Alaska Communications Systems Reports First Quarter 2013 Results – Total Revenues increased $5.1 million or 5.9% – – Broadband Revenue as percentage of total Service Revenue now stands at 50% – – Free Cash Flow of $17.9 million, up 85% – – Deleveraging continues with $15.0 million of repayments of long term debt – Business Wire ANCHORAGE, Alaska -- May 02, 2013 Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ:ALSK) today reported financial results for its first quarter ended March 31, 2013. “We had a solid start to the year. Our growth in overall business and wholesale revenues, combined with double-digit growth in every broadband revenue category, is continuing evidence of our business plan at work. “Upside from foreign roaming, combined with prudent operating expense and capital investment management, resulted in superior free cash flow performance accelerating our deleveraging initiatives. “We target closing the Alaska Wireless Network (“AWN”) transaction in the second quarter. The AWN Transaction mitigates risk associated with our wireless operations by providing predictable cash flows and a platform for additional deleveraging which will build shareholder value over time. “Demand for our core broadband products remains strong and we are translating market demand into business performance, all while strengthening our balance sheet, creating long-term shareholder value,” said Anand Vadapalli, president and CEO of Alaska Communications. Financial Highlights: First Quarter 2013 Compared to First Quarter 2012 *Revenues of $91.1 million increased by $5.1 million, or 5.9%, from $85.9 million in the prior year. *Business and wholesale revenue increased $1.6 million, or 6.4%^1. *Consumer revenue increased $0.4 million, or 4.4%. *Wireless revenue increased $6.2 million, or 21.2%. *Access and CETC revenue declined, as expected, $2.2 million, or 10.5%. *Broadband revenue as a percentage of total service revenue was 50%, compared to 43% in the prior year. *Adjusted EBITDA of $31.0 million increased $4.7 million, or 17.9%, from $26.3 million in the prior year. *Cost of services and sales increased $1.2 million, or 3.5%, due primarily to higher device and accessory expenses.^1 *Selling, general & administrative, excluding the increase of $0.5 million in AWN transaction related costs, and the $0.7 million increase in stock-based compensation and long-term cash incentives, remained relatively unchanged. Metric Highlights: First Quarter 2013 Compared to Fourth Quarter 2012 *Wireless subscribers decreased by 926 to 114,091. Losses experienced from the fourth quarter levels slowed significantly. *Wireless average monthly retail service revenue per subscriber (“ARPU”) decreased by 1.5% to $52.17. Erosion in voice ARPU offset strong performance in broadband ARPU which increased 8.2% to $22.63. *Business broadband connections increased to 19,466 from 19,202 and business broadband ARPU increased to $163.22 from $153.59. *Consumer broadband connections increased to 39,334 from 38,760 and consumer broadband ARPU increased to $44.75 from $42.53. *Consumer access lines declined to 54,037 from 55,823. *Business access lines decreased to 80,770 from 80,852. ^1 Excludes the effect of $0.9 million of revenue and expense, recorded in Q1 2012, associated with capacity exchange agreements on which we discontinued revenue and expense recognition in subsequent periods. “Alaska Communications continues to target free cash flow for debt reduction, and we are pleased that we achieved significant debt reductions in the quarter. Net debt now stands at $521.9 million and our total leverage ratio as calculated under our senior credit facility for the twelve months ended March 31, 2013, is 4.13 to 1.00. Because our operating results in 2013 will be impacted by the timing of the AWN transaction, we continue to delay providing full year 2013 guidance until we have established a firm closing date. The AWN transaction will result in approximately $65.0 million of debt pay down at closing, and our Adjusted EBITDA following close will reflect the preferred distributions we expect to receive from AWN,” said Wayne Graham, ACS chief financial officer. Conference Call The company will host a conference call and live webcast today at 5:00 p.m. Eastern time to discuss the results. Parties in the United States and Canada can access the call at 1-877-941-8609. Parties outside the United States and Canada can access the call at 1-480-629-9770. 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 Thursday, May 9, 2013, at midnight Eastern Time. To hear the replay, parties in the United States and Canada can call 1-800-406-7325 and enter pass code 4613887. Parties outside the United States and Canada can call 1-303-590-3030 and enter pass code 4613887. About Alaska Communications Headquartered in Anchorage, Alaska Communications Systems Group, Inc. (NASDAQ:ALSK) is a leading provider of high-speed wireless, mobile broadband, Internet, local, long-distance and advanced broadband solutions for businesses and consumers in Alaska. The Alaska Communications network includes the most advanced wireline and wireless broadband and voice networks and the most diverse undersea fiber optic system connecting Alaska to the contiguous United States. For more information, visit www.alaskacommunications.com or www.alsk.com. Non-GAAP Measures Adjusted EBITDA, as defined by the Company, may not be similar to Adjusted EBITDA measures used by other companies and is not a measurement under generally accepted accounting principles (GAAP). Management believes that Adjusted EBITDA provides useful information to investors about the Company’s performance because it eliminates the effects of period-to-period changes in costs associated with interest, loss on extinguishment of debt, depreciation and amortization, loss on disposal of assets, taxes, stock-based compensation and long-term cash incentive expense and AWN transaction related costs that are not directly attributable to the underlying performance of the Company’s operations. Management believes the most directly comparable GAAP measure would be Net cash provided by operating activities. 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 entry into the Alaska market, Universal Service Fund changes, our ability to consummate the AWN transaction and AWN’s subsequent financial and operational performance, the outcome of on-going IRS audits, 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 suppliers’ 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 or its roaming partners; 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 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED SCHEDULE OF OPERATIONS (Unaudited, In Thousands Except Per Share Amounts) Three Months Ended March 31, 2013 2012 Operating revenues $ 91,059 $ 85,947 Operating expenses: Cost of services and sales 35,447 35,162 Selling, general & administrative 26,797 25,495 Depreciation and amortization 12,632 12,942 Loss on disposal of assets, net 41 280 Total operating expenses 74,917 73,879 Operating income 16,142 12,068 Other income and expense: Interest expense (10,029 ) (9,559 ) Loss on extinguishment of debt - (323 ) Interest income 10 10 Total other income and expense (10,019 ) (9,872 ) Income before income tax expense 6,123 2,196 Income tax expense (2,655 ) (1,067 ) Net income $ 3,468 $ 1,129 Basic $ 0.08 $ 0.02 Diluted $ 0.07 $ 0.02 Weighted average shares outstanding: Basic 46,055 45,364 Diluted 46,563 45,624 Schedule 2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands Except Per Share Amounts) March 31, December 31, Assets 2013 2012 Current assets: Cash and cash equivalents $ 19,094 $ 16,839 Restricted cash 3,876 3,875 Short-term investments 2,050 2,050 Accounts receivable-trade, net of allowance 38,898 39,713 of $6,088 and $6,231 Materials and supplies 9,501 9,409 Prepayments and other current assets 6,212 5,566 Deferred income taxes 6,070 8,301 Total current assets 85,701 85,753 Property, plant and equipment 1,462,491 1,463,320 Less: accumulated depreciation and (1,059,829 ) (1,052,459 ) amortization Property, plant and equipment, net 402,662 410,861 Goodwill 8,850 8,850 Intangible assets, net 24,118 24,118 Debt issuance costs 9,900 10,558 Deferred income taxes 68,199 69,049 Equity method investment 2,028 2,028 Other assets 3,285 3,510 Total assets $ 604,743 $ 614,727 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Current portion of long-term obligations $ 10,108 $ 21,628 Accounts payable, accrued and other current 57,441 56,378 liabilities Advance billings and customer deposits 8,965 8,970 Total current liabilities 76,514 86,976 Long-term obligations, net of current 530,873 533,772 portion Other long-term liabilities 27,334 28,662 Total liabilities 634,721 649,410 Commitments and contingencies Stockholders’ equity (deficit): Common stock, $.01 par value; 145,000 465 458 authorized Additional paid in capital 144,975 144,377 Accumulated deficit (166,811 ) (170,279 ) Accumulated other comprehensive loss (8,607 ) (9,239 ) Total stockholders’ equity (deficit) (29,978 ) (34,683 ) Total liabilities and stockholders’ equity $ 604,743 $ 614,727 (deficit) Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, In Thousands) Three Months Ended March 31, 2013 2012 Cash Flows from Operating Activities: Net income $ 3,468 $ 1,129 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 12,632 12,942 Gain on ineffective hedge adjustment (420 ) - Amortization of debt issuance costs and debt 1,426 1,606 discount Amortization of ineffective hedge 430 - Stock-based compensation 1,219 717 Deferred income taxes 2,655 1,063 Provision for uncollectible accounts 268 550 Other non-cash expense, net 81 429 Changes in operating assets and liabilities 3,809 1,135 Net cash provided by operating activities 25,568 19,571 Cash Flows from Investing Activities: Capital expenditures (5,968 ) (9,653 ) Capitalized interest (483 ) (365 ) Change in unsettled capital expenditures (3,151 ) (3,131 ) Proceeds on sale of assets 1,935 - Net change in restricted accounts (1 ) (132 ) Net cash used by investing activities (7,668 ) (13,281 ) Cash Flows from Financing Activities: Repayments of long-term debt (15,015 ) (6,417 ) Payment of cash dividend on common stock - (2,268 ) Payment of withholding taxes on stock-based (630 ) (231 ) compensation Proceeds from issuance of common stock - 1 Net cash used by financing activities (15,645 ) (8,915 ) Change in cash and cash equivalents 2,255 (2,625 ) Cash and cash equivalents, beginning of period 16,839 20,490 Cash and cash equivalents, end of period $ 19,094 $ 17,865 Supplemental Cash Flow Data: Interest paid $ 7,164 $ 7,016 Supplemental Non-cash Transactions: Property acquired under capital leases $ 2 $ - Dividend declared, but not paid $ - $ 2,278 Additions to ARO asset $ 30 $ 22 Schedule 4 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED EBITDA AND FREE CASH FLOW (Unaudited, In Thousands) Three Months Ended March 31, 2013 2012 Net cash provided by operating activities $ 25,568 $ 19,571 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization (12,632 ) (12,942 ) Gain on ineffective hedge adjustment 420 - Amortization of debt issuance costs and debt (1,426 ) (1,606 ) discount Amortization of ineffective hedge (430 ) - Stock-based compensation (1,219 ) (717 ) Deferred income taxes (2,655 ) (1,063 ) Provision for uncollectible accounts (268 ) (550 ) Other non-cash expense, net (81 ) (429 ) Changes in operating assets and liabilities (3,809 ) (1,135 ) Net income $ 3,468 $ 1,129 Add (subtract): Interest expense 10,029 9,559 Loss on extinguishment of debt - 323 Interest income (10 ) (10 ) Depreciation and amortization 12,632 12,942 Loss on disposal of assets 41 280 Income tax expense 2,655 1,067 Stock-based compensation and long term cash 1,388 717 incentives AWN transaction related costs 845 328 Adjusted EBITDA $ 31,048 $ 26,335 Less: Incurred capital expenditures (5,968 ) (9,653 ) AWN transaction related capital costs, net change (55 ) - Cash interest expense (7,164 ) (7,016 ) Free cash flow $ 17,861 $ 9,666 Revenue $ 91,059 $ 85,947 Adjusted EBITDA Margin 34.1 % 30.6 % Note: 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, provisions for taxes, depreciation and amortization, gain or loss on asset purchases or disposals, AWN Transaction related costs, Stock-based compensation and long term cash incentive expense, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by Operating Revenues. Additionally, the Company has disclosed Free cash flow as Adjusted EBITDA, less capital expenditures that create an obligation to pay (“Incurred capital expenditures”) less cash interest expense, less non recurring capital items we have incurred to preliminarily establish infrastructure with AWN (“AWN non recurring capital expenditures”). These measures are provided because the Company believes they are important indicators regarding our ability to make principle payments on debt and fund working capital. 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. Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE MIX (Unaudited, In Thousands) Three Months Ended March 31, Operating revenues: 2013 2012 Business and wholesale Retail service revenue Voice $ 5,723 $ 6,040 Broadband 9,467 8,118 Equipment sales 554 336 Wholesale and other 11,422 11,954 Total business and wholesale revenue 27,166 26,448 Consumer Retail service revenue Voice 4,319 4,936 Broadband 5,242 4,349 Equipment sales 38 42 Other 414 266 Total consumer revenue 10,013 9,593 Wireless Retail service revenue Voice 11,101 12,667 Broadband 6,803 5,551 Equipment sales 1,248 1,172 Foreign roaming 15,026 8,776 Other 1,101 946 Total wireless revenue 35,279 29,112 Access and CETC CETC 4,924 5,527 High cost support 4,162 4,949 Switched, special and other access 9,515 10,318 Total access and CETC 18,601 20,794 Total revenues $ 91,059 $ 85,947 Revenue Mix: Business and wholesale 30 % 31 % Consumer 11 % 11 % Wireless 39 % 34 % Access and CETC 20 % 24 % Retail Service Revenue % of Total Revenues 47 % 48 % Broadband % of Total Service Revenue 50 % 43 % Note - Broadband contains the following dial-up revenue: Three months ended March 31, 2013: $83 Consumer and $23 Business. Three months ended March 31, 2012: $105 Consumer and $27 Business. Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) Three Months Ended March 31, December 31, March 31, 2013 2012 2012 Voice: Consumer access lines 54,037 55,823 61,422 Business access lines 80,770 80,852 82,317 Voice ARPU consumer $ 26.21 $ 26.53 $ 26.55 Voice ARPU business $ 23.61 $ 23.82 $ 24.35 Broadband: Consumer connections 39,334 38,760 38,449 Business connections 19,466 19,202 19,076 ARPU consumer $ 44.75 $ 42.53 $ 37.56 ARPU business $ 163.22 $ 153.59 $ 141.60 Wholesale lines 19,228 20,007 22,157 Wireless: Postpaid connections 99,857 100,910 106,133 Prepaid connections 14,234 14,107 11,023 Total 114,091 115,017 117,156 Retail wireless ARPU $ 52.17 $ 52.96 $ 51.83 Wireless broadband ARPU $ 22.63 $ 20.92 $ 17.35 Churn: Voice access lines 1.3 % 1.4 % 1.3 % Broadband connections 1.9 % 2.1 % 2.3 % Wireless connections 2.6 % 3.7 % 2.3 % Wireless equipment subsidy $ 3,527 $ 2,666 $ 1,799 Note - Broadband contains the following dial-up connections: March 31, 2013: 2,024 Consumer and 439 Business. December 31, 2012: 2,184 Consumer and 451 Business. March 31, 2012: 2,620 Consumer and 516 Business. Contact: Alaska Communications Systems Group, Inc. Wayne Graham, Chief Financial Officer, 907-564-7756 firstname.lastname@example.org
Alaska Communications Systems Reports First Quarter 2013 Results
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