Alaska Communications Systems Reports Second Quarter 2002 Results.Business Editors ANCHORAGE Anchorage (ăng`kərĭj), city (1990 pop. 226,338), Anchorage census div., S central Alaska, a port at the head of Cook Inlet; inc. 1920. , Alaska--(BUSINESS WIRE)--July 25, 2002 Alaska Communications Systems This article is about the current telecommunications company. For the historical "Alaska Communications System", see AT&T Alascom. Alaska Communications Systems, (or ACS) is a telecommunications corporation, headquartered in Anchorage, Alaska. Group, Inc. ("ACS (Asynchronous Communications Server) See network access server. ") (Nasdaq: ALSK) today reported financial results for the second quarter. Revenues from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the for the quarter were $92.5 million compared to $81.5 million in the same period last year. For the second quarter of 2002, EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become from continuing operations increased to $36.0 million, up from $32.4 million for the same period last year. Net income from continuing operations was $4.1 million, or $0.13 per share, compared to a loss from continuing operations of $2.3 million, or $0.07 per share for 2001. ACS also recorded a non-cash charge Non-Cash Charge A charge off, made by a company against earnings, that does not require an initial outlay of cash. Notes: Non-cash charges are typically against the depreciation, amortization, and depletion accounts on a company's balance sheet. associated with the required adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142 that reduced the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of the Company's goodwill by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. $105.4 million. Under SFAS 142, any impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charge as a result of adoption of the pronouncement is reported in the Company's first quarter results. After the impairment charge, the Company's net loss for the first quarter of 2002 was $112.6 million, or $3.55 per share. "While almost all of our businesses grew on a year-over-year and sequential One after the other in some consecutive order such as by name or number. basis, our top-line results were impacted by soft equipment spending and delays in the roll-out of services under our $92 million State of Alaska Alaska (əlă`skə), largest in area of the United States but third smallest (exceeding only Vermont and Wyoming) in population, occupying the northwest extremity of the North American continent, separated from the coterminous United States contract," commented Chuck chuck a hand grip to be attached to intramedullary pins to enable the surgeon to rotate or drive them into bone. Robinson, Chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. of ACS. "The quarter included a number of non-recurring events, including a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. revenue benefit which was partially offset by one-time expenses and spending on initiatives designed to improve our business over the long term. Performance of our wireless business was strong for the period, showing solid year-over-year revenue growth and we added over 1,500 new customers. In our local exchange business, line loss to competition slowed throughout the quarter but we continue to face a difficult market with unfair competitive arbitrage arbitrage: see foreign exchange. arbitrage Business operation involving the purchase of foreign currency, gold, financial securities, or commodities in one market and their almost simultaneous sale in another market, in order to profit from price opportunities associated with below cost UNE rates." In the second quarter, ACS recorded $11.1 million of interstate in·ter·state adj. Involving, existing between, or connecting two or more states. n. One of a system of highways extending between the major cities of the 48 contiguous United States. Noun 1. access revenues, previously deferred, as a result of a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. ruling by U.S. Court of Appeals for the District of Columbia District of Columbia, federal district (2000 pop. 572,059, a 5.7% decrease in population since the 1990 census), 69 sq mi (179 sq km), on the east bank of the Potomac River, coextensive with the city of Washington, D.C. (the capital of the United States). . Additionally, the Company incurred approximately $2.2 million in one-time expenses, partially related to certain restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). activities. Mr. Robinson added, "As part of this restructuring program, ACS is reducing its overall work force by approximately 7%. The restructuring program is anticipated to result in annual operating cost reductions of over $6 million and will start to have an impact in the third quarter, but its full effect will not be felt until later in the year." "We were disappointed in the quarter as EBITDA was down from the prior period on a normalized basis as, in addition to restructuring and other activities of $2.2 million, we also invested in a number of initiatives which we believe will help us grow and be more competitive in the future," commented Kevin KEVIN Keepers of the Eternal Vigilance of the Islamic Nation (fictional, from White Teeth by Zadie Smith) P. Hemenway, Senior Vice President and CFO See Chief Financial Officer. of ACS. "As a result of these initiatives, ACS incurred expenses of approximately $1.2 million on new customer care and retention programs and spent $1.8 million on the ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale of services to support the State of Alaska contract and our new IP network. June June: see month. was our strongest month of the quarter and with the State of Alaska contract contributing revenue and our restructuring program, we expect to improve on our normalized results in the third quarter." Quarter Summary -- Local telephone results were up both sequentially and year-over-year due to the increase in local network service revenues as well as the one-time benefit in interstate access revenues. As a result, local telephone EBITDA margins increased to 49.1% from 47.6% in the immediately preceding quarter. -- Local network service revenues were up 9.4% year-over-year, largely reflecting the benefit of the local service rate increases in Anchorage implemented in the fourth quarter of 2001. -- Access lines ended at 328,913. While retail lines decreased 6,107 during the quarter, UNE and resale lines increased 3,929, and 443, respectively, from the previous quarter. During the quarter, the impact of an aggressive marketing campaign by a competitor started to abate and the loss of lines in the Anchorage market slowed significantly. -- Access revenues increased by $9.9 million both sequentially and year-over-year. Excluding the one-time benefits, access revenues declined reflecting, in part, the impact of line loss in the first quarter. -- Deregulated and other revenues decreased by 13.4% sequentially. The Company continues to experience a slow down in demand for its equipment sales business as a result of the uncertainty in the current economic environment. -- Cellular revenues grew by 3.5% from the prior year period, resulting from both ARPU and subscriber increases. ARPU for the quarter inched up from the year-over-year period to $44.68. Additionally, the Company added over 1,500 new subscribers from the immediately preceding quarter and 2,500 from the prior year period. -- Directory revenues grew 2.0% over the corresponding quarter in 2001, as the directory business continued its strong profitable performance. -- Internet revenues were up 18.5% sequentially and 42.1% year-over-year. These increases reflect the success of the Company's DSL rollout and initial revenues from the State of Alaska contract. ACS ended the quarter with over 9,850 DSL subscribers, an increase of 1,350 subscribers on a sequential basis. -- Interexchange revenues were essentially flat with the preceding quarter. -- Operating expenses for the quarter, before depreciation and amortization, grew by $7.2 million sequentially, primarily due to the restructuring activities and costs associated with the State of Alaska contract and customer retention programs. ACS' management will host a conference call at 5:00 P.M. Eastern time on Thursday Thursday: see week. , July July: see month. 25, 2002 to discuss the first quarter results. The Webcast will be available live from the Company's Investor website at www.alsk.com and via replay beginning two hours after the completion of the call. An audio replay of the call will also be available for 48 hours by dialing 800-642-1687 and entering the passcode 4767109. About Alaska Communications Systems - ACS is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the services to business and residential customers throughout Alaska. ACS currently serves approximately 330,000 access lines, 80,000 cellular customers, 65,000 long distance customers and 47,000 Internet customers throughout the State. More information can be found on the Company's website at http://www.alsk.com Statements contained in this press release that are not historical fact are "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " that involve a number of known and unknown risks or uncertainties. Additional factors, which may affect actual results, are contained in the Company's filings with the SEC. Forward-looking statements in this release are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions contained in the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995.
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Operating revenues:
Local telephone $ 63,991 $ 54,461 $ 119,313 $ 109,158
Cellular 10,771 10,411 19,749 19,693
Directory 8,381 8,213 17,022 16,152
Internet 4,551 3,203 8,393 6,314
Interexchange 4,820 5,212 9,670 11,162
--------- --------- --------- ---------
Total operating
revenues 92,514 81,500 174,147 162,479
Operating expenses:
Local telephone 32,571 30,428 61,569 59,323
Cellular 6,678 5,972 12,343 11,550
Directory 3,532 3,363 6,958 6,862
Internet 7,317 3,266 12,445 7,009
Interexchange 6,997 6,821 13,612 16,365
Depreciation and
amortization 19,973 19,554 39,232 38,964
--------- --------- --------- ---------
Total operating
expenses 77,068 69,404 146,159 140,073
--------- --------- --------- ---------
Operating income 15,446 12,096 27,988 22,406
Other income (expense):
Interest expense (11,620) (15,197) (25,006) (31,202)
Interest income
and other 275 739 775 1,825
--------- --------- --------- ---------
Total other expense (11,345) (14,458) (24,231) (29,377)
--------- --------- --------- ---------
Income (loss) before
income taxes 4,101 (2,362) 3,757 (6,971)
Income tax benefit - 49 - 99
--------- --------- --------- ---------
Income (loss) from
continuing operations 4,101 (2,313) 3,757 (6,872)
Loss from discontinued
operations (515) (491) (7,387) (801)
--------- --------- --------- ---------
Income (loss) before
cumulative effect
of change in
accounting principle 3,586 (2,804) (3,630) (7,673)
Cumulative effect
of change in
accounting principle - - (105,350) -
--------- --------- --------- ---------
Net income (loss) $ 3,586 $ (2,804) $ (108,980) $ (7,673)
========= ========= ========= =========
Net income (loss)
per share -
basic and diluted:
Income (loss)
from continuing
operations $ 0.13 $ (0.07) $ 0.12 $ (0.22)
Loss from
discontinued
operations (0.02) (0.02) (0.23) (0.03)
--------- --------- --------- ---------
Income (loss) before
cumulative effect of
change in accounting
principle 0.11 (0.09) (0.11) (0.24)
Cumulative effect of
change in accounting
principle - - (3.32) -
--------- --------- --------- ---------
Net income (loss) $ 0.11 $ (0.09) $ (3.43) $ (0.24)
========= ========= ========= =========
Weighted average
shares outstanding -
Basic 31,767 31,472 31,755 31,470
========= ========= ========= =========
Diluted 31,808 31,472 31,775 31,470
========= ========= ========= =========
EBITDA from
continuing operations $ 35,967 $ 32,389 $ 68,269 $ 63,195
========= ========= ========= =========
Note: Certain reclassifications have been made to the 2001 data to
conform with the current presentation.
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEET DATA
(Unaudited, in Thousands)
June 30, December 31,
2002 2001
--------- ---------
Cash and cash equivalents $ 28,594 $ 41,012
Restricted cash 7,104 6,932
Property, plant and equipment, net 473,354 478,980
Total assets 776,541 901,514
Long-term debt 606,414 611,250
Stockholders' equity 82,830 191,687
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
Local telephone
revenues:
Local network service $ 25,040 $ 22,879 $ 50,684 $ 46,142
Network access revenue 34,929 25,029 59,965 51,265
Deregulated and other 4,022 6,553 8,664 11,751
--------- --------- --------- ---------
Local telephone
revenues $ 63,991 $ 54,461 $ 119,313 $ 109,158
========= ========= ========= =========
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
As of June 30,
---------------------
2002 2001
--------- ---------
Local telephone:
Retail access lines 246,310 268,419
Wholesale access lines 24,970 17,964
UNE loops 57,633 43,672
--------- ---------
Total access lines 328,913 330,055
Average access lines for the quarter 329,786 331,165
Annual growth rate -0.3% 0.0%
Average revenue per line $64.68 $54.82
Cellular:
Covered population 471,863 462,057
Ending subscribers 81,109 78,574
Average subscribers for the quarter 80,354 77,689
Annual growth rate 3.2% 6.8%
Activations for the quarter 6,489 5,795
Deactivations for the quarter 4,979 4,024
Penetration 17.2% 17.0%
Quarterly Minutes of use (000's) 50,359 42,610
Average revenue per subscriber $ 44.68 $ 44.67
Long Distance:
Long distance subscribers 64,958 66,341
Minutes of use (000's) 38,946 60,753
Average subscribers for the quarter 65,740 65,857
Average revenue per subscriber $ 24.44 $ 26.38
Internet:
DSL subscribers 9,856 4,958
Dial-Up and other service subscribers 37,985 38,723
--------- ---------
Total Internet subscribers 47,841 43,681
Average subscribers for the quarter 47,634 43,873
Average revenue per subscriber $ 31.85 $ 24.34
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