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):
|
August
6, 2014
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
(Exact
name of registrant as specified in its charter)
Delaware
|
|
000-28167
|
|
52-2126573
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(State or other jurisdiction
of incorporation)
|
|
(Commission
File Number)
|
|
(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.)
|
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 August 6, 2014, Alaska Communications Systems Group, Inc. (the
“Company”) released its financial results for the quarter ended June 30,
2014. The press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference. A presentation of supplemental
information which will be reviewed on the Company’s earnings call to be
held on August 7, 2014 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 9.01 Financial Statements and Exhibits
Exhibit No. Description
Exhibit
99.1 Alaska Communications Systems Group, Inc. Press Release
dated August 6, 2014.
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: August 6, 2014
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Alaska Communications Systems Group, Inc.
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|
|
|
|
|
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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
|
99.1
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Alaska Communications Systems Group, Inc. Press Release dated
August 6, 2014.
|
Exhibit 99.1
Alaska
Communications Systems Reports Strong Second Quarter 2014 Results
-Total
Service and Other Revenue increased $5.7 million or 11.5% year over year-
-Broadband
Revenue increased $1.8 million or 11.3% year over year-
-Adjusted
EBITDA increased $0.9 million sequentially to $23.8 million, an increase
of 3.9%-
ANCHORAGE, Alaska--(BUSINESS WIRE)--August 6, 2014--Alaska
Communications Systems Group, Inc. (“ACS,” “the Company”) (NASDAQ: ALSK)
today reported financial results for its second quarter ended June 30,
2014.
“We posted strong results for the quarter, with operating and financial
metrics tracking ahead of our full year guidance.
“Our top line performance is at levels that exceed our industry. This is
a combination of our superior network, focus on customer service, and
strong sales momentum. Additionally, performance in managed services
through TekMate continues to track ahead of our expectations. Our focus
on expense management and margin improvement is reflected in the bottom
line, with sequential EBITDA growth and strong free cash flow
performance.
“We have a sound operating plan for the year and are performing very
well to that plan,” said Anand Vadapalli, president and CEO of Alaska
Communications.
Financial Highlights: Second Quarter 2014
-
Results from the quarter demonstrate we are performing ahead of plan
in our key areas of focus:
-
Business and wholesale service revenue of $27.7 million grew $2.3
million or 9.2% year over year, with broadband revenues growing
11.3%.
-
Consumer service revenue of $10.4 million grew $0.1 million, or
1.0% year over year, with broadband revenues growing 11.4%.
-
Other revenue of $17.3 million grew $3.3 million, or 23.5% year
over year, benefiting from $2.1 million of revenue reserve
releases.
-
Wireless revenue of $19.7 million, declined $0.7 million, or 3.3%,
year over year. Performance in wireless is stabilizing
sequentially, with higher connections compared to the first
quarter, and wireless revenue increasing $0.3 million.
-
Adjusted EBITDA was $23.8 million for the quarter, and stands at $46.8
million year to date, well ahead of our guidance for the year.
-
Free Cash Flow is within expectations at $2.8 million for the quarter,
and stands at $11.2 million year to date, well ahead of guidance for
the year.
-
Deleveraging continues, with debt balances of $438.9 million at the
end of the quarter, compared to $456.3 million at December 31, 2013.
Debt balances have declined $17.3 million since the beginning of the
year. Cash balances are strong at $27.7 million.
Metric Highlights: Second Quarter 2014 Compared to First Quarter 2014
-
Business broadband connections increased to 19,618 from 19,304 and
business broadband ARPU increased to $189.54 from $182.96.
-
Consumer broadband connections decreased to 39,022 from 39,468 though
consumer broadband ARPU increased to $52.51 from $49.46.
-
Wireless subscribers increased to 109,578 from 107,975 and Wireless
ARPU increased to $52.55 from $52.51.
“Our financial performance for the year has been strong. This is our
first full year following the AWN transaction, and our commitment to
shareholders was to deliver on our financial guidance for the year using
free cash flow to reduce debt. We are tracking well with these
objectives.
“Strong Adjusted EBITDA and Free Cash Flow accelerate our deleveraging
strategy because the combination of Adjusted EBITDA performance and
lower net debt improves our leverage ratios over time," said Wayne
Graham, ACS chief financial officer.
2014 Guidance:
Guidance for the following categories is reaffirmed as follows:
-
Revenue of approximately $310 million.
-
Adjusted EBITDA of approximately $90 million.
-
Free cash flow of approximately $20 million.
Guidance for capital expenditures is revised as follows:
-
Capital expenditures of approximately $40 million, revised to between
$40-$45 million.
Our guidance for capital spending has increased to reflect a two year
project, which commenced in the second half of 2014, to build fiber
facilities on behalf of a customer. The customer is funding the project
during the period of the build and in 2014 cash payments will offset
this higher capital spending. Accordingly, our capital spending guidance
has increased but our free cash flow guidance is unchanged. We
anticipate that this multi-year project will be accretive to free cash
flow in 2015.
On July 25, 2014, our undersea cable serving Juneau, Alaska was damaged
by debris generated by an earthquake. The cost to repair this facility,
while leasing alternative capacity, is expected to be approximately $2
million. The costs from this unusual event will be excluded from the
above guidance considerations.
Conference Call
The Company will host a conference call and live webcast on Thursday,
August 7, 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 269043. All other parties can access the call at 1-719-325-2219.
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 September 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 3635655. All other parties can call
1-719-457-0820 and enter pass code 3635655.
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 Schedule 4 to this press release. Adjusted
EBITDA, Adjusted EBITDA Margin and Free Cash Flow are non-GAAP measures
and should not be considered a substitute for net cash provided by
operating activities and other measures of financial performance
recorded in accordance with GAAP. Other companies may not calculate
non-GAAP measures in the same manner as ACS.
Forward-Looking Statements
This press release includes certain "forward-looking statements," as
that term is defined in the Private Securities Litigation Reform Act of
1995. These forward-looking statements are based on management's beliefs
as well as on a number of assumptions concerning future events made
using information currently available to management. Readers are
cautioned not to put undue reliance on such forward-looking statements,
which are not a guarantee of performance and are subject to a number of
uncertainties and other factors, many of which are outside ACS' control.
Such factors include, without limitation, Verizon’s retail entry into
the Alaska market, Universal Service Fund changes, AWN’s financial and
operational performance and the competitiveness of the wholesale plans
it offers, adverse national economic conditions, adverse conditions in
the credit markets impacting the cost, including interest rates, and/or
availability of financing, adverse local economic conditions, including
an unexpected downturn in the Alaskan oil and gas or tourism markets,
changes in capital expenditures, the effects of competition in our
markets, the entry of one or more additional facilities-based carriers
into the Alaska market, the Company’s ability to complete, manage,
integrate, market, maintain, and attract sufficient customers to the
products and services it may derive, adverse changes in labor matters,
including workforce levels, labor negotiations, and benefits costs,
disruption of our supplier’s provisioning of critical products or
services, the impact of natural or man-made disasters, changes in
Company's relationships with large carrier or enterprise customers,
unforeseen changes in public policies, changes in accounting policies,
including the Company’s application of regulatory accounting rules,
which could result in an impact on earnings, or disruptive technological
developments in the telecommunications industry. For further
information regarding risks and uncertainties associated with ACS'
business, please refer to the Company's SEC filings, including, but not
limited to, the sections entitled "Risk Factors" and "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" in our annual report on Form 10-K and quarterly reports on
Form 10-Q. Copies of the Company's SEC filings may be obtained by
contacting its investor relations department at (907) 564-7556 or by
visiting its investor relations website at www.alsk.com.
Schedule 1
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|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
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CONSOLIDATED SCHEDULE OF OPERATIONS
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(Unaudited, In Thousands Except Per Share Amounts)
|
|
|
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|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
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June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating revenues, non-affiliates
|
|
|
$
|
78,803
|
|
|
|
$
|
97,699
|
|
|
|
$
|
155,348
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|
|
|
$
|
188,695
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|
Operating revenues, affiliates*
|
|
|
|
1,755
|
|
|
|
|
58
|
|
|
|
|
3,541
|
|
|
|
|
121
|
|
Total operating revenues
|
|
|
|
80,558
|
|
|
|
|
97,757
|
|
|
|
|
158,889
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|
|
|
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188,816
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
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Cost of services and sales, non-affiliates
|
|
|
|
29,800
|
|
|
|
|
37,015
|
|
|
|
|
59,858
|
|
|
|
|
72,334
|
|
Cost of services and sales, affiliates*
|
|
|
|
15,001
|
|
|
|
|
189
|
|
|
|
|
29,761
|
|
|
|
|
317
|
|
Selling, general & administrative
|
|
|
|
25,314
|
|
|
|
|
27,646
|
|
|
|
|
49,909
|
|
|
|
|
54,443
|
|
Depreciation and amortization
|
|
|
|
8,475
|
|
|
|
|
11,450
|
|
|
|
|
17,265
|
|
|
|
|
24,082
|
|
Loss on disposal of assets, net
|
|
|
|
410
|
|
|
|
|
585
|
|
|
|
|
811
|
|
|
|
|
626
|
|
(Earnings) loss from equity method investments
|
|
|
|
(9,168
|
)
|
|
|
|
21
|
|
|
|
|
(17,691
|
)
|
|
|
|
21
|
|
Total operating expenses
|
|
|
|
69,832
|
|
|
|
|
76,906
|
|
|
|
|
139,913
|
|
|
|
|
151,823
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
10,726
|
|
|
|
|
20,851
|
|
|
|
|
18,976
|
|
|
|
|
36,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
(8,672
|
)
|
|
|
|
(10,156
|
)
|
|
|
|
(17,529
|
)
|
|
|
|
(20,185
|
)
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
(276
|
)
|
|
|
|
-
|
|
|
|
|
(276
|
)
|
Interest income
|
|
|
|
6
|
|
|
|
|
8
|
|
|
|
|
14
|
|
|
|
|
18
|
|
Other
|
|
|
|
-
|
|
|
|
|
(13
|
)
|
|
|
|
-
|
|
|
|
|
(13
|
)
|
Total other income and (expense)
|
|
|
|
(8,666
|
)
|
|
|
|
(10,437
|
)
|
|
|
|
(17,515
|
)
|
|
|
|
(20,456
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income tax benefit (expense)
|
|
|
|
2,060
|
|
|
|
|
10,414
|
|
|
|
|
1,461
|
|
|
|
|
16,537
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense)
|
|
|
|
(975
|
)
|
|
|
|
27,280
|
|
|
|
|
(761
|
)
|
|
|
|
24,625
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,085
|
|
|
|
$
|
37,694
|
|
|
|
$
|
700
|
|
|
|
$
|
41,162
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income applicable to common shares
|
|
|
$
|
1,085
|
|
|
|
$
|
37,694
|
|
|
|
$
|
700
|
|
|
|
$
|
41,162
|
|
Tax-effected expense attributable to convertible notes
|
|
|
|
-
|
|
|
|
|
1,465
|
|
|
|
|
-
|
|
|
|
|
2,924
|
|
Net income assuming dilution
|
|
|
$
|
1,085
|
|
|
|
$
|
39,159
|
|
|
|
$
|
700
|
|
|
|
$
|
44,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
$
|
0.02
|
|
|
|
$
|
0.81
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.89
|
|
Diluted
|
|
|
$
|
0.02
|
|
|
|
$
|
0.67
|
|
|
|
$
|
0.01
|
|
|
|
$
|
0.76
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
49,377
|
|
|
|
|
46,550
|
|
|
|
|
49,146
|
|
|
|
|
46,304
|
|
Diluted
|
|
|
|
49,910
|
|
|
|
|
58,547
|
|
|
|
|
49,649
|
|
|
|
|
58,371
|
|
* 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)
|
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
Assets
|
|
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
$
|
27,659
|
|
|
|
$
|
43,039
|
|
Restricted cash
|
|
|
|
|
|
467
|
|
|
|
|
467
|
|
Accounts receivable-trade, non-affiliates, net
|
|
|
|
|
|
38,513
|
|
|
|
|
34,066
|
|
Materials and supplies
|
|
|
|
|
|
12,449
|
|
|
|
|
10,131
|
|
Prepayments and other current assets
|
|
|
|
|
|
7,972
|
|
|
|
|
7,300
|
|
Deferred income taxes
|
|
|
|
|
|
7,198
|
|
|
|
|
7,144
|
|
Total current assets
|
|
|
|
|
|
94,258
|
|
|
|
|
102,147
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment
|
|
|
|
|
|
1,358,974
|
|
|
|
|
1,344,949
|
|
Less: accumulated depreciation and amortization
|
|
|
|
|
|
(1,004,245
|
)
|
|
|
|
(992,936
|
)
|
Property, plant and equipment, net
|
|
|
|
|
|
354,729
|
|
|
|
|
352,013
|
|
|
|
|
|
|
|
|
|
|
Goodwill
|
|
|
|
|
|
5,892
|
|
|
|
|
4,650
|
|
Debt issuance costs
|
|
|
|
|
|
5,619
|
|
|
|
|
6,929
|
|
Deferred income taxes
|
|
|
|
|
|
12,460
|
|
|
|
|
14,107
|
|
Equity method investments
|
|
|
|
|
|
258,798
|
|
|
|
|
266,972
|
|
Other assets
|
|
|
|
|
|
394
|
|
|
|
|
502
|
|
Total assets
|
|
|
|
|
$
|
732,150
|
|
|
|
$
|
747,320
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Current portion of long-term obligations
|
|
|
|
|
$
|
8,265
|
|
|
|
$
|
14,256
|
|
Accounts payable, accrued and other current liabilities,
non-affiliates
|
|
|
|
|
|
50,031
|
|
|
|
|
55,475
|
|
Accounts payable, accrued and other current liabilities,
affiliates, net*
|
|
|
|
|
|
21,628
|
|
|
|
|
14,309
|
|
Advance billings and customer deposits
|
|
|
|
|
|
8,970
|
|
|
|
|
9,104
|
|
Total current liabilities
|
|
|
|
|
|
88,894
|
|
|
|
|
93,144
|
|
|
|
|
|
|
|
|
|
|
Long-term obligations, net of current portion
|
|
|
|
|
|
430,653
|
|
|
|
|
442,001
|
|
Other long-term liabilities
|
|
|
|
|
|
16,324
|
|
|
|
|
16,947
|
|
Deferred AWN capacity revenue, net of current portion
|
|
|
|
|
|
58,362
|
|
|
|
|
59,965
|
|
Total liabilities
|
|
|
|
|
|
594,233
|
|
|
|
|
612,057
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders' equity (deficit):
|
|
|
|
|
|
|
|
|
Common stock, $.01 par value; 145,000 authorized
|
|
|
|
|
|
495
|
|
|
|
|
487
|
|
Additional paid in capital
|
|
|
|
|
|
152,927
|
|
|
|
|
152,193
|
|
Accumulated deficit
|
|
|
|
|
|
(11,108
|
)
|
|
|
|
(11,808
|
)
|
Accumulated other comprehensive loss
|
|
|
|
|
|
(4,397
|
)
|
|
|
|
(5,609
|
)
|
Total stockholders' equity (deficit)
|
|
|
|
|
|
137,917
|
|
|
|
|
135,263
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity (deficit)
|
|
|
|
|
$
|
732,150
|
|
|
|
$
|
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
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,085
|
|
|
|
$
|
37,694
|
|
|
|
$
|
700
|
|
|
|
$
|
41,162
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
8,475
|
|
|
|
|
11,450
|
|
|
|
|
17,265
|
|
|
|
|
24,082
|
|
Loss on the disposal of assets
|
|
|
|
410
|
|
|
|
|
585
|
|
|
|
|
811
|
|
|
|
|
626
|
|
Gain on ineffective hedge adjustment
|
|
|
|
-
|
|
|
|
|
(596
|
)
|
|
|
|
-
|
|
|
|
|
(1,016
|
)
|
Amortization of debt issuance costs and debt discount
|
|
|
|
1,268
|
|
|
|
|
1,614
|
|
|
|
|
2,666
|
|
|
|
|
3,040
|
|
Amortization of ineffective hedge
|
|
|
|
307
|
|
|
|
|
436
|
|
|
|
|
914
|
|
|
|
|
866
|
|
Amortization of deferred AWN capacity revenue
|
|
|
|
(849
|
)
|
|
|
|
-
|
|
|
|
|
(1,690
|
)
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
|
540
|
|
|
|
|
499
|
|
|
|
|
1,193
|
|
|
|
|
1,718
|
|
Deferred income tax expense (benefit)
|
|
|
|
974
|
|
|
|
|
(27,280
|
)
|
|
|
|
747
|
|
|
|
|
(24,625
|
)
|
Provision for uncollectible accounts
|
|
|
|
910
|
|
|
|
|
171
|
|
|
|
|
1,475
|
|
|
|
|
439
|
|
Cash distribution from equity method investments
|
|
|
|
9,168
|
|
|
|
|
-
|
|
|
|
|
17,691
|
|
|
|
|
-
|
|
(Earnings) loss from equity method investments
|
|
|
|
(9,168
|
)
|
|
|
|
21
|
|
|
|
|
(17,691
|
)
|
|
|
|
21
|
|
Other non-cash (income) expense, net
|
|
|
|
(155
|
)
|
|
|
|
196
|
|
|
|
|
(158
|
)
|
|
|
|
236
|
|
Changes in operating assets and liabilities
|
|
|
|
(6,738
|
)
|
|
|
|
(4,874
|
)
|
|
|
|
(3,870
|
)
|
|
|
|
(1,065
|
)
|
Net cash provided by operating activities
|
|
|
|
6,227
|
|
|
|
|
19,916
|
|
|
|
|
20,053
|
|
|
|
|
45,484
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
|
(10,710
|
)
|
|
|
|
(7,629
|
)
|
|
|
|
(17,874
|
)
|
|
|
|
(13,597
|
)
|
Capitalized interest
|
|
|
|
(624
|
)
|
|
|
|
(387
|
)
|
|
|
|
(1,362
|
)
|
|
|
|
(870
|
)
|
Change in unsettled capital expenditures
|
|
|
|
2,772
|
|
|
|
|
(678
|
)
|
|
|
|
(4,414
|
)
|
|
|
|
(3,829
|
)
|
Proceeds on sale of assets
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
1,935
|
|
AWN excess distribution
|
|
|
|
-
|
|
|
|
|
1,512
|
|
|
|
|
-
|
|
|
|
|
1,512
|
|
Return of capital from equity investment
|
|
|
|
3,332
|
|
|
|
|
-
|
|
|
|
|
7,342
|
|
|
|
|
-
|
|
Non-cash acquisition, cash received
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
|
68
|
|
|
|
|
-
|
|
Net change in short-term investments
|
|
|
|
-
|
|
|
|
|
1,512
|
|
|
|
|
-
|
|
|
|
|
1,512
|
|
Net change in restricted accounts
|
|
|
|
-
|
|
|
|
|
49
|
|
|
|
|
-
|
|
|
|
|
48
|
|
Net cash used by investing activities
|
|
|
|
(5,230
|
)
|
|
|
|
(5,621
|
)
|
|
|
|
(16,240
|
)
|
|
|
|
(13,289
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
|
(5,388
|
)
|
|
|
|
(15,366
|
)
|
|
|
|
(18,742
|
)
|
|
|
|
(30,381
|
)
|
Debt issuance costs
|
|
|
|
-
|
|
|
|
|
(181
|
)
|
|
|
|
-
|
|
|
|
|
(181
|
)
|
Payment of withholding taxes on stock-based compensation
|
|
|
|
(2
|
)
|
|
|
|
-
|
|
|
|
|
(583
|
)
|
|
|
|
(630
|
)
|
Proceeds from issuance of common stock
|
|
|
|
132
|
|
|
|
|
115
|
|
|
|
|
132
|
|
|
|
|
115
|
|
Net cash used by financing activities
|
|
|
|
(5,258
|
)
|
|
|
|
(15,432
|
)
|
|
|
|
(19,193
|
)
|
|
|
|
(31,077
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
|
(4,261
|
)
|
|
|
|
(1,137
|
)
|
|
|
|
(15,380
|
)
|
|
|
|
1,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
|
31,920
|
|
|
|
|
19,094
|
|
|
|
|
43,039
|
|
|
|
|
16,839
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
|
$
|
27,659
|
|
|
|
$
|
17,957
|
|
|
|
$
|
27,659
|
|
|
|
$
|
17,957
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
|
$
|
9,466
|
|
|
|
$
|
11,219
|
|
|
|
$
|
16,028
|
|
|
|
$
|
18,383
|
|
Income tax paid
|
|
|
$
|
1
|
|
|
|
$
|
-
|
|
|
|
$
|
14
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-cash Transactions:
|
|
|
|
|
|
|
|
|
|
|
|
|
Property acquired under capital leases
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
44
|
|
|
|
$
|
2
|
|
Additions to ARO asset
|
|
|
$
|
75
|
|
|
|
$
|
107
|
|
|
|
$
|
289
|
|
|
|
$
|
137
|
|
Non-cash acquisition purchase price, net of cash received
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
|
$
|
1,850
|
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
ADJUSTED EBITDA AND FREE CASH FLOW
|
(Unaudited, In Thousands)
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
$
|
1,085
|
|
|
|
$
|
37,694
|
|
|
|
$
|
700
|
|
|
|
$
|
41,162
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
8,672
|
|
|
|
|
10,156
|
|
|
|
|
17,529
|
|
|
|
|
20,185
|
|
Loss on extinguishment of debt
|
|
|
|
-
|
|
|
|
|
276
|
|
|
|
|
-
|
|
|
|
|
276
|
|
Interest income
|
|
|
|
(6
|
)
|
|
|
|
(8
|
)
|
|
|
|
(14
|
)
|
|
|
|
(18
|
)
|
Depreciation and amortization
|
|
|
|
8,475
|
|
|
|
|
11,450
|
|
|
|
|
17,265
|
|
|
|
|
24,082
|
|
Loss on sale of short-term investments
|
|
|
|
-
|
|
|
|
|
13
|
|
|
|
|
-
|
|
|
|
|
13
|
|
Loss on disposal of assets
|
|
|
|
410
|
|
|
|
|
585
|
|
|
|
|
811
|
|
|
|
|
626
|
|
Loss (earnings) from equity method investment in TekMate
|
|
|
|
-
|
|
|
|
|
21
|
|
|
|
|
(12
|
)
|
|
|
|
21
|
|
Earnings from equity method investment in AWN
|
|
|
|
(9,168
|
)
|
|
|
|
-
|
|
|
|
|
(17,679
|
)
|
|
|
|
-
|
|
AWN distributions received
|
|
|
|
12,500
|
|
|
|
|
-
|
|
|
|
|
25,000
|
|
|
|
|
-
|
|
AWN distributions received for the prior period
|
|
|
|
(4,167
|
)
|
|
|
|
-
|
|
|
|
|
(4,167
|
)
|
|
|
|
-
|
|
AWN distributions receivable within 12 days
|
|
|
|
4,167
|
|
|
|
|
-
|
|
|
|
|
4,167
|
|
|
|
|
-
|
|
Income tax expense (benefit)
|
|
|
|
975
|
|
|
|
|
(27,280
|
)
|
|
|
|
761
|
|
|
|
|
(24,625
|
)
|
Stock-based compensation
|
|
|
|
540
|
|
|
|
|
499
|
|
|
|
|
1,193
|
|
|
|
|
1,718
|
|
Long-term cash incentives
|
|
|
|
301
|
|
|
|
|
161
|
|
|
|
|
985
|
|
|
|
|
330
|
|
AWN transaction-related costs
|
|
|
|
40
|
|
|
|
|
427
|
|
|
|
|
212
|
|
|
|
|
1,272
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
|
$
|
23,824
|
|
|
|
$
|
33,994
|
|
|
|
$
|
46,751
|
|
|
|
$
|
65,042
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
|
|
|
Incurred capital expenditures
|
|
|
|
(10,710
|
)
|
|
|
|
(7,629
|
)
|
|
|
|
(17,874
|
)
|
|
|
|
(13,597
|
)
|
Amortization of deferred AWN capacity revenue
|
|
|
|
(849
|
)
|
|
|
|
-
|
|
|
|
|
(1,690
|
)
|
|
|
|
-
|
|
AWN transaction-related capital costs, net change
|
|
|
|
-
|
|
|
|
|
14
|
|
|
|
|
-
|
|
|
|
|
(41
|
)
|
Cash interest expense
|
|
|
|
(9,466
|
)
|
|
|
|
(11,219
|
)
|
|
|
|
(16,028
|
)
|
|
|
|
(18,383
|
)
|
Free cash flow
|
|
|
$
|
2,799
|
|
|
|
$
|
15,160
|
|
|
|
$
|
11,159
|
|
|
|
$
|
33,021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
$
|
80,558
|
|
|
|
$
|
97,757
|
|
|
|
$
|
158,889
|
|
|
|
$
|
188,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
|
|
|
|
29.6
|
%
|
|
|
|
34.8
|
%
|
|
|
|
29.4
|
%
|
|
|
|
34.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NonGAAP Measures:
In an effort to provide investors with additional information regarding
the Company's results as determined by GAAP, the Company also discloses
certain non-GAAP information which management utilizes to assess
performance and believes provides useful information to investors.
The Company has disclosed Adjusted EBITDA as net income before interest,
loss on extinguishment of debt, depreciation and amortization, loss on
the impairment of equity investments, loss on sale of short-term
investments, gain or loss on asset purchases or disposals, earnings on
equity method investments, gains and distributions related to AWN,
provisions for taxes, AWN transaction-related costs, stock-based
compensation, and expenses under the company’s long term cash incentive
plan (“LTCI”). LTCI expenses are considered part of an interim
compensation structure to mitigate the dilutive impact of additional
share issuances for executive compensation. Distributions from AWN are
included in Adjusted EBITDA.
Adjusted EBITDA Margin, is defined as Adjusted EBITDA divided by
Operating Revenues.
Free cash flow is defined as Adjusted EBITDA, less capital expenditures
that create an obligation to pay (“incurred capital expenditures”), less
amortization of deferred AWN capacity revenue (a non cash revenue item),
less AWN transaction-related capital costs, less cash interest expense.
Adjusted EBITDA, Adjusted EBITDA Margin and Free cash flow are non-GAAP
measures and should not be considered a substitute for net cash provided
by operating activities and other measures of financial performance
recorded in accordance with GAAP. Other companies may not calculate
Non-GAAP measures in the same manner as ACS.
|
Schedule 5
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
REVENUE GROWTH
|
(Unaudited, In Thousands)
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
June 30,
|
|
|
June 30,
|
Service revenue:
|
|
|
2014
|
|
|
2013
|
|
|
2014
|
|
|
2013
|
Business and wholesale customers
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
|
|
|
$
|
5,671
|
|
|
|
$
|
5,790
|
|
|
$
|
11,282
|
|
|
|
$
|
11,513
|
Broadband
|
|
|
|
11,085
|
|
|
|
|
9,962
|
|
|
|
21,696
|
|
|
|
|
19,429
|
IT Services
|
|
|
|
945
|
|
|
|
|
-
|
|
|
|
1,533
|
|
|
|
|
-
|
Other
|
|
|
|
1,775
|
|
|
|
|
2,187
|
|
|
|
3,456
|
|
|
|
|
4,043
|
Wholesale
|
|
|
|
8,266
|
|
|
|
|
7,461
|
|
|
|
16,179
|
|
|
|
|
15,052
|
Business and wholesale service revenue
|
|
|
|
27,742
|
|
|
|
|
25,400
|
|
|
|
54,146
|
|
|
|
|
50,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer customers
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice
|
|
|
|
3,837
|
|
|
|
|
4,353
|
|
|
|
7,713
|
|
|
|
|
8,672
|
Broadband
|
|
|
|
6,244
|
|
|
|
|
5,605
|
|
|
|
12,105
|
|
|
|
|
10,847
|
Other
|
|
|
|
359
|
|
|
|
|
383
|
|
|
|
782
|
|
|
|
|
797
|
Consumer service revenue
|
|
|
|
10,440
|
|
|
|
|
10,341
|
|
|
|
20,600
|
|
|
|
|
20,316
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total service revenue
|
|
|
|
38,182
|
|
|
|
|
35,741
|
|
|
|
74,746
|
|
|
|
|
70,353
|
Growth in service revenue
|
|
|
|
6.8
|
%
|
|
|
|
|
|
|
6.2
|
%
|
|
|
|
Growth in broadband service revenue
|
|
|
|
11.3
|
%
|
|
|
|
|
|
|
11.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Equipment sales
|
|
|
|
1,274
|
|
|
|
|
343
|
|
|
|
2,111
|
|
|
|
|
935
|
Access
|
|
|
|
8,968
|
|
|
|
|
9,268
|
|
|
|
17,961
|
|
|
|
|
18,783
|
High cost support
|
|
|
|
7,075
|
|
|
|
|
4,412
|
|
|
|
13,349
|
|
|
|
|
8,574
|
Total service and other revenue
|
|
|
|
55,499
|
|
|
|
|
49,764
|
|
|
|
108,167
|
|
|
|
|
98,645
|
Growth in service and other revenue
|
|
|
|
11.5
|
%
|
|
|
|
|
|
|
9.7
|
%
|
|
|
|
Growth excluding equipment sales
|
|
|
|
9.7
|
%
|
|
|
|
|
|
|
8.5
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
Business and consumer service revenue
|
|
|
|
17,129
|
|
|
|
|
18,030
|
|
|
|
34,185
|
|
|
|
|
35,934
|
Equipment sales
|
|
|
|
1,115
|
|
|
|
|
1,282
|
|
|
|
2,119
|
|
|
|
|
2,530
|
Other
|
|
|
|
1,450
|
|
|
|
|
1,049
|
|
|
|
2,797
|
|
|
|
|
2,150
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AWN related:
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign roaming
|
|
|
|
-
|
|
|
|
|
19,409
|
|
|
|
-
|
|
|
|
|
34,435
|
Wireless backhaul
|
|
|
|
-
|
|
|
|
|
2,193
|
|
|
|
70
|
|
|
|
|
4,168
|
CETC
|
|
|
|
4,516
|
|
|
|
|
6,030
|
|
|
|
9,861
|
|
|
|
|
10,954
|
Amortization of deferred AWN capacity revenue
|
|
|
|
849
|
|
|
|
|
-
|
|
|
|
1,690
|
|
|
|
|
-
|
Total AWN related
|
|
|
|
5,365
|
|
|
|
|
27,632
|
|
|
|
11,621
|
|
|
|
|
49,557
|
Total wireless & AWN related revenue
|
|
|
|
25,059
|
|
|
|
|
47,993
|
|
|
|
50,722
|
|
|
|
|
90,171
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
|
$
|
80,558
|
|
|
|
$
|
97,757
|
|
|
$
|
158,889
|
|
|
|
$
|
188,816
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 6
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
KEY OPERATING STATISTICS
|
(Unaudited)
|
|
|
|
|
Three Months Ended
|
|
|
|
June 30,
|
|
|
|
March 31,
|
|
|
|
June 30,
|
|
|
|
2014
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice:
|
|
|
|
|
|
|
|
|
|
|
|
Consumer access lines
|
|
|
|
46,740
|
|
|
|
|
|
48,165
|
|
|
|
|
|
52,438
|
|
Business access lines
|
|
|
|
80,172
|
|
|
|
|
|
79,841
|
|
|
|
|
|
80,517
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice ARPU consumer
|
|
|
$
|
26.95
|
|
|
|
|
$
|
26.51
|
|
|
|
|
$
|
27.25
|
|
Voice ARPU business
|
|
|
$
|
23.63
|
|
|
|
|
$
|
23.43
|
|
|
|
|
$
|
23.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Broadband: (1)
|
|
|
|
|
|
|
|
|
|
|
|
Consumer connections
|
|
|
|
39,022
|
|
|
|
|
|
39,468
|
|
|
|
|
|
37,611
|
|
Business connections
|
|
|
|
19,618
|
|
|
|
|
|
19,304
|
|
|
|
|
|
19,104
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARPU consumer
|
|
|
$
|
52.51
|
|
|
|
|
$
|
49.46
|
|
|
|
|
$
|
49.21
|
|
ARPU business (2)
|
|
|
$
|
189.54
|
|
|
|
|
$
|
182.96
|
|
|
|
|
$
|
174.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless:
|
|
|
|
|
|
|
|
|
|
|
|
Postpaid connections
|
|
|
|
83,468
|
|
|
|
|
|
86,238
|
|
|
|
|
|
88,876
|
|
Lifeline connections
|
|
|
|
7,447
|
|
|
|
|
|
6,510
|
|
|
|
|
|
9,859
|
|
Prepaid connections
|
|
|
|
18,663
|
|
|
|
|
|
15,227
|
|
|
|
|
|
15,684
|
|
Total
|
|
|
|
109,578
|
|
|
|
|
|
107,975
|
|
|
|
|
|
114,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail wireless ARPU
|
|
|
$
|
52.55
|
|
|
|
|
$
|
52.51
|
|
|
|
|
$
|
52.68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Churn:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Voice connections (3)
|
|
|
|
1.9
|
%
|
|
|
|
|
1.0
|
%
|
|
|
|
|
1.3
|
%
|
Broadband connections (1) (3)
|
|
|
|
2.4
|
%
|
|
|
|
|
1.9
|
%
|
|
|
|
|
2.0
|
%
|
Wireless connections
|
|
|
|
2.4
|
%
|
|
|
|
|
3.0
|
%
|
|
|
|
|
2.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless equipment subsidy
|
|
|
|
(263
|
)
|
(4)
|
|
|
|
(463
|
)
|
(4)
|
|
|
|
(3,463
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Consumer and business broadband connections, ARPU, and churn have
been restated to exclude dial up lines.
|
(2)
|
|
Business broadband ARPU was restated to reflect the movement of IT
Services revenue into a separate category.
|
(3)
|
|
Voice and broadband churn have been restated to exclude wholesale
lines.
|
(4)
|
|
For the quarters ending June 30, 2014 and March 31, 2014,
respectively, these amounts are net of AWN subsidy reimbursement.
|
|
|
|
|
|
|
Schedule 7
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
Long Term Debt
|
(Unaudited, In Thousands)
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2014
|
|
|
2013
|
|
|
2013
|
2010 senior credit facility term loan due 2016
|
|
|
$
|
327,700
|
|
|
|
$
|
345,900
|
|
|
|
$
|
414,550
|
|
Debt discount - 2010 senior credit facility term loan due 2016
|
|
|
|
(1,315
|
)
|
|
|
|
(1,687
|
)
|
|
|
|
(2,358
|
)
|
6.25% convertible notes due 2018
|
|
|
|
114,000
|
|
|
|
|
114,000
|
|
|
|
|
120,000
|
|
Debt discount - 6.25% convertible notes due 2018
|
|
|
|
(8,229
|
)
|
|
|
|
(9,213
|
)
|
|
|
|
(10,650
|
)
|
Capital leases and other long-term obligations
|
|
|
|
6,762
|
|
|
|
|
7,257
|
|
|
|
|
4,810
|
|
|
|
|
|
438,918
|
|
|
|
|
456,257
|
|
|
|
|
526,352
|
|
Less current portion
|
|
|
|
(8,265
|
)
|
|
|
|
(14,256
|
)
|
|
|
|
(11,302
|
)
|
Long-term obligations, net of current portion
|
|
|
$
|
430,653
|
|
|
|
$
|
442,001
|
|
|
|
$
|
515,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
|
|
2014 (July 1 - December 31)
|
|
|
$
|
565
|
2015 (January 1 - December 31)
|
|
|
|
15,417
|
2016 (January 1 - December 31)
|
|
|
|
313,788
|
2017 (January 1 - December 31)
|
|
|
|
506
|
2018 (January 1 - December 31)
|
|
|
|
114,287
|
2019 (January 1 - December 31)
|
|
|
|
278
|
Thereafter
|
|
|
|
3,621
|
|
|
|
$
|
448,462
|
|
|
|
|
|
|
|
|
|
|
Schedule 8
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
Summary AWN information
|
(Unaudited, In Thousands)
|
|
Alaska Wireless Network, LLC
|
Stand Alone Selected Operating Results
|
|
|
|
|
Q1 - 2014
|
|
|
Q2 - 2014
|
|
|
YTD - 2014
|
|
|
|
Operating revenues
|
|
|
$
|
63,037
|
|
|
|
$
|
64,665
|
|
|
|
$
|
127,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of services and sales
|
|
|
|
19,119
|
|
|
|
|
18,880
|
|
|
|
|
37,999
|
|
|
|
|
|
Selling, general & administrative
|
|
|
|
5,954
|
|
|
|
|
5,898
|
|
|
|
|
11,852
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
10,995
|
|
|
|
|
10,644
|
|
|
|
|
21,639
|
|
|
|
|
|
Total operating expenses
|
|
|
|
36,068
|
|
|
|
|
35,422
|
|
|
|
|
71,490
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
|
26,969
|
|
|
|
|
29,243
|
|
|
|
|
56,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income and (expense)
|
|
|
|
(92
|
)
|
|
|
|
(88
|
)
|
|
|
|
(180
|
)
|
|
|
|
|
Net income
|
|
|
|
26,877
|
|
|
|
|
29,155
|
|
|
|
|
56,032
|
|
|
|
A
|
|
|
|
|
Plus:
|
Depreciation Expense
|
|
|
|
10,995
|
|
|
|
|
10,644
|
|
|
|
|
21,639
|
|
|
|
|
|
Other, net
|
|
|
|
1,706
|
|
|
|
|
1,631
|
|
|
|
|
3,337
|
|
|
|
|
Minus:
|
Capital Spending
|
|
|
|
3,639
|
|
|
|
|
7,110
|
|
|
|
|
10,749
|
|
|
|
|
|
Management Fee to GCI
|
|
|
|
1,438
|
|
|
|
|
1,372
|
|
|
|
|
2,810
|
|
|
|
|
Adjusted Free Cash Flow
|
|
|
$
|
34,501
|
|
|
|
$
|
32,948
|
|
|
|
$
|
67,449
|
|
|
|
|
|
Distributions paid to ACS:
|
|
|
|
12,500
|
|
|
|
|
12,500
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
Distributions to ACS as a proportion of FCF:
|
|
|
|
36.2
|
%
|
|
|
|
37.9
|
%
|
|
|
|
37.1
|
%
|
|
|
|
|
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 Contribution from AWN:
|
|
|
|
Q1 - 2014
|
|
|
Q2 - 2014
|
|
|
YTD - 2014
|
|
|
|
Wireless business and consumer service revenue
|
|
|
$
|
17,056
|
|
|
|
$
|
17,129
|
|
|
|
$
|
34,185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
AWN wholesale charges*
|
|
|
$
|
11,905
|
|
|
|
$
|
12,750
|
|
|
|
$
|
24,655
|
|
|
|
|
Handset subsidy support*
|
|
|
|
(2,664
|
)
|
|
|
|
(3,095
|
)
|
|
|
|
(5,759
|
)
|
|
|
|
Equipment subsidy
|
|
|
|
3,127
|
|
|
|
|
3,358
|
|
|
|
|
6,485
|
|
|
|
|
Other*
|
|
|
|
235
|
|
|
|
|
830
|
|
|
|
|
1,065
|
|
|
|
|
Total
|
|
|
$
|
12,603
|
|
|
|
$
|
13,843
|
|
|
|
$
|
26,446
|
|
|
|
|
|
Wholesale Margin
|
|
|
$
|
4,453
|
|
|
|
$
|
3,286
|
|
|
|
$
|
7,739
|
|
|
|
23
|
%
|
|
|
|
|
* 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
|
|
|
YTD - 2014
|
|
|
|
AWN net income
|
|
|
$
|
26,877
|
|
|
|
$
|
29,155
|
|
|
|
$
|
56,032
|
|
|
|
A
|
Adjusted for step-up in GCI assets
|
|
|
|
(1,345
|
)
|
|
|
|
(1,650
|
)
|
|
|
|
(2,995
|
)
|
|
|
B
|
AWN stepped-up earnings
|
|
|
$
|
25,532
|
|
|
|
$
|
27,505
|
|
|
|
$
|
53,037
|
|
|
|
C
|
|
ACS ownership percentage of AWN
|
|
|
|
33.33
|
%
|
|
|
|
33.33
|
%
|
|
|
|
33.33
|
%
|
|
|
D
|
|
"Adjusted for step-up"(B) reflects the step up on basis on the GCI
contributed assets to AWN and associated higher depreciation expense
that ACS is required to incorporate in its consolidated financial
statements.
|
|
Earnings on equity method investment in AWN
|
|
|
$
|
8,511
|
|
|
|
$
|
9,168
|
|
|
|
$
|
17,679
|
|
|
|
C * D
|
|
AWN's stepped up net income is used to calculate the equity in
earnings at ACS' 1/3 ownership percentage.
|
|
|
Key AWN Results Included in the ACS Non GAAP financial measures:
|
|
|
|
Q1 - 2014
|
|
|
Q2 - 2014
|
|
|
YTD - 2014
|
|
|
|
Cash distributions received during the quarter
|
|
|
$
|
12,500
|
|
|
|
$
|
12,500
|
|
|
|
$
|
25,000
|
|
|
|
|
Less:
|
Distributions received during the quarter related to the previous
period
|
|
|
|
(4,167
|
)
|
|
|
|
(4,167
|
)
|
|
|
|
(4,167
|
)
|
|
|
|
Plus:
|
Distributions received within 14 business days of quarter-end
|
|
|
|
4,167
|
|
|
|
|
4,167
|
|
|
|
|
4,167
|
|
|
|
|
|
Amortization of deferred AWN capacity revenue
|
|
|
|
841
|
|
|
|
|
849
|
|
|
|
|
1,690
|
|
|
|
|
Equals
|
AWN impact to Adjusted EBITDA
|
|
|
$
|
13,341
|
|
|
|
$
|
13,349
|
|
|
|
$
|
26,690
|
|
|
|
|
|
Less:
|
Amortization of deferred AWN capacity revenue
|
|
|
|
841
|
|
|
|
|
849
|
|
|
|
|
1,690
|
|
|
|
|
Equals
|
AWN impact to Free Cash Flow
|
|
|
$
|
12,500
|
|
|
|
$
|
12,500
|
|
|
|
$
|
25,000
|
|
|
|
|
|
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.
|
CONTACT:
Alaska Communications Investors:
Tiffany Dunn,
907-564-3314
Manager Investor Relations
investors@acsalaska.com
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