Alaska Communications Systems Reports Second Quarter Results; Company Achieves a Record 3,092 Net Wireless Additions Over 130 New Business Wins Added in the Quarter.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 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 -- 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 its second quarter ended June June: see month. 30, 2004. Revenues for the second quarter of 2004 were $75.3 million and the Company's net loss for the second quarter of 2004 was $7.2 million or $0.24 per share (basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. ). 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 for the second quarter of 2004 was $27.0 million. "This was a very successful quarter for the Company as we showed continued momentum in the business market, posted record results in wireless and had a strong sequential One after the other in some consecutive order such as by name or number. increase in our EBITDA," commented Liane li·an·a also li·ane n. Any of various climbing, woody, usually tropical vines. [Alteration of French liane, probably from lier, to bind, from Old French; see liable.] Pelletier Pelletier is the name of several people.
adj. 1. Forming or characterized by a sequence, as of units or musical notes. 2. Sequent. se·quen increased the number of access lines to commercial accounts for the first time in the last two years. Businesses account for approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. two-thirds of our local telephone retail revenue and our success in this area is a clear indication of our progress and future potential." "Our quarter was also highlighted by a record 3,092 wireless adds with sector leading churn churn: see butter. of only 1.7%. Our success against the competition was clearly apparent as 70% of customers who ported their wireless numbers in the second quarter moved to ACS. Capitalizing on the state's implementation of wireless number portability See NP. , ACS launched its new CDMA (Code Division Multiple Access) A method for transmitting simultaneous signals over a shared portion of the spectrum. The foremost application of CDMA is the digital cellular phone technology from QUALCOMM that operates in the 800 MHz band and 1.9 GHz PCS band. 1xRTT and EVDO network," added Pelletier. "Being first to market with next generation picture phones, PDAs and PC air cards was a huge differentiator Dif`fer`en´ti`a`tor n. 1. One who, or that which, differentiates. Noun 1. differentiator - a person who (or that which) differentiates discriminator for us. Interest in our new wireless data services is exciting as customers experience the highest available mobile speeds on EVDO with average speeds of 500 kbps and peak speeds of 2.4Mbps. All of these competitive advantages give ACS the opportunity to use wireless as a door opener door opener n. 1. An electromechanical or electronic device for automatically opening a door, as one to a garage. 2. Informal An effective means of gaining success or seizing an opportunity. to present its full product line to new customers and increase our share of wallet Share of Wallet (SOW) is a survey method used in performance management that helps managers understand the amount of business a company gets from specific customers. with existing customers." "We continued to make progress in our business model in the second quarter as our total revenues increased by 1% over the same period last year excluding the Company's exited Directories business and the discontinued dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: State of Alaska contract and we improved EBITDA from the first quarter of 2004 to $27 million during the second quarter," added David Wilson David Wilson may refer to:
n the use of various massage or muscle energy techniques to relax and stretch muscle and connective tissue. our customer lives through improved churn management and increasing ARPUs, will be key drivers of EBITDA going forward." Second Quarter Financial Highlights --During the quarter the Company grew its total number of retail customers across all product lines by 1,400 with strong growth in wireless and net line gains from the business segment of its LEC (1) (LAN Emulation Client) A software driver that provides LAN emulation (LANE) in an ATM network. It resides in an ATM end station or in a computer system that provides the LAN to ATM conversion, often known as a LAN access device. See LANE. operations. --The Company added 3,092 wireless subscribers from the preceding quarter. In the second quarter, Average Revenue per Unit, or ARPU (Average Revenue Per User) A calculation often used to determine the overall value of an application. It is also used to rate particular customers, especially in the wireless space, by comparing someone's account to the overall average. , improved by $1.87 to $50.11 and MOU (Minutes Of Usage) A metric used to compute billing and/or statistics for telephone calls or other network use. (Minutes of Use) increased by 13.8% over the same period last year. --The Company ended the quarter with 20,963 DSL DSL in full Digital Subscriber Line Broadband digital communications connection that operates over standard copper telephone wires. It requires a DSL modem, which splits transmissions into two frequency bands: the lower frequencies for voice (ordinary subscribers, an increase of 7.9% subscribers on a sequential basis. Each of these subscribers enjoys full broadband access See broadband and wireless broadband. speeds of up to 1.2 MB per second. --Access lines, excluding the impact of a change in line counting methodology which resulted in the reduction of 2,538 lines, declined 0.6% sequentially to 307,523, in line with many LECs. Importantly, retail local access lines to business customers increased sequentially during the quarter for the first time in two years. --Long distance subscribers increased by 600 to 42,653 customers from the preceding quarter principally as a result of a focused selling effort and the bundling bundling, courtship custom, thought to have originated in Holland and the British Isles. It was extended to America, particularly to New England, and most widely practiced in the years prior to the Revolution of 1776. of the LD product with other ACS services. --During the quarter, the Company generated $10.5 million of free cash flow, exclusive of $3.8 million of growth capex used to fund the roll out of our CDMA 1xRTT and EV-DO (EVolution-Data Only) A 3G high-speed digital data service provided by cellular carriers worldwide that use the CDMA technology, including Verizon and Sprint in the U.S. EV-DO works on EV-DO cellphones as well as laptops and portable devices that have EV-DO modems. network. Recent Business Highlights --On June 28, the Company announced that the UNE loop rate in Anchorage will increase by 28%, from $14.92 to $19.15, pursuant to the Regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. Commission of Alaska's order dated June 25, 2004. The increase in the Anchorage UNE loop rate will raise revenue to ACS by approximately $262,000 per month based upon the current level of UNE loops. --On May 24, the Company launched the initial phase of its new next generation CDMA network to coincide with the advent of wireless local number portability "LNP" redirects here. For the airport in Virginia with that IATA code, see Lonesome Pine Airport. For the compound InP, see Indium phosphide. Local number portability, (LNP) for fixed lines, and full mobile number portability (LNP (Local Number Portability) The capability of keeping the same local telephone number when switching carriers. See NP and WLNP. ) in Alaska. Combined with newly available ACS mobile phones the CDMA network enables internet browsing See browse. , mobile shopping for downloads like ringers, picture taking and sending capability, and much more. --On June 15, the Company announced the introduction of Wireless Broadband High-speed wireless transmission of data. What is "high" speed is always a changing number. Wireless systems are typically slower than land-based, wireline networks. In the past, wireless broadband started at 250 Kbps, whereas land-based broadband was generally considered to start at T1 Access -- a broadband wireless See wireless broadband. data service powered by its next generation CDMA network. Utilizing 1xEV-DO technology, ACS' Wireless Broadband Access is the fastest available wide area wireless data service available today. --In the second quarter, the Company introduced a new, high profile advertising campaign focusing on the benefits of the Company's full product line of local, wireless, long distance and internet. The campaign features a common look and feel and communicates ACS's integrated approach to solving customer needs. --On June 21, the Company announced that its stock will join the Russell Russell, English noble family. It first appeared prominently in the reign of Henry VIII when John Russell, 1st earl of Bedford, 1486?–1555, rose to military and diplomatic importance. 3000(R) Index. Revenues for the second quarter of 2004 were $75.3 million, an increase of 1% from the second quarter 2003 revenues of $74.5 million, excluding revenue from the Company's Directory business sold in 2003 and the State of Alaska contract terminated ter·mi·nate v. ter·mi·nat·ed, ter·mi·nat·ing, ter·mi·nates v.tr. 1. To bring to an end or halt: in 2003. Reported revenues, including Directory and the State of Alaska, for the second quarter of 2003 were $84.0 million. The Company's net loss for the second quarter of 2004 was $7.2 million or $0.24 per share (basic and diluted), which compares to a net gain of $92.7 million, or $3.08 per share (basic and diluted) for the same period in 2003 which included a one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. gain of $97.6 million attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to the sale of the Company's Directory business. ACS will host a conference call at 5:00 P.M. Eastern time today to discuss its first quarter results. For parties in the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. and Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of , call 800-257-3401 to access the earnings call. International parties can access the call at 303-262-2211. Additionally, ACS will offer a live webcast of the conference call, accessible from the "Investor Relations Investor relations The process by which the corporation communicates with its investors. " section of the Company's website (www.alsk.com). The webcast will be archived for a period of 45 days. A telephonic replay of the conference call will also be available 2 hours after the call and will run until Saturday Saturday: see week; Sabbath. , July July: see month. 31, 2004, at 7:00 p.m. ET. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11003166. International parties should call 303-590-3000 and enter pass code 11003166. About Alaska Communications Systems -- ACS is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. More information can be found on the Company's website at http://www.acsalaska.com. In addition to historical information, this release includes 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. , estimates and projections that are based on current expectations only, and are subject to a number of risks, uncertainties and assumptions, many of which are beyond the control of ACS. Actual events and results may differ materially from those anticipated, estimated or projected if one or more of these risks or uncertainties materialize ma·te·ri·al·ize v. ma·te·ri·al·ized, ma·te·ri·al·iz·ing, ma·te·ri·al·iz·es v.tr. 1. To cause to become real or actual: By building the house, we materialized a dream. , or if underlying assumptions prove incorrect Incorrect means to not be correct and may also refer to:
The reduction or elimination of government power in a particular industry, usually enacted to create more competition within the industry. Notes: Traditional areas that have been deregulated are the telephone and airline industries. in the telecommunications industry as a result of the Telecommunications Act There are several laws named the Telecommunications Act
adj. Not available, accessible, or at hand. un  a·vail of SFAS SFAS Statement of Financial Accounting StandardsSFAS 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 No. 71 to ACS's wireline subsidiaries; and possible changes in the demand for ACS's products and services. In addition to these factors, actual future performance, outcomes and results may differ materially because of other, more general, factors including (without limitation) changes in general industry and market conditions and growth rates Growth Rates The compounded annualized rate of growth of a company's revenues, earnings, dividends, or other figures. Notes: Remember, historically high growth rates don't always mean a high rate of growth looking into the future. ; changes in interest rates or other general national, regional or local economic conditions; governmental and public policy changes; changes in accounting policies or practices adopted voluntarily or as required by accounting principles generally accepted in the United States of America UNITED STATES OF AMERICA. The name of this country. The United States, now thirty-one in number, are Alabama, Arkansas, Connecticut, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Hampshire, ; and the continued availability of financing in the amounts, at the terms and on the conditions necessary to support ACS's future business. These and other uncertainties related to ACS's business are described in greater detail in ACS's Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended Dec. 31, 2003. The information contained in this release is as of July 29, 2004. ACS undertakes no obligation to update or revise any of this information whether as a result of new information, future events or developments, or otherwise.
Schedule 1
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER FINANCIAL DATA
For the Three and Six Months Ended June 30, 2004 and 2003
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
Operating revenues:
Local telephone $ 52,948 $ 55,210 $108,730 $109,211
Wireless 13,461 11,947 25,062 22,277
Directory - 3,353 - 11,631
Internet 5,105 9,037 9,718 16,193
Interexchange 3,790 4,449 7,199 8,476
-------- -------- -------- --------
Total operating revenues 75,304 83,996 150,709 167,788
Operating expenses:
Local telephone 29,112 26,852 61,636 54,107
Wireless 8,331 7,341 16,259 14,251
Directory - 1,800 - 5,249
Internet 6,407 13,485 13,913 24,099
Interexchange 4,858 6,212 9,874 11,830
Depreciation and
amortization 18,810 22,091 37,916 44,691
Gain (Loss) on disposal of
assets, net (2) (97,285) 225 (96,539)
-------- -------- -------- --------
Total operating expenses 67,516 (19,504) 139,823 57,688
-------- -------- -------- --------
Operating income 7,788 103,500 10,886 110,100
Other income and expense:
Interest expense (15,239) (15,563) (27,336) (28,892)
Interest income and other 232 4,787 462 4,979
-------- -------- -------- --------
Total other income
(expense) (15,007) (10,776) (26,874) (23,913)
-------- -------- -------- --------
Income (Loss) before income
taxes (7,219) 92,724 (15,988) 86,187
Income taxes - - - -
-------- -------- -------- --------
Income (Loss) from continuing
operations (7,219) 92,724 (15,988) 86,187
Loss from discontinued
operations, net of tax - - - (52)
-------- -------- -------- --------
Net income (loss) $ (7,219) $ 92,724 $(15,988) $ 86,135
======== ======== ======== ========
Net income (loss) per share -
basic and diluted:
Income (Loss) from
continuing operations (0.24) 3.08 (0.54) 2.84
Loss from discontinued
operations, net of tax - - - (0.00)
-------- -------- -------- --------
Net income (loss) $ (0.24) $ 3.08 $ (0.54) $ 2.84
======== ======== ======== ========
Weighted average shares
outstanding:
Basic and diluted 29,539 30,095 29,437 30,373
======== ======== ======== ========
Adjusted EBITDA $ 27,011 $ 27,436 $ 49,555 $ 52,745
======== ======== ======== ========
Note:Certain reclassifications have been made to the 2003 data to
conform with the current presentation.
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
June 30, Dec. 31,
Assets 2004 2003
---------- ----------
Current assets:
Cash and cash equivalents $ 81,585 $ 97,798
Restricted cash 4,885 3,635
Accounts receivable-trade, net of allowance
of $4,001 and $4,432 37,033 41,718
Materials and supplies 8,962 10,099
Prepayments and other current assets 7,039 5,850
---------- ----------
Total current assets 139,504 159,100
Property, plant and equipment 1,051,458 1,041,904
Less: Accumulated depreciation and
amortization 628,112 603,760
---------- ----------
Property, plant and equipment, net 423,346 438,144
Goodwill 38,403 38,403
Intangible Assets 21,963 22,055
Debt issuance costs, net of amortization of
$6,631 and $5,417 17,153 18,939
Deferred charges and other assets 9,494 8,750
---------- ----------
Total assets $ 649,863 $ 685,391
========== ==========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $ 2,290 $ 1,982
Accounts payable-affiliates 3,370 5,082
Accounts payable, accrued and other current
liabilities 40,790 47,303
Income taxes payable - 1,095
Advance billings and customer deposits 8,557 8,766
---------- ----------
Total current liabilities 55,007 64,228
Long-term obligations, net of current portion 531,493 548,238
Other deferred credits and long-term
liabilities 75,766 71,065
Stockholders' equity (deficit):
Preferred stock, no par, 5,000 authorized,
no shares issued and outstanding - -
Common stock, $.01 par value; 145,000
shares authorized, 33,933 and 33,611
shares issued and 29,384 and 29,343
outstanding, respectively 339 336
Common stock, $.01 par value; 267 shares
subject to mandatory redemption - (1,198)
Treasury stock, 4,549 and 4,268 shares,
respectively, at cost (18,443) (17,118)
Paid in capital in excess of par value 280,030 278,181
Accumulated deficit (269,786) (253,798)
Accumulated other comprehensive loss (4,543) (4,543)
---------- ----------
Total stockholders' equity (deficit) (12,403) 1,860
---------- ----------
Total liabilities and stockholders' equity
(deficit) $ 649,863 $ 685,391
========== ==========
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF ADJUSTED REVENUES
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -------------------
2004 2003 2004 2003
------- ------- -------- --------
Total operating revenues $75,304 $83,996 $150,709 $167,788
Adjustment for sale of the
Company's directory business -
Directory revenues - (3,353) - (11,631)
------- ------- -------- --------
Total adjusted operating
revenues $75,304 $80,643 $150,709 $156,157
======= ======= ======== ========
Note: In an effort to provide investors with additional information
regarding the Company's results as determined by generally accepted
accounting principles (GAAP), the Company also discloses certain non-
GAAP information which management utilizes to assess performance.
Within this press release, the Company has disclosed its total
operating revenues adjusted to exclude the impact of disposed of
operations (Total adjusted operating revenues) as the Company believes
that such data will facilitate more useful period-to-period
comparisons of the Company's ongoing operations.
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
Local telephone revenues:
Local network service $ 22,995 $ 25,219 $ 45,748 $ 49,348
Network access revenue 24,539 25,140 52,234 50,201
Deregulated and other 5,414 4,851 10,748 9,662
-------- -------- -------- --------
Local telephone revenues $ 52,948 $ 55,210 $108,730 $109,211
======== ======== ======== ========
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF ADJUSTED EBITDA CALCULATION
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------
2004 2003 2004 2003
----------------------------------------
Net income (loss) $(7,219) $92,724 $(15,988) $86,135
Add (subtract):
Interest expense 15,239 15,563 27,336 28,892
Income tax benefit - - - -
Depreciation and
amortization 18,810 22,091 37,916 44,691
Gain (Loss) on disposal
of assets, net (2) (97,285) 225 (96,539)
Gain on Foreign Exchange - (4,104) - (4,104)
Non-cash pension expense 183 - 366 -
Non-cash adjustment to
litigation reserves - - (300) -
----------------------------------------
EBITDA 27,011 28,989 49,555 59,075
Adjustment for
discontinued operations - - - 52
Adjustment for sale of
the Company's directory
business -
Directory EBITDA - (1,553) - (6,382)
----------------------------------------
Adjusted EBITDA $27,011 $27,436 $49,555 $52,745
========================================
Note: In an effort to provide investors with additional information
regarding the Company's results as determined by generally accepted
accounting principles (GAAP), the Company also discloses certain non-
GAAP information which management utilizes to assess performance and
believes provides useful information to investors. Within this press
release, the Company has disclosed its net gain before interest
expense, provisions for taxes, depreciation expense, amortization
expense and other non-cash charges inclusive of non cash pension
expense and a non cash release of litigation reserves following legal
settlement (EBITDA) because the Company believes it is an important
indicator because it provides information about our ability to service
debt, pay dividends and fund capital expenditures.
To further assist the reader in understanding operations, EBITDA has
also been adjusted to exclude the impact of discontinued and disposed
of operations (Adjusted EBITDA) as the Company believes that such data
will facilitate more useful period-to-period comparisons of the
Company's ongoing operations. EBITDA and adjusted EBITDA are not GAAP
measures and should not be considered a substitute for net income and
loss and other measures of financial performance recorded in
accordance with GAAP.
Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
As of June 30,
-------------------
2004 2003
-------- --------
Local telephone:
Retail access lines 212,737 227,604
Wholesale access lines 21,310 18,868
UNE loop lines 68,662 66,864
UNE platform lines 4,814 4,892
-------- --------
Total local telephone access lines 307,523 318,228
======== ========
Average local telephone access lines for the
quarter 309,721 319,388
Average local telephone revenue per line for
the quarter $ 56.98 $ 57.62
Quarterly growth rate in local telephone
access lines -1.4% -0.7%
Wireless
Covered population 480,422 478,413
Ending subscribers 91,083 82,894
Average subscribers for the quarter 89,537 82,560
Quarterly growth rate 3.5% 0.8%
Activations for the quarter 7,615 6,273
Deactivations for the quarter 4,523 5,604
Average monthly churn for the quarter 1.7% 2.1%
Penetration 19.0% 17.3%
Quarterly Minutes of use (000's) 68,708 60,383
Average revenue per subscriber for the quarter $ 50.11 $ 48.24
Long Distance:
Long distance subscribers 42,653 44,289
Quarterly Minutes of use (000's) 33,119 36,721
Average subscribers for the quarter 42,353 50,983
Average revenue per subscriber for the quarter $ 29.83 $ 29.09
Internet:
DSL subscribers 20,963 14,817
Dial-Up and other service subscribers 24,215 29,787
-------- --------
Total Internet subscribers 45,178 44,604
======== ========
Average subscribers for the quarter 45,432 44,944
Average revenue per subscriber for the quarter $ 33.56 $ 27.84
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF FREE CASHFLOWS
(Unaudited, in Thousands)
Three Months Three Months Six Months
Ended Ended Ended
March 31, June 30, June 30,
--------- --------- ---------
2004 2004 2004
--------- --------- ---------
Net cash provided by operating
activities $ 5,719 $ 17,259 $ 22,978
Total construction and
capital expenditures (10,311) (10,475) (20,786)
--------- --------- ---------
Free Cashflow (4,592) 6,784 2,192
CDMA growth 2,050 3,753 5,803
--------- --------- ---------
Free cashflow adjusted for CDMA
growth $ (2,542) $ 10,537 $ 7,995
========= ========= =========
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