-Total Service and Other Revenues increased
$3.8 million or 7.7%, led by Broadband growth-
-Adjusted EBITDA of $22.9 million-
-Free Cash Flow of $8.4 million-
-Deleveraging continues with over $13
million of repayments of long term debt-
Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK)
today reported financial results for its first quarter ended March
31, 2014.
“We are starting 2014 on strong footing, and have delivered
solid results for the quarter. Top line growth was robust, driven
by continued strength in broadband revenues, while EBITDA
performance positions us well to meet our guidance for the year. We
continue to pay down debt ahead of schedule which directly
translates to shareholder value creation.
"Looking ahead, we are pleased with our performance in the
market. We’ve seen strategic customer wins which provide momentum
for the rest of the year. Further, since closing the TekMate
transaction in January, sales have exceeded expectations which bode
well for continued growth in the managed services area. We have a
sound operating plan for the year and we are doing well performing
to our plan,” said Anand Vadapalli, president and CEO of Alaska
Communications.
Financial Highlights: First Quarter 2014 Compared to First
Quarter 2013
- The quarter experienced strong revenue
performance in our key areas of focus:
o Business and wholesale service revenue of
$26.4 million grew $1.8 million or 7.2%, with broadband revenues
growing 17.1%.
o Consumer service revenue of $10.2 million
grew $0.2 million, or 1.9%, with broadband revenues growing
11.8%.
o Wireless revenue of $19.4 million, declined
$0.8 million, or 4.2%, as connections continued to decline.
- Adjusted EBITDA was $22.9 million and
is consistent with our overall guidance expectations for the
year.
- Free Cash Flow was strong at $8.4
million.
- Persistent deleveraging continues, with
debt balances of $444 million at the end of the quarter, compared
to $456 million at December 31, 2013. Cash stands at approximately
$32 million.
Metric Highlights: First Quarter 2014 Compared to Fourth
Quarter 2013
- Business broadband connections
increased to 19,304 from 19,285 and business broadband ARPU
increased to $191.21 from $181.77.
- Consumer broadband connections
increased to 39,468 from 38,677 and consumer broadband ARPU
increased to $49.46 from $48.59.
- Wireless subscribers decreased by 873
to 107,975 and Wireless ARPU decreased to $52.51 from $53.14.
“Our financial metrics for the quarter were strong, and our
balance sheet is strengthening as we pay down debt ahead of
schedule while maintaining strong cash reserves. As anticipated,
total revenue of $78.3 million decreased $12.7 million reflecting
the shift of $15.7 million in AWN revenue categories, including
roaming, which the company no longer reports but reside in its AWN
affiliate. Our focus is on Total Service and Other revenue, which
grew $3.8 million or 7.7%. Close attention to cost management will
result in continued free cash flow performance which will be
dedicated to further debt reductions," said Wayne Graham, ACS chief
financial officer.
2014 Guidance:
We reaffirm guidance for the year as follows:
Revenue is expected to be approximately $310 million.
Adjusted EBITDA is expected to be approximately $90 million.
Capital spending is expected to be approximately $40
million.
Free cash flow is expected to be approximately $20 million.
Conference Call
The company will host a conference call and live webcast on
Friday, May 9, 2014 at 2:00 p.m. Eastern time to discuss the
results. The live webcast will include a slide presentation.
Parties in the United States and Canada can access the call at
1-877-941-8609. All other parties can access the call at
1-480-629-9692.
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 June 9, 2014
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
4678703. All other parties can call 1-303-590-3030 and enter pass
code 4678703.
About Alaska Communications
Alaska Communications (NASDAQ: ALSK) is a leading provider of
advanced broadband and managed service solutions for businesses and
consumers in Alaska. The company operates 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 http://www.alaskacommunications.com or
http://www.alsk.com.
Non-GAAP Measures
In an effort to provide investors with additional information
regarding our financial results, in particular with regards to our
liquidity and capital resources, we have disclosed certain non-GAAP
financial information such as Adjusted EBITDA, Adjusted EBTDA
margin and Free Cash Flow, which management utilizes to assess
performance and believes provides useful information to investors.
The definition of these non-GAAP measures are on Schedule 4 to this
press release. 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.
Other companies may not calculate non-GAAP measures in the same
manner as ACS.
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 retail entry into the Alaska
market, Universal Service Fund changes, AWN’s financial and
operational performance, 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 derive, adverse changes in labor matters,
including workforce levels, labor negotiations, and benefits costs,
disruption of our supplier’s 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,
changes in revenue from universal service funds, 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 March
31, 2014
2013 Operating revenues:
Operating revenues, non-affiliates $ 76,545 $ 90,996 Operating
revenues, affiliates *
1,786
63 Total operating revenues
78,331 91,059
Operating expenses: Cost of services and sales, non-affiliates
30,058 35,319 Cost of services and sales, affiliates * 14,760 128
Selling, general & administrative 24,595 26,797 Depreciation
and amortization 8,790 12,632 Loss on disposal of assets, net 401
41 Earnings from equity method investments
(8,523 ) -
Total operating expenses
70,081
74,917 Operating income 8,250 16,142
Other income and (expense): Interest expense (8,857 )
(10,029 ) Interest income
8
10 Total other income and (expense)
(8,849 ) (10,019
) (Loss) income before income tax benefit
(expense) (599 ) 6,123 Income tax benefit (expense)
214 (2,655 )
Net (loss) income
$ (385
) $ 3,468 Net
(loss) income per share: Basic
$ (0.01
) $ 0.08 Diluted
$ (0.01 ) $
0.07 Weighted average shares
outstanding: Basic
48,913
46,055 Diluted
48,913
46,563 * Affiliate
balances are related to activity with our equity method investees
TekMate and AWN
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands
Except Per Share Amounts) March 31, December
31, Assets 2014
2013 Current assets: Cash and
cash equivalents $ 31,920 $ 43,039 Restricted cash 467 467 Accounts
receivable-trade, non-affiliates, net 33,864 34,066 Materials and
supplies 10,784 10,131 Prepayments and other current assets 7,413
7,300 Deferred income taxes
9,975
7,144 Total current assets 94,423 102,147
Property, plant and equipment 1,351,056 1,344,949 Less:
accumulated depreciation and amortization
(999,300 ) (992,936
) Property, plant and equipment, net 351,756 352,013
Goodwill 5,892 4,650 Debt issuance costs 6,226 6,929
Deferred income taxes 12,435 15,572 Equity method investments
262,130 266,972 Other assets
396
502 Total assets
$
733,258 $ 748,785
Liabilities and Stockholders' Equity (Deficit)
Current liabilities: Current portion of long-term obligations $
4,798 $ 14,256 Accounts payable, accrued and other current
liabilities, non-affiliates 51,170 55,475 Accounts payable, accrued
and other current liabilities, affiliates, net * 17,725 14,566
Advance billings and customer deposits
9,115
9,104 Total current liabilities
82,808 93,401 Long-term obligations, net of current portion
438,847 442,001 Other long-term liabilities 15,558 16,947 Deferred
AWN capacity revenue, net of current portion
62,422 63,263 Total
liabilities
599,635
615,612 Commitments and contingencies
Stockholders' equity (deficit): Common stock, $.01 par value;
145,000 authorized 494 487 Additional paid in capital 152,258
152,193 Accumulated deficit (14,283 ) (13,898 ) Accumulated other
comprehensive loss
(4,846 )
(5,609 ) Total stockholders' equity
(deficit) 133,623 133,173 Total liabilities and
stockholders' equity (deficit)
$ 733,258
$ 748,785 *
Affiliate balances are related to activity with our equity method
investees TekMate and AWN
Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands) Three Months Ended
March 31, 2014
2013 Cash Flows from
Operating Activities: Net (loss) income $ (385 ) $ 3,468
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 8,790 12,632
Loss on the disposal of assets 401 41 Gain on ineffective hedge
adjustment - (420 ) Amortization of debt issuance costs and debt
discount 1,398 1,426 Amortization of ineffective hedge 607 430
Amortization of deferred AWN capacity revenue (841 ) - Stock-based
compensation 653 1,219 Deferred income taxes (227 ) 2,655 Provision
for uncollectible accounts 565 268 Cash distribution from equity
method investments 8,523 - Earnings from equity method investments
(8,523 ) - Other non-cash expense, net (3 ) 40 Changes in operating
assets and liabilities
2,868
3,809 Net cash provided by operating activities
13,826 25,568 Cash Flows from Investing Activities: Capital
expenditures (7,164 ) (5,968 ) Capitalized interest (738 ) (483 )
Change in unsettled capital expenditures (7,186 ) (3,151 ) Proceeds
on sale of assets - 1,935 Return of capital from equity investment
4,010 - Non-cash acquisition, cash received 68 - Net change in
restricted accounts
-
(1 ) Net cash used by investing
activities (11,010 ) (7,668 ) Cash Flows from Financing
Activities: Repayments of long-term debt (13,354 ) (15,015 )
Payment of withholding taxes on stock-based compensation
(581 ) (630
) Net cash used by financing activities (13,935 )
(15,645 ) Change in cash and cash equivalents (11,119 )
2,255 Cash and cash equivalents, beginning of period
43,039 16,839
Cash and cash equivalents, end of period
$
31,920 $ 19,094
Supplemental Cash Flow Data: Interest paid $ 6,562 $
7,164 Income tax paid (refunded), net $ 13 $ - Supplemental
Non-cash Transactions: Property (retired) acquired under capital
leases, net $ 44 $ 2 Additions to ARO asset $ 214 $ 30 Non-cash
acquisition purchase price, net of cash received $ 1,850 $ -
Schedule 4 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED EBITDA AND FREE
CASH FLOW (Unaudited, In Thousands) Three
Months Ended March 31,
2014 2013
Net (loss) income $ (385 ) $ 3,468 Add (subtract):
Interest expense 8,857 10,029 Interest income (8 ) (10 )
Depreciation and amortization 8,790 12,632 Loss on disposal of
assets 401 41 Earnings from equity method investment in TekMate (12
) - Earnings from equity method investment in AWN (8,511 ) - AWN
distributions received 12,500 - AWN distributions received for the
prior period (4,167 ) - AWN distributions receivable within 12 days
4,167 - Income tax expense (benefit) (214 ) 2,655 Stock-based
compensation 653 1,219 Long-term cash incentives 684 169 AWN
transaction-related costs
172
845 Adjusted EBITDA
$
22,927 $ 31,048
Less: Incurred capital expenditures (7,164 ) (5,968 )
Amortization of deferred AWN capacity revenue (841 ) - AWN
transaction-related capital costs, net change - (55 ) Cash interest
expense
(6,562 )
(7,164 ) Free cash flow
$
8,360 $ 17,861
Revenue
$ 78,331
$ 91,059 Adjusted EBITDA
Margin 29.3 % 34.1 %
NonGAAP 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 the impairment of equity
investments, 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, provisions for
taxes, AWN transaction-related costs, stock-based compensation, and
expenses under the company’s long term cash incentive plan
(“LTCI”). LTCI expenses are considered part of an interim
compensation structure to mitigate the dilutive impact of
additional share issuances for executive compensation.
Distributions from AWN are included in Adjusted EBITDA.
Adjusted EBITDA Margin, is defined as
Adjusted EBITDA divided by Operating Revenues.
Free cash flow is defined as Adjusted
EBITDA, less capital expenditures that create an obligation to pay
(“incurred capital expenditures”), less amortization of deferred
AWN capacity revenue (a non cash revenue item), less AWN
transaction-related capital costs, less cash interest expense.
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. Other companies may not calculate Non-GAAP
measures in the same manner as ACS.
Schedule 5 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE GROWTH
(Unaudited, In Thousands) Three Months Ended
March 31, Service Revenue:
2014
2013 Business and Wholesale Customers
Voice $ 5,611 $ 5,723 Broadband 11,088 9,467 Other 1,792 1,856
Wholesale
7,913
7,591 Business and Wholesale service revenue
26,404 24,637
Consumer Customers Voice 3,876 4,319 Broadband 5,861 5,242 Other
423 414 Consumer
service revenue 10,160 9,975
Total Service Revenue
36,564
34,612 Growth in Service Revenue 5.6 % Growth
in Broadband Service Revenue 15.2 %
Other Revenue:
Equipment Sales 837 592 Access 8,993 9,515 High Cost Support
6,274 4,162 Total
Service and Other Revenue 52,668
48,881 Growth in Service and Other Revenue 7.7
% Growth excluding equipment sales 7.3 %
Wireless
Revenue: Business and Consumer service revenue 17,056 17,904
Equipment sales 1,004 1,248 Other 1,347 1,101
AWN
Related: Foreign Roaming - 15,026 Wireless Backhaul 70 1,975
CETC 5,345 4,924 Amortization of deferred AWN capacity revenue
841 - Total AWN
Related 6,256
21,925 Total Wireless & AWN Related
Revenue 25,663
42,178 Total Revenue
$ 78,331
$ 91,059
Schedule 6 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING
STATISTICS (Unaudited)
Three Months Ended
March 31, December 31, March 31,
2014 2013
2013 Voice:
Consumer access lines 48,165 49,297 54,037 Business access lines
79,841 79,816 80,770 Voice ARPU consumer $ 26.51 $ 26.65 $
26.21 Voice ARPU business $ 23.43 $ 23.53 $ 23.61
Broadband: (1) Consumer connections 39,468 38,677 37,310
Business connections (2) 19,304 19,285 18,794 ARPU consumer
$ 49.46 $ 48.59 $ 46.57 ARPU business (2) $ 191.21 $ 181.77 $
167.85
Wireless: Postpaid connections 86,238 85,982
90,363 Lifeline connections 6,510 7,145 9,494 Prepaid connections
15,227 15,721
14,234 Total 107,975 108,848
114,091 Retail wireless ARPU $
52.51 $ 53.14 $ 52.17
Churn: Voice connections
(3) 1.0 % 1.3 % 1.2 % Broadband connections (1) (3) 1.9 % 2.1 % 1.9
% Wireless connections 3.0 % 3.4 % 2.6 %
Wireless
equipment subsidy (4) (463 ) (1,100 ) (3,527 )
(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 circuit types
are measured. These changes have no material affect on our
financial results, but will affect connection count and ARPU
amounts presented above compared to their presentation in prior
periods.
(3)
Voice and broadband churn have been
restated to exclude wholesale lines.
(4)
For the quarters ending March 31, 2014 and
December 31, 2013, respectively, these amounts are net of AWN
subsidy reimbursement.
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Long Term
Debt (Unaudited, In Thousands) March 31
2014
2013 2010 senior credit facility term
loan due 2016 $ 332,700 $ 429,375 Debt discount - 2010 senior
credit facility term loan due 2016 (1,479 ) (2,613 ) 6.25%
convertible notes due 2018 114,000 120,000 Debt discount - 6.25%
convertible notes due 2018 (8,726 ) (11,131 ) Capital leases and
other long-term obligations
7,150
5,350 443,645 540,981 Less current portion
(4,798 )
(10,108 ) Long-term obligations, net of
current portion
$ 438,847
$ 530,873
Maturities 2014 (April 1 - December 31) $ 952
2015 (January 1 - December 31) 15,417 2016 (January 1 - December
31) 318,788 2017 (January 1 - December 31) 506 2018 (January 1 -
December 31) 114,287 2019 (January 1 - December 31) 278 Thereafter
3,622 $
453,850
Schedule 8
ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC.
Summary AWN information
(Unaudited, In Thousands)
Alaska Wireless Network, LLC Stand Alone Selected
Operating Results Q1 - 2014 Operating
revenues $ 63,037 Operating expenses: Cost of services and
sales 19,119 Selling, general & administrative 5,954
Depreciation and amortization 10,995 Total operating
expenses 36,068 Operating income 26,969 Other income
and (expense)
(92
)
Net income
26,877
A
Plus: Depreciation Expense 10,995 Other, net 1,706 Minus:
Capital Spending 3,639 Management Fee to GCI
1,438
Adjusted Free Cash Flow
$ 34,501
Distributions paid to ACS: 12,500 Distributions to
ACS as a proportion of FCF: 36.2
%
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 and 10-K filings.
Wholesale
Margin Contribution from AWN: Wireless business
and consumer service revenue $ 17,056 AWN wholesale charges
* $ 11,905 Handset subsidy support * (2,664 ) Equipment subsidy
3,127 Other *
235 Total $ 12,603
Wholesale Margin $ 4,453 26 %
* Balances are included under the caption
Cost of services and sales, affiliates on the consolidated
statement of operations. Excluded from the balances above is CETC,
for which we pay an equivalent amount to AWN.
Key AWN Results included in the ACS Consolidated Income
Statement: Q4 AWN net income $ 26,877
A
Adjusted for step-up in GCI assets
(1,345
) B AWN stepped-up earnings $ 25,532
C
ACS ownership percentage of AWN 33.33 %
D "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
$ 8,511 C * D
AWN's stepped up net income is used to calculate the equity in
earnings at ACS' 1/3 ownership percentage.
Key AWN
Results Included in the ACS Non GAAP financial measures:
Q1 Cash distributions received during the quarter $
12,500 Less: Distributions received during the quarter related to
the previous period (4,167 ) Plus: Distributions received within 14
business days of quarter-end 4,167 Amortization of deferred AWN
capacity revenue
841 Equals AWN impact
to Adjusted EBITDA
$ 13,341
Less: Amortization of deferred AWN capacity revenue
841 Equals AWN impact to Free Cash Flow
$ 12,500 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 Communications Systems Group, Inc.Heather Cavanaugh, APR,
907-564-7722Director, Marketing and Corporate
CommunicationsHeather.Cavanaugh@acsalaska.com
Alaska Communications Sy... (NASDAQ:ALSK)
Historical Stock Chart
From Mar 2024 to Apr 2024
Alaska Communications Sy... (NASDAQ:ALSK)
Historical Stock Chart
From Apr 2023 to Apr 2024