Exhibit 99.1
For more information, contact: | ||
Alaska Communications Systems Group, Inc. | the blueshirt group | |
Kevin P. Hemenway | Chris Danne, Rakesh Mehta | |
Chief Financial Officer | (415) 217-7722 | |
(907) 297-3000 | chris@blueshirtgroup.com | |
www.acsalaska.com | rakesh@blueshirtgroup.com |
ALASKA COMMUNICATIONS SYSTEMS REPORTS FOURTH QUARTER 2003 RESULTS
Record Quarter for Wireless Additions; Broadband Continues to Grow;
New Management Spearheads Operational Changes
ANCHORAGE, Alaska —Alaska Communications Systems Group, Inc. (“ACS”) (Nasdaq: ALSK) today reported financial results for the fourth quarter and year ended December 31, 2003.
Revenues for the fourth quarter of 2003 were $77.5 million, which represented a 3% increase over fourth quarter 2002 revenues of $75.2 million, adjusted to exclude revenue from the Company’s Directory business sold in 2003. This increase was primarily attributable to continued growth in wireless and broadband, as the Company’s local telephone revenues decreased by less than 3% year over year. Reported revenues for fourth quarter of 2002 were $83.4 million. The Company’s net loss for the fourth quarter of 2003 was $17.2 million or $0.58 per share, which compares to a net loss of $69.2 million, or $2.25 per share for the same period in 2002.
During the quarter, the Company incurred charges to operations of $7.4 million related to litigation reserves, management changes and M&A costs, $4.7 million of which were non-cash. Excluding the cash component of these charges, adjusted EBITDA was within Company guidance at $26.9 million for the quarter. Including the cash charges, EBITDA was $24.2 million.
“At ACS, we are fundamentally changing the way we operate our business to compete as a true integrated telecommunications company that earns the loyalty of its customers each and every day,” commented Liane Pelletier, President and CEO of ACS. “Over the past five months, we have bolstered our management team, accelerated our sales effort, reduced costs and reorganized to better serve our business, consumer and wholesale customers. We are making tangible progress toward building a business model that will grow the number of loyal customers who stay with us, buy more and refer us to others. For example, in the business market, we have increased our business sales force by 50%, easily doubled the number of customer visits for each rep and changed the way we compensate our sales teams. These efforts are already producing tangible results with over 25 new business wins in Q4. In the consumer market, we have integrated sales and service for the very first time in ACS history and are focused on offering one-stop shopping for our customers, delivering a full range of telecommunications and entertainment services.”
“With these and other changes, we believe we can significantly improve our competitive position, despite the fact that our core market continues to face line shrinkage similar to other LECs,” added Ms. Pelletier. “A key to our efforts will be our wireless and broadband product offerings, which continue to grow impressively. In Q4, we added a record 3,000 wireless customers sequentially in a seasonally soft period with typical levels of promotional activity and in Q1 we see a continued opportunity to pick up share in an unsettled market. In broadband, we added almost 1,500 subscribers and dramatically reduced the wait time for installation, as we focused on improving customer service in every facet of our business. On this note, we have reduced ASA (average speed of answer) in every one of our service queues and have already retrained over 25% of our consumer market customer-facing employees in multiple product lines.”
• | Access lines declined by 0.6% sequentially to 314,221, in line with many LECs as the Company faced displacement by broadband and wireless as well as competitive pressure. |
• | The Company added 3,024 wireless subscribers from the immediately preceding quarter. In Q4, Average Revenue per Unit, or ARPU, improved by $1.73 to $45.53 and MOU (Minutes of Use) increased by 19.2% over the same period last year. | |||
• | ACS ended the quarter with 17,780 DSL subscribers, an increase of 1,486 subscribers on a sequential basis. | |||
• | Long distance subscribers decreased modestly to 43,166 customers, as the Company still faces wireless substitution and restrictions on its ability to easily bundle long distance with local telephone. |
“We have made significant progress on our company-wide cost reduction efforts that will have a positive impact in 2004,” commented Kevin P. Hemenway, Senior Vice President and CFO of ACS. “During the quarter, we undertook a number of planned capital expenditures related to satisfying strong demand for our wireless and DSL offerings. In addition, we experienced an increase in wireless expenses, reflecting our success in adding 3,000 customers during a seasonally low period of cellular usage. Going forward, we will continue to closely control capital expenditures and manage operating expenses, as we build a stronger company.”
Recent Highlights
Since Liane Pelletier joined in October, ACS has significantly bolstered its management team and Board of Directors with the hiring of three senior executives and the addition of two new board members. The executives and directors bring a wealth of industry knowledge and will be invaluable in executing ACS’ goal to offer fully integrated services in a customer focused organization.
• | David Eisenberg joined the Company as Senior Vice President, Corporate Strategy and Development from Sprint Corporation where he was Vice President — Corporate Strategy. David is an industry veteran spending 21 years at Sprint and Centel. He is directly responsible for strategic planning, business development, market and competitive analysis, market research and strategy, regulatory strategy and corporate communications at ACS. | |||
• | Sheldon Fisher joined as Senior Vice President of Sales and Product Marketing from Sprint where he was Vice President, Broadband Direct. Sheldon focused on deploying a number of new technologies while at Sprint, and his knowledge will be essential as ACS delivers innovative new offerings to its customers. | |||
• | Andrew Coon joined as Director of Business Sales and Service from GCI, where he was the Director of Major Strategic Accounts and the former Vice President of Sales. Andrew brings in depth knowledge of the Alaskan business market and will help solidify ACS’ leading position in providing telecommunications services to businesses in the state of Alaska. | |||
• | ACS announced the appointments of John M. Egan and Patrick Pichette to its board of directors. John is the recently retired founder and chairman/CEO of ARRIS Group (Nasdaq:ARRS). Patrick is Executive Vice-President at Bell Canada, and was also previously a partner at McKinsey & Co. |
Revenues for the year ended December 31, 2003 were $323.5 million compared to $340.1 million for the year ended 2002. The Company’s net loss for 2003 was $6.6 million, or $0.22 per share compared to a net loss of $185.2 million, or $5.89 per share in 2002.
EBITDA from continuing operations was $100.1 million for the full year 2003 compared to $129.3 million for 2002. During the year, the Company incurred cash charges of $12.5 million related primarily to the State of Alaska contract termination, management changes and M&A costs. Excluding these charges, adjusted EBITDA was $112.6 million for 2003.
ACS will host a conference call at 5:00 P.M. Eastern time today to discuss its fourth quarter results. The access dial-in number for the call is 800-218-0713 for domestic callers or 303-262-2211 for international callers. In order to ensure participation by phone, please dial-in 10 minutes prior to the scheduled start time. 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 568311.
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 314,000 access lines, 87,000 cellular customers,
43,000 long distance customers and 46,000 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, 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, or if underlying assumptions prove incorrect. Factors that could affect actual results include but are not limited to: rapid technological developments and changes in the telecommunications industries; ongoing deregulation in the telecommunications industry as a result of the Telecommunications Act of 1996 and other similar federal and state legislation and the federal and state rules and regulations enacted pursuant to that legislation; regulatory limitations on the Company’s ability to change its pricing for communications services; the possible future unavailability of SFAS 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; 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; 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 for the year ended December 31, 2002, as amended, and its quarterly report on Form 10-Q for the nine months ended September 30, 2003, as amended. The information contained in this release is as of February 26, 2004. 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 STATEMENT OF OPERATIONS
For the Three Months and Year Ended December 31, 2003 and 2002
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Operating revenues: | ||||||||||||||||
Local telephone | $ | 52,915 | $ | 54,319 | $ | 215,387 | $ | 226,447 | ||||||||
Wireless | 11,680 | 10,760 | 46,548 | 43,180 | ||||||||||||
Directory | — | 8,222 | 11,631 | 33,604 | ||||||||||||
Internet | 8,610 | 6,032 | 33,026 | 20,847 | ||||||||||||
Interexchange | 4,333 | 4,075 | 16,956 | 16,066 | ||||||||||||
Total operating revenues | 77,538 | 83,408 | 323,548 | 340,144 | ||||||||||||
Operating expenses: | ||||||||||||||||
Local telephone | 32,087 | 26,361 | 116,354 | 114,582 | ||||||||||||
Wireless | 9,268 | 8,023 | 31,064 | 29,352 | ||||||||||||
Directory | — | 3,804 | 5,249 | 14,170 | ||||||||||||
Internet | 9,694 | 9,395 | 45,523 | 31,299 | ||||||||||||
Interexchange | 7,656 | 6,153 | 25,542 | 23,647 | ||||||||||||
Depreciation and amortization | 15,450 | 21,250 | 82,185 | 82,940 | ||||||||||||
Contract termination and asset impairment charges | 319 | — | 54,858 | — | ||||||||||||
Loss (gain) on disposal of assets, net | (115 | ) | 55 | (112,622 | ) | 2,163 | ||||||||||
Goodwill impairment loss | — | 64,755 | — | 64,755 | ||||||||||||
Total operating expenses | 74,359 | 139,796 | 248,153 | 362,908 | ||||||||||||
Operating income (loss) | 3,179 | (56,388 | ) | 75,395 | (22,764 | ) | ||||||||||
Other income and expense: | ||||||||||||||||
Interest expense | (19,992 | ) | (13,302 | ) | (71,470 | ) | (51,704 | ) | ||||||||
Interest income and other | 713 | 577 | (9,408 | ) | 2,203 | |||||||||||
Total other income (expense) | (19,279 | ) | (12,725 | ) | (80,878 | ) | (49,501 | ) | ||||||||
Income (loss) before income taxes | (16,100 | ) | (69,113 | ) | (5,483 | ) | (72,265 | ) | ||||||||
Income taxes | (1,095 | ) | — | (1,095 | ) | — | ||||||||||
Loss from continuing operations | (17,195 | ) | (69,113 | ) | (6,578 | ) | (72,265 | ) | ||||||||
Loss from discontinued operations | — | (109 | ) | (52 | ) | (7,632 | ) | |||||||||
Loss before cumulative effect of change in accounting principle | (17,195 | ) | (69,222 | ) | (6,630 | ) | (79,897 | ) | ||||||||
Cumulative effect of change in accounting principle, net of tax | — | — | — | (105,350 | ) | |||||||||||
Net loss | $ | (17,195 | ) | $ | (69,222 | ) | $ | (6,630 | ) | $ | (185,247 | ) | ||||
Loss per share — basic and diluted: | ||||||||||||||||
Loss from continuing operations | $ | (0.58 | ) | $ | (2.25 | ) | $ | (0.22 | ) | $ | (2.30 | ) | ||||
Loss from discontinued operations | — | (0.00 | ) | (0.00 | ) | (0.24 | ) | |||||||||
Cumulative effect of change in accounting principle, net of tax | — | — | — | (3.35 | ) | |||||||||||
Net loss | $ | (0.58 | ) | $ | (2.25 | ) | $ | (0.22 | ) | $ | (5.89 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 29,429 | 30,702 | 29,980 | 31,464 | ||||||||||||
Diluted | 29,429 | 30,702 | 29,980 | 31,474 | ||||||||||||
EBITDA from continuing operations | $ | 24,245 | $ | 30,249 | $ | 100,066 | $ | 129,297 | ||||||||
Note: | Certain reclassifications have been made to the 2002 data to conform with the current presentation. |
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
December 31, | December 31, | |||||||
Assets | 2003 | 2002 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 97,798 | $ | 18,565 | ||||
Restricted cash | 3,635 | 3,440 | ||||||
Accounts receivable-trade, net of allowance of $4,432 and $6,075 | 41,718 | 48,820 | ||||||
Materials and supplies | 10,099 | 11,203 | ||||||
Prepayments and other current assets | 5,850 | 6,172 | ||||||
Assets held for sale | — | 261 | ||||||
Total current assets | 159,100 | 88,461 | ||||||
Property, plant and equipment | 1,041,904 | 1,090,365 | ||||||
Less: Accumulated depreciation and amortization | 603,760 | 574,387 | ||||||
Property, plant and equipment, net | 438,144 | 515,978 | ||||||
Goodwill | 38,403 | 77,225 | ||||||
Intangible Assets | 22,055 | 23,269 | ||||||
Debt issuance costs, net of amortization of $5,417 and $16,365 | 18,939 | 21,529 | ||||||
Deferred charges and other assets | 8,750 | 26,047 | ||||||
Total assets | $ | 685,391 | $ | 752,509 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current portion of long-term obligations | $ | 1,982 | $ | 5,649 | ||||
Accounts payable-affiliate | 2,215 | 1,319 | ||||||
Accounts payable, accrued and other current liabilities | 50,170 | 49,796 | ||||||
Income taxes payable | 1,095 | — | ||||||
Advance billings and customer deposits | 8,766 | 9,804 | ||||||
Total current liabilities | 64,228 | 66,568 | ||||||
Long-term obligations, net of current portion | 548,238 | 602,114 | ||||||
Other deferred credits and long-term liabilities | 71,065 | 83,819 | ||||||
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, 33,611 and 33,481 shares issued and 29,343 and 30,745 outstanding, respectively | 336 | 334 | ||||||
Common stock, $.01 par value; 267 shares subject to mandatory redemption | (1,198 | ) | — | |||||
Treasury stock, 4,268 and 2,737 shares, respectively, at cost | (17,118 | ) | (12,082 | ) | ||||
Paid in capital in excess of par value | 278,181 | 277,810 | ||||||
Accumulated deficit | (253,798 | ) | (247,168 | ) | ||||
Accumulated other comprehensive loss | (4,543 | ) | (18,886 | ) | ||||
Total stockholders’ equity | 1,860 | 8 | ||||||
Total liabilities and stockholders’ equity | $ | 685,391 | $ | 752,509 | ||||
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Local telephone revenues: | ||||||||||||||||
Local network service | $ | 22,987 | $ | 24,642 | $ | 96,357 | $ | 99,512 | ||||||||
Network access revenue | 23,808 | 24,508 | 97,759 | 108,335 | ||||||||||||
Deregulated and other | 6,120 | 5,169 | 21,271 | 18,600 | ||||||||||||
Local telephone revenues | $ | 52,915 | $ | 54,319 | $ | 215,387 | $ | 226,447 | ||||||||
Notes: | During the second quarter of 2002, the Company recognized as revenue $11,066 of previously deferred interstate access revenues related to a dispute on interstate access rates for the Anchorage market based on a favorable ruling by the District of Columbia Court of Appeals. |
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF EBITDA CALCULATION
(Unaudited, in Thousands)
Three Months Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2003 | 2002 | 2003 | 2002 | |||||||||||||
Income (loss) from continuing operations | $ | (17,195 | ) | $ | (69,113 | ) | $ | (6,578 | ) | $ | (72,265 | ) | ||||
Add (subtract): | ||||||||||||||||
Interest expense | 19,992 | 13,302 | 71,470 | 51,704 | ||||||||||||
Income taxes | 1,095 | — | 1,095 | — | ||||||||||||
Depreciation and amortization | 15,450 | 21,250 | 82,185 | 82,940 | ||||||||||||
Gain on foreign exchange | — | — | (4,261 | ) | — | |||||||||||
Loss (gain) on disposal of assets and asset impairment charges, net | (115 | ) | 55 | (48,863 | ) | 2,163 | ||||||||||
Goodwill impairment loss | — | 64,755 | — | 64,755 | ||||||||||||
Stock based compensation | 900 | — | 900 | — | ||||||||||||
Non-cash pension expense | 238 | — | 238 | — | ||||||||||||
Non-cash litigation reserves | 3,880 | — | 3,880 | — | ||||||||||||
EBITDA from continuing operations | $ | 24,245 | $ | 30,249 | $ | 100,066 | $ | 129,297 | ||||||||
Notes: | EBITDA is presented as an additional means of evaluating the Company’s ability to satisfy rating agency and creditor requirements. The Company incurs significant non-cash charges, including depreciation and amortization, related to the capital assets utilized in its operations. EBITDA is a central measure used in the Company’s compliance with debt covenants related to its senior credit facility. EBITDA as defined by the senior credit facility’s credit agreement is net income before interest expense, provisions for taxes, depreciation expense, amortization expense, other noncash charges, and unusual gains. The credit agreement also calls for excluding the EBITDA of any business disposed of during the period. Using this information along with income from continuing operations provides for a more complete analysis of results of operations. Income from continuing operations is the most directly comparable GAAP measure. |
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
As of December 31, | ||||||||
2003 | 2002 | |||||||
Local telephone: | ||||||||
Retail access lines | 220,818 | 236,148 | ||||||
Wholesale access lines | 19,157 | 22,148 | ||||||
UNE loop lines | 68,914 | 62,091 | ||||||
UNE platform lines | 5,332 | 2,620 | ||||||
Total local telephone access lines | 314,221 | 323,007 | ||||||
Average local telephone access lines for the quarter | 315,105 | 325,084 | ||||||
Average local telephone revenue per line for the quarter | $ | 55.98 | $ | 55.70 | ||||
Quarterly growth rate in local telephone access lines | -2.7 | % | -3.0 | % | ||||
Wireless | ||||||||
Covered population | 480,422 | 478,413 | ||||||
Ending subscribers | 87,017 | 82,220 | ||||||
Average subscribers for the quarter | 85,505 | 81,890 | ||||||
Quarterly growth rate | 3.6 | % | 0.8 | % | ||||
Activations for the quarter | 6,865 | 6,718 | ||||||
Deactivations for the quarter | 3,841 | 6,057 | ||||||
Average monthly churn for the quarter | 1.4 | % | 2.3 | % | ||||
Penetration | 18.1 | % | 17.2 | % | ||||
Quarterly minutes of use (000’s) | 59,327 | 49,780 | ||||||
Average revenue per subscriber for the quarter | $ | 45.53 | $ | 43.80 | ||||
Long Distance: | ||||||||
Long distance subscribers | 43,166 | 70,000 | ||||||
Quarterly minutes of use (000’s) | 35,795 | 37,897 | ||||||
Average subscribers for the quarter | 43,333 | 68,615 | ||||||
Average monthly revenue per subscriber for the quarter | $ | 33.33 | $ | 19.80 | ||||
Internet: | ||||||||
DSL subscribers | 17,780 | 12,590 | ||||||
Dial-Up and other service subscribers | 28,277 | 33,791 | ||||||
Total Internet subscribers | 46,057 | 46,381 | ||||||
Average subscribers for the quarter | 45,704 | 46,520 | ||||||
Average revenue per subscriber for the quarter | $ | 31.64 | $ | 26.03 |