Alaska Communications Systems Reports Third 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)--Oct. 24, 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 third quarter ended September September: see month. 30, 2002. 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 $84.3 million and 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 was $30.8 million, in line with Company guidance. Net loss from continuing operations of $7.0 million, or $0.22 per share was impacted by higher depreciation charges and a non-cash loss on disposal of assets and compares to a loss from continuing operations of $0.9 million, or $0.03 per share for the same period in 2001. "During the quarter, we made significant strides in our 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). efforts which produced results that were in line with expectations," 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. "Growing our 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 and wireless operations, and improving margins in our long distance 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 businesses has been a significant thrust of the Company and our results in these areas point to opportunities for long term growth. In the third quarter, we added 450 wireless subscribers, grew our DSL business by approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 1,200 customers and made slow but steady progress on growing revenues on our 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. We expect further improvement in many of these areas in the fourth quarter." "While we are pleased with our successes, below cost UNE rates continue to result in a competitively unbalanced local telephone market and ACS increasingly is not able to recover its investment in its local telephone network. Below cost UNE rates give our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. an artificial pricing advantage, which they use to capture local service, access and universal service revenues from ACS. While we will continue to look for ways to operate more efficiently to offset these harmful effects this dynamic is resulting in reduced capital investment in the telecommunications Communicating information, including data, text, pictures, voice and video over long distance. See communications. infrastructure in Alaska," explained Chuck Robinson, Chairman and CEO of ACS. "In light of the current environment, during the quarter, we focused on reducing our costs, increasing margins and lowering capital investment to increase cash flow," 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. "On a normalized basis, we were able to increase our EBITDA margins in all of our businesses. Excluding the Company's partial financing of an undersea fiber optic cable Noun 1. fiber optic cable - a cable made of optical fibers that can transmit large amounts of information at the speed of light fibre optic cable transmission line, cable, line - a conductor for transmitting electrical or optical signals or electric power operator, the Company generated positive cash flow of $3.7 million during the third quarter. Reflecting the normal seasonal increase in spending and State of Alaska expenditures, we had capital expenditures of $18.0 million for the quarter and $50.3 million year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. . More importantly, because of our need to scale back the level of investment in the local telephone network, we expect cap ex for the remainder of the year to be below our previous estimates and 2003 capital spending capital spending Spending for long-term assets such as factories, equipment, machinery, and buildings that permits the production of more goods and services in future years. to be significantly lower than this years' levels, enabling ACS to generate positive free cash flow." Quarter Summary -- Local telephone revenues were down sequentially and year-over-year. While normalized local telephone EBITDA margins increased to 45.8% from 42.5% in the immediately preceding quarter, they were flat from the same period last year. -- Access lines ended at 327,161. UNE and resale lines increased 2,975 from the previous quarter, reflecting a continued slowdown in competitive line losses. -- Local network service revenues decreased 3.4% from the immediately proceeding quarter reflecting the impact of competition in Anchorage, Fairbanks and Juneau. -- Access revenues were lower sequentially and down 4.5% year-over-year, reflecting the impact of competition. -- Deregulated and other revenues increased by 18.5% sequentially and were up slightly from last year. 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 4.1% from the prior year period and 6.6% sequentially, resulting from both ARPU and subscriber increases. ARPU for the quarter inched up from the year-over-year period to $48.78. Additionally, the Company added over 450 net new subscribers from the immediately preceding quarter and 2,801 from the prior year period. -- Directory revenues decreased 4.0% over the corresponding quarter in 2001, but EBITDA margins increased, as the directory business continued its solid profitable performance. -- Internet revenues were up 41.1% sequentially and 79.2% year-over-year. These increases reflect the success of the Company's DSL rollout and increasing revenues from the State of Alaska contract. ACS ended the quarter with over 11,000 DSL subscribers, an increase of approximately 1,200 subscribers on a sequential basis. -- Interexchange revenues were flat with the preceding quarter as subscriber gains were offset by overall lower minutes of use. -- Operating expenses for the quarter, before depreciation and amortization and loss of disposal of assets, decreased by $3.4 million sequentially. In July 2002, ACS announced an initiative to reduce its workforce by 7% in order to achieve projected annualized cost savings of $6 million. At the end of the quarter, ACS has achieved most of the objectives of this initiative and expects to start to see the full benefit of this restructuring in the fourth quarter. ACS' management will host a conference call at 5:00 P.M. Eastern time on Thursday Thursday: see week. , October October: see month. 24, 2002 to discuss the third quarter results. The Webcast will be available live from the Company's Investor website at www.alsk.com. An audio replay of the call will also be available two hours after the call for a period of 48 hours by dialing 800/405-2236 and entering the passcode 501098. 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. ACS currently serves approximately 327,000 access lines, 82,000 cellular customers, 67,000 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. 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 Alaska Communications. 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
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. limitations on the Company's ability to change its pricing for communications services; the possible future unavailability un·a·vail·a·ble 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 the Company's wireline subsidiaries; and possible changes in the demand for the Company'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 the Company's future business. These and other uncertainties related to the Company's business are described in greater detail in the Company'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 December December: see month. 31, 2001. The information contained in this release is as of October 24, 2002. The Company 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
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- --------------------
2002 2001 2002 2001
-------- -------- ---------- ---------
Operating revenues:
Local telephone $52,815 $53,860 $172,128 $163,018
Cellular 11,903 11,437 32,420 31,802
Directory 8,360 8,705 25,382 24,857
Internet 6,422 3,584 14,815 9,898
Interexchange 4,830 5,395 14,500 16,557
-------- -------- ---------- ---------
Total operating revenues 84,330 82,981 259,245 246,132
Operating expenses:
Local telephone 28,650 29,259 90,219 88,582
Cellular 7,116 6,347 20,227 18,569
Directory 3,408 3,616 10,366 10,478
Internet 8,157 4,583 20,602 11,592
Interexchange 6,797 6,678 20,409 23,043
Depreciation and
amortization 22,458 19,790 61,690 58,754
Gain/loss on disposal of
assets 1,835 -- 2,108 --
-------- -------- ---------- ---------
Total operating expenses 78,421 70,273 225,621 211,018
-------- -------- ---------- ---------
Operating income 5,909 12,708 33,624 35,114
Other income (expense):
Interest expense (13,396) (14,648) (38,402) (45,850)
Interest income and other 578 1,019 1,626 2,844
-------- -------- ---------- ---------
Total other expense (12,818) (13,629) (36,776) (43,006)
-------- -------- ---------- ---------
Income (loss) before income
taxes (6,909) (921) (3,152) (7,892)
Income tax benefit -- 48 -- 147
-------- -------- ---------- ---------
Income (loss) from continuing
operations (6,909) (873) (3,152) (7,745)
Loss from discontinued
operations (136) (526) (7,523) (1,327)
-------- -------- ---------- ---------
Income (loss) before
cumulative effect of change
in accounting principle (7,045) (1,399) (10,675) (9,072)
Cumulative effect of change in
accounting principle -- -- (105,350) --
-------- -------- ---------- ---------
Net income (loss) $(7,045) $(1,399) $(116,025) $(9,072)
======== ======== ========== =========
Net income (loss) per share -
basic and diluted:
Income (loss) from continuing
operations $(0.22) $(0.03) $(0.10) $(0.25)
Loss from discontinued
operations (0.00) (0.02) (0.24) (0.04)
-------- -------- ---------- ---------
Income (loss) before
cumulative effect of change
in accounting principle (0.22) (0.04) (0.34) (0.29)
Cumulative effect of change
in accounting principle -- -- (3.32) --
-------- -------- ---------- ---------
Net income (loss) $(0.22) $(0.04) $(3.66) $(0.29)
======== ======== ========== =========
Weighted average shares
outstanding -
Basic 31,653 31,550 31,721 31,497
======== ======== ========== =========
Diluted 31,653 31,550 31,735 31,497
======== ======== ========== =========
EBITDA from continuing
operations $30,780 $33,517 $99,048 $96,712
======== ======== ========== =========
Note: Certain reclassifications have been made to the 2001 data to
conform with the current presentation.
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
September 30, December 31,
Assets 2002 2001
---------- ------------
Current assets:
Cash and cash equivalents $21,040 $41,012
Restricted cash 3,428 6,932
Accounts receivable-trade, net of
allowance of $5,386 and $4,944 46,812 46,912
Materials and supplies 10,438 8,723
Prepayments and other current assets 8,561 6,032
Assets held for sale 271 --
---------- -----------
Total current assets 90,550 109,611
Property, plant and equipment 1,077,843 1,036,829
Less: accumulated depreciation 610,311 557,849
---------- -----------
Property, plant and equipment, net 467,532 478,980
Goodwill 141,980 250,495
Intangible assets 23,146 26,785
Debt issuance costs, net of amortization
of $15,296 and $12,126 22,598 25,768
Deferred charges and other assets 25,155 9,875
---------- -----------
Total assets $770,961 $901,514
========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term obligations $5,548 $4,823
Accounts payable-affiliates 989 1,303
Accounts payable, accrued and other current
liabilities 54,451 63,081
Advance billings and customer deposits 9,531 9,190
---------- -----------
Total current liabilities 70,519 78,397
Long-term obligations, net of current
portion 600,810 606,427
Other deferred credits and long-term
liabilities 27,875 25,003
Commitments and contingencies -- --
Stockholders' equity:
Preferred stock, no par, 5,000 authorized,
no shares issued and outstanding -- --
Common stock, $.01 par value; 145,000
shares authorized, 33,360 and
33,221 shares issued and 31,328 and
31,688 outstanding, respectively 334 332
Treasury stock, 2,032 and 1,532 shares,
respectively, at cost (10,565) (9,735)
Paid in capital in excess of par value 277,549 276,840
Accumulated deficit (177,946) (61,921)
Accumulated other comprehensive loss (17,615) (13,829)
---------- -----------
Total stockholders' equity 71,757 191,687
---------- -----------
Total liabilities and stockholders'
equity $770,961 $901,514
========== ===========
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Nine Months Ended
Ended
September 30, September 30,
----------------- -------------------
2002 2001 2002 2001
-------- -------- --------- ---------
Local telephone revenues:
Local network service $24,186 $24,388 $74,870 $70,530
Network access revenue 23,862 24,993 83,827 76,258
Deregulated and other 4,767 4,479 13,431 16,230
-------- -------- --------- ---------
Local telephone
revenues $52,815 $53,860 $172,128 $163,018
======== ======== ========= =========
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
As of September 30,
----------------------
2002 2001
---------- ----------
Local telephone:
Retail access lines 241,583 266,040
Wholesale access lines 25,074 20,858
UNE loops 60,504 46,268
---------- ----------
Total access lines 327,161 333,166
Average access lines for the quarter 328,037 331,611
Annual growth rate -1.8% 1.3%
Average revenue per line for the
quarter $53.67 $54.14
Cellular:
Covered population 471,863 462,057
Ending subscribers 81,559 78,758
Average subscribers for the quarter 81,334 78,666
Annual growth rate 3.6% 7.6%
Activations for the quarter 5,730 4,584
Deactivations for the quarter 5,280 4,400
Penetration 17.3% 17.0%
Quarterly Minutes of use (000's) 55,471 45,272
Average revenue per subscriber for the
quarter $48.78 $48.46
Long Distance:
Long distance subscribers 67,230 67,211
Quarterly Minutes of use (000's) 38,704 49,387
Average subscribers for the quarter 66,094 66,776
Average revenue per subscriber for the
quarter $24.36 $26.93
Internet:
DSL subscribers 11,045 5,884
Dial-Up and other service subscribers 35,614 44,616
---------- ----------
Total Internet subscribers 46,659 50,500
Average subscribers for the quarter 47,250 47,091
Average revenue per subscriber for the
quarter $45.31 $25.37
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