusted EBITDA Margin and Free cash flow are non-GAAP measures and
should not be considered a substitute for net cash provided by
operating activities and other measures of financial performance
recorded in accordance with GAAP.
Forward-Looking Statements
This press release includes certain “forward-looking
statements,” as that term is defined in the Private Securities
Litigation Reform Act of 1995. These forward-looking statements are
based on management’s beliefs as well as on a number of assumptions
concerning future events made using information currently available
to management. Readers are cautioned not to put undue reliance on
such forward-looking statements, which are not a guarantee of
performance and are subject to a number of uncertainties and other
factors, many of which are outside ACS’ control. Such factors
include, without limitation, Verizon’s continued build out of their
wireless network in Alaska, Universal Service Fund changes, AWN’s
future financial and operational performance and the wholesale
terms it establishes, adverse national economic conditions, adverse
conditions in the credit markets impacting the cost, including
interest rates, and/or availability of financing, adverse local
economic conditions, including an unexpected downturn in the
Alaskan oil and gas or tourism markets, changes in capital
expenditures, the effects of competition in our markets, the entry
of one or more additional facilities-based carriers into the Alaska
market; the Company’s ability to complete, manage, integrate,
market, maintain, and attract sufficient customers to the products
and services it may deliver, adverse changes in labor matters,
including workforce levels, labor negotiations, and benefits costs;
disruption of our suppliers’ provisioning of critical products or
services; the impact of natural or man-made disasters; changes in
Company’s relationships with large carrier or enterprise customers;
unforeseen changes in public policies; changes in accounting
policies, including the Company’s application of regulatory
accounting rules, which could result in an impact on earnings; or
disruptive technological developments in the telecommunications
industry. For further information regarding risks and uncertainties
associated with ACS’ business, please refer to the Company’s SEC
filings, including, but not limited to, the sections entitled "Risk
Factors” and “Management's Discussion and Analysis of Financial
Condition and Results of Operations” in our annual report on Form
10-K and quarterly reports on Form 10-Q. Copies of the Company’s
SEC filings may be obtained by contacting its investor relations
department at (907) 564-7556 or by visiting its investor relations
website at www.alsk.com.
Schedule 1 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. CONSOLIDATED SCHEDULE OF OPERATIONS (Unaudited,
In Thousands Except Per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012
2013 2012
Operating revenues $ 83,841 $ 96,750 $ 272,657 $ 272,709
Operating expenses: Cost of services and sales, inclusive of
$11,228 of AWN 44,720 36,346 117,371 111,602 Selling, general &
administrative 29,274 25,437 83,717 80,374 Depreciation and
amortization 9,209 12,932 33,291 38,452 (Income) loss on disposal
of assets, net (132,109 ) (2,559 ) (131,483 ) (2,140 ) Earnings on
equity method investments (8,082 ) (45 ) (8,061 ) (45 ) AWN excess
distribution
(2,867 )
- (2,867 )
- Total operating (income) expenses
(59,855 )
72,111 91,968
228,243 Operating income 143,696 24,639
180,689 44,466 Other income and expense: Interest expense
(9,785 ) (10,268 ) (29,970 ) (29,203 ) Loss on extinguishment of
debt (2,094 ) - (2,370 ) (323 ) Interest income 19 9 37 31 Other
- -
(13 ) - Total
other income and expense
(11,860 )
(10,259 )
(32,316 )
(29,495 ) Income before income tax
expense 131,836 14,380 148,373 14,971 Income tax expense
(54,238 )
(6,136 ) (29,613
) (6,385 ) Net
income
$ 77,598 $
8,244 $ 118,760
$ 8,586 Net income
per share: Basic
$ 1.65
$ 0.18 $
2.55 $ 0.19
Diluted
$ 1.33 $
0.17 $ 2.09
$ 0.19 Weighted average
shares outstanding: Basic
47,159
45,664 46,592
45,511 Diluted
59,346
59,437 58,816
45,806 Schedule
2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands
Except Per Share Amounts) September
30, December 31, Assets
2013 2012 Current
assets: Cash and cash equivalents $ 53,295 $ 16,839 Restricted cash
482 3,875 Short-term investments - 2,050 Accounts receivable-trade,
net of allowance of $5,744 and $6,231 31,390 39,713 Materials and
supplies 12,112 9,409 Prepayments and other current assets 7,672
5,566 Deferred income taxes
1,478
8,301 Total current assets 106,429 85,753
Property, plant and equipment 1,345,048 1,463,320 Less:
accumulated depreciation and amortization
(1,005,035 )
(1,052,459 ) Property, plant and
equipment, net 340,013 410,861 Goodwill 4,650 8,850
Intangible assets, net - 24,118 Debt issuance costs 7,502 10,558
Deferred income taxes 48,337 69,049 Equity method investments
207,566 2,028 Other assets
400
3,510 Total assets
$
714,897 $ 614,727
Liabilities and Stockholders' Equity (Deficit)
Current liabilities: Current portion of long-term obligations $
12,865 $ 21,628 Accounts payable, accrued and other current
liabilities, inclusive of $3,926 of AWN 61,033 56,378 Advance
billings and customer deposits
8,837
8,970
Total current liabilities
82,735 86,976 Long-term obligations, net of current portion
444,782 533,772 Other long-term liabilities
93,571 28,662 Total
liabilities
621,088
649,410 Commitments and contingencies
Stockholders' equity (deficit): Common stock, $.01 par value;
145,000 authorized 486 458 Additional paid in capital 151,784
144,377 Accumulated deficit (51,519 ) (170,279 ) Accumulated other
comprehensive loss
(6,942 )
(9,239 ) Total stockholders' equity
(deficit) 93,809 (34,683 ) Total liabilities and
stockholders' equity (deficit)
$ 714,897
$ 614,727
Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands) Three
Months Ended Nine Months Ended
September 30, September 30,
2013 2012
2013 2012
Cash Flows from Operating Activities: Net income $ 77,598 $ 8,244 $
118,760 $ 8,586
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 9,209 12,932 33,291 38,452 Gain on
sale/contribution of asset to AWN (132,424 ) - (132,424 ) - AWN
excess distribution (2,867 ) - (2,867 ) - Gain on ineffective hedge
adjustment 231 - (785 ) - Amortization of debt issuance costs and
debt discount 2,714 1,380 5,754 4,382 Amortization of ineffective
hedge 1,082 - 1,948 - Amortization of deferred AWN capacity revenue
(738 ) - (738 ) - Stock-based compensation 550 969 2,268 2,662
Deferred income taxes 53,640 6,136 29,015 6,385 Provision for
uncollectible accounts 366 307 805 1,836 Cash distribution from
equity method investments 5,389 32 5,389 32 Earnings on equity
method investments (8,082 ) (45 ) (8,061 ) (45 ) Other non-cash
expense, net (2,572 ) (2,585 ) (1,710 ) (2,042 ) Changes in
operating assets and liabilities
7,161
(8,198 ) 6,096
(4,038 ) Net cash provided
by operating activities 11,257 19,172 56,741 56,210 Cash
Flows from Investing Activities: Capital expenditures (13,717 )
(13,876 ) (27,314 ) (36,319 ) Capitalized interest (421 ) (567 )
(1,291 ) (1,396 ) Change in unsettled capital expenditures 553
(1,279 ) (3,276 ) (5,648 ) Proceeds on sale of assets 2,812 2,923
4,747 2,923 Proceeds on sale/contribution of asset to AWN 100,000 -
100,000 - AWN excess distribution 2,867 - 2,867 - Net change in
short-term investments 525 - 2,037 - Change in unsettled
acquisition costs (3,345 ) - (3,345 ) - Net change in restricted
accounts
3,345 (527
) 3,393
(1,071 ) Net cash provided (used) by
investing activities 92,619 (13,326 ) 77,818 (41,511 ) Cash
Flows from Financing Activities: Repayments of long-term debt
(67,001 ) (1,330 ) (97,382 ) (9,255 ) Debt issuance costs (25 ) -
(206 ) - Payment of cash dividend on common stock - (2,285 ) -
(6,831 ) Payment of withholding taxes on stock-based compensation
(2 ) (4 ) (632 ) (243 ) Proceeds from issuance of common stock
2 (1 )
117 179 Net
cash used by financing activities (67,026 ) (3,620 ) (98,103 )
(16,150 ) Change in cash and cash equivalents 36,850 2,226
36,456 (1,451 ) Cash and cash equivalents, beginning of
period
16,445 16,813
16,839 20,490
Cash and cash equivalents, end of period
$ 53,295 $
19,039 $ 53,295
$ 19,039
Supplemental Cash Flow Data: Interest paid $ 6,818 $ 7,796 $ 25,201
$ 24,799 Extinguishment of hedging instrument $ 4,073 $ - $ 4,073 $
- Income tax paid (refunded), net $ - $ - $ - $ (24 )
Supplemental Non-cash Transactions: Property (retired) acquired
under capital leases, net $ (19 ) $ - $ (17 ) $ (24 ) Dividend
declared, but not paid $ - $ 2,286 $ - $ 2,286 Additions to ARO
asset $ 43 $ 24 $ 180 $ 78 Exchange of debt with common stock $
6,000 $ - $ 6,000 $ -
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED EBITDA
AND FREE CASH FLOW (Unaudited, In Thousands)
Three Months Ended Nine
Months Ended September 30,
September 30, 2013
2012 2013
2012 Net income $ 77,598 $ 8,244 $
118,760 $ 8,586 Add (subtract): Interest expense 9,785 10,268
29,970 29,203 Loss on extinguishment of debt 2,094 - 2,370 323
Interest income (19 ) (9 ) (37 ) (31 ) Depreciation and
amortization 9,209 12,932 33,291 38,452 Loss on sale of short-term
investments - - 13 - (Gain) loss on disposal of assets 315 (2,559 )
941 (2,140 ) Earnings on equity method investment in TekMate (18 )
(45 ) 3 (45 ) Earnings on equity method investment in AWN (8,064 )
- (8,064 ) - Gain on sale/contribution of asset to AWN (132,424 ) -
(132,424 ) - TekMate distribution received - 32 - 32 AWN excess
distribution (2,867 ) - (2,867 ) - AWN distributions received 5,389
- 5,389 -
AWN distributions receivable within 14
days
4,167 - 4,167 - Income tax expense 54,238 6,136 29,613 6,385
Stock-based compensation and long-term cash incentives 702 969
2,750 2,662 AWN transaction-related costs
4,702
587 5,974
5,046 Adjusted EBITDA
$ 24,807 $
36,555 $ 89,849
$ 88,473 Less:
Incurred capital expenditures (13,717 ) (13,876 ) (27,314 ) (36,319
) Amortization of deferred AWN capacity revenue (738 ) - (738 ) -
AWN transaction-related capital costs, net change - 342 (41 ) 342
Cash interest expense
(6,818 )
(7,796 )
(25,201 ) (24,799
) Free cash flow
$ 3,534
$ 15,225 $
36,555 $ 27,697
Revenue
$ 83,841
$ 96,750 $
272,657 $ 272,709
Adjusted EBITDA Margin 29.6 % 37.8 % 33.0 % 32.4 %
Note: In an effort to provide investors with
additional information regarding the Company's results as
determined by GAAP, the Company also discloses certain non-GAAP
information which management utilizes to assess performance and
believes provides useful information to investors. The Company has
disclosed Adjusted EBITDA as net income before interest, loss on
extinguishment of debt, depreciation and amortization, loss on sale
of short-term investments, gain or loss on asset purchases or
disposals, earnings on equity method investments, gains and
distributions related to AWN, amortization of deferred AWN service
revenue, provisions for taxes, stock-based compensation, and AWN
transaction-related costs, and Adjusted EBITDA Margin, defined as
Adjusted EBITDA divided by Operating Revenues. Additionally, the
Company has disclosed Free cash flow as Adjusted EBITDA, less
capital expenditures that create an obligation to pay (“incurred
capital expenditures”), less amortization of deferred AWN capacity
revenue, less AWN transaction-related capital costs, less cash
interest expense. These measures are provided because the Company
believes they are important indicators regarding our ability to
make principal payments on debt and fund working capital. Adjusted
EBITDA, Adjusted EBITDA Margin and Free cash flow are non-GAAP
measures and should not be considered a substitute for net cash
provided by operating activities and other measures of financial
performance recorded in accordance with GAAP.
Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. REVENUE GROWTH (Unaudited, In Thousands)
Three Months Ended
Nine Months Ended September 30,
September 30, Wireline revenue
2013 2012
2013 2012
Business and wholesale Retail service revenue Voice $ 5,790 $ 5,967
$ 17,303 $ 18,046 Broadband 10,080 8,613 29,509 25,156 Equipment
sales 480 311 1,340 927 Wholesale and other
9,193 9,736
28,288 29,686 Total
business and wholesale revenue
25,543
24,627 76,440
73,815 Consumer Retail service revenue Voice
4,147 4,676 12,819 14,460 Broadband 5,596 4,613 16,443 13,469
Equipment sales 36 42 111 126 Other
478
413 1,275
971 Total consumer revenue
10,257
9,744 30,648
29,026 Access High cost support 4,984
5,087 13,558 15,041 Switched, special and other access
9,273 10,024
28,056 30,503 Total access
14,257 15,111
41,614 45,544 Total
wireline revenue
50,057
49,482 148,702
148,385 Wireless and
backhaul revenue Retail service revenue Voice 9,993 12,355
31,824 37,231 Broadband 7,680 6,340 21,783 17,892 Equipment sales
1,255 1,737 3,785 4,594 Foreign roaming 5,594 18,919 40,029 40,996
Other 1,441 1,132 3,591 3,227 CETC 5,139 4,979 16,093 15,669
Wireless backhaul 1,944 1,806 6,112 4,715 Amortization of deferred
AWN capacity
738 -
738 - Total wireless
and backhaul revenue
33,784
47,268 123,955
124,324 Total revenues
$
83,841 $
96,750 $
272,657 $
272,709 Revenue Growth: Business and
wholesale 3.7 % 3.6 % Consumer 5.3 % 5.6 % Wireline 1.2 % 0.2 %
Total revenue -13.3 % 0.0 % Broadband 19.4 % 19.8 %
Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. KEY OPERATING STATISTICS (Unaudited)
Three Months Ended September 30,
June 30, September 30,
2013 2013
2012 Voice: Consumer access lines
50,722 52,438 57,483 Business access lines 80,071 80,517 81,330
Voice ARPU consumer $ 26.81 $ 27.25 $ 26.65 Voice ARPU
business $ 24.04 $ 23.93 $ 24.34
Broadband: (1)
Consumer connections 38,117 37,611 36,152 Business connections (2)
19,216 19,104 18,605 ARPU consumer $ 48.63 $ 49.21 $ 41.73
ARPU business (2) $ 175.00 $ 174.87 $ 154.02
Wireless: Postpaid connections (3) 86,423 88,876 94,530
Lifeline connections 9,077 9,859 12,690 Prepaid connections
16,614 15,684 13,755 Total
112,114 114,419 120,975
Retail wireless ARPU $ 52.08 $ 52.68 $ 51.79 Wireless
broadband ARPU $ 26.40 $ 24.55 $ 19.70
Churn:
Voice connections (4) 1.4 % 1.3 % 1.4 % Broadband connections (1)
(4) 2.4 % 2.0 % 2.3 % Wireless connections 3.2 % 2.4 % 2.0 %
Wireless equipment subsidy (1,062 ) (3,463 ) (2,608 )
(1) Consumer and business broadband connections,
ARPU, and churn have been restated to exclude dial up lines.
(2) Business broadband connections counts have been restated to
correct how certain high bandwidth circuits types are measured.
These change have no affect on our financial results, but will
affect connection count and ARPU amounts presented above compared
to their presentation in prior periods. (3) September 30,
2013 Wireless connections have been reduced by 714, non-revenue
generating, internal-use, connections. (4) Voice and
broadband churn have been restated to exclude wholesale lines.
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC.Summary AWN information(Unaudited, In
Thousands)
Alaska Wireless Network, LLC Stand Alone Selected
Operating Results For the Period July 23, 2013 - September
30, 2013 Operating revenues $ 58,826
Operating expenses:
Cost of services and sales
22,258
Selling, general & administrative
3,908
Depreciation and amortization
7,327
Total operating expenses
33,493 Operating income 25,333 Other income and
(expense)
(74 ) Net income
25,259
A Plus: Depreciation Expense 7,327 Other, net
753 Minus: Capital Spending 12,435 Management Fee to GCI
836 Adjusted Free Cash Flow
$
20,068 D Distributions paid or
payable to ACS: (includes balance to be received with 12 days)
9,556
E Distributions to ACS as a proportion of Free
Cash Flow: 47.6 %
The above information reflects summary unaudited financial
performance of AWN, which Alaska Communication owns a 33.3%
ownership interest. Certain additional summary information is
included in our Form 10-Q filings.
Key AWN Results Included in the ACS Consolidated Balance
Sheet: Equity method investment $
205,542 Deferred AWN capacity revenue: $ 76,337
Accounts payable, accrued and other
current liabilities
$ 3,852 Other long-term liabilities $ 72,485
Investment in AWN represents the value of ACS's 1/3 ownership
interest in AWN. Deferred revenue represents capacity contributions
and the operations and maintenance support of these capacity
contributions for AWN's network. The benefit of this deferred
revenue is recognized over 20 years.
Key AWN Results included in the ACS Consolidated Income
Statement:
AWN net income $ 25,259
A
Adjusted for step-up in GCI assets
(1,066
) B AWN stepped-up earnings $ 24,193
C
Adjusted Free Cash Flow $ 20,068
D Distributions paid or
payable to ACS $ 9,556
E ACS ownership percentage of AWN
33.33 %
F
"Adjusted for step-up"(B) reflects the step up on basis on the
GCI contributed assets to AWN and associated higher depreciation
expense that ACS is required to incorporate in its consolidated
financial statements.
Earnings on equity method investment in AWN
$ 8,064 C * F
Distributions paid or payable to ACS $ 9,556
E Hypothetical
distributions at 33.3%
6,689 D * F AWN
excess distribution
$ 2,867
AWN's stepped up net income is used to calculate the equity in
earnings at ACS' 1/3 ownership percentage or $8,064. Additionally,
an AWN excess distribution, or $2,867, is recognized in the quarter
to reflect the disproportionate nature of the AWN preferred
distributions.
Key AWN Results Included in the ACS Non GAAP financial
measures: Cash distributions received during the quarter
$ 5,389 Less: Distributions
received during the quarter related to the previous period - Plus:
Distributions received within 14 business days of quarter-end 4,167
Amortization of deferred AWN capacity revenue
738 Equals AWN impact to Adjusted EBITDA
$ 10,294 Less: Amortization of
deferred AWN capacity revenue
738 Equals AWN
impact to Free Cash Flow
$ 9,556
In our non-GAAP reporting of Adjusted EBITDA, ACS is using our
Senior Credit Agreement definition, as amended, for the AWN
distribution, which is distributions received or eligible to be
received within 14 business days.
Alaska CommunicationsInvestors:Wayne Graham,
907-564-3314Chief Financial Officerinvestors@acsalaska.com
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