Exhibit 99.1
GCI REPORTS FIRST QUARTER 2017 FINANCIAL RESULTS
Net Loss of $55 million
Consolidated Revenue of $228 million
Pro Forma EBITDA of $73 million
May 3, 2017, Anchorage, Alaska - General Communication, Inc. (“GCI”) (NASDAQ: GNCMA) announces its results for the first quarter of 2017.
Liberty Interactive Transaction:
On April 4th GCI and Liberty Interactive Corporation announced the signing of an agreement to combine GCI with certain assets of the Liberty Ventures Group (“Liberty Ventures”). The new company will be named GCI Liberty. As part of the transaction GCI shareholders will receive 0.63 shares of a reclassified GCI Class A common stock and 0.20 shares of a new GCI Series A preferred stock. The exchange ratios were determined based on a total consideration of $32.50 per share for existing GCI common stock, comprised of $27.50 per share in reclassified GCI Class A common stock and $5.00 per share in a newly issued GCI preferred stock, and a Liberty Ventures reference price of $43.65 (with no premium paid for shares of GCI Class B common stock). The transaction is subject to regulatory review, and applicable regulatory filings are in process. The transaction is expected to close in the first quarter of 2018.
We recently received consent from our bondholders to waive any change of control put rights in connection with the transaction. We are in the process of completing an amendment of our Senior Credit Facility to allow for the transaction.
Net Loss:
The net income for the quarter was negatively affected by a significantly higher income tax expense for the quarter than we expect to record for the entire year. This highly unusual outcome does not affect Adjusted EBITDA, Cash Flow or our Net Operating Losses. More information about this can be seen in our 10-Q.
Operating Segment:
In 2017, we merged our former Wireless and Wireline segments into one operating segment to reflect changes in how we manage the business. The former wireless segment revenues are now reflected in the consumer and business customer groups as follows:
1. | Wholesale Wireless is reported in Consumer or Business wireless, according to which customer type is providing that revenue. |
2. | Roaming and Backhaul is reported in Business wireless. |
3. | High Cost USF Revenue is reported in Consumer wireless revenue. |
Operating and Financial Highlights
Our first quarter revenues were $228 million, a decline of $4 million sequentially and $3 million from the first quarter of 2016 (down approximately 1% year-over-year) driven by weakness in consumer wireless and video. Pro Forma EBITDA, which is Adjusted EBITDA plus $4 million of one-time Liberty transaction costs in the quarter, was $73 million. This is up $5 million from the previous quarter and $2 million year over year. Pro Forma EBITDA is up due to savings achieved in procurement initiatives and our circuit costs.
As we mentioned in our year end call we are focusing on operating efficiencies and cost savings. This quarter we had Pro Forma EBITDA margins of 32.0 percent compared to 30.6 percent in the first quarter of 2016 and 29.1 percent in the fourth quarter of 2016.
Consumer
Consumer revenues of $107 million in the first quarter are down $7 million or six percent year-over-year and down $4 million or three percent sequentially. Declining wireless plan fees, which was an industry wide trend in the first quarter, was partially responsible for the revenue declines. Our video subscribers were down six percent year-over year which also contributed to the declining revenue.
Our total wireless subscribers were down 500 in the first quarter and were associated with pre-paid subscriber losses. Our “Better than Unlimited” wireless plan is gaining traction in the market and we will be able to offer non-907 phone number porting with our plans soon.
Business
GCI Business revenues were $121 million in the first quarter. This is up $4 million or three percent year-over-year and flat sequentially. Sales of data products led to the revenue increase in business, which was partially offset by declines in voice and video.
SG&A
SG&A expenses were $94 million during the quarter. Excluding the one-time Liberty transaction costs of $4 million, the expenses were up $2 million or two percent year-over-year and down $4 million or five percent sequentially. The sequential decline is a result of one-time charges in the fourth quarter of 2016.
Capital Expenditures
Capital expenditures for the quarter totaled $28 million.
Leverage
After adding back the roaming adjustment and Liberty transaction costs, our net debt to trailing 12 months Adjusted EBITDA was 4.7x as of March 31st 2017.
2017 Guidance
Pro Forma EBITDA is expected to be between $300 million and $325 million in 2017, excluding costs related to the Liberty transaction.
Capital expenditures are expected to be approximately $165 million in 2017.
Use of Non-GAAP Measure
Pro-Forma and Adjusted EBITDA are presented herein and are non-GAAP measures. See our attached financials for a reconciliation of these non-GAAP measures to the nearest GAAP measure.
Adjusted EBITDA guidance is a forward-looking non-GAAP financial measure presented herein. Reconciliation to the most directly comparable GAAP financial measure is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty regarding the occurrence, the financial impact and the periods with respect to recognition of future GAAP financial measures. We also believe that such a reconciliation would imply an inappropriate degree of precision. For the same reasons, we are unable to address the probable significance of the unavailable information.
Conference Call
The company will hold a conference call to discuss the financial results on Thursday, May 4th, at 2:00 p.m. (Eastern). To access the call, call the conference operator between 1:45-2:00 p.m. (Eastern) at 844-850-0551 (International callers should dial +1-412-902-4197) and identify your call as “GCI”.
In addition to dial-up access, GCI will make available net conferencing. To access the call via net conference, log on to ir.gci.com and follow the instructions.
A replay of the call will be available, beginning at 4:00pm, for 72-hours by dialing 877-344-7529, access code 10104277 (International callers should dial +1-412-317-0088).
Forward-Looking Statement Disclosure
The foregoing contains forward-looking statements regarding GCI’s expected results that are based on management’s expectations as well as on a number of assumptions concerning future events. Actual results might differ materially from those projected in the forward-looking statements due to uncertainties and other factors, many of which are
outside GCI’s control. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in GCI’s cautionary statement sections of Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
About GCI
GCI is the largest communications provider in Alaska, providing data, wireless, video, voice and managed services to consumer and business customers throughout Alaska and nationwide. Headquartered in Alaska, GCI has delivered services for nearly 40 years to some of the most remote communities and in some of the most challenging conditions in North America. Learn more about GCI at www.gci.com.
Contacts:
Investors: Kyle Jones, 907.868.7105, kjones@gci.com
Media: Heather Handyside, 907.868.6838, hhandyside@gci.com
# # #
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
(Amounts in thousands) | ||||||
March 31, | December 31, | |||||
ASSETS | 2017 | 2016 | ||||
Current assets: | ||||||
Cash and cash equivalents | $ | 14,759 | 19,297 | |||
Receivables | 212,585 | 184,296 | ||||
Less allowance for doubtful receivables | 4,408 | 4,407 | ||||
Net receivables | 208,177 | 179,889 | ||||
Prepaid expenses | 21,852 | 18,599 | ||||
Inventories | 9,370 | 11,945 | ||||
Other current assets | 139 | 167 | ||||
Total current assets | 254,297 | 229,897 | ||||
Property and equipment | 2,642,130 | 2,614,875 | ||||
Less accumulated depreciation | 1,497,542 | 1,452,957 | ||||
Net property and equipment | 1,144,588 | 1,161,918 | ||||
Goodwill | 242,108 | 239,263 | ||||
Cable certificates | 191,635 | 191,635 | ||||
Wireless licenses | 92,347 | 92,347 | ||||
Other intangible assets, net of amortization | 78,248 | 74,444 | ||||
Other assets | 80,408 | 76,435 | ||||
Total other assets | 684,746 | 674,124 | ||||
Total assets | $ | 2,083,631 | 2,065,939 | |||
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
(Continued) | ||||||
(Amounts in thousands) | ||||||
March 31, | December 31, | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | 2017 | 2016 | ||||
Current liabilities: | ||||||
Current maturities of obligations under long-term debt, capital leases, and tower obligation | $ | 13,429 | 13,229 | |||
Accounts payable | 50,975 | 72,937 | ||||
Deferred revenue | 39,037 | 37,618 | ||||
Accrued payroll and payroll related obligations | 30,134 | 30,305 | ||||
Accrued interest (including $894 and $5,132 to a related party at March 31, 2017 and December 31, 2016, respectively) | 22,886 | 13,926 | ||||
Accrued liabilities | 15,230 | 14,729 | ||||
Subscriber deposits | 1,070 | 917 | ||||
Total current liabilities | 172,761 | 183,661 | ||||
Long-term debt, net (including $57,130 and $56,640 to a related party at March 31, 2017 and December 31, 2016, respectively) | 1,363,793 | 1,333,446 | ||||
Obligations under capital leases, excluding current maturities (including $1,754 and $1,769 due to a related party at March 31, 2017 and December 31, 2016, respectively) | 47,843 | 50,316 | ||||
Deferred income taxes | 177,480 | 137,982 | ||||
Long-term deferred revenue | 137,885 | 135,877 | ||||
Tower obligation | 91,221 | 87,653 | ||||
Other liabilities (including $32,610 and $29,700 for derivative stock appreciation rights with a related party at March 31, 2017 and December 31, 2016, respectively) | 87,312 | 83,756 | ||||
Total liabilities | 2,078,295 | 2,012,691 | ||||
Commitments and contingencies | ||||||
Stockholders’ equity: | ||||||
Common stock (no par): | ||||||
Class A. Authorized 100,000 shares; issued 32,909 and 32,668 shares at March 31, 2017 and December 31, 2016, respectively; outstanding 32,883 and 32,642 shares at March 31, 2017 and December 31, 2016, respectively | — | — | ||||
Class B. Authorized 10,000 shares; issued and outstanding 3,153 at March 31, 2017 and December 31, 2016; convertible on a share-per-share basis into Class A common stock | 2,663 | 2,663 | ||||
Less cost of 26 Class A common shares held in treasury at March 31, 2017 and December 31, 2016 | (249 | ) | (249 | ) | ||
Paid-in capital | 6,358 | 3,237 | ||||
Retained earnings (deficit) | (36,557 | ) | 17,068 | |||
Total General Communication, Inc. stockholders' equity | (27,785 | ) | 22,719 | |||
Non-controlling interests | 33,121 | 30,529 | ||||
Total stockholders’ equity | 5,336 | 53,248 | ||||
Total liabilities and stockholders’ equity | $ | 2,083,631 | 2,065,939 |
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||
(Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
(Amounts in thousands, except per share amounts) | 2017 | 2016 | ||||
Revenues | $ | 228,115 | 231,098 | |||
Cost of goods sold (exclusive of depreciation and amortization shown separately below) | 69,274 | 76,291 | ||||
Selling, general and administrative expenses | 93,558 | 87,646 | ||||
Depreciation and amortization expense | 49,937 | 47,142 | ||||
Operating income | 15,346 | 20,019 | ||||
Other income (expense): | ||||||
Interest expense (including amortization of deferred loan fees) | (19,836 | ) | (19,171 | ) | ||
Interest expense with related party | (1,877 | ) | (1,831 | ) | ||
Derivative instrument unrealized income (loss) with related party | (2,910 | ) | 4,530 | |||
Other | 627 | 502 | ||||
Other expense, net | (23,996 | ) | (15,970 | ) | ||
Income (loss) before income taxes | (8,650 | ) | 4,049 | |||
Income tax expense | (46,596 | ) | (3,067 | ) | ||
Net income (loss) | (55,246 | ) | 982 | |||
Net loss attributable to non-controlling interests | (117 | ) | (117 | ) | ||
Net income (loss) attributable to General Communication, Inc. | $ | (55,129 | ) | 1,099 | ||
Basic net income (loss) attributable to General Communication, Inc. common stockholders per Class A common share | $ | (1.60 | ) | 0.03 | ||
Basic net income (loss) attributable to General Communication, Inc. common stockholders per Class B common share | $ | (1.60 | ) | 0.03 | ||
Diluted net loss attributable to General Communication, Inc. common stockholders per Class A common share | $ | (1.60 | ) | (0.04 | ) | |
Diluted net loss attributable to General Communication, Inc. common stockholders per Class B common share | $ | (1.60 | ) | (0.04 | ) | |
Common shares used to calculate Class A basic EPS | 31,220 | 33,696 | ||||
Common shares used to calculate Class A diluted EPS | 34,373 | 37,746 |
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | |||||||||
SUPPLEMENTAL SCHEDULES | |||||||||
(Unaudited) | |||||||||
(Amounts in thousands) | |||||||||
First Quarter 2017 | First Quarter 2016 | Fourth Quarter 2016 | |||||||
Revenues | |||||||||
Wireless | $ | 65,462 | 68,260 | 68,650 | |||||
Data | 114,154 | 106,971 | 111,388 | ||||||
Video | 29,061 | 33,409 | 31,583 | ||||||
Voice | 19,438 | 22,458 | 20,672 | ||||||
Total | 228,115 | 231,098 | 232,293 | ||||||
Cost of goods sold | 69,274 | 76,291 | 74,652 | ||||||
Contribution | 158,841 | 154,807 | 157,641 | ||||||
Less SG&A | (93,558 | ) | (87,646 | ) | (93,714 | ) | |||
Plus share-based compensation | 3,138 | 2,327 | 3,223 | ||||||
Plus imputed interest on financed devices | 681 | 601 | 672 | ||||||
Plus accretion | 490 | 392 | (11 | ) | |||||
Other | (783 | ) | 125 | (98 | ) | ||||
Adjusted EBITDA | 68,809 | 70,606 | 67,713 | ||||||
Liberty transaction costs | 4,208 | — | — | ||||||
Pro Forma EBITDA | $ | 73,017 | 70,606 | 67,713 |
General Communication, Inc. | ||||||||||
Non-GAAP Financial Reconciliation Schedule | ||||||||||
(Unaudited, Amounts in Thousands) | ||||||||||
Three Months Ended | ||||||||||
March 31, | March 31, | December 31, | ||||||||
2017 | 2016 | 2016 | ||||||||
Net income (loss) | $ | (55,246 | ) | 982 | (16,243 | ) | ||||
Income tax expense (benefit) | 46,596 | 3,067 | (2,391 | ) | ||||||
Income (loss) before income taxes | (8,650 | ) | 4,049 | (18,634 | ) | |||||
Other (income) expense: | ||||||||||
Interest expense (including amortization of deferred loan fees) | 19,836 | 19,171 | 20,429 | |||||||
Related party interest expense | 1,877 | 1,831 | 1,897 | |||||||
Derivative instrument unrealized (income) loss with related party | 2,910 | (4,530 | ) | 12,720 | ||||||
Loss on extinguishment of debt | — | — | 640 | |||||||
Other | (627 | ) | (502 | ) | (3,867 | ) | ||||
Other expense, net | 23,996 | 15,970 | 31,819 | |||||||
Operating income | 15,346 | 20,019 | 13,185 | |||||||
Plus depreciation and amortization expense | 49,937 | 47,142 | 50,742 | |||||||
Plus share-based compensation expense | 3,138 | 2,327 | 3,223 | |||||||
Plus imputed interest on financed devices | 681 | 601 | 672 | |||||||
Plus accretion expense | 490 | 392 | (11 | ) | ||||||
Other | (783 | ) | 125 | (98 | ) | |||||
Adjusted EBITDA (Note 1) | 68,809 | 70,606 | 67,713 | |||||||
Liberty transaction costs | 4,208 | — | — | |||||||
Pro Forma EBITDA (Note 2) | $ | 73,017 | 70,606 | 67,713 | ||||||
Note: |
(1) Earnings plus imputed interest on financed devices before:
•Net interest expense,
•Income taxes,
•Depreciation and amortization expense,
•Loss on extinguishment of debt,
•Derivative instrument unrealized income (loss),
•Share-based compensation expense,
•Accretion expense,
•Loss attributable to non-controlling interest resulting from NMTC transactions,
•Gains and impairment losses on equity and cost method investments, and
•Other non-cash adjustments.
(2) Adjusted EBITDA plus Liberty transaction costs.
Adjusted and Pro Forma EBITDA are not presented as an alternative measure of net income, operating income or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. GCI's management uses Adjusted EBITDA and Pro Forma EBITDA to evaluate the operating performance of its business, and as a measure of performance for incentive compensation purposes. GCI believes Adjusted EBITDA and Pro Forma EBITDA are useful to investors and other users of our financial information in understanding and evaluating operating performance as an analytical indicator of income generated to service debt and fund capital expenditures. In addition, multiples of current or projected Adjusted EBITDA and Pro Forma EBITDA are used to estimate current or prospective enterprise value. Adjusted EBITDA and Pro Forma EBITDA do not give effect to cash used for debt service requirements, and thus do not reflect funds available for investment or other discretionary uses. Adjusted EBITDA and Pro Forma EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies.
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | ||||||||||||||
SUPPLEMENTAL REVENUE SCHEDULES | ||||||||||||||
(Unaudited) | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
First Quarter 2017 | First Quarter 2016 | |||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||
Revenues | ||||||||||||||
Wireless | $ | 40,100 | 25,362 | 65,462 | 43,404 | 24,856 | 68,260 | |||||||
Data | 36,088 | 78,066 | 114,154 | 34,960 | 72,011 | 106,971 | ||||||||
Video | 24,939 | 4,122 | 29,061 | 28,347 | 5,062 | 33,409 | ||||||||
Voice | 6,061 | 13,377 | 19,438 | 7,042 | 15,416 | 22,458 | ||||||||
Total | $ | 107,188 | 120,927 | 228,115 | 113,753 | 117,345 | 231,098 | |||||||
(Amounts in thousands) | ||||||||||||||
First Quarter 2017 | Fourth Quarter 2016 | |||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||
Revenues | ||||||||||||||
Wireless | $ | 40,100 | 25,362 | 65,462 | 43,352 | 25,298 | 68,650 | |||||||
Data | 36,088 | 78,066 | 114,154 | 35,163 | 76,225 | 111,388 | ||||||||
Video | 24,939 | 4,122 | 29,061 | 26,011 | 5,572 | 31,583 | ||||||||
Voice | 6,061 | 13,377 | 19,438 | 6,377 | 14,295 | 20,672 | ||||||||
Total | $ | 107,188 | 120,927 | 228,115 | 110,903 | 121,390 | 232,293 | |||||||
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES | |||||||||||||||||
KEY PERFORMANCE INDICATORS | |||||||||||||||||
(Unaudited) | |||||||||||||||||
March 31, 2017 | March 31, 2017 | ||||||||||||||||
as compared to | as compared to | ||||||||||||||||
March 31, | March 31, | December 31, | March 31, | December 31, | March 31, | December 31, | |||||||||||
2017 | 2016 | 2016 | 2016 | 2016 | 2016 | 2016 | |||||||||||
Consumer | |||||||||||||||||
Data | |||||||||||||||||
Cable modem subscribers1 | 130,900 | 130,900 | 130,700 | — | 200 | — | % | 0.2 | % | ||||||||
Video | |||||||||||||||||
Basic subscribers2 | 106,100 | 112,700 | 108,200 | (6,600 | ) | (2,100 | ) | (5.9 | )% | (1.9 | )% | ||||||
Digital programming tier subscribers3 | 48,000 | 57,800 | 52,100 | (9,800 | ) | (4,100 | ) | (17.0 | )% | (7.9 | )% | ||||||
HD/DVR converter boxes4 | 112,400 | 118,000 | 116,200 | (5,600 | ) | (3,800 | ) | (4.7 | )% | (3.3 | )% | ||||||
Homes passed | 250,800 | 253,100 | 250,800 | (2,300 | ) | — | (0.9 | )% | — | % | |||||||
Voice | |||||||||||||||||
Local access lines in service5 | 52,700 | 54,900 | 53,400 | (2,200 | ) | (700 | ) | (4.0 | )% | (1.3 | )% | ||||||
Business | |||||||||||||||||
Data | |||||||||||||||||
Cable modem subscribers1 | 9,900 | 9,700 | 10,100 | 200 | (200 | ) | 2.1 | % | (2.0 | )% | |||||||
Voice | |||||||||||||||||
Local access lines in service5 | 40,300 | 41,600 | 41,100 | (1,300 | ) | (800 | ) | (3.1 | )% | (1.9 | )% | ||||||
Consumer and Business Combined | |||||||||||||||||
Wireless | |||||||||||||||||
Consumer Lifeline lines in service | 27,200 | 28,000 | 27,200 | (800 | ) | — | (2.9 | )% | — | % | |||||||
Consumer prepaid lines in service | 27,800 | 23,900 | 28,500 | 3,900 | (700 | ) | 16.3 | % | (2.5 | )% | |||||||
Consumer postpaid lines in service6 | 143,600 | 149,100 | 142,900 | (5,500 | ) | 700 | (3.7 | )% | 0.5 | % | |||||||
Business postpaid lines in service6 | 23,400 | 25,000 | 23,900 | (1,600 | ) | (500 | ) | (6.4 | )% | (2.1 | )% | ||||||
Total wireless lines in service | 222,000 | 226,000 | 222,500 | (4,000 | ) | (500 | ) | (1.8 | )% | -0.2 | % | ||||||
1 On January 1, 2017, we transferred 3,100 small business cable modem subscribers from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | |||||||||||||||||
2 On January 1, 2017, we transferred 500 small business basic subscribers from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | |||||||||||||||||
3 On January 1, 2017, we transferred 100 small business digital programming tier subscribers from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | |||||||||||||||||
4 On January 1, 2017, we transferred 300 small business HD/DVR converter boxes from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | |||||||||||||||||
5 On January 1, 2017, we transferred 4,800 small business local access lines from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | |||||||||||||||||
6 On January 1, 2017, we transferred 3,700 small business postpaid wireless lines from Business to Consumer. We adjusted the previously reported subscriber numbers as of March 31, 2016 for the number of subscribers that were transferred on January 1, 2017. |