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):
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November
4, 2015
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
(Exact
name of registrant as specified in its charter)
Delaware
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000-28167
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52-2126573
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(State or other jurisdiction
of incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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600 Telephone Ave, Anchorage, Alaska
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99503
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s telephone number, including area code
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907 - 297 - 3000
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(Former name or former address, if changed since last report.)
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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):
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
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 November 5, 2015, Alaska Communications Systems Group, Inc. (the
“Company”) released its financial results for the quarter ended
September 30, 2015. The press release is attached hereto as Exhibit
99.1 and incorporated herein by reference. A presentation of
supplemental information to be reviewed on the Company’s earnings call
to be held on November 5, 2015 will be made available on the Company’s
Investor Relations website at http://www.alsk.com at the time of the
call and is incorporated herein by reference.
Pursuant to General Instruction B.2 of Form 8-K, the information in this
Item 2.02 is being furnished to the Securities and Exchange Commission
and shall not be deemed to be “filed” for purposes of Section 18 of the
Securities Exchange Act of 1934 or otherwise subject to the liabilities
of that section. Furthermore, the information in this Item 2.02 shall
not be deemed to be incorporated by reference into the filings of the
Corporation under the Securities Act of 1933.
Item 5.02 Departure of Directors or Certain Officers; Election of
Directors; Appointment of Certain Officers; Compensatory Arrangements of
Certain Officers.
(b) On November 4, 2015, Wayne Graham, Chief Financial Officer, and the
Company, agreed that that Mr. Graham would separate from the Company
effective November 30, 2015. The Company announced Mr. Graham’s
departure in a press release on November 5, 2015. The press release is
attached and incorporated herein by reference as Exhibit 99.1 to this
report.
Additionally, on November 4, 2015, David Eisenberg, Chief Revenue
Officer and the Company agreed that Mr. Eisenberg would separate from
the Company effective November 30, 2015.
The Company has no disputes with Mr. Graham or Mr. Eisenberg.
(c) The Company also appointed Laurie Butcher, Senior Vice President,
Finance, to serve as the Company’s primary financial and accounting
officer effective on November 5, 2015.
Ms. Butcher, aged 53, joined Alaska Communications in 1997 and has
served as Vice President of Finance for the past ten years and became
the Senior Vice President, Finance on October 4, 2015.
(e) Employment Agreement between the Registrant and Laurie Butcher:
Set forth below is a description of the terms of employment and the
amounts payable to Ms. Butcher thereunder and attached hereto as Exhibit
10.1.
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Base Salary: Annual base salary of $240,000
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Annual Cash Incentive: The opportunity to earn an annual cash
incentive payment, in accordance with the Company’s senior executive
cash incentive program with a target amount equal to 60% of base
salary.
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Long Term Equity Incentive: Ms. Butcher is eligible to earn a
long-term equity incentive, with a target annual equity award valued
at approximately 80% of base salary comprised equally of Performance
Stock Units and Restricted Stock Units. Participation is to be subject
to the same terms and provisions applicable to other senior executives.
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Post-Termination Payments: Upon a termination by the Company without
cause or by Ms. Butcher for good reason, Ms. Butcher is entitled to
post-termination benefits in accordance with the Company’s 2015
Officer Severance Policy as modified from time to time. The Company’s
2015 Officer Severance Policy is attached hereto as Exhibit 10.2.
Item 9.01 Financial Statements and Exhibits
Exhibit No.
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Description
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Exhibit 99.1
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Alaska Communications Systems Group, Inc. Press Release dated
November 5, 2015.
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Exhibit 10.1
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Employment arrangement between Alaska Communications Systems
Group, Inc. and Laurie Butcher.
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Exhibit 10.2
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The Alaska Communications System Group, Inc. 2015 Officer
Severance Policy.
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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.
Date: November 5, 2015
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Alaska Communications Systems Group, Inc.
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/s/ Leonard A. Steinberg
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Leonard A. Steinberg
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Corporate Secretary
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Exhibit Index
Exhibit No.
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Description
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99.1
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Alaska Communications Systems Group, Inc. Press Release dated
November 5, 2015.
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Exhibit 10.1
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Employment arrangement between Alaska Communications Systems
Group, Inc. and Laurie Butcher.
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Exhibit 10.2
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The Alaska Communications Systems Group, Inc. 2015 Officer
Severance Policy.
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Exhibit 10.1
Hand Delivered
September 24, 2015
Laurie Butcher
Vice President, Finance & Controller
Dear Laurie:
I am pleased to offer you the position of Senior Vice President, Finance
with Alaska Communications. In this capacity, you will be joining a
highly professional team that is dedicated to advancing Alaska
Communications in its position as Alaska’s leading integrated
telecommunications company. We are a customer driven organization and
you will play a crucial role executing this strategy with our existing
and future customers. If you accept this offer, you will report
directly to Wayne Graham, our Chief Financial Officer. Your effective
date will be October 4, 2015.
In this role, you will receive $240,000 in annual base salary paid on a
weekly rate and delivered in bi-weekly payrolls, and a $144,000 (60% of
your base salary rate) target annual cash incentive for an annualized
target cash compensation total of $384,000.
Your actual incentive payment (a) will vary based on your and our
Company’s performance, (b) is earned and paid only after completion of
the year-end financial audit, (c) is paid only to employees who continue
to be regular, full time employees at the time payment is made in the
year following the performance year, and (d) is pro-rated your first
year based on your actual time in the position.
Another substantial component of your total compensation in this job is
a target annual long-term incentive compensation award. Your total
annual target long-term incentive compensation award as Senior Vice
President, Finance will be 80% of your base salary rate, comprised
equally of Performance Stock Units and Restricted Stock Units. We
determine actual awards based on your role and performance of that role,
and prorate for your actual time in the position. All awards are
contingent upon Board of Directors (BOD) approval, governing plan
documents, and your execution of required award documents.
Alaska Communications has developed a Corporate Compliance Program (CCP)
and Protection of Proprietary Information Policy (PIP) to help employees
meet the Company’s expectations. Adherence to all Alaska Communications
Policies & Procedures is a condition of employment at Alaska
Communications and new hires are expected to confirm their willingness
to comply in writing. Copies of the current versions of both the CCP
and PIP are attached for your advance review. By accepting our offer,
you are agreeing to comply with these policies, as they may be amended
from time to time in the future, and certify you are not obligated by
any previously signed agreements that will preclude you from working at
Alaska Communications.
Laurie Butcher
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Page 2 of 2
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Offer Letter
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September 24, 2015
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In your position as an officer of our company, you will become privy to
confidential and highly-sensitive competitive and proprietary
information concerning our business, including but not limited to our
customers, the products and services we offer, our finances, our
business strategies, and our future plans. You agree that during your
employment with us, and for a period of twelve months after termination
of your employment, you will not become an officer, director, employee,
contractor, consultant, partner, joint-venture, or otherwise enter a
business relationship or service with any competitor of Alaska
Communications in the markets we are serving at the time your employment
terminates; and for a period of twelve months after termination of your
employment you also agree that you will not offer, encourage or solicit
any other officer or employee of Alaska Communications to leave the
company or enter into an employment or business relationship with you or
your subsequent employer. If and when you leave Alaska Communications,
you agree that you will not make any disparaging statements, whether
oral or written, about the company, its officers, directors, or
employees or any aspect of its business. In addition, you agree to
always protect all Alaska Communications’ confidential and proprietary
information you learned as a result of your employment with us in
accordance with the CCP and PIP.
As Senior Vice President,
Finance you will also be covered by the Alaska Communications Officer
Severance Policy. A copy of the current 2015 plan is attached. It may
be modified in the future and, as modified, will apply to you.
Business conditions change from time to time and the commitment to
provide continuing employment and your total compensation package
depends upon the Company’s success and continuing business
requirements. As a result, I feel a responsibility to advise you that
Alaska Communications is an “at will” employer. This means that either
you or the Company can terminate the employment relationship at any time
for any reason, with or without cause. While I feel the need to share
these cautions, please also know that I feel confident that you are
joining an organization that will prevail as the premier Alaskan
communications service provider.
Laurie, I’m looking forward to watching teams grow under your
leadership. If you have questions about this offer, please do not
hesitate to speak with me.
Respectfully yours,
/s/Anand Vadapalli
Anand Vadapalli
CEO & President
cc: Employee File
Accepted:
/s/ Laurie Butcher Date: 10/1/2015
Laurie Butcher
Exhibit 10.2
Alaska Communications 2015 Officer Severance Policy
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P/P 250.0
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Prepared by: Legal
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Effective Date:
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Supersedes: 2014, 2010, 2008 & 2009 Officer
Severance Policies & 2006 Officer Severance Plan
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September 4, 2015
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Approved by: Compensation & Personnel Committee of the
Board of Directors
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1. Purpose
The Alaska Communications
Systems Holdings, Inc. 2015 Officer Severance Policy (“the Policy”) is
established to provide severance income continuance to Eligible Officers
under certain termination and change in control circumstances as further
defined in this Policy. In consideration for such severance income and
benefits, the Eligible Officer will release Alaska Communications
Systems Holdings, Inc. and its affiliates (the “Company”) from any and
all actions, suits, proceedings, claims, and demands related to the
termination.
2. Administration
The Policy is
administered by the Compensation and Personnel Committee (the
“Committee”) designated by the Board of Directors of the Company (“the
Board”). The Committee, subject to action of the Board, has complete
discretion and authority with respect to the Policy and its
application. The Committee reserves the right to interpret the Policy,
prescribe, amend and rescind rules relating to it, determine the terms
and provisions of the severance payments and make all other
determinations it deems necessary or advisable for the administration of
the Policy. The determination of the Committee on all matters regarding
the Policy will be conclusive.
3. Eligibility
Eligible
Officers are regular full-time and part-time individuals employed by the
Company for a minimum of six continuous months in the positions listed
in this Section 3 below (“Eligible Officer(s)”). Eligible Officers will
be eligible to participate in the Policy; provided, however, that an
employee of the Company who is temporarily appointed to a particular
eligible position in an acting manner, is not eligible to participate as
a result of that temporary position. Additionally, any employee with an
employment agreement that includes severance benefits will not be an
Eligible Officer under this Policy.
Vice President
Senior
Vice President
Executive Vice President
President
4. Definitions
a. “Cause”
means the occurrence, at the sole discretion of the Company, of any of
the following:
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(i)
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an act or acts of personal dishonesty or illegal or unethical acts
knowingly performed by the Eligible Officer, including but not
limited to omissions;
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(ii)
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a breach of a fiduciary duty owed to the Company, its Board, or
stockholders (even if the Company is required to indemnify the
Eligible Officer),
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(iii)
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a breach of an obligation or violation of a provision applicable
under any corporate compliance or ethics policy;
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(iv)
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repeated failures or negligence by the Eligible Officer to perform
faithfully and efficiently the duties, obligations and
responsibilities of the position or engaging in conduct harmful to
the Company or its employees, and which failures or conduct are
not remedied after receipt of written notice from the Company
within a period set forth in the notice, (where the Company has or
may suffer immediate and grave harm from the Eligible Officer’s
continued employment, no advance warning may be provided); or
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(v)
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a conviction or plea of guilty or “no contest” of the Eligible
Officer for a felony or any misdemeanor involving theft,
dishonesty, fraud or moral turpitude.
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b. “Change of Control” means the occurrence of any of the following
events:
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(i)
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Any Company transaction or series of related transactions that
result in the Company’s voting stockholders owning less than fifty
percent of the voting power of the new company;
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(ii)
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During any period of two years or less, the election of an
insurgent slate of directors comprising a new majority of the
Board of Directors (an “insurgent slate” means director candidates
not nominated by the incumbent board);
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(iii)
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Approval by the Company’s stockholders of a complete liquidation
or dissolution of the Company; or
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(iv)
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The sale of all or substantially all of the Company’s assets.
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c. “Death” means an Eligible Officer is dead or declared legally dead
by a competent authority.
d. “Disability” or “Disabled” means a physical or mental impairment
that renders an Eligible Officer incapable of working for at least six
consecutive months during any one year period, not limited to a calendar
year. In the event of a dispute regarding the presence of a Disability,
the Company will seek the opinion of an independent physician.
e. “Eligible Officer” is defined in Section 3.
f. “Executive Officer” means an Eligible Officer who has one of the
titles listed in this Section 4.f. below, provided, however, that an
employee of the Company who is temporarily appointed to the position of
Executive Officer as an acting Executive Officer, is not considered an
Executive Officer for purposes of the benefits provided under this
Policy.
Executive Vice President
Senior
Vice President
President
g. “Good Reason” means the occurrence of any of the following events
without the Eligible Officer’s written consent, provided, however within
60 days following the occurrence of the event, the Eligible Officer must
provide at least 30 days written notice of intent to resign specifying
the specific Good Reason for resignation and during which time the
Company has not provided a cure sufficient to remove the Good Reason:
(i) a reduction in Target Annual Compensation of greater
than 10% in any three year period, unless substantially all Eligible
Officers’ compensation is similarly reduced;
(ii) a significant reduction in other benefits (unless
reduction applies to substantially all other Eligible Officers or
substantially all full-time employees of the Company);
(iii) a significant reduction in job title, responsibilities,
number of employees under supervision, duties or a significant demotion,
recognizing that the Company may, from time to time, have a business
need to modify assigned responsibilities or reassign employees between
Eligible Officers, which changes, in and of themselves, will not
constitute Good Reason
(iv) required relocation of the principal work location that
is more than 60 miles from the prior work location; or
(v) the
Company’s material breach of a material obligation owed under an
employment agreement.
h. “Target Annual Compensation” means base salary, and target annual
incentive compensation.
5. Severance Pay and Benefits
a. Any Eligible Officer whose employment with the Company is terminated
under either of the circumstances described below in this Section 5.a.,
and who signs a form of waiver attached as Exhibit A within 21 days of
termination of employment, or 45 days as may be required under
applicable law, and does not revoke the signed waiver within the
revocation period as required under applicable law, will be eligible for
Severance Pay and Severance Benefits as described in this Section 5.
i. An Eligible Officer is terminated by the Company or an affiliate
without Cause, or
ii. An Eligible Officer resigns for Good Reason after giving at least
30 days written notice of intent to resign specifying the specific Good
Reason for the resignation and during which time the Company has not
provided a cure sufficient to remove the Good Reason.
b. The amount of Severance Pay and Benefits to which an Eligible
Officer may be entitled under this Policy will be determined in
accordance with the Eligible Officer’s position.
Position
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Severance Pay
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Executive Officer
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●
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One times the annual base salary in effect on the termination
date, unless resigning for Good Reason based on Section 4g(i)
reduction in compensation, then annual base salary prior to
reduction, to be paid in a lump sum within 60 days of termination;
and
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●
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Sixty percent of the annual base salary in effect on the
termination date, unless resigning for Good Reason based on
Section 4g(i) reduction in compensation, then annual base salary
prior to reduction, prorated based on termination date, to be paid
in a lump sum within 60 days of termination; and
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Annual cash incentive payment based on achievement of annual
performance goals for the prior full performance year of Executive
Officer’s employment, if unpaid as of the date of termination to
be paid if and when other executives are paid; and
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Severance Benefit
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Subject to Section 5c below, for up to one year after termination,
reimbursement of any monthly federal medical COBRA premiums
actually paid by the Executive Officer for continuing medical
insurance coverage for the Executive Officer and family, less the
standard employee contribution amount. Reimbursement will be
provided no later than March 15 of the year after the year in
which the expense was incurred.
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Other Eligible Officers
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Severance Pay
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One times the annual base salary in effect on the termination
date, unless resigning for Good Reason based on Section 4g(i)
reduction in compensation, then annual base salary prior to
reduction.
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Severance Benefit
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Subject to Section 5c below, for up to six months after
termination, reimbursement of any monthly federal medical COBRA
premiums actually paid by the employee for continuing medical
insurance coverage for the employee and family, less the standard
employee contribution amount. Reimbursement will be provided no
later than March 15 of the year after the year in which the
expense was incurred.
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c. Replacement Medical Benefits. To the extent an
Eligible Officer is eligible for medical benefits coverage under a
subsequent employer’s medical plan and before the applicable time period
has elapsed, such Eligible Officer will no longer be eligible for a
Severance Benefit. An Eligible Officer must notify the Company of the
start date of the replacement coverage. Any payments for COBRA coverage
or other benefits to which an Eligible Officer was not entitled must be
reimbursed to the Company. Adequate documentation of payment of COBRA
premiums is required in order to qualify for reimbursement.
d. Unvested Equity Compensation. Unless otherwise provided herein,
Eligible Officers will not be eligible for any unvested equity
compensation including, but not limited to, stock options, restricted
stock, and performance stock.
e. Other Incentive Compensation. Unless otherwise provided herein,
non-executive Eligible Officers will not be entitled to or deemed to
have earned any cash or other bonus or incentive compensation payments
for the final year or partial year of employment.
6. Clawback Requirement. Notwithstanding any
other provisions of this Policy to the contrary, any compensation paid
to an Eligible Officer pursuant to this Policy or any other agreement or
arrangement with the Company which is subject to recovery under any law,
government regulation or stock exchange listing requirement, will be
subject to such deductions and clawback as may be required to be made
pursuant to such law, government regulation or stock exchange listing
requirement
7. Change of Control Severance Pay and Benefits
Any Eligible Officer whose employment with the Company is terminated
without Cause or who resigns for Good Reason within two and one half
months before or one year after a Change of Control will be eligible for
two times base salary and the Severance Benefit described in Part 5
above. In addition, all long term incentive compensation, whether equity
or cash, will vest and be released or paid, as appropriate. Any eligible
severance pay and benefits based on a termination prior to Change in
Control is contingent upon and payable subsequent to Eligible Officers
termination of employment without Cause or resignation for Good Reason
and the consummation of the Change in Control.
Change of control, in and of itself, will not be deemed Good Reason for
a resignation.
8. Disability or Death
In the event of the Death or Disability of an Eligible Officer while
employed by the Company, no severance pay or benefits under this Policy
will be payable, however, an Eligible Officer or his or her estate will
be eligible for a prorated annual cash incentive payment based on the
time of active work in the last performance year. Eligibility for this
partial cash incentive award is in accordance with the Company’s
incentive compensation policy, including adjustments for Company and
individual performance, and giving credit for active work time in the
last performance year.
Unless otherwise provided for in a particular incentive award agreement,
no other incentive compensation, unvested equity compensation or bonus
will be deemed to have been earned or be paid for the final year or
partial year of employment following a death or Disability.
9. Non-Compete, Non-Disparagement and Non-Solicitation
Attached as Exhibit A to this Policy, and incorporated herein by
reference, is a Form of Officer’s Release (“Release”) that provides,
among other things, restrictions for competition, disparagement and
solicitation of other Company employees. An Eligible Officer must
acknowledge, agree to, and sign the Release prior to receiving any
severance pay or benefits under this Policy. If, during the term that
an Eligible Officer is receiving any severance pay or benefits described
in this Policy, the Eligible Officer violates the terms of this
Agreement, the Release, or any other noncompetition or nondisclosure
agreement with the Company, the Company’s obligations to the Eligible
Officer under this Policy will automatically terminate.
10. Tax Withholding; Section 280G
The Company may withhold from any cash amounts payable to an Eligible
Officer under this Policy to satisfy all applicable federal, state,
local or other income (including excise) and employment withholding
taxes. In the event the Company fails to withhold such sums for any
reason, or withholding is required for any noncash payments provided in
connection with the Eligible Officer’s termination of employment, the
Company may require the Eligible Officer to promptly remit to the
Company sufficient cash to satisfy all applicable income and employment
withholding taxes. The Company will not make any “gross-up” payment to
cover any personal tax liability of an Eligible Officer.
Certain employees under Section 409A of the Internal Revenue Code may be
required to delay payments that would otherwise be payable during the
six month period immediately following separation from service.
In the event that the severance pay or benefits provided under this
Policy are subject to an excise tax under Section 280G of the Internal
Revenue Code, then pay and benefits under this Policy will be either (i)
delivered in full or (ii) reduced so that any payment is limited to 2.99
times “base amount,” within the meaning of Section 280G(b)(3) of the
Internal Revenue Code, whichever of the foregoing amounts results in the
Eligible Officer’s receipt of the greatest amount of benefits after
tax. Eligible Officers must cooperate in good faith with the Company in
any valuation of benefits that may be required under Section 280G of the
Internal Revenue Code.
Any determinations required to be made related to Section 280G will be
made in writing by an accounting or consulting firm selected by the
Company, and will be conclusive and binding upon the Eligible Officer
and the Company. The Company will bear all costs reasonably incurred in
connection with any such calculations. In the event it is later
determined that a greater reduction in payments should have been made to
implement the objective and intent of this Section 9, the excess amount
shall be returned immediately by the Eligible Officer to the Company,
plus interest at a rate equal to 120% of the semi-annual applicable
federal rate as in effect at the time of the Change in Control.
10. Dispute Resolution and Governing Law
The Committee will interpret the Policy with respect to any dispute that
arises between an Eligible Officer and the Company. The decision of the
Committee on all disputes regarding the Policy are conclusive.
This Policy will be governed by and construed in accordance with the
laws of the state of Alaska, including all matters of construction,
validity and performance, without regard to the principles of conflicts
of law thereof, to the extent not superseded by applicable federal
law. Each party will be responsible its own for legal fees and costs
incurred in any dispute related to this Policy or the Release.
11. Section 409A
The intent of the Company is that the payments and benefits under this
Policy comply with or be exempt from Section 409A of the Internal
Revenue Code of 1986, as amended, and the regulations and guidance
promulgated thereunder (collectively, “Section 409A”) and, accordingly,
to the maximum extent permitted, this Policy shall be interpreted to be
in compliance therewith.
Notwithstanding anything in this Policy to the contrary, any
compensation or benefits payable under this Policy that is considered
nonqualified deferred compensation under Section 409A and is designated
under this Policy as payable upon termination of employment shall be
payable only upon a “separation from service” with the Company within
the meaning of Section 409A (a “Separation from Service”).
Notwithstanding anything in this Policy to the contrary, if an Eligible
Officer is deemed by the Company at the time of Separation from Service
to be a “specified employee” for purposes of Section 409A, to the extent
delayed commencement of any portion of the benefits to which he or she
is entitled under this Agreement is required in order to avoid a
prohibited distribution under Section 409A, such portion of the benefits
shall not be provided to the Eligible Officer prior to the earlier of
(i) the expiration of the six-month period measured from the date of
Separation from Service with the Company or (ii) the date of the
Eligible Officer’s death. Upon the first business day following the
expiration of the applicable Section 409A period, all payments deferred
pursuant to the preceding sentence shall be paid in a lump sum, and any
remaining payments due under this Policy shall be paid as otherwise
provided herein.
Miscellaneous
a. This Policy will not be deemed to create a contract of employment
between the Company and the Eligible Officer and will create no right in
the Eligible Officer to continue in the Company’s employment for any
specific period of time, or to create any other rights on the part of
the Eligible Officer or obligations on the part of the Company, except
as set forth herein. This Policy does not restrict the right of the
Company to terminate the Eligible Officer, or restrict the right of the
Eligible Officer to terminate employment.
b. Nonalienation of Benefits. Except in so far as this provision may
be contrary to applicable law, no sale, transfer, alienation,
assignment, pledge, collateralization or attachment of any benefits
under this Policy will be valid or recognized by the Company.
c. Eligible Officers will retain applicable rights to indemnification
under the Company’s certificate of incorporation, or otherwise provided
at law or pursuant to By-laws. Eligible Officers will continue to be
covered by applicable Company insurance, including directors’ and
officers’ liability or employment practices insurance coverage for work
performed while employed by the Company.
d. This Policy is an unfunded compensation arrangement for a member of
a select group of the Company’s management and any exemptions under
ERISA, as applicable to such an arrangement, will be applicable to this
Policy.
e. All notices, requests, demands, and other communication with are
required or may be given under this Policy will be in writing and will
be deemed to have been duly given when delivered by hand or overnight
courier service or three days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to
these respective addresses (or to such other addresses as the parties
may notify each other of in the meantime using the same methods
herein). Notice of change of address, however, is only effective only
upon actual receipt.
If to the Company addressed to:
Alaska Communications Systems Holdings, Inc.
600
Telephone Avenue MS65
Anchorage, Alaska 99503
If to the Eligible Officer, addressed to the most recent address in the
Company’s personnel records.
This Policy supersedes all prior understandings (including oral
agreements) between Eligible Officers and the Company concerning
severance matters. Nevertheless; this Policy may be amended, modified,
changed, or terminated by the Company without prior notification or
negotiation, and a
Exhibit 99.1
Alaska
Communications Reports Third Quarter 2015 Results
Increased
Total Broadband Revenue 7.6 Percent, Again Delivering Industry-Leading
Revenue Growth
Improved
Adjusted EBITDA Remains on Track to Achieve 2015 Exit Run Rate Target
ANCHORAGE, Alaska--(BUSINESS WIRE)--November 5, 2015--Alaska
Communications Systems Group, Inc. (NASDAQ: ALSK) today reported
financial results for the third quarter of 2015.
“Our focus on reliable broadband technologies, differentiated by
customer service, resulted in strong sales and financial performance in
the third quarter. Q3 Adjusted EBITDA, as expected, grew significantly,
up 13.7% sequentially to $12.6 million. We expect Q4 performance will
show continued strong sequential growth from revenue uplift and
additional cost reductions. This supports our goal to achieve a 2015
Adjusted EBITDA exit run rate of $54 million to $56 million and
strengthens our financial foundation going into 2016.
“Consistently performing to our plan over the last four years, we have
transformed Alaska Communications into a pure play broadband and IT
managed services provider. Our management team has strengthened our
balance sheet, refinanced our debt, and achieved industry-leading
growth. We are focused on our future, positioning Alaska Communications
for further success in broadband and IT managed services and creating
shareholder value. We are at a natural place in our evolution to provide
leadership opportunities for our deeply experienced management team,”
said President and CEO Anand Vadapalli.
Laurie Butcher, who has been a key financial leader at Alaska
Communications for many years, has been promoted to senior vice
president of finance and will lead the finance organization, succeeding
CFO Wayne Graham. Butcher joined Alaska Communications in 1997 and
served as vice president of finance for the past 10 years. The company
has also aligned its core sales and operations functions in three key
areas. Bill Bishop, who has led the company’s growth in business sales,
has been promoted to senior vice president of business services and will
lead the business and wholesale segment. Mike Todd, who has led Alaska
Communications’ successful network expansion, has been named senior vice
president of consumer services and will lead the consumer segment. Randy
Ritter, named senior vice president of shared services, previously led
the company’s successful entry into IT managed services.
“Collectively, our team has five decades’ experience at Alaska
Communications and over 100 years in the telecom sector. This extensive
knowledge of the telecommunications industry and the Alaska market,
along with our focus on customer experience, will serve our investors,
customers and employees well,” said Vadapalli.
Wayne Graham, chief financial officer, along with David Eisenberg, chief
revenue officer, will be separating from Alaska Communications effective
the end of November. “I thank Wayne and David for their leadership and
service. Their dedication and stellar performance record helped create
today’s Alaska Communications,” noted Vadapalli.
“I am proud of our rising executives and confident in their talent. We
are in the right markets, at the right time, with the right team. We
have built a platform to increase shareholder value by delivering
top-line performance, growing Adjusted EBITDA and generating strong free
cash flow while operating at some of the lowest leverage levels in our
sector,” concluded Vadapalli.
Third Quarter 2015 Revenue Highlights Compared to Third Quarter 2014
-
Total Service and Other:
-
Revenue was $54.7 million. Compared to $53.4 million, revenue grew
2.5 percent year over year.
-
Total broadband revenue reached $18.6 million, up 7.6 percent from
$17.3 million.
-
Business and Wholesale:
-
Comprised 54.3 percent of total service and other revenue and is
expected to continue to generate an increasing percentage of our
top line performance.
-
Revenue grew to $29.7 million, up 6.2 percent from $28.0 million,
led by continued strong broadband performance.
-
Broadband revenue reached $12.5 million, up 14.1 percent from
$11.0 million.
-
Consumer:
-
Comprised 18.2 percent of total service and other revenue.
-
Revenue was $9.9 million, down 4.7 percent from $10.4 million,
reflecting general industry trends.
-
Broadband revenue was $6.1 million, down 3.5 percent from $6.3
million.
-
Access and Other:
-
Comprised 27.5 percent of total service and other revenue.
-
Revenue grew to $15.1 million, up 0.6 percent from $15.0 million,
led by an increase in equipment sales and installations.
Financial Highlights from Third Quarter 2015
-
Completed the refinancing of our senior loan facility on September 14,
2015, entering into $100 million of senior secured financing,
including a $10 million undrawn revolving loan. The company has no
debt maturities prior to 2018.
-
Reported continued benefits from the wind down of the wireless
business resulting in increased Adjusted EBITDA to $12.6 million, up
from $11.1 million in Q2. The remaining wind down activities and the
resulting benefits will be completed in Q4.
-
Total debt was $188.7 million, and cash balances were $42.1 million at
September 30, 2015.
“During Q3, we achieved several financial milestones. We refinanced our
senior debt facility, lowered our cost structure and turned up record
sales activities that are expected to result in a strong Q4. The
management team is focused on building on this success with an
increasing focus on not only top-line and Adjusted EBITDA performance,
but driving free cash flow growth in 2016,” said CFO Wayne Graham.
2015 Guidance
The company reaffirmed 2015 guidance as follows:
-
Total service and other revenue of approximately $220 million
-
Run rate Adjusted EBITDA exiting 2015 of $54 million to $56 million
-
Net capital expenditures range of $34 million to $36 million1
-
Net debt at year end of approximately $159 million
1. The purchase of the North Slope Network is not included in
capital spending guidance. Schedule 5 presents the impact of this
investment on overall capital spending results for the year.
Conference Call
The company will host a conference call and live webcast on Thursday,
November 5, 2015 at 3:00 p.m. Eastern Standard Time to discuss the
results. The live webcast will include a slide presentation. Parties in
the U.S. and Canada can access the call at 1-888-523-1208 and enter pass
code 737999. All other parties can access the call at 1-719-955-1569.
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 90 days. A replay of the call will be
available two hours after the call and will run until December 7, 2015,
at 4:00 p.m. EST. To hear the replay, parties in the U.S. and Canada can
call 1-888-203-1112 and enter pass code 1306436. All other parties can
call 1-719-457-0820 and enter pass code 1306436.
About Alaska Communications
Alaska Communications (NASDAQ: ALSK) is the leading provider of advanced
broadband and IT managed services for businesses and consumers in
Alaska. The company operates a highly reliable, advanced statewide data
network with the latest technology and the most diverse undersea fiber
optic system connecting Alaska to the contiguous U.S. For more
information, visit www.alaskacommunications.com or 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, Free Cash Flow and Net Debt, 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, 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.
Reconciliations of our non-GAAP measures to our nearest GAAP measures
can be found on our website at http://www.alsk.com in the
investment data section. 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, adverse economic conditions, the effects of competition in our
markets, our relatively small size compared with our competitors, the
Company’s ability to compete, manage, integrate, market, maintain, and
attract sufficient customers for its products and services, 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
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.
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Schedule 1
|
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|
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|
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|
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,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
Operating revenues, non-affiliates
|
|
$
|
54,735
|
|
|
$
|
76,683
|
|
|
|
$
|
175,611
|
|
|
$
|
232,031
|
|
Operating revenues, affiliates
|
|
|
-
|
|
|
|
1,782
|
|
|
|
|
575
|
|
|
|
5,323
|
|
Total operating revenues
|
|
|
54,735
|
|
|
|
78,465
|
|
|
|
|
176,186
|
|
|
|
237,354
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
Cost of services and sales, non-affiliates
|
|
|
24,673
|
|
|
|
31,416
|
|
|
|
|
81,056
|
|
|
|
91,274
|
|
Cost of services and sales, affiliates
|
|
|
-
|
|
|
|
13,534
|
|
|
|
|
4,961
|
|
|
|
43,295
|
|
Selling, general & administrative
|
|
|
20,387
|
|
|
|
25,017
|
|
|
|
|
70,982
|
|
|
|
74,926
|
|
Depreciation and amortization
|
|
|
8,475
|
|
|
|
8,585
|
|
|
|
|
25,491
|
|
|
|
25,850
|
|
(Gain) loss on disposal of assets, net
|
|
|
(6,978
|
)
|
|
|
(199
|
)
|
|
|
|
(46,364
|
)
|
|
|
612
|
|
Earnings from equity method investments
|
|
|
-
|
|
|
|
(11,556
|
)
|
|
|
|
(3,056
|
)
|
|
|
(29,247
|
)
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
46,557
|
|
|
|
66,797
|
|
|
|
|
133,070
|
|
|
|
206,710
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
8,178
|
|
|
|
11,668
|
|
|
|
|
43,116
|
|
|
|
30,644
|
|
|
|
|
|
|
|
|
|
|
|
Other income and expense:
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(4,077
|
)
|
|
|
(8,615
|
)
|
|
|
|
(18,381
|
)
|
|
|
(26,144
|
)
|
Loss on extinguishment of debt
|
|
|
(2,250
|
)
|
|
|
-
|
|
|
|
|
(2,250
|
)
|
|
|
-
|
|
Interest income
|
|
|
14
|
|
|
|
28
|
|
|
|
|
56
|
|
|
|
42
|
|
Total other income and expense
|
|
|
(6,313
|
)
|
|
|
(8,587
|
)
|
|
|
|
(20,575
|
)
|
|
|
(26,102
|
)
|
|
|
|
|
|
|
|
|
|
|
Income before income tax expense
|
|
|
1,865
|
|
|
|
3,081
|
|
|
|
|
22,541
|
|
|
|
4,542
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
|
(663
|
)
|
|
|
(1,203
|
)
|
|
|
|
(9,982
|
)
|
|
|
(1,964
|
)
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1,202
|
|
|
|
1,878
|
|
|
|
|
12,559
|
|
|
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
Less net loss attributable to non-controlling interest
|
|
|
(37
|
)
|
|
|
-
|
|
|
|
|
(56
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to ACS
|
|
$
|
1,239
|
|
|
$
|
1,878
|
|
|
|
$
|
12,615
|
|
|
$
|
2,578
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
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Basic and Diluted
|
|
$
|
0.02
|
|
|
$
|
0.04
|
|
|
|
$
|
0.25
|
|
|
$
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
50,399
|
|
|
|
49,498
|
|
|
|
|
50,191
|
|
|
|
49,265
|
|
Diluted
|
|
|
51,588
|
|
|
|
50,155
|
|
|
|
|
51,246
|
|
|
|
49,730
|
|
|
|
|
|
|
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|
|
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|
|
|
|
Schedule 2
|
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited, In Thousands Except Per Share Amounts)
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
Assets
|
|
|
2015
|
|
|
|
|
2014
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
42,104
|
|
|
|
$
|
31,709
|
|
Restricted cash
|
|
|
2,052
|
|
|
|
|
467
|
|
Accounts receivable, net of allowance of $2,022 and $2,338
|
|
|
24,506
|
|
|
|
|
30,900
|
|
Materials and supplies
|
|
|
4,927
|
|
|
|
|
4,321
|
|
Prepayments and other current assets
|
|
|
7,846
|
|
|
|
|
6,575
|
|
Deferred income taxes
|
|
|
12,943
|
|
|
|
|
104,245
|
|
Current assets held-for-sale
|
|
|
-
|
|
|
|
|
9,565
|
|
Total current assets
|
|
|
94,378
|
|
|
|
|
187,782
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
1,332,184
|
|
|
|
|
1,333,134
|
|
Less: accumulated depreciation and amortization
|
|
|
(967,140
|
)
|
|
|
|
(976,401
|
)
|
Property, plant and equipment, net
|
|
|
365,044
|
|
|
|
|
356,733
|
|
|
|
|
|
|
|
Deferred income taxes
|
|
|
5,047
|
|
|
|
|
-
|
|
Equity method investments
|
|
|
-
|
|
|
|
|
252,067
|
|
Non-current assets held-for-sale
|
|
|
-
|
|
|
|
|
14,664
|
|
Other assets
|
|
|
1,843
|
|
|
|
|
301
|
|
Total assets
|
|
$
|
466,312
|
|
|
|
$
|
811,547
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit)
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current portion of long-term obligations
|
|
$
|
3,249
|
|
|
|
$
|
15,521
|
|
Accounts payable, accrued and other current liabilities,
non-affiliates
|
|
|
58,030
|
|
|
|
|
54,373
|
|
Accounts payable, accrued and other current liabilities, affiliates,
net *
|
|
|
-
|
|
|
|
|
4,853
|
|
Advance billings and customer deposits
|
|
|
4,603
|
|
|
|
|
4,490
|
|
Current liabilities held-for-sale
|
|
|
-
|
|
|
|
|
18,728
|
|
Total current liabilities
|
|
|
65,882
|
|
|
|
|
97,965
|
|
|
|
|
|
|
|
Long-term obligations, net of current portion
|
|
|
185,403
|
|
|
|
|
413,978
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
|
81,267
|
|
Other long-term liabilities, net of current portion
|
|
|
61,776
|
|
|
|
|
24,370
|
|
Non-current liabilities held-for-sale
|
|
|
-
|
|
|
|
|
2,107
|
|
Deferred AWN capacity revenue, net of current portion
|
|
|
-
|
|
|
|
|
56,734
|
|
Total liabilities
|
|
|
313,061
|
|
|
|
|
676,421
|
|
Commitments and contingencies
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
Common stock, $.01 par value; 145,000 authorized
|
|
|
504
|
|
|
|
|
497
|
|
Additional paid in capital
|
|
|
156,724
|
|
|
|
|
154,368
|
|
Accumulated deficit
|
|
|
(1,973
|
)
|
|
|
|
(14,588
|
)
|
Accumulated other comprehensive loss
|
|
|
(3,120
|
)
|
|
|
|
(5,151
|
)
|
Total ACS stockholders' equity
|
|
|
152,135
|
|
|
|
|
135,126
|
|
Non-controlling interest
|
|
|
1,116
|
|
|
|
|
-
|
|
Total stockholders' equity
|
|
|
153,251
|
|
|
|
|
135,126
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
466,312
|
|
|
|
$
|
811,547
|
|
|
|
|
|
|
|
* Affiliate balances are related to activity with our equity method
investment in AWN.
|
On February 2, 2015 we sold our interest in AWN.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
2015
|
|
|
|
2014
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,202
|
|
|
$
|
1,878
|
|
|
|
$
|
12,559
|
|
|
$
|
2,578
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
8,475
|
|
|
|
8,585
|
|
|
|
|
25,491
|
|
|
|
25,850
|
|
Gain on wireless sale
|
|
|
(7,092
|
)
|
|
|
-
|
|
|
|
|
(48,232
|
)
|
|
|
-
|
|
Loss (gain) on the disposal of assets, net
|
|
|
114
|
|
|
|
(199
|
)
|
|
|
|
1,868
|
|
|
|
612
|
|
Unrealized gain on ineffective hedge
|
|
|
(278
|
)
|
|
|
-
|
|
|
|
|
(820
|
)
|
|
|
-
|
|
Amortization of debt issuance costs and debt discount
|
|
|
1,019
|
|
|
|
1,260
|
|
|
|
|
5,690
|
|
|
|
3,926
|
|
Amortization of ineffective hedge
|
|
|
-
|
|
|
|
362
|
|
|
|
|
1,970
|
|
|
|
1,276
|
|
Loss on extinguishment of debt
|
|
|
2,250
|
|
|
|
-
|
|
|
|
|
2,250
|
|
|
|
-
|
|
Cash paid for debt extinguishment
|
|
|
(391
|
)
|
|
|
-
|
|
|
|
|
(391
|
)
|
|
|
-
|
|
Amortization of deferred capacity revenue
|
|
|
(693
|
)
|
|
|
(809
|
)
|
|
|
|
(2,162
|
)
|
|
|
(2,819
|
)
|
Stock-based compensation
|
|
|
619
|
|
|
|
684
|
|
|
|
|
1,898
|
|
|
|
1,877
|
|
Deferred income tax expense
|
|
|
6,965
|
|
|
|
961
|
|
|
|
|
3,571
|
|
|
|
1,708
|
|
Provision for uncollectible accounts
|
|
|
66
|
|
|
|
1,467
|
|
|
|
|
1,385
|
|
|
|
2,942
|
|
Cash distribution from equity method investments
|
|
|
-
|
|
|
|
11,556
|
|
|
|
|
3,056
|
|
|
|
29,247
|
|
Earnings from equity method investments
|
|
|
-
|
|
|
|
(11,556
|
)
|
|
|
|
(3,056
|
)
|
|
|
(29,247
|
)
|
Other non-cash expense, net
|
|
|
274
|
|
|
|
111
|
|
|
|
|
817
|
|
|
|
318
|
|
Income taxes payable
|
|
|
(6,302
|
)
|
|
|
-
|
|
|
|
|
1,736
|
|
|
|
-
|
|
Changes in operating assets and liabilities
|
|
|
7,127
|
|
|
|
5,538
|
|
|
|
|
(2,521
|
)
|
|
|
1,623
|
|
Net cash provided by operating activities
|
|
|
13,355
|
|
|
|
19,838
|
|
|
|
|
5,109
|
|
|
|
39,891
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(12,083
|
)
|
|
|
(16,042
|
)
|
|
|
|
(38,216
|
)
|
|
|
(33,916
|
)
|
Capitalized interest
|
|
|
(444
|
)
|
|
|
(720
|
)
|
|
|
|
(1,232
|
)
|
|
|
(2,082
|
)
|
Change in unsettled capital expenditures
|
|
|
2,713
|
|
|
|
3,114
|
|
|
|
|
3,387
|
|
|
|
(1,300
|
)
|
Cash received in acquisition of business
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
68
|
|
Proceeds on wireless sale
|
|
|
7,092
|
|
|
|
-
|
|
|
|
|
285,160
|
|
|
|
-
|
|
Proceeds on sale of assets
|
|
|
3
|
|
|
|
136
|
|
|
|
|
3,129
|
|
|
|
136
|
|
Return of capital from equity investment
|
|
|
-
|
|
|
|
944
|
|
|
|
|
1,875
|
|
|
|
8,286
|
|
Net change in restricted accounts
|
|
|
(1,357
|
)
|
|
|
-
|
|
|
|
|
(1,357
|
)
|
|
|
-
|
|
Net cash (used) provided by investing activities
|
|
|
(4,076
|
)
|
|
|
(12,568
|
)
|
|
|
|
252,746
|
|
|
|
(28,808
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(90,553
|
)
|
|
|
(5,280
|
)
|
|
|
|
(333,390
|
)
|
|
|
(24,022
|
)
|
Proceeds from the issuance of long-term debt
|
|
|
90,061
|
|
|
|
-
|
|
|
|
|
90,061
|
|
|
|
-
|
|
Debt issuance costs
|
|
|
(3,513
|
)
|
|
|
-
|
|
|
|
|
(4,555
|
)
|
|
|
-
|
|
Cash paid in acquisition of business
|
|
|
-
|
|
|
|
(795
|
)
|
|
|
|
(291
|
)
|
|
|
(795
|
)
|
Cash proceeds from non-controlling interest
|
|
|
-
|
|
|
|
-
|
|
|
|
|
250
|
|
|
|
-
|
|
Payment of withholding taxes on stock-based compensation
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
|
(402
|
)
|
|
|
(586
|
)
|
Excess tax benefit from share-based payments
|
|
|
-
|
|
|
|
-
|
|
|
|
|
733
|
|
|
|
-
|
|
Proceeds from issuance of common stock
|
|
|
(1
|
)
|
|
|
-
|
|
|
|
|
134
|
|
|
|
132
|
|
Net cash used by financing activities
|
|
|
(4,006
|
)
|
|
|
(6,078
|
)
|
|
|
|
(247,460
|
)
|
|
|
(25,271
|
)
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
5,273
|
|
|
|
1,192
|
|
|
|
|
10,395
|
|
|
|
(14,188
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
36,831
|
|
|
|
27,659
|
|
|
|
|
31,709
|
|
|
|
43,039
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
42,104
|
|
|
$
|
28,851
|
|
|
|
$
|
42,104
|
|
|
$
|
28,851
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
2,179
|
|
|
$
|
6,008
|
|
|
|
$
|
11,120
|
|
|
$
|
22,036
|
|
Income taxes paid, net
|
|
$
|
-
|
|
|
$
|
206
|
|
|
|
$
|
3,942
|
|
|
$
|
220
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
ADJUSTED EBITDA
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,202
|
|
|
$
|
1,878
|
|
|
|
$
|
12,559
|
|
|
$
|
2,578
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
4,077
|
|
|
|
8,615
|
|
|
|
|
18,381
|
|
|
|
26,144
|
|
Loss on extinguishment of debt
|
|
|
2,250
|
|
|
|
-
|
|
|
|
|
2,250
|
|
|
|
-
|
|
Interest income
|
|
|
(14
|
)
|
|
|
(28
|
)
|
|
|
|
(56
|
)
|
|
|
(42
|
)
|
Depreciation and amortization
|
|
|
8,475
|
|
|
|
8,585
|
|
|
|
|
25,491
|
|
|
|
25,850
|
|
Loss (gain) on disposal of assets, net
|
|
|
114
|
|
|
|
(199
|
)
|
|
|
|
1,868
|
|
|
|
612
|
|
Earnings from equity method investment in TekMate
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(12
|
)
|
Earnings from equity method investment in AWN
|
|
|
-
|
|
|
|
(11,556
|
)
|
|
|
|
(3,056
|
)
|
|
|
(29,235
|
)
|
Gain on sale of assets
|
|
|
(7,092
|
)
|
|
|
-
|
|
|
|
|
(48,232
|
)
|
|
|
-
|
|
AWN distributions received/receivable, net
|
|
|
-
|
|
|
|
12,500
|
|
|
|
|
765
|
|
|
|
37,500
|
|
AWN distributions received for the prior period
|
|
|
-
|
|
|
|
(4,167
|
)
|
|
|
|
-
|
|
|
|
(4,167
|
)
|
AWN distributions receivable within 12 days
|
|
|
-
|
|
|
|
4,167
|
|
|
|
|
-
|
|
|
|
4,167
|
|
Income tax expense
|
|
|
663
|
|
|
|
1,203
|
|
|
|
|
9,982
|
|
|
|
1,964
|
|
Stock-based compensation
|
|
|
619
|
|
|
|
684
|
|
|
|
|
1,898
|
|
|
|
1,877
|
|
Long-term cash incentives
|
|
|
714
|
|
|
|
587
|
|
|
|
|
1,356
|
|
|
|
1,572
|
|
Pension adjustment
|
|
|
210
|
|
|
|
-
|
|
|
|
|
210
|
|
|
|
-
|
|
Earthquake-related expense
|
|
|
-
|
|
|
|
1,228
|
|
|
|
|
-
|
|
|
|
1,228
|
|
Net loss attributable to non-controlling interest
|
|
|
37
|
|
|
|
-
|
|
|
|
|
56
|
|
|
|
-
|
|
Wireless sale transaction-related and wind down costs
|
|
|
1,321
|
|
|
|
28
|
|
|
|
|
12,629
|
|
|
|
240
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
12,576
|
|
|
$
|
23,525
|
|
|
|
$
|
36,101
|
|
|
$
|
70,276
|
|
|
|
|
|
|
|
|
|
|
|
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 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, gain or loss on asset purchases or disposals,
earnings on equity method investments, gain on the sale of our
wireless operations, provisions for taxes, wireless
transaction-related costs, loss attributable to non-controlling
interest, stock-based compensation, pension adjustments,
earthquake-related expenses 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.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 5
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
FREE CASH FLOW
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
2015
|
|
|
|
2014
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
12,576
|
|
|
$
|
23,525
|
|
|
|
$
|
36,101
|
|
|
$
|
70,276
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(12,083
|
)
|
|
|
(16,042
|
)
|
|
|
|
(27,216
|
)
|
|
|
(33,916
|
)
|
Milestone billings for fiber build project for a carrier customer
|
|
|
-
|
|
|
|
2,000
|
|
|
|
|
2,500
|
|
|
|
2,000
|
|
Net capital expenditures
|
|
|
(12,083
|
)
|
|
|
(14,042
|
)
|
|
|
|
(24,716
|
)
|
|
|
(31,916
|
)
|
|
|
|
|
|
|
|
|
|
|
Purchase of North Slope fiber network
|
|
|
|
|
|
|
|
|
|
Acquisition price
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(11,000
|
)
|
|
|
-
|
|
Less: 50% due in 2016
|
|
|
-
|
|
|
|
-
|
|
|
|
|
5,500
|
|
|
|
-
|
|
Less: proceeds on sale of fiber to JV partner
|
|
|
-
|
|
|
|
-
|
|
|
|
|
2,650
|
|
|
|
-
|
|
Less: other cash proceeds
|
|
|
-
|
|
|
|
-
|
|
|
|
|
400
|
|
|
|
-
|
|
Net North Slope purchase
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(2,450
|
)
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of GCI/AWN capacity revenue
|
|
|
(520
|
)
|
|
|
(647
|
)
|
|
|
|
(1,649
|
)
|
|
|
(2,337
|
)
|
Earthquake-related expense
|
|
|
-
|
|
|
|
(1,228
|
)
|
|
|
|
-
|
|
|
|
(1,228
|
)
|
Cash interest expense
|
|
|
(2,179
|
)
|
|
|
(6,008
|
)
|
|
|
|
(11,120
|
)
|
|
|
(22,036
|
)
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
(2,206
|
)
|
|
$
|
1,600
|
|
|
|
$
|
(3,834
|
)
|
|
$
|
12,759
|
|
|
|
|
|
|
|
|
|
|
|
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 recurring performance and believes provides
useful information to investors regarding baseline operating
results.
|
|
Free cash flow ("FCF") is defined as Adjusted EBITDA, less
recurring operating cash requirements which include capital
expenditures, net of cash received for a fiber build for carrier
customer, less cash interest expense, earthquake-related expenses,
significant non-cash revenue associated with our interconnection
agreement with AWN and GCI, and in Q2 2015 the purchase of the
North Slope fiber network.
|
|
ACS continues to have net operating losses and is not a significant
taxpayer on ordinary income. Income taxes paid in 2015 are related
to the Wireless retail sale and are not included in free cash flow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
REVENUE GROWTH
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
September 30,
|
|
|
September 30,
|
Service revenue:
|
|
|
2015
|
|
|
|
2014
|
|
|
|
2015
|
|
|
|
2014
|
|
Business and wholesale customers
|
|
|
|
|
|
|
|
|
|
Voice
|
|
$
|
5,562
|
|
|
$
|
5,666
|
|
|
$
|
16,544
|
|
|
$
|
16,948
|
|
Broadband
|
|
|
12,506
|
|
|
|
10,962
|
|
|
|
36,569
|
|
|
|
32,658
|
|
Managed IT services
|
|
|
708
|
|
|
|
1,007
|
|
|
|
2,247
|
|
|
|
2,540
|
|
Other
|
|
|
2,108
|
|
|
|
1,800
|
|
|
|
5,708
|
|
|
|
5,256
|
|
Wholesale
|
|
|
8,816
|
|
|
|
8,544
|
|
|
|
26,932
|
|
|
|
24,723
|
|
Business and wholesale service revenue
|
|
|
29,700
|
|
|
|
27,979
|
|
|
|
88,000
|
|
|
|
82,125
|
|
|
|
|
|
|
|
|
|
|
|
Consumer customers
|
|
|
|
|
|
|
|
|
|
Voice
|
|
|
3,487
|
|
|
|
3,686
|
|
|
|
10,257
|
|
|
|
11,399
|
|
Broadband
|
|
|
6,114
|
|
|
|
6,336
|
|
|
|
19,136
|
|
|
|
18,441
|
|
Other
|
|
|
337
|
|
|
|
409
|
|
|
|
873
|
|
|
|
1,191
|
|
Consumer service revenue
|
|
|
9,938
|
|
|
|
10,431
|
|
|
|
30,266
|
|
|
|
31,031
|
|
|
|
|
|
|
|
|
|
|
|
Total service revenue
|
|
|
39,638
|
|
|
|
38,410
|
|
|
|
118,266
|
|
|
|
113,156
|
|
Growth in service revenue
|
|
|
3.2
|
%
|
|
|
|
|
|
4.5
|
%
|
|
|
Growth in broadband service revenue
|
|
|
7.6
|
%
|
|
|
|
|
|
9.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue:
|
|
|
|
|
|
|
|
|
|
Equipment sales and installations
|
|
|
1,757
|
|
|
|
1,310
|
|
|
|
4,667
|
|
|
|
3,421
|
|
Access
|
|
|
8,420
|
|
|
|
8,771
|
|
|
|
25,477
|
|
|
|
26,732
|
|
High cost support
|
|
|
4,920
|
|
|
|
4,922
|
|
|
|
14,761
|
|
|
|
18,271
|
|
Total service and other revenue
|
|
|
54,735
|
|
|
|
53,413
|
|
|
|
163,171
|
|
|
|
161,580
|
|
Growth in service and other revenue
|
|
|
2.5
|
%
|
|
|
|
|
|
1.0
|
%
|
|
|
Growth excluding equipment sales
|
|
|
1.7
|
%
|
|
|
|
|
|
0.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless and AWN related revenue:
|
|
|
|
|
|
|
|
|
|
Service revenue, equipment sales and other
|
|
|
-
|
|
|
|
19,685
|
|
|
|
6,300
|
|
|
|
58,856
|
|
Transition services
|
|
|
-
|
|
|
|
-
|
|
|
|
4,769
|
|
|
|
-
|
|
CETC
|
|
|
-
|
|
|
|
4,720
|
|
|
|
1,654
|
|
|
|
14,581
|
|
Amortization of deferred AWN capacity revenue
|
|
|
-
|
|
|
|
647
|
|
|
|
292
|
|
|
|
2,337
|
|
|
|
|
|
|
|
|
|
|
|
Total wireless & AWN related revenue
|
|
|
-
|
|
|
|
25,052
|
|
|
|
13,015
|
|
|
|
75,774
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
54,735
|
|
|
$
|
78,465
|
|
|
$
|
176,186
|
|
|
$
|
237,354
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted for prior year access reserve releases:
|
|
|
|
|
|
|
|
|
|
Total service and other revenue
|
|
|
54,735
|
|
|
|
53,413
|
|
|
|
163,171
|
|
|
|
161,580
|
|
Prior year access reserve releases
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,502
|
)
|
Adjusted total service and other revenue
|
|
|
54,735
|
|
|
|
53,413
|
|
|
|
163,171
|
|
|
|
158,078
|
|
Growth in service and other revenue
|
|
|
2.5
|
%
|
|
|
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 7
|
|
|
|
|
|
|
|
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
KEY OPERATING STATISTICS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
September 30,
|
|
June 30,
|
|
September 30,
|
|
|
|
|
2015
|
|
2015
|
|
2014
|
|
|
|
|
|
|
|
|
|
Voice:
|
|
|
|
|
|
|
Consumer access lines
|
|
|
39,016
|
|
|
40,888
|
|
|
45,177
|
Business access lines
|
|
|
78,164
|
|
|
78,544
|
|
|
79,563
|
|
|
|
|
|
|
|
|
|
Voice ARPU consumer
|
|
$
|
29.09
|
|
$
|
26.73
|
|
$
|
26.73
|
Voice ARPU business
|
|
$
|
23.66
|
|
$
|
23.53
|
|
$
|
23.65
|
|
|
|
|
|
|
|
|
|
Broadband:
|
|
|
|
|
|
|
Consumer connections
|
|
|
33,488
|
|
|
34,895
|
|
|
38,257
|
Business connections (2)
|
|
|
19,125
|
|
|
18,976
|
|
|
18,765
|
|
|
|
|
|
|
|
|
|
ARPU consumer
|
|
$
|
59.16
|
|
$
|
60.37
|
|
$
|
54.18
|
ARPU business (1) (2)
|
|
$
|
218.54
|
|
$
|
218.90
|
|
$
|
195.04
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Business broadband ARPU was restated to reflect the movement of
Managed 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 and Net Debt
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2015
|
|
|
|
|
2014
|
|
2015 senior secured credit facilities due 2018
|
|
$
|
90,000
|
|
|
|
$
|
-
|
|
Debt issuance costs - 2015 senior secured credit facilities due 2018
|
|
|
(3,824
|
)
|
|
|
|
-
|
|
2010 senior credit facility term loan due 2016
|
|
|
-
|
|
|
|
|
322,700
|
|
Debt discount - 2010 senior credit facility term loan due 2016
|
|
|
-
|
|
|
|
|
(1,014
|
)
|
Debt issuance costs - 2010 senior credit facility term loan due 2016
|
|
|
-
|
|
|
|
|
(2,810
|
)
|
6.25% convertible notes due 2018
|
|
|
104,000
|
|
|
|
|
114,000
|
|
Debt discount - 6.25% convertible notes due 2018
|
|
|
(5,141
|
)
|
|
|
|
(7,242
|
)
|
Debt issuance costs - 6.25% convertible notes due 2018
|
|
|
(1,132
|
)
|
|
|
|
(1,659
|
)
|
Capital leases and other long-term obligations
|
|
|
4,749
|
|
|
|
|
5,524
|
|
Total debt
|
|
|
188,652
|
|
|
|
|
429,499
|
|
Less current portion
|
|
|
(3,249
|
)
|
|
|
|
(15,521
|
)
|
Long-term obligations, net of current portion
|
|
$
|
185,403
|
|
|
|
$
|
413,978
|
|
|
|
|
|
|
|
Total debt
|
|
$
|
188,652
|
|
|
|
$
|
429,499
|
|
Plus debt discounts and debt issuance costs
|
|
|
10,097
|
|
|
|
|
12,725
|
|
Gross debt
|
|
|
198,749
|
|
|
|
|
442,224
|
|
Cash and cash equivalents
|
|
|
(42,104
|
)
|
|
|
|
(31,709
|
)
|
Net debt
|
|
$
|
156,645
|
|
|
|
$
|
410,515
|
|
|
|
|
|
|
|
Midpoint of 2015 run rate Adjusted EBITDA guidance
|
|
|
55,000
|
|
|
|
|
|
|
|
|
|
|
Net debt year end guidance
|
|
|
159,000
|
|
|
|
|
|
|
|
|
|
|
Net leverage at 2015 year end guidance
|
|
2.9x
|
|
|
|
CONTACT:
Alaska Communications Systems Group, Inc.
Investor
Contact:
Tiffany Dunn, 907-297-3103
Manager, Board and Investor
Relations
investors@acsalaska.com
or
Media Contact:
Hannah
Blankenship, 907-564-1326
Associate Manager, Corporate Communications
Hannah.Blankenship@acsalaska.com
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