Alaska Communications Systems 8-K Alaska Communications Systems Reports Third Quarter 2013 Results

Exhibit 99.1

Alaska Communications Systems Reports Third Quarter 2013 Results

Growth in Wireline revenue, led by Broadband revenue growth of 19.4%

Over $134.2 of net debt reductions on a year-to-date basis

AWN transaction closed and monthly preferred distribution payments have commenced

Guidance affirmed for the year, with free cash flow at the high end of range

ANCHORAGE, Alaska--(BUSINESS WIRE)--November 6, 2013--Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK) today reported financial results for its third quarter ended September 30, 2013.

“We are pleased to report steady performance to our business plan. Another quarter of solid broadband revenue performance has driven total wireline revenue growth, representing an important way we create value. Consistent with the other mechanism in our plan to create value by strengthening our balance sheet, we achieved meaningful de-leveraging and strong cash flows in this quarter. Closing the AWN transaction allows us to direct our capital more efficiently to further broadband growth,” said Anand Vadapalli, President and Chief Executive Officer of ACS.

Year-Over-Year Financial Highlights for the Quarter:

The third quarter represents the first reporting period following the Alaska Wireless Network, LLC (“AWN”) close and we encourage readers to review our press release schedules for description of changes in mapping of certain revenue categories. Further, we are providing additional supplemental information for readers to understand the AWN preferred distribution structure and its impact to our results.

• Wireline revenues include business and wholesale, consumer and access revenues. We are focused on achieving growth in wireline revenues by driving broadband revenue performance. Wireline revenues were $50.1 million which increased by $0.6 million, or 1.2%.
  • Business and wholesale revenue increased $0.9 million, or 3.7%, which was driven by broadband revenue growth of 17.0%.
  • Consumer revenue increased $0.5 million, or 5.3%, with broadband revenue growth of 21.3%.
  • Access revenue declined, as expected, $0.9 million, or 5.7%, due to lower switched, special and other access revenue.
• Wireless and backhaul revenue was $33.8 million and, as expected, declined year-over-year.
  • Retail service revenue declined $1.0 million, or 5.5%.
  • As expected, foreign roaming revenue declined $13.3 million, as roaming revenue moved to AWN.
  • CETC revenue increased 3.2%. CETC is now a pass-through under the AWN structure and has no impact on Adjusted EBITDA.
• Adjusted EBITDA was $24.8 million and free cash flow was $3.5 million. The decline in Adjusted EBITDA compared to last year was anticipated following the close of AWN.
  • The AWN preferred distribution contributed $9.6 million to Adjusted EBITDA.
  • Free cash flow was impacted by higher levels of capital spending associated with the summer build season.
• Net debt, which represents total debt less cash and cash equivalents, stands at $404.4 million. This represents a decrease of $134.2 million, or 24.9%, since December 31, 2012, evidencing commitment to deleveraging.

Sequential Metric Highlights: Third Quarter 2013 Compared to Second Quarter 2013

• Business broadband connections increased by 112, or 0.6%, to 19,216 and business broadband ARPU remained relatively flat at $175.00.
• Consumer broadband connections increased by 506, or 1.3%, to 38,117 and consumer broadband ARPU declined slightly by 1.2% to $48.63.
• Consumer access lines declined by 1,716, or 3.3%, to 50,722 and business access lines decreased by 446, or 0.6%, to 80,071.
• Wireless connections declined by 2,305, or 2.0%, to 112,114. Connections were impacted by 782 fewer lifeline customers associated with continued compliance with new certification rules, and 2,453 fewer post-pay connections of which 714 were non-revenue-generating-internal-use connections that were disconnected as part of the AWN transaction, partially offset by an increase of 930 in prepaid connections.
• Wireless broadband ARPU increased 7.5%. Retail wireless ARPU declined slightly to $52.08.

“This is the first quarter of results following the close of the AWN transaction, and we have provided additional information in this press release to enable readers to evaluate our performance under this new operating structure. During our upcoming conference call we will walk the readers through this information. Our path to deliver shareholder value is growing wireline and total broadband revenue, while strengthening the business through debt reductions. Our financial results are in-line with our expectations, with solid free cash flow generation for the year,” said Wayne Graham, Chief Financial Officer of ACS.

Guidance for the year is as follows:

Total revenue guidance is unchanged and expected to be $340 - $350 million.

Adjusted EBITDA guidance is unchanged and expected to be $105 - $110 million.

Capital spending, previously targeted to be around $50 million, is now expected to be moderately lower.

Previous Free Cash Flow guidance of $20 - $25 million is unchanged and we are comfortable with the high end of the range.

Guidance for 2014, with a full-year without the transition period of pre- and post-AWN ownership, will be provided when we report fourth quarter 2013 results.

Conference Call

The company will host a conference call and live webcast today at 5:00 p.m. Eastern time to discuss these results. Parties in the United States and Canada can access the call at 1-877-941-0843. Parties outside the United States and Canada can access the call at 1-480-629-9722. 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 December 31, 2013, at midnight Eastern time. To hear the replay, parties in the United States and Canada can call 1-800-406-7325 and enter pass code 4645116. Parties outside the United States and Canada can call 1-303-590-3030 and enter pass code 4645116.

About Alaska Communications

Alaska Communications is a leading provider of advanced broadband solutions for businesses and consumers in Alaska. We operate 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 www.alaskacommunications.com or www.alsk.com.

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 performance and believes provides useful information to investors. The Company has disclosed Adjusted EBITDA as net income before interest, loss on extinguishment of debt, depreciation and amortization, loss on sale of short-term investments, gain or loss on asset purchases or disposals, earnings on equity method investments, gains and distributions related to AWN, amortization of deferred AWN service revenue, provisions for taxes, stock-based compensation, and AWN transaction-related costs, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by Operating Revenues. Additionally, the Company has disclosed Free cash flow as Adjusted EBITDA, less capital expenditures that create an obligation to pay (“incurred capital expenditures”), less amortization of deferred AWN capacity revenue, less AWN transaction-related capital costs, less cash interest expense. These measures are provided because the Company believes they are important indicators regarding our ability to make principal payments on debt and fund working capital. Adjusted EBITDA, Adjusted EBITDA Margin and Free cash flow are non-GAAP measures and should not be considered a substitute for net cash provided by operating activities and other measures of financial performance recorded in accordance with GAAP.

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 continued build out of their wireless network in Alaska, Universal Service Fund changes, AWN’s future financial and operational performance and the wholesale terms it establishes, adverse national economic conditions, adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing, adverse local economic conditions, including an unexpected downturn in the Alaskan oil and gas or tourism markets, changes in capital expenditures, the effects of competition in our markets, the entry of one or more additional facilities-based carriers into the Alaska market; the Company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may deliver, 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; unforeseen changes in public policies; changes in accounting policies, including the Company’s application of regulatory accounting rules, which could result in an impact on earnings; or disruptive technological developments in the telecommunications industry. For further information regarding risks and uncertainties associated with ACS’ business, please refer to the Company’s SEC filings, including, but not limited to, the sections entitled "Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K and quarterly reports on Form 10-Q. Copies of the Company’s SEC filings may be obtained by contacting its investor relations department at (907) 564-7556 or by visiting its investor relations website at www.alsk.com.

Schedule 1
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED SCHEDULE OF OPERATIONS
(Unaudited, In Thousands Except Per Share Amounts)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Operating revenues	$	83,841		$	96,750		$	272,657		$	272,709
Operating expenses:
Cost of services and sales, inclusive of $11,228 of AWN		44,720			36,346			117,371			111,602
Selling, general & administrative		29,274			25,437			83,717			80,374
Depreciation and amortization		9,209			12,932			33,291			38,452
(Income) loss on disposal of assets, net		(132,109	)		(2,559	)		(131,483	)		(2,140	)
Earnings on equity method investments		(8,082	)		(45	)		(8,061	)		(45	)
AWN excess distribution		(2,867	)		-			(2,867	)		-
Total operating (income) expenses		(59,855	)		72,111			91,968			228,243
Operating income		143,696			24,639			180,689			44,466
Other income and expense:
Interest expense		(9,785	)		(10,268	)		(29,970	)		(29,203	)
Loss on extinguishment of debt		(2,094	)		-			(2,370	)		(323	)
Interest income		19			9			37			31
Other		-			-			(13	)		-
Total other income and expense		(11,860	)		(10,259	)		(32,316	)		(29,495	)
Income before income tax expense		131,836			14,380			148,373			14,971
Income tax expense		(54,238	)		(6,136	)		(29,613	)		(6,385	)
Net income	$	77,598		$	8,244		$	118,760		$	8,586
Net income per share:
Basic	$	1.65		$	0.18		$	2.55		$	0.19
Diluted	$	1.33		$	0.17		$	2.09		$	0.19
Weighted average shares outstanding:
Basic		47,159			45,664			46,592			45,511
Diluted		59,346			59,437			58,816			45,806

Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
	September 30,			December 31,
Assets	2013			2012
Current assets:
Cash and cash equivalents	$	53,295		$	16,839
Restricted cash		482			3,875
Short-term investments		-			2,050
Accounts receivable-trade, net of allowance of $5,744 and $6,231		31,390			39,713
Materials and supplies		12,112			9,409
Prepayments and other current assets		7,672			5,566
Deferred income taxes		1,478			8,301
Total current assets		106,429			85,753
Property, plant and equipment		1,345,048			1,463,320
Less: accumulated depreciation and amortization		(1,005,035	)		(1,052,459	)
Property, plant and equipment, net		340,013			410,861
Goodwill		4,650			8,850
Intangible assets, net		-			24,118
Debt issuance costs		7,502			10,558
Deferred income taxes		48,337			69,049
Equity method investments		207,566			2,028
Other assets		400			3,510
Total assets	$	714,897		$	614,727
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations	$	12,865		$	21,628
Accounts payable, accrued and other current liabilities, inclusive of $3,926 of AWN		61,033			56,378
Advance billings and customer deposits		8,837			8,970
Total current liabilities		82,735			86,976
Long-term obligations, net of current portion		444,782			533,772
Other long-term liabilities		93,571			28,662
Total liabilities		621,088			649,410
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $.01 par value; 145,000 authorized		486			458
Additional paid in capital		151,784			144,377
Accumulated deficit		(51,519	)		(170,279	)
Accumulated other comprehensive loss		(6,942	)		(9,239	)
Total stockholders' equity (deficit)		93,809			(34,683	)
Total liabilities and stockholders' equity (deficit)	$	714,897		$	614,727

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,
	2013			2012			2013			2012
Cash Flows from Operating Activities:
Net income	$	77,598		$	8,244		$	118,760		$	8,586
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		9,209			12,932			33,291			38,452
Gain on sale/contribution of asset to AWN		(132,424	)		-			(132,424	)		-
AWN excess distribution		(2,867	)		-			(2,867	)		-
Gain on ineffective hedge adjustment		231			-			(785	)		-
Amortization of debt issuance costs and debt discount		2,714			1,380			5,754			4,382
Amortization of ineffective hedge		1,082			-			1,948			-
Amortization of deferred AWN capacity revenue		(738	)		-			(738	)		-
Stock-based compensation		550			969			2,268			2,662
Deferred income taxes		53,640			6,136			29,015			6,385
Provision for uncollectible accounts		366			307			805			1,836
Cash distribution from equity method investments		5,389			32			5,389			32
Earnings on equity method investments		(8,082	)		(45	)		(8,061	)		(45	)
Other non-cash expense, net		(2,572	)		(2,585	)		(1,710	)		(2,042	)
Changes in operating assets and liabilities		7,161			(8,198	)		6,096			(4,038	)
Net cash provided by operating activities		11,257			19,172			56,741			56,210
Cash Flows from Investing Activities:
Capital expenditures		(13,717	)		(13,876	)		(27,314	)		(36,319	)
Capitalized interest		(421	)		(567	)		(1,291	)		(1,396	)
Change in unsettled capital expenditures		553			(1,279	)		(3,276	)		(5,648	)
Proceeds on sale of assets		2,812			2,923			4,747			2,923
Proceeds on sale/contribution of asset to AWN		100,000			-			100,000			-
AWN excess distribution		2,867			-			2,867			-
Net change in short-term investments		525			-			2,037			-
Change in unsettled acquisition costs		(3,345	)		-			(3,345	)		-
Net change in restricted accounts		3,345			(527	)		3,393			(1,071	)
Net cash provided (used) by investing activities		92,619			(13,326	)		77,818			(41,511	)
Cash Flows from Financing Activities:
Repayments of long-term debt		(67,001	)		(1,330	)		(97,382	)		(9,255	)
Debt issuance costs		(25	)		-			(206	)		-
Payment of cash dividend on common stock		-			(2,285	)		-			(6,831	)
Payment of withholding taxes on stock-based compensation		(2	)		(4	)		(632	)		(243	)
Proceeds from issuance of common stock		2			(1	)		117			179
Net cash used by financing activities		(67,026	)		(3,620	)		(98,103	)		(16,150	)
Change in cash and cash equivalents		36,850			2,226			36,456			(1,451	)
Cash and cash equivalents, beginning of period		16,445			16,813			16,839			20,490
Cash and cash equivalents, end of period	$	53,295		$	19,039		$	53,295		$	19,039
Supplemental Cash Flow Data:
Interest paid	$	6,818		$	7,796		$	25,201		$	24,799
Extinguishment of hedging instrument	$	4,073		$	-		$	4,073		$	-
Income tax paid (refunded), net	$	-		$	-		$	-		$	(24	)
Supplemental Non-cash Transactions:
Property (retired) acquired under capital leases, net	$	(19	)	$	-		$	(17	)	$	(24	)
Dividend declared, but not paid	$	-		$	2,286		$	-		$	2,286
Additions to ARO asset	$	43		$	24		$	180		$	78
Exchange of debt with common stock	$	6,000		$	-		$	6,000		$	-

Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA AND FREE CASH FLOW
(Unaudited, In Thousands)
	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net income	$	77,598		$	8,244		$	118,760		$	8,586
Add (subtract):
Interest expense		9,785			10,268			29,970			29,203
Loss on extinguishment of debt		2,094			-			2,370			323
Interest income		(19	)		(9	)		(37	)		(31	)
Depreciation and amortization		9,209			12,932			33,291			38,452
Loss on sale of short-term investments		-			-			13			-
(Gain) loss on disposal of assets		315			(2,559	)		941			(2,140	)
Earnings on equity method investment in TekMate		(18	)		(45	)		3			(45	)
Earnings on equity method investment in AWN		(8,064	)		-			(8,064	)		-
Gain on sale/contribution of asset to AWN		(132,424	)		-			(132,424	)		-
TekMate distribution received		-			32			-			32
AWN excess distribution		(2,867	)		-			(2,867	)		-
AWN distributions received		5,389			-			5,389			-
AWN distributions receivable within 14 days		4,167			-			4,167			-
Income tax expense		54,238			6,136			29,613			6,385
Stock-based compensation and long-term cash incentives		702			969			2,750			2,662
AWN transaction-related costs		4,702			587			5,974			5,046
Adjusted EBITDA	$	24,807		$	36,555		$	89,849		$	88,473
Less:
Incurred capital expenditures		(13,717	)		(13,876	)		(27,314	)		(36,319	)
Amortization of deferred AWN capacity revenue		(738	)		-			(738	)		-
AWN transaction-related capital costs, net change		-			342			(41	)		342
Cash interest expense		(6,818	)		(7,796	)		(25,201	)		(24,799	)
Free cash flow	$	3,534		$	15,225		$	36,555		$	27,697
Revenue	$	83,841		$	96,750		$	272,657		$	272,709
Adjusted EBITDA Margin		29.6	%		37.8	%		33.0	%		32.4	%

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, loss on extinguishment of debt, depreciation and amortization, loss on sale of short-term investments, gain or loss on asset purchases or disposals, earnings on equity method investments, gains and distributions related to AWN, amortization of deferred AWN service revenue, provisions for taxes, stock-based compensation, and AWN transaction-related costs, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by Operating Revenues. Additionally, the Company has disclosed Free cash flow as Adjusted EBITDA, less capital expenditures that create an obligation to pay (“incurred capital expenditures”), less amortization of deferred AWN capacity revenue, less AWN transaction-related capital costs, less cash interest expense. These measures are provided because the Company believes they are important indicators regarding our ability to make principal payments on debt and fund working capital. Adjusted EBITDA, Adjusted EBITDA Margin and Free cash flow are non-GAAP measures and should not be considered a substitute for net cash provided by operating activities and other measures of financial performance recorded in accordance with GAAP.

Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
REVENUE GROWTH
(Unaudited, In Thousands)
	Three Months Ended					Nine Months Ended
	September 30,					September 30,
Wireline revenue	2013			2012		2013			2012
Business and wholesale
Retail service revenue
Voice	$	5,790		$	5,967	$	17,303		$	18,046
Broadband		10,080			8,613		29,509			25,156
Equipment sales		480			311		1,340			927
Wholesale and other		9,193			9,736		28,288			29,686
Total business and wholesale revenue		25,543			24,627		76,440			73,815
Consumer
Retail service revenue
Voice		4,147			4,676		12,819			14,460
Broadband		5,596			4,613		16,443			13,469
Equipment sales		36			42		111			126
Other		478			413		1,275			971
Total consumer revenue		10,257			9,744		30,648			29,026
Access
High cost support		4,984			5,087		13,558			15,041
Switched, special and other access		9,273			10,024		28,056			30,503
Total access		14,257			15,111		41,614			45,544
Total wireline revenue		50,057			49,482		148,702			148,385
Wireless and backhaul revenue
Retail service revenue
Voice		9,993			12,355		31,824			37,231
Broadband		7,680			6,340		21,783			17,892
Equipment sales		1,255			1,737		3,785			4,594
Foreign roaming		5,594			18,919		40,029			40,996
Other		1,441			1,132		3,591			3,227
CETC		5,139			4,979		16,093			15,669
Wireless backhaul		1,944			1,806		6,112			4,715
Amortization of deferred AWN capacity		738			-		738			-
Total wireless and backhaul revenue		33,784			47,268		123,955			124,324
Total revenues	$	83,841		$	96,750	$	272,657		$	272,709
Revenue Growth:
Business and wholesale		3.7	%				3.6	%
Consumer		5.3	%				5.6	%
Wireline		1.2	%				0.2	%
Total revenue		-13.3	%				0.0	%
Broadband		19.4	%				19.8	%

Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
	Three Months Ended
	September 30,			June 30,			September 30,
	2013			2013			2012
Voice:
Consumer access lines		50,722			52,438			57,483
Business access lines		80,071			80,517			81,330
Voice ARPU consumer	$	26.81		$	27.25		$	26.65
Voice ARPU business	$	24.04		$	23.93		$	24.34
Broadband: (1)
Consumer connections		38,117			37,611			36,152
Business connections (2)		19,216			19,104			18,605
ARPU consumer	$	48.63		$	49.21		$	41.73
ARPU business (2)	$	175.00		$	174.87		$	154.02
Wireless:
Postpaid connections (3)		86,423			88,876			94,530
Lifeline connections		9,077			9,859			12,690
Prepaid connections		16,614			15,684			13,755
Total		112,114			114,419			120,975
Retail wireless ARPU	$	52.08		$	52.68		$	51.79
Wireless broadband ARPU	$	26.40		$	24.55		$	19.70
Churn:
Voice connections (4)		1.4	%		1.3	%		1.4	%
Broadband connections (1) (4)		2.4	%		2.0	%		2.3	%
Wireless connections		3.2	%		2.4	%		2.0	%
Wireless equipment subsidy		(1,062	)		(3,463	)		(2,608	)

(1)	Consumer and business broadband connections, ARPU, and churn have been restated to exclude dial up lines.
(2)	Business broadband connections counts have been restated to correct how certain high bandwidth circuits types are measured. These change have no affect on our financial results, but will affect connection count and ARPU amounts presented above compared to their presentation in prior periods.
(3)	September 30, 2013 Wireless connections have been reduced by 714, non-revenue generating, internal-use, connections.
(4)	Voice and broadband churn have been restated to exclude wholesale lines.

Schedule 7

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Summary AWN information
(Unaudited, In Thousands)

Alaska Wireless Network, LLC
Stand Alone Selected Operating Results
For the Period July 23, 2013 - September 30, 2013
Operating revenues		$	58,826
Operating expenses:
	Cost of services and sales		22,258
	Selling, general & administrative		3,908
	Depreciation and amortization		7,327
Total operating expenses			33,493
Operating income			25,333
Other income and (expense)			(74	)
Net income			25,259		A
Plus:	Depreciation Expense		7,327
	Other, net		753
Minus:	Capital Spending		12,435
	Management Fee to GCI		836
Adjusted Free Cash Flow		$	20,068		D
Distributions paid or payable to ACS:
(includes balance to be received with 12 days)			9,556		E
Distributions to ACS as a proportion of Free Cash Flow:			47.6	%

The above information reflects summary unaudited financial performance of AWN, which Alaska Communication owns a 33.3% ownership interest. Certain additional summary information is included in our Form 10-Q filings.

Key AWN Results Included in the ACS Consolidated Balance Sheet:
Equity method investment	$	205,542
Deferred AWN capacity revenue:	$	76,337
Accounts payable, accrued and other current liabilities	$	3,852
Other long-term liabilities	$	72,485

Investment in AWN represents the value of ACS's 1/3 ownership interest in AWN. Deferred revenue represents capacity contributions and the operations and maintenance support of these capacity contributions for AWN's network. The benefit of this deferred revenue is recognized over 20 years.

Key AWN Results included in the ACS Consolidated Income Statement:

AWN net income	$	25,259		A
Adjusted for step-up in GCI assets		(1,066	)	B
AWN stepped-up earnings	$	24,193		C
Adjusted Free Cash Flow	$	20,068		D
Distributions paid or payable to ACS	$	9,556		E
ACS ownership percentage of AWN		33.33	%	F

"Adjusted for step-up"(B) reflects the step up on basis on the GCI contributed assets to AWN and associated higher depreciation expense that ACS is required to incorporate in its consolidated financial statements.

Earnings on equity method investment in AWN	$	8,064	C * F
Distributions paid or payable to ACS	$	9,556	E
Hypothetical distributions at 33.3%		6,689	D * F
AWN excess distribution	$	2,867

AWN's stepped up net income is used to calculate the equity in earnings at ACS' 1/3 ownership percentage or $8,064. Additionally, an AWN excess distribution, or $2,867, is recognized in the quarter to reflect the disproportionate nature of the AWN preferred distributions.

Key AWN Results Included in the ACS Non GAAP financial measures:
Cash distributions received during the quarter		$	5,389
Less:	Distributions received during the quarter related to the previous period		-
Plus:	Distributions received within 14 business days of quarter-end		4,167
	Amortization of deferred AWN capacity revenue		738
Equals	AWN impact to Adjusted EBITDA	$	10,294
Less:	Amortization of deferred AWN capacity revenue		738
Equals	AWN impact to Free Cash Flow	$	9,556

In our non-GAAP reporting of Adjusted EBITDA, ACS is using our Senior Credit Agreement definition, as amended, for the AWN distribution, which is distributions received or eligible to be received within 14 business days.

CONTACT:
Alaska Communications
Investors:
Wayne Graham, 907-564-3314
Chief Financial Officer
investors@acsalaska.com