[March 04, 2015] |
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Alaska Communications Reports Strong 4Q and Year-End 2014 Results
Alaska Communications Systems Group, Inc. (NASDAQ:ALSK) today reported
financial results for its fourth quarter and full year ended Dec. 31,
2014.
"Our 2014 results reflect stellar performance to a solid business plan.
We have built and continue to expand our broadband and IT managed
service franchise in a growing Alaska market. The sale of our wireless
operations, which closed Feb. 2, 2015, was a bold strategic move. This
transaction has eliminated the wireless overhang on our valuation,
reduced our debt, and will bring our leverage ratio to one of the lowest
in our industry.
"We enter 2015 with good business momentum, continuing our strong
performance in broadband and IT managed services. Our margins will
strengthen through the course of the year as we achieve synergies and
remove costs associated with the wireless operations. We have turned a
page in our journey and look forward to delivering significant value
creation for our shareholders," Anand Vadapalli, president and CEO of
Alaska Communications, said.
Revenue Highlights: Year over Year Fourth Quarter
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Total service and other:
-
Revenue increased to $53.5 million from $50.5 million, up 5.9
percent
-
Total broadband revenue reached $17.5 million from $16.2 million,
up 8.3 percent
-
Business and wholesale service:
-
Revenue grew to $27.8 million from $25.6 million, up 8.7 percent
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Broadband revenues reached $11.1 from $10.5, up 5.8 percent
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Consumer service:
-
Revenue grew to $10.3 million from $10.1 million, increasing 1.7
percent
-
Broadband revenues increased to $6.4 million from $5.7 million, up
13.0 percent
Earnings Highlights: Fourth Quarter and Year ended Dec. 31, 2014
compared to Dec. 31, 2013
-
Adjusted EBITDA increased 34.0 percent to $22.3 million from $16.6
million, bringing the year to $92.6 million.
-
Total operating revenue increased 1.6 percent to $77.5 million from
$76.3 million, bringing the year to $314.9 million.
-
Free Cash Flow was $3.4 million for the quarter and $16.2 million for
the year.
Balance Sheet Highlights
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Cash remained strong at $31.7 million at Dec. 31, 2014, and with the
closing of the wireless transaction, we are expecting higher cash
balances in the first half of 2015.
-
Deleveraging continues with total debt reductions during the year of
$24.4 million to $436.4 million at Dec. 31, 2014.
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On Feb. 2, 2015, debt was further reduced by an additional $241
million and cash was increased by $10 million from the sale of the
wireless operations.
Wayne Graham, Alaska Communications chief financial officer, said, "We
accomplished our goal of positioning the company to achieve one of the
lowest leverage ratios among operators in our industry by using a
substantial portion of the proceeds from the sale of the wireless
operations to pay down debt. We are performing to a plan to achieve our
operational synergies from the sale of the wireless business, and our
outlook for future performance is strong. Today, we are increasing our
target run rate adjusted EBITDA exiting 2015 from $54 million provided
at the time of the wireless sale to a range of $54 million to $56
million. We are poised to generate significant value for our
shareholders."
2015 Guidance:
Management's focus is continued top line performance, steady
deleveraging and achieving run rate adjusted EBITDA exiting 2015 through
targeted synergies. Guidance for 2015 is as follows.
-
Total Wireline Revenue of approximately $220 million
-
Run rate Adjusted EBITDA exiting 2015 of $54 million to $56 million
-
Capital expenditures range of $34 million to $36 million, with $16
million of success based capital
-
Net debt at year end of approximately $159 million, resulting in our
having one of the lowest leverage ratios in our industry
Investors are encouraged to listen to the earnings conference call and
review page 16 of the earnings call presentation for a better
understanding of guidance during this transition year.
Conference Call
The Company will host a conference call and live webcast on Thursday,
March 5, 2015 at 5:00 p.m. Eastern Time to discuss the results. The live
webcast will include a slide presentation. Parties in the United States
and Canada can access the call at 1-888-554-1422 and enter pass code
563023. All other parties can access the call at 1-719-457-2663.
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 April 6, 2015 at 4:00 p.m. Eastern Time. To hear
the replay, parties in the United States and Canada can call
1-888-203-1112 and enter pass code 1673988. All other parties can call
1-719-457-0820 and enter pass code 1673988.
About Alaska Communications
Alaska Communications (NASDAQ: ALSK) is a leading provider of advanced
broadband and IT managed service solutions for businesses and consumers
in Alaska. The Company operates a highly reliable, advanced statewide
data and voice network with the latest technology and the most diverse
undersea fiber optic system connecting Alaska to the contiguous United
States. For more information, visit http://www.alaskacommunications.com
or http://www.alsk.com.
Non-GAAP Measures
In an effort to provide investors with additional information regarding
our financial results, in particular with regards to our liquidity and
capital resources, we have disclosed certain non-GAAP financial
information such as Adjusted EBITDA, Adjusted EBITDA Margin and Free
Cash Flow, which management utilizes to assess performance and believes
provides useful information to investors. The definition of these
non-GAAP measures are on Schedules 4 and 5 to this press release.
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. Reconciliations of our non-GAAP
measures to our nearest GAAP measures can be found on our website at http://www.alsk.com
in the investment data section. Other companies may not calculate
non-GAAP measures in the same manner as ACS.
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, Universal Service Fund changes
adverse economic conditions, adverse conditions in the credit markets
impacting the cost, including interest rates, and/or availability of
financing, and the effects of competition in our markets, the Company's
ability to compete, manage, integrate, market, maintain, and attract
sufficient customers for its products and services, adverse changes in
labor matters, including workforce levels, labor negotiations, and
benefits costs, disruption of our supplier's provisioning of critical
products or services, the impact of natural or man-made disasters,
changes in Company's relationships with large customers, unforeseen
changes in public policies, and changes in accounting policies, which
could result in an impact on earnings. 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.
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Schedule 1
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
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CONSOLIDATED SCHEDULE OF OPERATIONS
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(Unaudited, In Thousands Except Per Share Amounts)
|
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Three Months Ended
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Twelve Months Ended
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December 31,
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December 31,
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2014
|
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2013
|
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2014
|
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2013
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Operating revenues:
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Operating revenues, non-affiliates
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$
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75,886
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$
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74,489
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$
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307,917
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$
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345,611
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Operating revenues, affiliates *
|
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1,623
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|
|
1,778
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6,946
|
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|
|
3,313
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Total operating revenues
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77,509
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76,267
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314,863
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348,924
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Operating expenses:
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Cost of services and sales, non-affiliates
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32,580
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32,712
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123,854
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138,124
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Cost of services and sales, affiliates *
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13,821
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13,199
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57,116
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25,158
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Selling, general & administrative
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26,472
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27,317
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101,398
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111,034
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Depreciation and amortization
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6,733
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|
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8,900
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|
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32,583
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|
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42,191
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(Gain) loss on disposal of assets, net
|
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(486
|
)
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|
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2,177
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|
|
|
|
126
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|
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(207,755
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)
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Loss on impairment of goodwill
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5,986
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|
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-
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5,986
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-
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Loss on impairment of equity investment
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-
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1,267
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-
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1,267
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Earnings from equity method investments
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(6,713
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)
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(9,995
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)
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(35,960
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)
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(18,056
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)
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Total operating expenses
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78,393
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75,577
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285,103
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91,963
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Operating (loss) income
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(884
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)
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690
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29,760
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256,961
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Other income and (expense):
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Interest expense
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(8,266
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)
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(9,820
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)
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(34,410
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)
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(39,790
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)
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Loss on extinguishment of debt
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-
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-
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-
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(2,370
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)
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Interest income
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41
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16
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83
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53
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Other
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-
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-
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-
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(13
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)
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Total other income and (expense)
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(8,225
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)
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(9,804
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)
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(34,327
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)
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(42,120
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)
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Income (loss) before income tax (expense) benefit
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(9,109
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)
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(9,114
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)
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(4,567
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)
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214,841
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Income tax (expense) benefit
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3,751
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|
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4,426
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1,787
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(56,370
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)
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Net (loss) income
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$
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(5,358
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)
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$
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(4,688
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)
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$
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(2,780
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)
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$
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158,471
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Net (loss) income per share:
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Net (loss) income applicable to common shares
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$
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(5,358
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)
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$
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(4,688
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)
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$
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(2,780
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)
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$
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158,471
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Tax-effected expense attributable to convertible notes
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-
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-
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-
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5,813
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Net (loss) income assuming dilution
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$
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(5,358
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)
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$
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(4,688
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)
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$
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(2,780
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)
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$
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164,284
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Basic
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$
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(0.11
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$
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(0.10
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$
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(0.06
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$
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3.37
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Diluted
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$
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(0.11
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$
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(0.10
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$
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(0.06
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$
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2.78
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Basic and Diluted
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$
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(0.11
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)
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$
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(0.10
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)
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$
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(0.06
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$
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3.37
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Weighted average shares outstanding:
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Basic
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49,540
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48,577
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49,334
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47,092
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Diluted
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49,540
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48,577
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49,334
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59,107
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* Affiliate balances are related to activity with our equity method
investees TekMate and AWN. The remaining interest in TekMate was
purchased on January 31, 2014 at which time it became a wholly owned
subsidiary.
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Schedule 2
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
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CONSOLIDATED BALANCE SHEETS
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(Unaudited, In Thousands Except Per Share Amounts)
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December 31,
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December 31,
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Assets
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2014
|
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2013
|
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Current assets:
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Cash and cash equivalents
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$
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31,709
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$
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43,039
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Restricted cash
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467
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467
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Accounts receivable-trade, non-affiliates, net
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30,900
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34,066
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Materials and supplies
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4,321
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10,131
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Prepayments and other current assets
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6,575
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|
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7,300
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Deferred income taxes
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|
|
104,245
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|
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7,144
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Assets held-for-sale
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|
9,565
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-
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Total current assets
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187,782
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|
|
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|
102,147
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|
|
|
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Property, plant and equipment
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1,333,134
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1,344,949
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Less: accumulated depreciation and amortization
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(976,401
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)
|
|
|
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(992,936
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)
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Property, plant and equipment, net
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356,733
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|
|
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352,013
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Goodwill
|
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|
-
|
|
|
|
|
4,650
|
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Debt issuance costs
|
|
|
4,469
|
|
|
|
|
6,929
|
|
Deferred income taxes
|
|
|
-
|
|
|
|
|
14,107
|
|
Equity method investments
|
|
|
252,067
|
|
|
|
|
266,972
|
|
Non-current assets held-for-sale
|
|
|
14,664
|
|
|
|
|
-
|
|
Other assets
|
|
|
301
|
|
|
|
|
502
|
|
Total assets
|
|
$
|
816,016
|
|
|
|
$
|
747,320
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity (Deficit)
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
Current portion of long-term obligations
|
|
$
|
15,521
|
|
|
|
$
|
14,256
|
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Accounts payable, accrued and other current liabilities,
non-affiliates
|
|
|
54,373
|
|
|
|
|
55,475
|
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Accounts payable, accrued and other current liabilities, affiliates,
net *
|
|
|
4,853
|
|
|
|
|
14,309
|
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Advance billings and customer deposits
|
|
|
4,490
|
|
|
|
|
9,104
|
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Liabilities held-for-sale
|
|
|
18,728
|
|
|
|
|
-
|
|
Total current liabilities
|
|
|
97,965
|
|
|
|
|
93,144
|
|
|
|
|
|
|
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Long-term obligations, net of current portion
|
|
|
418,447
|
|
|
|
|
442,001
|
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Deferred income taxes
|
|
|
81,267
|
|
|
|
|
-
|
|
Other long-term liabilities
|
|
|
24,370
|
|
|
|
|
16,947
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Non-current liabilities held-for-sale
|
|
|
2,107
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|
|
|
|
-
|
|
Deferred AWN capacity revenue, net of current portion
|
|
|
56,734
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|
|
|
|
59,965
|
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Total liabilities
|
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|
680,890
|
|
|
|
|
612,057
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Commitments and contingencies
|
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|
|
|
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Stockholders' equity (deficit):
|
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|
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Common stock, $.01 par value; 145,000 authorized
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|
|
497
|
|
|
|
|
487
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|
Additional paid in capital
|
|
|
154,368
|
|
|
|
|
152,193
|
|
Accumulated deficit
|
|
|
(14,588
|
)
|
|
|
|
(11,808
|
)
|
Accumulated other comprehensive loss
|
|
|
(5,151
|
)
|
|
|
|
(5,609
|
)
|
Total stockholders' equity
|
|
|
135,126
|
|
|
|
|
135,263
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
816,016
|
|
|
|
$
|
747,320
|
|
|
* Affiliate balances are related to activity with our equity method
investees TekMate and AWN. The remaining interest in TekMate was
purchased on January 31, 2014 at which time it became a wholly owned
subsidiary.
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Schedule 3
|
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
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CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
2013
|
|
Cash Flows from Operating Activities:
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(5,358
|
)
|
|
$
|
(4,688
|
)
|
|
|
$
|
(2,780
|
)
|
|
$
|
158,471
|
|
Adjustments to reconcile net (loss) income to net cash provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
6,733
|
|
|
|
8,900
|
|
|
|
|
32,583
|
|
|
|
42,191
|
|
Gain on sale/contribution of asset to AWN
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(210,873
|
)
|
(Gain) loss on the disposal of assets, net
|
|
|
(486
|
)
|
|
|
2,177
|
|
|
|
|
126
|
|
|
|
3,118
|
|
Loss on impairment of goodwill
|
|
|
5,986
|
|
|
|
-
|
|
|
|
|
5,986
|
|
|
|
-
|
|
Loss on the impairment of equity investment
|
|
|
-
|
|
|
|
1,267
|
|
|
|
|
-
|
|
|
|
1,267
|
|
Gain on ineffective hedge adjustment
|
|
|
(273
|
)
|
|
|
-
|
|
|
|
|
(273
|
)
|
|
|
(785
|
)
|
Amortization of debt issuance costs and debt discount
|
|
|
1,178
|
|
|
|
1,178
|
|
|
|
|
5,104
|
|
|
|
6,932
|
|
Amortization of ineffective hedge
|
|
|
337
|
|
|
|
359
|
|
|
|
|
1,613
|
|
|
|
2,307
|
|
Amortization of deferred AWN capacity revenue
|
|
|
(814
|
)
|
|
|
(774
|
)
|
|
|
|
(3,151
|
)
|
|
|
(1,512
|
)
|
Stock-based compensation
|
|
|
634
|
|
|
|
592
|
|
|
|
|
2,511
|
|
|
|
2,860
|
|
Deferred income tax expense (benefit)
|
|
|
(3,755
|
)
|
|
|
(3,828
|
)
|
|
|
|
(2,047
|
)
|
|
|
56,370
|
|
Provision for uncollectible accounts
|
|
|
387
|
|
|
|
1,042
|
|
|
|
|
3,329
|
|
|
|
1,847
|
|
Earnings from equity method investments
|
|
|
(6,713
|
)
|
|
|
(9,995
|
)
|
|
|
|
(35,960
|
)
|
|
|
(18,056
|
)
|
Cash distribution from equity method investments
|
|
|
6,713
|
|
|
|
12,455
|
|
|
|
|
35,960
|
|
|
|
17,844
|
|
Other non-cash (income) expense, net
|
|
|
(82
|
)
|
|
|
67
|
|
|
|
|
(466
|
)
|
|
|
283
|
|
Changes in operating assets and liabilities
|
|
|
16,168
|
|
|
|
(653
|
)
|
|
|
|
18,110
|
|
|
|
5,443
|
|
Net cash provided by operating activities
|
|
|
20,655
|
|
|
|
8,099
|
|
|
|
|
60,645
|
|
|
|
67,707
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Investing Activities:
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
|
|
(12,507
|
)
|
|
|
(20,424
|
)
|
|
|
|
(46,423
|
)
|
|
|
(47,738
|
)
|
Capitalized interest
|
|
|
(728
|
)
|
|
|
(635
|
)
|
|
|
|
(2,810
|
)
|
|
|
(1,926
|
)
|
Change in unsettled capital expenditures
|
|
|
(10,080
|
)
|
|
|
4,768
|
|
|
|
|
(11,380
|
)
|
|
|
1,492
|
|
Proceeds on sale of assets
|
|
|
-
|
|
|
|
-
|
|
|
|
|
136
|
|
|
|
4,747
|
|
Proceeds on sale/contribution of asset to AWN
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
100,000
|
|
Return of capital from equity investment
|
|
|
5,787
|
|
|
|
-
|
|
|
|
|
14,073
|
|
|
|
-
|
|
TekMate acquisition, net of cash received
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(826
|
)
|
|
|
-
|
|
Net change in short-term investments
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
2,037
|
|
Change in unsettled acquisition costs
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(3,345
|
)
|
Net change in restricted accounts
|
|
|
-
|
|
|
|
15
|
|
|
|
|
-
|
|
|
|
3,408
|
|
Net cash (used) provided by investing activities
|
|
|
(17,528
|
)
|
|
|
(16,276
|
)
|
|
|
|
(47,230
|
)
|
|
|
58,675
|
|
|
|
|
|
|
|
|
|
|
|
Cash Flows from Financing Activities:
|
|
|
|
|
|
|
|
|
|
Repayments of long-term debt
|
|
|
(397
|
)
|
|
|
(2,183
|
)
|
|
|
|
(24,419
|
)
|
|
|
(99,565
|
)
|
Debt issuance costs
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(206
|
)
|
Payment of withholding taxes on stock-based compensation
|
|
|
(7
|
)
|
|
|
(6
|
)
|
|
|
|
(593
|
)
|
|
|
(638
|
)
|
Proceeds from issuance of common stock
|
|
|
135
|
|
|
|
110
|
|
|
|
|
267
|
|
|
|
227
|
|
Net cash used by financing activities
|
|
|
(269
|
)
|
|
|
(2,079
|
)
|
|
|
|
(24,745
|
)
|
|
|
(100,182
|
)
|
|
|
|
|
|
|
|
|
|
|
Change in cash and cash equivalents
|
|
|
2,858
|
|
|
|
(10,256
|
)
|
|
|
|
(11,330
|
)
|
|
|
26,200
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
28,851
|
|
|
|
53,295
|
|
|
|
|
43,039
|
|
|
|
16,839
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
31,709
|
|
|
$
|
43,039
|
|
|
|
$
|
31,709
|
|
|
$
|
43,039
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
Interest paid
|
|
$
|
9,526
|
|
|
$
|
9,986
|
|
|
|
$
|
31,562
|
|
|
$
|
35,187
|
|
Cash paid on extinguishment of hedging instrument
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
$
|
4,073
|
|
Income tax paid
|
|
$
|
40
|
|
|
$
|
6
|
|
|
|
$
|
260
|
|
|
$
|
6
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental Non-cash Transactions:
|
|
|
|
|
|
|
|
|
|
Property acquired under capital leases
|
|
$
|
1,487
|
|
|
$
|
188
|
|
|
|
$
|
1,877
|
|
|
$
|
171
|
|
Additions to ARO asset
|
|
$
|
63
|
|
|
$
|
49
|
|
|
|
$
|
369
|
|
|
$
|
229
|
|
Exchange of debt with common stock
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
-
|
|
|
$
|
6,000
|
|
Non-cash acquisition purchase price, net of cash received
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
$
|
956
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 4
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
ADJUSTED EBITDA
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(5,358
|
)
|
|
$
|
(4,688
|
)
|
|
|
$
|
(2,780
|
)
|
|
$
|
158,471
|
|
Add (subtract):
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
8,266
|
|
|
|
9,820
|
|
|
|
|
34,410
|
|
|
|
39,790
|
|
Loss on extinguishment of debt
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
2,370
|
|
Interest income
|
|
|
(41
|
)
|
|
|
(16
|
)
|
|
|
|
(83
|
)
|
|
|
(53
|
)
|
Depreciation and amortization
|
|
|
6,733
|
|
|
|
8,900
|
|
|
|
|
32,583
|
|
|
|
42,191
|
|
Loss on the impairment of equity investment
|
|
|
-
|
|
|
|
1,267
|
|
|
|
|
-
|
|
|
|
1,267
|
|
Loss on impairment of goodwill
|
|
|
5,986
|
|
|
|
-
|
|
|
|
|
5,986
|
|
|
|
-
|
|
Loss on sale of short-term investments
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
13
|
|
(Gain) loss on disposal of assets, net
|
|
|
(486
|
)
|
|
|
2,177
|
|
|
|
|
126
|
|
|
|
3,118
|
|
(Earnings) loss from equity method investment in TekMate
|
|
|
-
|
|
|
|
(96
|
)
|
|
|
|
(12
|
)
|
|
|
(93
|
)
|
Earnings from equity method investment in AWN
|
|
|
(6,713
|
)
|
|
|
(9,899
|
)
|
|
|
|
(35,948
|
)
|
|
|
(17,963
|
)
|
Gain on sale/contribution of asset to AWN
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(210,873
|
)
|
AWN distributions received
|
|
|
12,500
|
|
|
|
12,455
|
|
|
|
|
50,000
|
|
|
|
22,011
|
|
AWN distributions received for the prior period
|
|
|
(4,167
|
)
|
|
|
(4,167
|
)
|
|
|
|
(4,167
|
)
|
|
|
(4,167
|
)
|
AWN distributions receivable within 12 days
|
|
|
4,167
|
|
|
|
4,167
|
|
|
|
|
4,167
|
|
|
|
4,167
|
|
Income tax (benefit) expense
|
|
|
(3,751
|
)
|
|
|
(4,426
|
)
|
|
|
|
(1,787
|
)
|
|
|
56,370
|
|
Stock-based compensation
|
|
|
634
|
|
|
|
592
|
|
|
|
|
2,511
|
|
|
|
2,860
|
|
Long-term cash incentives
|
|
|
470
|
|
|
|
149
|
|
|
|
|
2,042
|
|
|
|
631
|
|
Earthquake related expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
1,228
|
|
|
|
-
|
|
Formation of AWN and wireless sale transaction-related costs
|
|
|
4,057
|
|
|
|
408
|
|
|
|
|
4,297
|
|
|
|
6,382
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
22,297
|
|
|
$
|
16,643
|
|
|
|
$
|
92,573
|
|
|
$
|
106,492
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
|
77,509
|
|
|
|
76,267
|
|
|
|
|
314,863
|
|
|
|
348,924
|
|
CETC Revenue
|
|
|
(4,984
|
)
|
|
|
(4,925
|
)
|
|
|
|
(19,565
|
)
|
|
|
(21,018
|
)
|
Net Revenue
|
|
$
|
72,525
|
|
|
$
|
71,342
|
|
|
|
$
|
295,298
|
|
|
$
|
327,906
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA Margin
|
|
|
30.7
|
%
|
|
|
23.3
|
%
|
|
|
|
31.3
|
%
|
|
|
32.5
|
%
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Measures:
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
recurring performance and believes provides useful information to
investors regarding baseline operating results.
The Company has disclosed Adjusted EBITDA as net income before interest,
loss on extinguishment of debt, depreciation and amortization, loss on
the impairment of equity investments or other assets, loss on sale of
short-term investments, gain or loss on asset purchases or disposals,
earnings on equity method investments, provisions for taxes,
transaction-related costs, stock-based compensation, and expenses under
the company's long term cash incentive plan ("LTCI") including
adjustments to TekMate purchase price based upon achieving earn out
targets. LTCI expenses are considered part of an interim compensation
structure to mitigate the dilutive impact of additional share issuances
for executive compensation. Transaction related costs include $1,069 of
inventory write downs associated with the AWN formation and sale
transactions. Distributions from AWN are included in Adjusted EBITDA.
Additionally, in July 2014 an undersea cable serving Juneau, Alaska was
impacted by a service disruption associated with an earthquake. The
costs associated with restoration and repair of this facility is
excluded from Adjusted EBITDA.
Due to the AWN structure, ACS receives certain high cost revenues
("CETC") which are reported in operating revenue, non-affiliates, and
remits an equal amount to AWN as a component of our consideration for
wholesale wireless services, which is reported in Cost of services and
sales, affiliated. From a financial reporting perspective CETC grosses
up our revenue and expense and has no impact on Adjusted EBITDA, but
impacts our core margins. We therefore report Adjusted EBITDA Margin to
exclude this impact.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 5
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
FREE CASH FLOW
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
22,297
|
|
|
$
|
16,643
|
|
|
|
$
|
92,573
|
|
|
$
|
106,492
|
|
|
|
|
|
|
|
|
|
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital spending
|
|
|
|
|
|
|
|
|
|
Incurred capital expenditures
|
|
|
(12,507
|
)
|
|
|
(20,424
|
)
|
|
|
|
(46,423
|
)
|
|
|
(47,738
|
)
|
Milestone billings for fiber build project for a carrier customer
|
|
|
3,960
|
|
|
|
-
|
|
|
|
|
5,960
|
|
|
|
-
|
|
AWN transaction-related capital costs, net change
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
(41
|
)
|
Net capital spending
|
|
|
(8,547
|
)
|
|
|
(20,424
|
)
|
|
|
|
(40,463
|
)
|
|
|
(47,779
|
)
|
|
|
|
|
|
|
|
|
|
|
Amortization of AWN capacity revenue
|
|
|
(814
|
)
|
|
|
(774
|
)
|
|
|
|
(3,151
|
)
|
|
|
(1,512
|
)
|
Earthquake related expense
|
|
|
-
|
|
|
|
-
|
|
|
|
|
(1,228
|
)
|
|
|
-
|
|
Cash interest expense
|
|
|
(9,526
|
)
|
|
|
(9,986
|
)
|
|
|
|
(31,562
|
)
|
|
|
(35,187
|
)
|
|
|
|
|
|
|
|
|
|
|
Free cash flow
|
|
$
|
3,410
|
|
|
$
|
(14,541
|
)
|
|
|
$
|
16,169
|
|
|
$
|
22,014
|
|
|
|
Non-GAAP Measures:
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
recurring performance and believes provides useful information to
investors regarding baseline operating results.
Free cash flow ("FCF") is defined as Adjusted EBITDA, less capital
expenditures that create an obligation to pay ("incurred capital
expenditures"), plus milestone billings for a fiber build project for a
carrier customer, less AWN transaction-related capital costs, less
amortization of AWN capacity revenue (which is a non cash revenue item),
less earthquake related costs, less cash interest expense. Note that
incurred capital spending includes the costs associated with a two year
fiber build project with a strategic customer however we are adding back
the cash we receive from the customer for the funding of that project to
FCF. Accordingly, our capital spending will be elevated because of this
project, but the project will be accretive to FCF.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
REVENUE GROWTH
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Twelve Months Ended
|
|
|
December 31,
|
|
|
December 31,
|
Service revenue:
|
|
|
2014
|
|
|
|
2013
|
|
|
|
|
2014
|
|
|
|
2013
|
Business and wholesale customers
|
|
|
|
|
|
|
|
|
|
Voice
|
|
$
|
5,551
|
|
|
$
|
5,644
|
|
|
|
$
|
22,499
|
|
|
$
|
22,947
|
Broadband
|
|
|
11,125
|
|
|
|
10,518
|
|
|
|
|
43,783
|
|
|
|
40,027
|
IT Services
|
|
|
952
|
|
|
|
-
|
|
|
|
|
3,492
|
|
|
|
-
|
Other
|
|
|
1,848
|
|
|
|
1,690
|
|
|
|
|
7,104
|
|
|
|
7,659
|
Wholesale
|
|
|
8,320
|
|
|
|
7,728
|
|
|
|
|
33,043
|
|
|
|
30,047
|
Business and wholesale service revenue
|
|
|
27,796
|
|
|
|
25,580
|
|
|
|
|
109,921
|
|
|
|
100,680
|
|
|
|
|
|
|
|
|
|
|
Consumer customers
|
|
|
|
|
|
|
|
|
|
Voice
|
|
|
3,533
|
|
|
|
3,999
|
|
|
|
|
14,932
|
|
|
|
16,818
|
Broadband
|
|
|
6,400
|
|
|
|
5,665
|
|
|
|
|
24,841
|
|
|
|
22,108
|
Other
|
|
|
372
|
|
|
|
464
|
|
|
|
|
1,563
|
|
|
|
1,739
|
Consumer service revenue
|
|
|
10,305
|
|
|
|
10,128
|
|
|
|
|
41,336
|
|
|
|
40,665
|
|
|
|
|
|
|
|
|
|
|
Total service revenue
|
|
|
38,101
|
|
|
|
35,708
|
|
|
|
|
151,257
|
|
|
|
141,345
|
Growth in service revenue
|
|
|
6.7
|
%
|
|
|
|
|
|
7.0
|
%
|
|
|
Growth in broadband service revenue
|
|
|
8.3
|
%
|
|
|
|
|
|
10.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Other revenue:
|
|
|
|
|
|
|
|
|
|
Equipment sales
|
|
|
1,900
|
|
|
|
632
|
|
|
|
|
5,321
|
|
|
|
2,083
|
Access
|
|
|
8,591
|
|
|
|
8,977
|
|
|
|
|
35,323
|
|
|
|
37,033
|
High cost support
|
|
|
4,921
|
|
|
|
5,218
|
|
|
|
|
23,192
|
|
|
|
18,776
|
Total service and other revenue
|
|
|
53,513
|
|
|
|
50,535
|
|
|
|
|
215,093
|
|
|
|
199,237
|
Growth in service and other revenue
|
|
|
5.9
|
%
|
|
|
|
|
|
8.0
|
%
|
|
|
Growth excluding equipment sales
|
|
|
3.4
|
%
|
|
|
|
|
|
6.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Wireless revenue:
|
|
|
|
|
|
|
|
|
|
Business and consumer service revenue
|
|
|
14,906
|
|
|
|
17,590
|
|
|
|
|
65,504
|
|
|
|
71,197
|
Equipment sales
|
|
|
2,000
|
|
|
|
1,062
|
|
|
|
|
6,178
|
|
|
|
4,847
|
Other
|
|
|
1,292
|
|
|
|
1,458
|
|
|
|
|
5,302
|
|
|
|
5,049
|
|
|
|
|
|
|
|
|
|
|
AWN related:
|
|
|
|
|
|
|
|
|
|
Foreign roaming
|
|
|
-
|
|
|
|
-
|
|
|
|
|
-
|
|
|
|
40,029
|
Wireless backhaul
|
|
|
-
|
|
|
|
(77
|
)
|
|
|
|
70
|
|
|
|
6,035
|
CETC
|
|
|
4,984
|
|
|
|
4,925
|
|
|
|
|
19,565
|
|
|
|
21,018
|
Amortization of deferred AWN capacity revenue
|
|
|
814
|
|
|
|
774
|
|
|
|
|
3,151
|
|
|
|
1,512
|
Total AWN related
|
|
|
5,798
|
|
|
|
5,622
|
|
|
|
|
22,786
|
|
|
|
68,594
|
Total wireless & AWN related revenue
|
|
|
23,996
|
|
|
|
25,732
|
|
|
|
|
99,770
|
|
|
|
149,687
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
77,509
|
|
|
$
|
76,267
|
|
|
|
$
|
314,863
|
|
|
$
|
348,924
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 7
|
|
|
|
|
|
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
KEY OPERATING STATISTICS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
December 31,
|
|
September 30,
|
|
December 31,
|
|
|
2014
|
|
2014
|
|
2013
|
|
|
|
|
|
|
|
Voice:
|
|
|
|
|
|
|
Consumer access lines
|
|
|
43,773
|
|
|
45,177
|
|
|
49,297
|
Business access lines
|
|
|
79,168
|
|
|
79,563
|
|
|
79,816
|
|
|
|
|
|
|
|
Voice ARPU consumer
|
|
$
|
26.48
|
|
$
|
26.73
|
|
$
|
26.65
|
Voice ARPU business
|
|
$
|
23.31
|
|
$
|
23.65
|
|
$
|
23.53
|
|
|
|
|
|
|
|
Broadband:
|
|
|
|
|
|
|
Consumer connections
|
|
|
37,412
|
|
|
38,257
|
|
|
38,677
|
Business connections (2)
|
|
|
19,234
|
|
|
19,201
|
|
|
18,739
|
|
|
|
|
|
|
|
ARPU consumer
|
|
$
|
55.91
|
|
$
|
54.18
|
|
$
|
48.59
|
ARPU business (1) (2)
|
|
$
|
192.64
|
|
$
|
190.60
|
|
$
|
186.92
|
|
|
|
|
|
|
|
Wireless:
|
|
|
|
|
|
|
Postpaid connections
|
|
|
74,839
|
|
|
79,963
|
|
|
85,982
|
Lifeline connections
|
|
|
7,232
|
|
|
7,637
|
|
|
7,145
|
Prepaid connections
|
|
|
21,267
|
|
|
21,463
|
|
|
15,721
|
Total
|
|
|
103,338
|
|
|
109,063
|
|
|
108,848
|
|
|
|
|
|
|
|
(1)
|
|
Business broadband ARPU was restated to reflect the movement of IT
services revenue into a separate category.
|
(2)
|
|
How we calculate broadband connections has changed to exclude
certain internal use circuits. Historical amounts have been
restated to reflect appropriate comparisons period over period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Schedule 8
|
|
|
|
|
|
|
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
|
Long Term Debt
|
(Unaudited, In Thousands)
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2014
|
|
|
|
|
2013
|
|
2010 senior credit facility term loan due 2016
|
|
$
|
322,700
|
|
|
|
$
|
345,900
|
|
Debt discount - 2010 senior credit facility term loan due 2016
|
|
|
(1,014
|
)
|
|
|
|
(1,687
|
)
|
6.25% convertible notes due 2018
|
|
|
114,000
|
|
|
|
|
114,000
|
|
Debt discount - 6.25% convertible notes due 2018
|
|
|
(7,242
|
)
|
|
|
|
(9,213
|
)
|
Capital leases and other long-term obligations
|
|
|
5,524
|
|
|
|
|
7,257
|
|
|
|
|
433,968
|
|
|
|
|
456,257
|
|
Less current portion
|
|
|
(15,521
|
)
|
|
|
|
(14,256
|
)
|
Long-term obligations, net of current portion
|
|
$
|
418,447
|
|
|
|
$
|
442,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturities
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
$
|
15,808
|
|
|
|
|
2017
|
|
|
309,078
|
|
|
|
|
2018
|
|
|
815
|
|
|
|
|
2019
|
|
|
114,618
|
|
|
|
|
2020
|
|
|
392
|
|
|
|
|
Thereafter
|
|
|
3,907
|
|
|
|
|
|
|
$
|
444,618
|
|
|
|
|
|
|
|
|
|
|
Our debt balances exclude $2,394 associated with the capital leases
held-for-sale in conjunction with the sale of our wireless operations.
Our maturity schedule includes these balances.
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|