-Grew Total Service and Other Revenue 6.7%
year over year--Increased Total Broadband Revenue 10.3% year
over year--Improved Adjusted EBITDA Margins Sequentially to
31.9%--Increased 2014 Guidance for Revenue and Adjusted
EBITDA--Won State of Alaska Five-year Contract for Statewide
Broadband Services-
Alaska Communications Systems Group, Inc. (“ACS”, “the Company”,
“Alaska Communications”) (NASDAQ: ALSK) today reported financial
results for its third quarter ended September 30, 2014.
“Our emphasis on broadband solutions has delivered another
quarter of broadband revenue growth, with continued industry
leading top-line performance for the third quarter of 2014.
Combined with exceptional operations and cost controls, we have
expanded Adjusted EBITDA margins, all while managing our free cash
flow to deleverage our balance sheet.
“We have a growing market opportunity with a unique competitive
dynamic that is enabling us to gain share in our target markets of
business and wholesale services. As a particularly noteworthy
example of taking share, after months of in-depth network
capabilities and reliability reviews, we are honored the State of
Alaska chose Alaska Communications to be its primary broadband
provider for its statewide core network. Our experienced team
continues to gain market share due to our deep understanding of the
needs of Alaskan businesses matched with quality network solutions,
packaging of IT Services, and superior attention to customer
service.
“The investments we previously made in technology combined with
our steady focus on process improvement enable us to improve
customer service while we manage our expenses and improve
margins.
“We are focused. Our broadband momentum continues. And, we are
very excited about serving our community and shareholders for
decades to come,” said Anand Vadapalli, president and CEO of Alaska
Communications.
Third Quarter 2014 Highlights
- Total service and other revenue
increased to $53.4 million, up 6.7% year over year.
- Total broadband revenue reached $17.3
million, up 10.3% year over year.
- Business and wholesale service:
- Revenue reached $28.0 million, up 11.6%
year over year.
- Broadband revenues grew 8.8% year over
year.
- Broadband business connections totaled
19,201, increasing 0.6% sequentially.
- Consumer service:
- Revenue grew to $10.4 million,
increasing 2.1% year over year.
- Broadband revenues grew 13.2% year over
year.
- Consumer broadband ARPU grew $1.67 or
3.2% sequentially.
Operational Improvements
- Successfully deployed an automated
workforce management system to streamline future service delivery
and enhance customer experience.
- Installed new inventory management
structures in retail stores reducing wireless inventory balances by
approximately 40%, or $2.5 million.
Third Quarter and Year to Date Consolidated Financial Results
for the periods ended September 30, 2014
- Adjusted EBITDA was $23.5 million for
the quarter and stands at $70.3 million year to date.
- Total operating revenue was $78.5
million for the quarter and stands at $237.4 million year to
date.
- Free Cash Flow was $1.6 million for the
quarter and stands at $12.8 million year to date.
- Deleveraging continues:
- Debt balances were $434.6 million at
the end of the quarter.
- Debt repayments totaled $24.0 million
year to date.
- Cash balances remain strong at $28.9
million.
Wayne Graham, ACS chief financial officer, said, “We expect to
achieve continued broadband growth, which is reflected in our
updated guidance. The incremental economics of adding this revenue
to our mix should drive margin improvements going forward. We also
remain committed to dedicating free cash flow to deleveraging the
balance sheet. All of which is expected to improve value creation
to our shareholders.”
2014 Guidance:
The Company updated guidance as follows:
- Increased revenue to approximately $315
million from approximately $310 million.
- Increased Adjusted EBITDA to
approximately $92 million from approximately $90 million.
- Confirmed free cash flow of
approximately $20 million.
- Confirmed the capital expenditures
range of approximately $40 to $45 million which includes $4 to $5
million for a fiber build project with a strategic customer.
Conference Call
The Company will host a conference call and live webcast on
Thursday, November 6, 2014 at 5:00 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
1-888-471-3830 and enter pass code 399324. All other parties can
access the call at 1-719-457-2706.
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 8,
2014 at 4:00 p.m. Eastern Time. To hear the replay, parties in the
United States and Canada can call 1-888-203-1112 and enter pass
code 1781788. All other parties can call 1-719-457-0820 and enter
pass code 1781788.
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 EBITDA
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 Schedules 4 and 5
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, Universal Service Fund changes, AWN’s
financial and operational performance and the competitiveness of
the wholesale plans it offers, adverse economic conditions, adverse
conditions in the credit markets impacting the cost, including
interest rates, and/or availability of financing, and the effects
of competition in our markets, the Company’s ability to compete,
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 customers, unforeseen changes in public policies, and
changes in accounting policies, which could result in an impact on
earnings. 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, 2014
2013 2014
2013 Operating revenues:
Operating revenues, non-affiliates $ 76,683 $ 82,427 $ 232,031 $
271,122 Operating revenues, affiliates *
1,782
1,414 5,323
1,535 Total operating revenues
78,465 83,841
237,354 272,657
Operating expenses: Cost of services and sales,
non-affiliates 31,416 33,078 91,274 105,412 Cost of services and
sales, affiliates * 13,534 11,642 43,295 11,959 Selling, general
& administrative 25,017 29,274 74,926 83,717 Depreciation and
amortization 8,585 9,209 25,850 33,291 (Gain) loss on disposal of
assets, net (199 ) (210,558 ) 612 (209,932 ) Earnings from equity
method investments
(11,556 )
(8,082 )
(29,247 ) (8,061
) Total operating expenses
66,797 (135,437
) 206,710
16,386 Operating income 11,668 219,278
30,644 256,271 Other income and (expense): Interest expense
(8,615 ) (9,785 ) (26,144 ) (29,970 ) Loss on extinguishment of
debt - (2,094 ) - (2,370 ) Interest income 28 19 42 37 Other
- -
- (13 ) Total
other income and (expense)
(8,587
) (11,860 )
(26,102 ) (32,316
) Income before income tax expense 3,081
207,418 4,542 223,955 Income tax expense
(1,203 ) (85,421
) (1,964 )
(60,796 ) Net income
$ 1,878 $
121,997 $ 2,578
$ 163,159 Net income
per share: Net income applicable to common shares $ 1,878 $ 121,997
$ 2,578 $ 163,159 Tax-effected expense attributable to convertible
notes
- 1,485
- 4,409 Net
income assuming dilution
$ 1,878
$ 123,482 $
2,578 $ 167,568
Basic
$ 0.04
$ 2.59 $
0.05 $ 3.50
Diluted
$ 0.04 $
2.08 $ 0.05
$ 2.85 Weighted average
shares outstanding: Basic
49,498
47,159 49,265
46,592 Diluted
50,155
59,359 49,730
58,816 * Affiliate balances are
related to activity with our equity method investees TekMate and
AWN. The remaining interest in TekMate was purchased on January 31,
2014 at which time it became a wholly owned subsidiary.
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands
Except Per Share Amounts)
September 30, December 31,
Assets 2014 2013
Current assets: Cash and cash equivalents $ 28,851 $ 43,039
Restricted cash 467 467 Accounts receivable-trade, non-affiliates,
net 38,116 34,066 Materials and supplies 9,591 10,131 Prepayments
and other current assets 8,003 7,300 Deferred income taxes
6,694 7,144 Total
current assets 91,722 102,147 Property, plant and equipment
1,357,660 1,344,949 Less: accumulated depreciation and amortization
(994,358 )
(992,936 ) Property, plant and equipment,
net 363,302 352,013 Goodwill 5,986 4,650 Debt issuance costs
5,017 6,929 Deferred income taxes 11,606 14,107 Equity method
investments 257,853 266,972 Other assets
349
502 Total assets
$
735,835 $ 747,320
Liabilities and Stockholders' Equity (Deficit)
Current liabilities: Current portion of long-term obligations $
11,846 $ 14,256 Accounts payable, accrued and other current
liabilities, non-affiliates 53,457 55,475 Accounts payable, accrued
and other current liabilities, affiliates, net * 22,905 14,309
Advance billings and customer deposits
8,501
9,104 Total current liabilities
96,709 93,144 Long-term obligations, net of current portion
422,796 442,001 Other long-term liabilities 17,736 16,947 Deferred
AWN capacity revenue, net of current portion
57,548 59,965 Total
liabilities
594,789
612,057 Commitments and contingencies
Stockholders' equity (deficit): Common stock, $.01 par
value; 145,000 authorized 495 487 Additional paid in capital
153,608 152,193 Accumulated deficit (9,230 ) (11,808 ) Accumulated
other comprehensive loss
(3,827 )
(5,609 ) Total stockholders'
equity (deficit) 141,046 135,263 Total liabilities and
stockholders' equity (deficit)
$ 735,835
$ 747,320 * Affiliate
balances are related to activity with our equity method investees
TekMate and AWN. The remaining interest in TekMate was purchased on
January 31, 2014 at which time it became a wholly owned subsidiary.
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,
2014
2013 2014
2013 Cash Flows from Operating
Activities: Net income $ 1,878 $ 121,997 $ 2,578 $ 163,159
Adjustments to reconcile net income to net cash provided by
operating activities: Depreciation and amortization 8,585 9,209
25,850 33,291 Gain on sale/contribution of asset to AWN - (210,873
) - (210,873 ) (Gain) loss on the disposal of assets (199 ) 315 612
941 Gain on ineffective hedge adjustment - 231 - (785 )
Amortization of debt issuance costs and debt discount 1,260 2,714
3,926 5,754 Amortization of ineffective hedge 362 1,082 1,276 1,948
Amortization of deferred AWN capacity revenue (647 ) (738 ) (2,337
) (738 ) Stock-based compensation 684 550 1,877 2,268 Deferred
income tax expense (benefit) 961 84,823 1,708 60,198 Provision for
uncollectible accounts 1,467 366 2,942 805 Earnings from equity
method investments (11,556 ) (8,082 ) (29,247 ) (8,061 ) Cash
distribution from equity method investments 11,556 5,389 29,247
5,389 Other non-cash (income) expense, net (226 ) (20 ) (384 ) 216
Changes in operating assets and liabilities
4,918 7,161
1,048 6,096 Net cash
provided by operating activities
19,043
14,124 39,096
59,608 Cash Flows from Investing
Activities: Capital expenditures (16,042 ) (13,717 ) (33,916 )
(27,314 ) Capitalized interest (720 ) (421 ) (2,082 ) (1,291 )
Change in unsettled capital expenditures 3,114 553 (1,300 ) (3,276
) Proceeds on sale of assets 136 2,812 136 4,747 Proceeds on
sale/contribution of asset to AWN - 100,000 - 100,000 Return of
capital from equity investment 944 - 8,286 - Non-cash acquisition,
cash received - - 68 - 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 -
3,393 Net cash (used) provided by
investing activities
(12,568 )
89,752 (28,808
) 74,951 Cash Flows
from Financing Activities: Repayments of long-term debt (5,280 )
(67,001 ) (24,022 ) (97,382 ) Debt issuance costs - (25 ) - (206 )
Payment of withholding taxes on stock-based compensation (3 ) (2 )
(586 ) (632 ) Proceeds from issuance of common stock
- 2
132 117
Net cash used by financing activities
(5,283 )
(67,026 ) (24,476
) (98,103 )
Change in cash and cash equivalents 1,192 36,850 (14,188 ) 36,456
Cash and cash equivalents, beginning of period
27,659 16,445
43,039 16,839
Cash and cash equivalents, end of period
$
28,851 $ 53,295
$ 28,851 $
53,295 Supplemental Cash Flow Data:
Interest paid $ 6,008 $ 6,818 $ 22,036 $ 25,201 Cash paid on
extinguishment of hedging instrument $ - $ 4,073 $ - $ 4,073 Income
tax paid $ 206 $ - $ 220 $ - Supplemental Non-cash
Transactions: Property acquired under capital leases $ 346 $ (19 )
$ 390 $ (17 ) Additions to ARO asset $ 17 $ 43 $ 306 $ 180 Exchange
of debt with common stock $ - $ 6,000 $ - $ 6,000
Non-cash acquisition purchase price, net
of cash received
$ - $ - $ 1,850 $ -
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED
EBITDA (Unaudited, In Thousands)
Three Months Ended Nine
Months Ended September 30,
September 30, 2014
2013 2014
2013 Net income $
1,878 $ 121,997 $ 2,578 $ 163,159 Add (subtract): Interest expense
8,615 9,785 26,144 29,970 Loss on extinguishment of debt - 2,094 -
2,370 Interest income (28 ) (19 ) (42 ) (37 ) Depreciation and
amortization 8,585 9,209 25,850 33,291 Loss on sale of short-term
investments - - - 13 (Gain) loss on disposal of assets (199 ) 315
612 941 (Earnings) loss from equity method investment in TekMate -
(18 ) (12 ) 3 Earnings from equity method investment in AWN (11,556
) (8,064 ) (29,235 ) (8,064 ) Gain on sale/contribution of asset to
AWN - (210,873 ) - (210,873 ) AWN distributions received 12,500
5,389 37,500 5,389 AWN distributions received for the prior period
(4,167 ) - (4,167 ) - AWN distributions receivable within 12 days
4,167 4,167 4,167 4,167 Income tax expense 1,203 85,421 1,964
60,796 Stock-based compensation 684 550 1,877 2,268 Long-term cash
incentives 587 152 1,572 482 Earthquake related expense 1,228 -
1,228 -
AWN transaction-related costs
28 4,702
240 5,974
Adjusted EBITDA
$ 23,525
$ 24,807 $
70,276 $ 89,849
Revenue 78,465 83,841 237,354 272,657 CETC Revenue
(4,720 )
(5,139 ) (14,581
) (16,093 ) Net
Revenue
$ 73,745 $
78,702 $ 222,773
$ 256,564 Adjusted
EBITDA Margin 31.9 % 31.5 % 31.5 % 35.0 %
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 recurring performance and believes provides
useful information to investors regarding baseline operating
results. 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 or other assets, loss on sale of short-term
investments, gain or loss on asset purchases or disposals, earnings
on equity method investments, provisions for taxes,
transaction-related costs, stock-based compensation, and expenses
under the company’s long term cash incentive plan (“LTCI”)
including adjustments to TekMate purchase price based upon
achieving earn out targets. 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 and Schedule
9 to these press release financials provides additional AWN related
financial information. Additionally, in July 2014 an undersea cable
serving Juneau, Alaska was impacted by a service disruption
associated with an earthquake. The costs associated with
restoration and repair of this facility is excluded from Adjusted
EBITDA. Due to the AWN structure, ACS receives certain high
cost revenues ("CETC") which are reported in operating revenue,
non-affiliates, and remits an equal amount to AWN as a component of
our consideration for wholesale wireless services, which is
reported in Cost of services and sales, affiliated. From a
financial reporting perspective CETC grosses up our revenue and
expense and has no impact on Adjusted EBITDA, but impacts our core
margins. We therefore report Adjusted EBITDA Margin to exclude this
impact.
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. FREE
CASH FLOW (Unaudited, In Thousands)
Three Months Ended Nine
Months Ended September 30,
September 30, 2014
2013 2014
2013 Adjusted
EBITDA
$ 23,525 $
24,807 $ 70,276
$ 89,849 Less:
Capital spending Incurred capital expenditures (16,042 ) (13,717 )
(33,916 ) (27,314 ) Milestone billings for fiber build project for
a carrier customer 2,000 - 2,000 - AWN transaction-related capital
costs, net change
-
- -
(41 ) Net capital spending (14,042 )
(13,717 ) (31,916 ) (27,355 ) Amortization of AWN capacity
revenue (647 ) (738 ) (2,337 ) (738 ) Earthquake related expense
(1,228 ) - (1,228 ) - Cash interest expense
(6,008 ) (6,818
) (22,036 )
(25,201 ) Free cash flow
$ 1,600 $
3,534 $ 12,759
$ 36,555
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 recurring performance and believes provides
useful information to investors regarding baseline operating
results. Free cash flow ("FCF") is defined as Adjusted
EBITDA, less capital expenditures that create an obligation to pay
(“incurred capital expenditures”), plus milestone billings for a
fiber build project for a carrier customer, less AWN
transaction-related capital costs, less amortization of AWN
capacity revenue (which is a non cash revenue item), less
earthquake related costs, less cash interest expense. Note that
incurred capital spending includes the costs associated with a two
year fiber build project with a strategic customer however we are
adding back the cash we receive from the customer for the funding
of that project to FCF. Accordingly, our capital spending will be
elevated because of this project, but the project will be accretive
to FCF by 2015.
Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE
GROWTH (Unaudited, In Thousands)
Three Months Ended Nine
Months Ended September 30,
September 30, Service revenue:
2014
2013 2014
2013 Business and wholesale customers
Voice $ 5,666 $ 5,790 $ 16,948 $ 17,303 Broadband 10,962 10,080
32,658 29,509 IT Services 1,007 - 2,540 - Other 1,800 1,926 5,256
5,969 Wholesale
8,544
7,267 24,723
22,319 Business and wholesale service revenue
27,979 25,063
82,125 75,100
Consumer customers Voice 3,686 4,147 11,399 12,819 Broadband 6,336
5,596 18,441 16,443 Other
409
478 1,191
1,275 Consumer service revenue 10,431 10,221 31,031
30,537
Total service revenue
38,410 35,284
113,156
105,637 Growth in service revenue 8.9 % 7.1 %
Growth in broadband service revenue 10.3 % 11.2 %
Other
revenue: Equipment sales 1,310 516 3,421 1,451 Access 8,771
9,273 26,732 28,056 High cost support
4,922
4,984 18,271
13,558 Total service and other revenue
53,413 50,057
161,580 148,702 Growth in
service and other revenue 6.7 % 8.7 % Growth excluding equipment
sales 5.2 % 7.4 %
Wireless revenue: Business and
consumer service revenue 16,413 17,673 50,598 53,607 Equipment
sales 2,059 1,255 4,178 3,785 Other 1,213 1,441 4,010 3,591
AWN related: Foreign roaming - 5,594 - 40,029 Wireless
backhaul - 1,944 70 6,112 CETC 4,720 5,139 14,581 16,093
Amortization of deferred AWN capacity revenue
647 738
2,337 738 Total AWN
related 5,367
13,415 16,988
62,972 Total wireless & AWN
related revenue 25,052
33,784 75,774
123,955 Total revenue
$ 78,465
$ 83,841
$ 237,354
$ 272,657
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY
OPERATING STATISTICS (Unaudited)
Three Months Ended September 30,
June 30, September 30,
2014 2014
2013 Voice: Consumer access lines
45,177 46,740 50,722 Business access lines 79,563 80,172 80,071
Voice ARPU consumer $ 26.73 $ 26.95 $ 26.81 Voice ARPU
business $ 23.65 $ 23.63 $ 24.04
Broadband: Consumer
connections 38,257 39,022 38,117 Business connections (2) 19,201
19,077 18,700 ARPU consumer $ 54.18 $ 52.51 $ 48.63 ARPU
business (1) (2) $ 190.60 $ 194.96 $ 180.15
Wireless:
Postpaid connections 79,963 83,468 86,423 Lifeline connections
7,637 7,447 9,077 Prepaid connections 21,463
18,663
16,614 Total 109,063
109,578 112,114
Retail wireless ARPU $ 50.10 $ 52.55 $ 52.08
Churn: Voice connections 1.5 % 1.9 % 1.4 % Broadband
connections (2) 2.6 % 2.4 % 2.3 % Wireless connections 2.9 % 2.4 %
3.2 % (1) Business broadband ARPU was
restated to reflect the movement of IT services revenue into a
separate category. (2)
How we calculate broadband connections has
changed to exclude certain internal use circuits. Historical
amounts have been restated to reflect appropriate comparisons
period over period.
Schedule 8
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Long
Term Debt (Unaudited, In Thousands)
September 30, December
31, September 30,
2014 2013
2013 2010 senior credit facility term loan due
2016 $ 322,700 $ 345,900 $ 347,725 Debt discount - 2010 senior
credit facility term loan due 2016 (1,155 ) (1,687 ) (1,838 ) 6.25%
convertible notes due 2018 114,000 114,000 114,000 Debt discount -
6.25% convertible notes due 2018 (7,731 ) (9,213 ) (9,666 ) Capital
leases and other long-term obligations
6,828
7,257 7,426
434,642 456,257 457,647 Less current portion
(11,846 ) (14,256
) (12,865 ) Long-term
obligations, net of current portion
$
422,796 $ 442,001
$ 444,782
Maturities
2014 (October 1 - December 31) $ 286 2015 (January 1 -
December 31) 15,422 2016 (January 1 - December 31) 308,792 2017
(January 1 - December 31) 510 2018 (January 1 - December 31)
114,292 2019 (January 1 - December 31) 283 Thereafter
3,943 $
443,528
Schedule 9
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Summary
AWN information (Unaudited, In Thousands)
Alaska Wireless Network, LLC Stand Alone Selected
Operating Results
Q1 - 2014 Q2 -
2014 Q3 - 2014 YTD - 2014
Operating revenues $ 63,037 $ 64,665 $ 70,424 $ 198,126
Operating expenses: Cost of services and sales 19,119 18,880 18,049
56,048 Selling, general & administrative 5,954 5,898 5,337
17,189 Depreciation and amortization
10,995
10,644 11,097
32,736 Total operating
expenses 36,068 35,422 34,483 105,973 Operating income
26,969 29,243 35,941 92,153 Other income and (expense)
(92 ) (88
) (94 )
(274 ) Net income 26,877 29,155
35,847 91,879 Plus: Depreciation Expense
10,995 10,644 11,097 32,736 Other, net 1,706 1,631 1,420 4,757
Minus: Capital Spending 3,639 7,110 21,141 31,890 Management Fee to
GCI
1,438 1,372
1,089 3,899
Adjusted Free Cash Flow
$ 34,501
$ 32,948 $
26,134 $ 93,583
Distributions paid to ACS: 12,500 12,500 12,500
37,500 Distributions to ACS as a proportion of FCF: 36.2 %
37.9 % 47.8 % 40.1 % 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: Q1 - 2014 Q2 -
2014 Q3 - 2014 YTD - 2014 Wireless
business and consumer service revenue $ 17,056 $ 17,129 $ 16,413 $
50,598 AWN wholesale charges * $ 11,905 $ 12,750 $ 11,210 $
35,865 Handset subsidy support * (2,664 ) (3,095 ) (2,256 ) (8,015
) Equipment subsidy 3,127 3,358 1,875 8,360 Other *
235 830
(141 ) 924
Total $ 12,603 $ 13,843 $ 10,688 $ 37,134 Wholesale Margin $
4,453 $ 3,286 $ 5,725 $ 13,464 27 % * 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: Q1 - 2014 Q2 - 2014
Q3 - 2014 YTD - 2014 AWN net income $
26,877 $ 29,155 $ 35,847 $ 91,879 Adjusted for step-up in GCI
assets
(1,345 )
(1,650 ) (1,180
) (4,175 ) AWN
stepped-up earnings $ 25,532 $ 27,505 $ 34,667 $ 87,704 ACS
ownership percentage of AWN 33.33 % 33.33 % 33.33 % 33.33 %
"Adjusted for step-up"(B) reflects the step up in 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 $
9,168 $ 11,556
$ 29,235 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 - 2014 Q2 -
2014 Q3 - 2014 YTD - 2014 Cash
distributions received during the quarter $ 12,500 $ 12,500 $
12,500 $ 37,500
Less:
Distributions received during the quarter
related to the previous period
(4,167 ) (4,167 ) (4,167 ) (4,167 ) Plus: Distributions received
within 14 business days of quarter-end 4,167 4,167 4,167 4,167
Amortization of deferred AWN capacity revenue
841 849
647 2,337 Equals AWN
impact to Adjusted EBITDA
$ 13,341
$ 13,349 $
13,147 $ 39,837
Less:
Amortization of deferred AWN capacity revenue
841 849
647 2,337 Equals AWN
impact to Free Cash Flow
$ 12,500
$ 12,500 $
12,500 $ 37,500
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.Tiffany DunnManager,
Board and Investor Relations907-297-3103investors@acsalaska.com
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