Alaska Communications Systems 8-K Alaska Communications Systems Reports Third Quarter 2012 Results

Exhibit 99.1

Alaska Communications Systems Reports Third Quarter 2012 Results

Business and Wholesale Revenue increases 4.6 percent

Adjusted EBITDA margin of 37.8 percent

Free cash flow of $13.0M, increasing 21.2 percent

Launch of 4G LTE network

New Agreements with the IBEW and senior lenders

Dividend suspended to accelerate deleveraging

ANCHORAGE, Alaska--(BUSINESS WIRE)--November 1, 2012--Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ:ALSK) today reported financial results for its third quarter ended September 30, 2012.

“The fundamentals of our value proposition to the Alaskan customer remain strong. We are successfully executing against our business plan to grow retail revenue, with a focus on business customers and broadband services. Broadband revenues have increased across the board both sequentially and year over year. Broadband Data as a percentage of service revenue now stands at 46% for the quarter, up 10% from a year ago. Importantly, we have good momentum in winning new customer relationships in the small and medium business segment. Demand for our broadband products is strong and we are making important strides in accelerating our product roadmap which allows us to provide the most advanced broadband services to our customers in Alaska. We recently launched our statewide 4G LTE network, which further cements our leadership position in wireless communications.

“We have also made solid progress on the Alaska Wireless Network (“AWN”) joint-venture transaction, which positions us to provide the most expansive, fastest wireless services in the state. We now have two important agreements that were necessary for AWN. We have a new three-year contract with the International Brotherhood of Electrical Workers ('IBEW') which also provides the framework to improve our operating model and costs over time. Additionally, we have executed an amended credit agreement with our senior lenders that also puts in place a framework to accelerate debt reductions. We remain on track to close the AWN transaction sometime in the second quarter of 2013.

“While our business plan combined with AWN puts us on a path to grow and pay down debt, we believe further strengthening of our balance sheet is warranted. Making a decision now to accelerate deleveraging has also helped us secure the continued support from our senior lenders on favorable terms. To that end, our Board of Directors has elected to suspend our common dividend and accelerate our deleveraging plans, which we believe will position us to be one of the best capitalized telecom companies based in Alaska.

“The long-term sustainability of our plan comes from the trust our customers place in us. Our customers value us for our reliability, our customer service, our trustworthiness and our local community presence. This, combined with our accelerated debt pay downs will drive long-term value creation for our employees, customers and shareholders,” said Anand Vadapalli, president and CEO of Alaska Communications.

Financial Highlights: Third Quarter 2012 Compared to Third Quarter 2011

• Revenue of $96.8 million grew by $6.5 million, or 7.2 percent, from $90.3 million in the prior year.
  • Business and Wholesale revenue increased by $1.2 million, or 4.6 percent, led by growth in wholesale revenue, which increased $1.0 million, or 9.3 percent.
  • Wireless revenue increased by $5.7 million, or 16.5 percent. Wireless broadband revenue grew $0.9 million, or 15.5 percent and roaming revenue grew $5.4 million, or 39.9 percent, both driven by higher data usage.
  • Access and CETC revenue decreased $0.4 million, or 2 percent.
  • Consumer broadband revenues increased $0.3 million, or 8.1 percent.
• Adjusted EBITDA of $36.6 million increased $3.8 million, or 11.6%.
  • Costs of service and sales increased $1.8 million, resulting from higher levels of data and network usage which drove increases in our roaming, DSL and advanced network expenses.
  • Selling, general and administrative expenses increased by $1.3 million primarily driven by increases in labor expenses in our sales and service organization and administrative costs associated with the AWN transaction.

Metric Highlights: Third Quarter 2012 Compared to Second Quarter 2012

• Business broadband connections remained relatively flat at 19,063, and ARPU grew 2.3 percent to $150.58.
• Wireless connections grew by 925 to 120,975 from 120,050 and churn was unchanged at 2.0 percent.
• Wireless retail ARPU grew 1.0 percent to $51.79.
• Consumer broadband connections, exclusive of erosion in dial up connections, increased sequentially and stand at 38,491 while ARPU grew 2.3 percent to $39.90.

“We are pleased with our performance and the debt amendment we recently entered into with our senior lenders. The amendment dedicates $65 million of the up-front proceeds from the AWN transaction to debt pay downs, with modestly higher borrowing rates and additional covenant flexibility related to future preferred dividend payments from the AWN venture,” said Wayne Graham, chief financial officer of Alaska Communications.

2012 Business Outlook

Our guidance for the year is unchanged:

• Revenue of between $355 and $365;
• EBITDA of approximately $120 million;
• Capex of $54 - $57 million; and
• Free Cash Flow of $28 - $34 million.

All guidance excludes costs associated with the AWN transaction.

Conference Call

The Company will host a conference call and live webcast today at 5:00 p.m. Eastern Time. Parties in the United States and Canada can call 877-941-8609 to access the conference call. Parties outside the United States and Canada can access the call at 480-629-9645. 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, November 8, 2012 at midnight Eastern Time. To hear the replay, parties in the United States and Canada can call 800-406-7325 and enter pass code 4568287. Parties outside the United States and Canada can call 303-590-3030 and enter pass code 4568287.

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 advanced 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.

Forward-Looking Guidance

This press release includes information related to management's estimate of Adjusted EBITDA and Free Cash Flow (FCF) for the year ending December 31, 2012. EBITDA and FCF, as defined by the Company, may not be consistent with Adjusted EBITDA and FCF measures used by other companies are not measurements under generally accepted accounting principles (GAAP), and should not be a considered a substitute for other measures of financial performance recorded in accordance with GAAP. Management believes that Adjusted EBITDA provides useful information to investors about the Company's performance because it eliminates costs associated with, interest income and expense, stock-based compensation expense, losses and gains associated with the extinguishment of debt and disposal of assets, gift of services, earnings of equity investments in excess or less than cash distributions, AWN transaction related costs, income tax expense and depreciation and amortization that are not directly attributable to the underlying performance of the Company's business operations. Similarly, FCF provides useful information about the ability of the Company to reduce its outstanding indebtedness. Due to the difficulty in forecasting and quantifying the amounts that would be required to be included in the most comparable GAAP measure, “net cash provided by operating activities” the Company is not providing an estimate of the year-end 2012 amount for that measure.

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) rule changes; problems with the formation, operation, or financial performance of AWN;; 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, or other factors affecting the Company's ability to generate sufficient earnings and cash flows to maintain operations; 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; changes in revenue from universal service funds; 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 STATEMENTS OF OPERATIONS
(Unaudited, In Thousands, Except Per Share Amounts)
		Three Months Ended							Nine Months Ended
		September 30,							September 30,
			2012			2011				2012			2011
Operating revenues		$	96,795		$	90,306			$	272,754		$	261,842
Operating expenses:
	Cost of services and sales		36,346			34,505				111,602			100,880
	Selling, general & administrative		25,437			24,121				80,374			68,385
	Depreciation and amortization		12,932			14,392				38,452			43,510
	Gain on disposal of assets, net		(2,559	)		(709	)			(2,140	)		(590	)
Total operating expenses			72,156			72,309				228,288			212,185
Operating income			24,639			17,997				44,466			49,657
Other income and expense:
	Interest expense		(10,268	)		(9,529	)			(29,203	)		(28,815	)
	Loss on extinguishment of debt		-			-				(323	)		(13,445	)
	Interest income		9			10				31			26
	Other		-			174				-			174
Total other income and expense			(10,259	)		(9,345	)			(29,495	)		(42,060	)
Income (loss) before income tax (expense) benefit			14,380			8,652				14,971			7,597
	Income tax (expense) benefit		(6,136	)		(9,468	)			(6,385	)		(9,369	)
Net income (loss)		$	8,244		$	(816	)		$	8,586		$	(1,772	)
Net income (loss) per share:
	Net income (loss) applicable to common shares	$	8,244		$	(816	)		$	8,586		$	(1,772	)
	Tax-effected expense attributable to convertible notes		1,808		$	-		#	$	-		$	-
	Net income (loss) assuming dilution	$	10,052		$	(816	)	#	$	8,586		$	(1,772	)
	Basic	$	0.18		$	(0.02	)		$	0.19		$	(0.04	)
	Diluted	$	0.17		$	(0.02	)		$	0.19		$	(0.04	)
Weighted average shares outstanding:
	Basic		45,664			45,202				45,511			45,061
	Diluted		59,437			45,202				45,806			45,061

						Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
			September 30,			December 31,
Assets				2012			2011
Current assets:
	Cash and cash equivalents		$	19,039		$	20,490
	Restricted cash			6,027			4,956
	Accounts receivable-trade, net of allowance of $6,008 and $5,788			40,157			36,986
	Materials and supplies			9,355			5,412
	Prepayments and other current assets			6,097			4,920
	Deferred income taxes			8,681			6,596
		Total current assets		89,356			79,360
Property, plant and equipment				1,447,403			1,428,597
Less: accumulated depreciation and amortization				(1,043,372	)		(1,023,360	)
	Property, plant and equipment, net			404,031			405,237
Goodwill				8,850			8,850
Intangible assets, net				24,123			24,118
Debt issuance costs				8,022			9,515
Deferred income taxes				66,622			72,814
Equity method investment				2,073			2,060
Other assets				4,803			3,154
Total assets			$	607,880		$	605,108
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
	Current portion of long-term obligations		$	27,034		$	30,930
	Accounts payable, accrued and other current liabilities			51,931			48,919
	Advance billings and customer deposits			8,797			9,218
		Total current liabilities		87,762			89,067
Long-term obligations, net of current portion				536,167			538,624
Other long-term liabilities				30,006			28,340
Total liabilities				653,935			656,031
Commitments and contingencies
Stockholders' equity (deficit):
	Common stock, $.01 par value; 145,000 authorized			457			453
	Additional paid in capital			141,892			144,631
	Accumulated deficit			(179,102	)		(187,688	)
	Accumulated other comprehensive loss			(9,302	)		(8,319	)
		Total stockholders' equity (deficit)		(46,055	)		(50,923	)
Total liabilities and stockholders' equity (deficit)			$	607,880		$	605,108

												Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands)
			Three Months Ended						Nine Months Ended
			September 30,						September 30,
				2012			2011			2012			2011
Cash Flows from Operating Activities:
	Net income (loss)		$	8,244		$	(816	)	$	8,586		$	(1,772	)
	Adjustments to reconcile net income (loss) to net cash provided by
	operating activities:
		Depreciation and amortization		12,932			14,392			38,452			43,510
		Amortization of debt issuance costs and debt discount		1,380			1,421			4,382			11,507
		Stock-based compensation		969			1,188			2,662			2,620
		Deferred income taxes		6,136			8,834			6,385			8,735
		Provision for uncollectible accounts		307			409			1,836			1,468
		Earnings is excess of distributions from equity method investment		(13	)		-			(13	)		-
		Other non-cash income, net		(2,585	)		(726	)		(2,042	)		(292	)
		Changes in operating assets and liabilities		(8,198	)		1,131			(4,038	)		(8,225	)
	Net cash provided by operating activities			19,172			25,833			56,210			57,551
Cash Flows from Investing Activities:
		Capital expenditures		(14,443	)		(15,191	)		(37,715	)		(33,463	)
		Change in unsettled capital expenditures		(1,279	)		394			(5,648	)		(943	)
		Proceeds on sale of assets		2,923			2,665			2,923			2,665
		Net change in non-current investments		-			529			-			529
		Net change in restricted accounts		(527	)		(127	)		(1,071	)		(129	)
	Net cash used by investing activities			(13,326	)		(11,730	)		(41,511	)		(31,341	)
Cash Flows from Financing Activities:
		Repayments of long-term debt		(1,330	)		(1,490	)		(9,255	)		(102,738	)
		Proceeds from the issuance of long-term debt		-			-			-			120,000
		Debt issuance costs		-			336			-			(4,448	)
		Payment of cash dividend on common stock		(2,285	)		(9,733	)		(6,831	)		(29,082	)
		Payment of withholding taxes on stock-based compensation		(4	)		(8	)		(243	)		(2,030	)
		Proceeds from issuance of common stock		(1	)		-			179			199
	Net cash used by financing activities			(3,620	)		(10,895	)		(16,150	)		(18,099	)
Change in cash and cash equivalents				2,226			3,208			(1,451	)		8,111
Cash and cash equivalents, beginning of period				16,813			20,219			20,490			15,316
Cash and cash equivalents, end of period			$	19,039		$	23,427		$	19,039		$	23,427
Supplemental Cash Flow Data:
	Interest paid		$	7,796		$	7,193		$	24,799		$	24,415
	Income tax refunds		$	-		$	-		$	24		$	-
Supplemental Non-cash Transactions:
	Property acquired under capital leases		$	-		$	679		$	(24	)	$	1,841
	Dividend declared, but not paid		$	2,286		$	9,736		$	2,286		$	9,736
	Additions to ARO asset		$	24		$	104		$	78		$	118

												Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
EBITDA AND FREE CASH FLOW
(Unaudited, In Thousands)
			Three Months Ended						Nine Months Ended
			September 30,						September 30,
				2012			2011			2012			2011
Net cash provided by operating activities			$	19,172		$	25,833		$	56,210		$	57,551
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Depreciation and amortization		(12,932	)		(14,392	)		(38,452	)		(43,510	)
		Amortization of debt issuance costs and debt discount		(1,380	)		(1,421	)		(4,382	)		(11,507	)
		Stock-based compensation		(969	)		(1,188	)		(2,662	)		(2,620	)
		Deferred income taxes		(6,136	)		(8,834	)		(6,385	)		(8,735	)
		Provision for uncollectible accounts		(307	)		(409	)		(1,836	)		(1,468	)
		Earnings in excess of distributions from equity method investment		13			-			13			-
		Other non-cash income, net		2,585			726			2,042			292
		Changes in operating assets and liabilities		8,198			(1,131	)		4,038			8,225
Net income (loss)			$	8,244		$	(816	)	$	8,586		$	(1,772	)
	Add (subtract):
		Interest expense		10,268			9,529			29,203			28,815
		Loss on extinguishment of debt		-			-			323			13,445
		Interest income		(9	)		(10	)		(31	)		(26	)
		Depreciation and amortization		12,932			14,392			38,452			43,510
		Gain on sale of long-term investments		-			(174	)		-			(174	)
		Gain on disposal of assets		(2,559	)		(709	)		(2,140	)		(590	)
		Gain on extraordinary items, net of tax		-			-			-			-
		Income tax expense		6,136			9,468			6,385			9,369
		Stock-based compensation		969			1,188			2,662			2,620
		Gift of services		-			(118	)		-			(51	)
		Earnings in excess of distributions from equity method investment		(13	)		-			(13	)		-
		AWN transaction related costs		587			-			5,046			-
Adjusted EBITDA			$	36,555		$	32,750		$	88,473		$	95,146
	Less:
		Cash capital expenditures		(15,722	)		(14,797	)		(43,363	)		(34,406	)
		Cash interest expense		(7,796	)		(7,193	)		(24,799	)		(24,415	)
	Free cash flow		$	13,037		$	10,760		$	20,311		$	36,325
Revenue			$	96,795		$	90,306		$	272,754		$	261,842
Adjusted EBITDA Margin				37.8	%		36.3	%		32.4	%		36.3	%
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 expense, gain or loss on asset purchases or disposals, gift of services, earnings of equity investments in excess of or less than cash distributions, AWN Transaction related costs, amortization of intangibles and stock-based compensation expense, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by Operating Revenues, and Free Cash Flow as reconciled above, because the Company believes they are important indicators providing information about our ability to service debt and fund capital expenditures. Adjusted EBITDA, Adjusted EBITDA Margin and Free cash flow are not 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 Except Per Share Amounts)
					Three Months Ended						Nine Months Ended
					September 30,						September 30,
	Operating revenues:					2012			2011			2012			2011
		Business and wholesale
			Retail service revenue
			Voice		$	5,967		$	6,440		$	18,046		$	19,576
			Broadband			8,613			8,046			25,156			22,616
			Equipment sales			311			224			927			763
			Wholesale and other			11,587			10,597			34,446			31,248
				Total business and wholesale revenue		26,478			25,307			78,575			74,203
		Consumer
			Retail service revenue
			Voice			4,676			5,173			14,460			15,978
			Broadband			4,613			4,266			13,469			12,720
			Equipment sales			42			48			126			149
			Other			413			268			971			795
				Total consumer revenue		9,744			9,755			29,026			29,642
		Wireless
			Retail service revenue
			Voice			12,355			12,973			37,231			40,296
			Broadband			6,340			5,490			17,892			15,375
			Equipment sales			1,737			1,541			4,594			4,322
			Foreign roaming			18,919			13,525			40,996			29,592
			Other			1,132			1,223			3,227			3,372
				Total wireless revenue		40,483			34,752			103,940			92,957
		Access and CETC
			CETC			4,979			6,022			15,669			21,218
			High cost support			5,087			4,480			15,041			16,009
			Switched, special and other access			10,024			9,990			30,503			27,813
				Total access and CETC		20,090			20,492			61,213			65,040
		Total revenues			$	96,795		$	90,306		$	272,754		$	261,842
	Revenue Mix:
			Business and wholesale			27	%		28	%		29	%		28	%
			Consumer			10	%		11	%		11	%		11	%
			Wireless			42	%		38	%		38	%		36	%
			Access and CETC			21	%		23	%		22	%		25	%
			Retail Service Revenue % of Total Revenues			44	%		47	%		46	%		48	%
			Data % of Total Service Revenue			46	%		42	%		45	%		40	%
Note: Broadband contains the following dial-up revenue:
		Three months ended September 30, 2012: $94 Consumer and $25 Business.
		Three months ended September 30, 2011: $126 Consumer and $30 Business.
		Nine months ended September 30, 2012: $297 Consumer and $78 Business.
		Nine months ended September 30, 2011: $398 Consumer and $93 Business.
In 2012, our financial presentation has been remapped to focus expanded customer groups. Significant changes in presentation include:
- Retail, Enterprise and Wholesale revenue in our prior presentation are now included in the categories of Business and Wholesale, Consumer, and Access and CETC.
- Access and CETC revenue has been combined into one group with CETC and Access broken out into Switched, Special, Other Access, and High Cost Support line items.
- Wireless revenue included CETC in our prior presentation and is now included in the category Access and CETC.

									Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
			Three Months Ended
			September 30,			June 30,			September 30,
			2012			2012				2011
Voice:
	Consumer access lines			57,483			59,480			63,775
	Business access lines			81,330			82,083			84,185
	Voice ARPU consumer		$	26.65		$	26.73		$	26.70
	Voice ARPU business		$	24.34		$	24.49		$	25.39
Broadband:
	Consumer connections			38,491			38,583			39,602
	Business connections			19,063			19,069			19,051
	ARPU consumer		$	39.90		$	39.01		$	35.52
	ARPU business		$	150.58		$	147.25		$	140.77
Wholesale lines				20,782			21,278			23,749
Wireless:
	Postpaid connections			107,220			107,704			108,664
	Prepaid connections			13,755			12,346			8,832
	Total			120,975			120,050			117,496
	Retail wireless ARPU		$	51.79		$	51.26		$	52.81
	Wireless broadband ARPU		$	19.70		$	18.74		$	16.82
Churn:
	Voice access lines			1.4	%		1.4	%		1.7	%
	Broadband connections			2.2	%		2.5	%		2.3	%
	Wireless connections			2.0	%		2.0	%		2.4	%
Wireless equipment subsidy			$	2,608		$	7,318		$	2,731
Note: Broadband contains the following dial-up connections:
		September 30, 2012: 2,339 Consumer and 458 Business.
		June 30, 2012: 2,482 Consumer and 499 Business.
		September 30, 2011: 3,080 Consumer and 553 Business.

CONTACT:
Alaska Communications Systems Group, Inc.
Wayne Graham, Chief Financial Officer, 907-564-7756
investors@acsalaska.com