Printer Friendly


 ANCHORAGE, Alaska, Nov. 22 /PRNewswire/ -- General Communication Inc. (NASDAQ: GNCMA) reported earnings on Nov. 16. The following is a more detailed release:
 General Communication Inc. (GCI) reported net income of $1.253 million for the third quarter of 1993 compared with $283,000 in the same quarter of 1992. Earnings per share were $.05 on 24.2 million weighted average and common equivalent shares outstanding versus $.02 on 16.1 million weighted average and common equivalent shares reported last year.
 There were 23.1 million shares outstanding at the end of the quarter compared with 15.3 million shares outstanding at the end of the same quarter the previous year.
 Revenues were $26.9 million compared with $25.8 million for the 1992 quarter.
 The number of shares outstanding increased 7.8 million over the previous year as a result of new shares issued pursuant to MCI's investment in GCI.
 For the first nine months of the year revenues were $75 million and earnings were $2.3 million or $.10 per share compared with $72 million in revenues and $866,000 or $.05 per share a year earlier.
 According to GCI President Ron Duncan, "This significant increase in earnings reflects fundamental improvements in our business. The transaction with MCI earlier this year has added to revenues and significantly reduced financing costs. Our efforts to reduce access costs are bearing fruit."
 "Additionally," Duncan continued, "we have achieved an important regulatory objective. The Federal State Joint Board has recommended that the $100 million annual subsidy paid to our competitor, Alascom, be terminated as of Sept. 1, 1995."
 The reported earnings were consistent with those previously projected for the third quarter by GCI. Chief Financial Officer John Lowber has estimated that year end 1993 revenues will be approximately $102 million and that fourth quarter will add earnings of another 4 to 5 cents a share.
 Financial Results
 Revenue growth for the quarter resulted from a number of factors including increases of 6 percent and 13.4 percent in the number of billable minutes of interstate and intrastate traffic, a 43-percent increase in operator service revenues, and a 16-percent increase in private line revenues. The increase in interstate traffic is largely due to GCI's provision of service to other carriers including MCI and U.S. Sprint. GCI also experienced gains in revenue resulting from increases in 800 number traffic following implementation of regulations that allowed customers to change carriers without changing their 800 numbers.
 Growth in revenue was accompanied by a decrease in access and distribution costs as a percentage of revenues. Distribution and access charges, which totaled 63.8 percent of transmission revenues for the quarter ended Sept. 30, 1992, dropped to 56.2 percent for the quarter ended Sept. 30, 1993. This decrease resulted primarily from a reduction in charges effective July 1, 1993 for originating and terminating access provided by the Anchorage Telephone Utility.
 Operating expenses, excluding depreciation and amortization, totaled 29.7 percent and 29.1 percent of revenues for the quarter and nine-month periods ended Sept. 30, 1993, respectively and 25.8 percent and 28.4 percent during the same periods in 1992. the increases are, in part, due to expenses incurred by GCI in integrating certain marketing, operations and management information systems with those of MCI.
 GCI experienced a significant reduction in net interest expense due in part to its purchase of capacity on the undersea fiber liking Seward, Alaska and Pacific City, Ore. Prior to December 1992, GCI leased the same capacity pursuant to capital lease with an implicit interest rate of more than 20 percent.
 Interest expense was also reduced by GCI's use of a portion of the proceeds from its sale of equity to MCI to repay nearly $10 million of senior indebtedness. Net interest expense for the three- and nine-month periods ended Sept. 30, 1993 totaled $556,000 and $1,657,000 as compared to $1,221,000 and $3,165,000 during the same periods of the prior year.
 The effective income tax rate totaled almost 46 percent for the quarter due to the re-valuation of deferred tax assets and liabilities as a result of the Revenue Reconciliation Act of 1993.
 Alaska Market Structure
 Currently, GCI's competitor, Alascom, receives a substantial portion of its revenues from a subsidy paid by American Telegraph & Telephone (AT&T). This arrangement pre-dates the start of competition in Alaska. It is the result of FCC policies which require that AT&T rates charged in the rest of the country apply in Alaska as well. Alascom charges AT&T rates for service in Alaska, but the revenue Alascom collects does not cover its costs. Alascom collects the difference from AT&T. This agreement is worth as much as $100 million per year to Alascom, one-third of its total revenue. GCI has no subsidy.
 Shortly after GCI began operations in 1982, the FCC created a Federal State Joint Board to recommend changes to the Alaska market structure. The Joint Board is comprised of four state public utility commissioners (one from Alaska) and three members of the FCC.
 In May 1993, the Joint Board released a tentative recommendation that would lead to the elimination of Alascom's subsidy from AT&T. This leveling of the competitive playing field is the kind of action the GCI has long advocated.
 On Oct. 26, 1993, the Joint Board issued its Final Recommended Decision. The Joint Board recommended that the subsidy received by Alascom from AT&T be eliminated after an adequate transition. That transition will begin on March 1, 1994 and will last for four years. Until Sept. 1, 1995, the subsidy from AT&T to Alascom will continue. During the subsequent two and one half years, AT&T will be required to carry a declining percentage of its traffic on Alascom. That amount declines every six months, beginning at 90 percent and decreasing to zero percent on March 1, 1998.
 AT&T has also been ordered to pay an additional $150 million to Alascom to reduce the book value of its plant. Alascom will receive $75 million on March 1, 1994 and $75 million on Sept. 1, 1995.
 According to the decision, AT&T must continue to provide service to Alaska both during and after the transition. Following the transition, Alascom can offer service independently, it if chooses. Alascom must continue to offer private line service and distribution service to rural Alaska for other carriers, and AT&T may offer private line service, if it chooses.
 The Joint Board Recommended Decision now goes to the full FCC for consideration. In spite of the fact that the three current members of the FCC voted for adoption of the Recommended Decision, there is no guarantee that the FCC will adopt the Joint Board's recommendation. If adopted by the FCC the decision could be set aside by a successful appeal.
 GCI believes that the Recommended Decision, if ultimately implemented, will be good for consumers and competitors in Alaska. Commenting on the Joint Board's action Duncan said, "All of the competitors in the Alaska market were waiting for this. Now that the regulators have made a decision, the parties can proceed with plans for investment in Alaska. As a result of this I expect there will be a reshaping of the Alaska market in the next several years."
 Duncan continued, "Since the formation of GCI in 1979, one of the principal barriers to fair competition has been the enormous subsidy paid to Alascom. The Alascom subsidy made it more difficult for GCI to compete. It also prevented GCI from carrying traffic for AT&T in Alaska. GCI carries traffic for MCI and Sprint, to and from Alaska, at rate substantially less than what AT&T pays to Alascom, but AT&T has been prohibited from seeking competitive alternatives."
 He added, "An important part of the decision is that after the transition period AT&T will no longer be required to use Alascom for distribution of its Alaska traffic. GCI intends to compete vigorously for AT&T's Alaska traffic when AT&T mandatory use of Alascom is eliminated.
 "Alascom's business will change as a result of the elimination of the subsidy. This will lead to change in the Alaska market. GCI is interested in expanding its facilities in Alaska, either by acquisition or new construction, and is seeking opportunities to increase the traffic it carries for other long-distance companies in Alaska."
 MCI Alliance
 In May of this year, GCI sold 7.5 million new shares to MCI in exchange for cash and other consideration. Included in the consideration was the right for GCI to extend the features of MCI's network into the Alaska market, and to sell MCI branded products in Alaska.
 The first MCI product to be brought to Alaska by GCI was 800- COLLECT. In 1994, GCI plans to roll out additional MCI products.
 "We expect these MCI products will enhance our position in Alaska and create further growth opportunities for GCI," Duncan said. "Access to MCI's network and products will allow us to deliver state-of-the-art service in Alaska and gives us a competitive advantage."
 Personal Communication Services Opportunity
 On Sept. 23, 1993 the FCC authorized the allocation of radio frequencies for Personal Communication Services (PCS). Licenses will be chosen through an auction process. PCS will provide mobile and fixed wireless local communication. It can also provide an alternative to the existing local telephone companies for both local service and for access to long-distance services.
 As part of its alliance with MCI, GCI has agreed to participate in a national network of PCS providers that MCI is organizing. If this group succeeds in obtaining a national PCS license, GCI will operate the Alaska portion of that network. If MCI's national licensing efforts are not successful, GCI will independently pursue PCS in Alaska.
 Future Financing Plans
 A number of the opportunities that GCI is examining would require additional capital resources. GCI currently generates annual operating cash flows, before income taxes, debt service and capital expenditures, in excess of $18 million. It has a reducing revolving credit agreement with Nations Bank of Texas, N.A. under which it has borrowed $12 million.
 According to Lowber, GCI is currently evaluating possibilities for additional debt and equity financing. "There are potential business opportunities that g?ht require additional capital during 1994," Lowber said. "We are exploring the options to determine how we might raise that capital," he added.
 GCI was formed in 1979 by three Alaskans to bring long-distance competition to Alaska. It became an independent public company in early 1987. In May 1993, MCI purchased 30 percent of GCI. Two of GCI's original founders, Ron Duncan and Robert Walp, are still active in the business and are substantial shareholders.
 The GCI board of directors includes Carter F. Page, chairman, managing general partner of Semaphore Partners and former president of Westmare; Ronald A. Duncan, president and chief executive officer; Robert M. Walp, vice chairman; Donne F. Fisher, executive vice president of Tele-Communications Inc. (TCI); Larry E. Romrell, senior vice president of TCI; Gerald H. Taylor, MCI executive vice president and group executive-communication services; and Daniel M. Dennis, MCI vice president of national accounts.
 GCI long-distance service is available to more than 93 percent of the telephones in Alaska. It currently serves 80,000 customers in the state. GCI carries all of the Alaska traffic for MCI and Sprint.
 (Unaudited, amounts in thousands)
 Sept. 30, Dec. 31,
 1993 1992
 Current assets:
 Cash and cash equivalents $3,465 2,974
 Trade 16,868 14,812
 Income taxes -- 17
 Other 436 665
 Total 17,304 15,494
 Less allowance for doubtful
 receivables 829 675
 Net receivables 16,475 14,819
 Deposits 20 29
 Notes receivable -- 964
 Inventory 608 628
 Prepaid and other current assets 1,390 1,081
 Deferred income taxes 1,061 311
 Total current assets 23,019 20,806
 Restricted cash 680 2,952
 Property and equipment, at cost
 Land 73 73
 Distribution systems 69,790 66,459
 Support equipment 8,515 8,150
 Property and equipment under
 capital leases 1,462 2,179
 Total 79,840 76,861
 Less amortization and accumulated
 depreciation 37,628 32,628
 Net property and equipment 42,212 44,233
 Notes receivable 599 --
 Other assets, at cost, net of
 amortization 3,880 4,360
 Total $70,390 72,351
 Liabilities and stockholders'
 Current liabilities:
 Current maturities of long-term
 debt $3,551 23,879
 Current maturities of obligations
 under capital leases 216 201
 Accounts payable 10,460 10,368
 Accrued liabilities 2,414 2,414
 Accrued interest 195 130
 Accrued income taxes 146 --
 Deferred revenues 1,070 967
 Total current liabilities 18,052 37,959
 Long-term debt, excluding current
 maturities 20,001 13,356
 Obligations under capital leases,
 excluding current maturities 528 664
 Obligations under capital leases
 due to related parties, excluding
 current maturities 834 855
 Deferred income taxes 5,112 4,110
 Deferred revenues -- 94
 Other liabilities 463 443
 Total liabilities 44,990 57,481
 Stockholders' equity:
 Preferred stock. Authorized
 1,000,000 shares -- 347,047 shares
 issued at Dec. 31, 1992;
 issuable in series -- 3,282
 Common stock (no par):
 Class A. Authorized
 50,000,000 shares; issued and
 outstanding 18,961,392 and
 12,638,653 shares at
 Sept. 30, 1993 and
 Dec. 31, 1992, respectively 13,462 2,430
 Class B. Authorized
 10,000,000 shares; issued and
 outstanding 4,117,532 and
 2,853,184 shares at
 Sept. 30, 1993 and
 Dec. 31, 1992, respectively 3,432 1,210
 Less cost of 105,111 Class A
 common shares held in treasury (328) (328)
 Paid-in capital 3,093 4,690
 Retained earnings 5,741 3,586
 Total stockholders' equity 25,400 14,870
 Total $70,390 72,351
 (Unaudited, amounts in thousands, except per share amounts)
 Three months Nine months
 Ended Sept. 30 1993 1992 1993 1992
 Transmission services $24,759 22,983 69,307 65,284
 Systems sales 657 1,069 1,597 2,620
 Service 1,332 1,585 3,835 3,629
 Other 204 146 552 529
 Total revenues 26,952 25,783 75,291 72,062
 Cost of sales 14,269 15,653 42,164 41,715
 Contribution 12,683 10,130 33,127 30,347
 Operating costs and expenses:
 Operating and engineering 1,375 1,150 3,502 3,458
 System sales 425 274 1,291 871
 Service 1,018 1,066 2,838 2,589
 Commercial sales, residential
 sales and communications 896 776 2,375 2,184
 General and administrative 3,508 2,603 9,815 8,755
 Legal and regulatory 452 419 1,037 1,141
 Bad debt 328 354 1,076 1,437
 Depreciation and amortization 1,812 1,770 5,408 5,366
 Total operating costs
 and expenses 9,814 8,412 27,342 25,801
 Operating income 2,869 1,718 5,785 4,546
 Other income (expense):
 Interest expense (593) (1,286) (1,783) (3,338)
 Interest income 37 65 126 173
 Total (556) (1,221) (1,657) (3,165)
 Earnings before income
 taxes 2,313 497 4,128 1,381
 Income tax expense 1,060 214 1,820 515
 Net earnings $ 1,253 283 2,308 866
 Earnings per common share $ 0.05 0.02 0.10 0.05
 Weighted average and common
 equivalent shares outstanding
 (million) 24.2 16.1 21.5 15.9
 -0- 11/22/93
 /CONTACT: John Lowber, 907-265-5600, or Linda Duck, 907-265-5458, both of GCI; or Bonnie Bernholz of Bernholz & Graham, 907-561-4488, for GCI/

CO: General Communication Inc.; MCI; AT&T; Alascom; U.S. Sprint ST: Alaska IN: TLS SU: ERN

RB-IC -- SE002 -- 6708 11/22/93 09:32 EST
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Nov 22, 1993

Terms of use | Copyright © 2016 Farlex, Inc. | Feedback | For webmasters