EXHIBIT 99.1
FOR MORE INFORMATION, CONTACT:
Alaska Communications Systems Group, Inc. the blueshirt group
Kevin P. Hemenway Chris Danne, Brinlea Johnson
Chief Financial Officer (415) 217-7722
(907) 297-3000 chris@blueshirtgroup.com
www.acsalaska.com brinlea@blueshirtgroup.com
ALASKA COMMUNICATIONS SYSTEMS REPORTS THIRD QUARTER RESULTS
LOCAL TELEPHONE, WIRELESS, INTERNET AND LONG DISTANCE GROW YEAR-OVER-YEAR
COMPANY TAKES CHARGES RELATED TO CONTRACT TERMINATION AND ASSET IMPAIRMENT
ANCHORAGE, Alaska -- Alaska Communications Systems Group, Inc. ("ACS")
(Nasdaq:ALSK) today reported financial results for the third quarter ended
September 30, 2003.
Revenues for the third quarter of 2003 increased on a year-over-year basis to
$78.2 million, when compared to revenues of $75.1 million from the same period
last year, excluding directory revenues. The net loss for the quarter was $75.6
million or $2.54 per share for the third quarter of 2003, compared to net loss
of $7.0 million, or $0.22 per share for the same period in 2002.
During the third quarter, ACS recorded charges totaling $83.4 million, of which
$73.5 million were non-cash, and recorded a gain of $15.9 million. Excluding
these factors, operating income for the third quarter would have been $3.9
million and EBITDA would have been $26.6 million. This compares to operating
income of $1.0 million and EBITDA of $25.8 million for the third quarter of 2002
after adjusting for $8.4 million of revenue and $3.4 million of expense
associated with the directories business.
"During the quarter, we took a number of charges related to the termination of
the State of Alaska contract and evaluating the carrying value of our asset base
for impairment," commented Liane Pelletier, President and CEO of ACS. "These
charges mask important signs of progress at ACS. Each of our four business units
- - local telephone, cellular, Internet and long distance - showed revenue growth
over normalized revenues for the prior year period. Wireless continued to be a
very strong contributor, with record revenues, MOU and EBITDA, and we will soon
be rolling out our CDMA 1X and EVDO product offering that will revolutionize
wireless telecommunications in Alaska. We also had an excellent quarter in DSL,
adding approximately 1,500 customers and we began to sell a satellite
entertainment product very price competitive with the local cable monopoly
including all the local channels Alaskans love to watch. Finally, our July and
August bundling campaign had its intended consequence of improving our
competitive position among local service customers."
"Moving forward, we will focus on better serving our customers by providing a
one-stop shop for all of their telecommunications needs," added Ms. Pelletier.
"To accomplish this, we will move to a customer-centric business model and we
will work to earn their loyalty with each interaction. We believe the many
systemic changes associated with this one-stop shop strategy will position ACS
as Alaska's premier telecommunications company."
"In August, we completed the sale of the remaining interest in the directory
business, which resulted in a gain of $15.9 million and raised net proceeds of
$17.3 million. We also refinanced our indebtedness providing additional balance
sheet cash and extending our first significant debt maturities from 2006 to
2009," commented Kevin P. Hemenway, Senior Vice President and CFO of ACS. "These
changes solidified our capital structure and have allowed us to enter the fourth
quarter with $121.2 million in cash, representing a $56.6 million increase from
the prior quarter, and with an available $50 million line of credit. Under the
leadership of Liane Pelletier, our strong balance sheet position will enable us
to make continued strategic investment in the Company's growth initiatives."
RECENT HIGHLIGHTS
- On September 15, 2003, ACS announced the appointment of Liane Pelletier as
CEO and President and the retirement of Charles E. Robinson as CEO. Ms.
Pelletier, who joined ACS and its Board of Directors on
October 6, joins ACS after spending 17 years at Sprint Corporation, most
recently as Chief Integration Officer and a member of the Executive
Management Committee.
- On September 2, 2003, ACS announced the sale of substantially all of its
remaining interest in its former directories business. ACS now owns only a
0.10% interest in ACS Media, LLC, but will continue its close relationship
with the leading directory in Alaska through a number of long-term
contracts.
- On August 26, 2003, the Company announced that it has completed the
issuance of $182 million aggregate principal amount of 9 7/8% senior
unsecured notes due 2011 and entered into a new bank credit facility of
$250 million, including an undrawn $50 million revolving line of credit.
The proceeds of the debt issuance were used to retire $320.7 million of
old bank debt and to provide cash working capital for other corporate
purposes.
- On August 12, 2003, ACS announced an agreement with EchoStar Satellite
Corporation, a subsidiary of EchoStar Communications Corporation (NASDAQ:
DISH), to sell and market EchoStar's DISH Network service in Alaska.
OPERATIONAL SUMMARY
- Local telephone revenues for the third quarter were up $446,000
year-over-year.
o Access lines ended at 315,988, which is a sequential decrease of 0.7%
or 2,240 lines. In line with LECs in the lower 48, ACS access line
declines result from displacement by broadband and wireless and the
continuing impact of a sluggish economy. During the quarter, the
company's service bundles aimed at winning back local telephone
customers significantly slowed the rate of competitive line loss: 620
for the third quarter versus 1,909 for the second quarter of 2003.
o Local network service revenues were down $164,000 compared to the prior
year period.
o Access revenues were essentially flat with the prior year period.
o Deregulated and other revenues were up $0.7 million from last year as
both rents and billing and collection revenues increased.
- Cellular revenues grew by 6% from the prior year period as the Company
added over 2,400 subscribers. Average Revenue per Unit, or ARPU, improved
by $1.52 to $50.30 and MOU (Minutes of Use) increased by 15.4% over the
same period last year.
- Internet revenues were up significantly on a year-over-year basis. This
reflects the Company's successful DSL campaigns - ACS ended the quarter
with 16,294 DSL subscribers, an increase of almost 1,500 subscribers on a
sequential basis. Additionally, the quarter's Internet revenues included
$3.9 million from the State of Alaska. This contract is winding down
during the fourth quarter, which will result in declining revenues and
costs. The Company expects overall profitability to be improved as a
result.
- Long distance revenues were up 3.7% compared to the prior year period. ACS
also reported a change in the accounting for its fiber capacity usage
between segments, resulting in a reclassification that reduced revenue and
expense by approximately $0.8 million in both the current and prior year
quarters.
- Operating expenses for the quarter, before depreciation and amortization
and the gain on disposal of assets, grew by $1.6 million on a sequential
basis. The quarter included $3.2 million related to executive retirement
and recruiting and prior years federal universal service charges.
CHARGES, GAINS AND OUT-OF-PERIOD SETTLEMENTS
- During the third quarter, ACS recorded charges totaling $83.4 million and
recorded a gain of $15.9 million. Of the $83.4 million in charges, $73.5
million were non-cash. These charges and the gain consisted of:
o a $12.4 million charge related to the termination of the Company's
contract with the State of Alaska;
o $42.2 million in asset impairment charges under FAS 144;
o a $3.2 million charge related to executive retirement and recruiting
and prior years federal universal service charges;
o a non-operating $15.9 million charge related to a loan made to Neptune
Communications, and;
o a $9.7 million charge to interest expense for unamortized debt issue
costs as a result of refinancing completed during the quarter;
o and a gain of $15.9 million during the quarter resulting from the sale
of substantially all of the remaining interest in ACS Media, LLC on
August 29, 2003.
ACS will host a conference call at 5:00 P.M. Eastern time today to discuss its
third quarter results. The access dial-in number for the call is 800-218-0713
for domestic callers or 303-205-0033 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 544224.
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 316,000 access lines,
84,000 cellular customers, 43,500 long distance customers and 45,000 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. The information contained in this release is as of October 30, 2003. 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 AND NINE
MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
(UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------ ------------------------
2003 2002 2003 2002
--------- --------- --------- ---------
Operating revenues:
Local telephone $ 53,261 $ 52,815 $ 162,472 $ 172,128
Wireless 12,591 11,903 34,868 32,420
Directory -- 8,360 11,631 25,382
Internet 8,223 6,422 24,416 14,815
Interexchange 4,147 3,998 12,623 11,991
--------- --------- --------- ---------
Total operating revenues 78,222 83,498 246,010 256,736
Operating expenses:
Local telephone 30,160 27,968 84,267 88,221
Wireless 7,545 7,441 21,796 21,329
Directory -- 3,408 5,249 10,366
Internet 11,730 8,756 35,829 21,904
Interexchange 6,056 5,723 17,886 17,494
Depreciation and amortization 22,044 22,458 66,735 61,690
Contract termination and asset impairment charges 54,539 -- 54,539 --
Loss (gain) on disposal of assets, net (15,968) 1,835 (112,507) 2,108
--------- --------- --------- ---------
Total operating expenses 116,106 77,589 173,794 223,112
Operating income (loss) (37,884) 5,909 72,216 33,624
Other income and expense:
Interest expense (22,586) (13,396) (51,478) (38,402)
Interest income and other (15,100) 578 (10,121) 1,626
--------- --------- --------- ---------
Total other income (expense) (37,686) (12,818) (61,599) (36,776)
--------- --------- --------- ---------
Income (loss) before income taxes (75,570) (6,909) 10,617 (3,152)
Income taxes -- -- -- --
--------- --------- --------- ---------
Income (loss) from continuing operations (75,570) (6,909) 10,617 (3,152)
Loss from discontinued operations -- (136) (52) (7,523)
--------- --------- --------- ---------
Income (loss) before cumulative effect of change in accounting principle (75,570) (7,045) 10,565 (10,675)
Cumulative effect of change in accounting principle, net of tax -- -- -- (105,350)
--------- --------- --------- ---------
Net income (loss) $ (75,570) $ (7,045) $ 10,565 $(116,025)
========= ========= ========= =========
Income (loss) per share - basic and diluted:
Income (loss) from continuing operations $ (2.54) $ (0.22) $ 0.35 $ (0.10)
Loss from discontinued operations -- (0.00) (0.00) (0.24)
Cumulative effect of change in accounting principle, net of tax -- -- -- (3.32)
--------- --------- --------- ---------
Net income (loss) $ (2.54) $ (0.22) $ 0.35 $ (3.66)
========= ========= ========= =========
Weighted average shares outstanding:
Basic 29,786 31,653 30,165 31,721
========= ========= ========= =========
Diluted 29,786 31,653 30,165 31,735
========= ========= ========= =========
EBITDA from continuing operations $ 16,694 $ 30,780 $ 75,821 $ 99,048
========= ========= ========= =========
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)
SEPTEMBER 30, DECEMBER 31,
ASSETS 2003 2002
----------- -----------
Current assets:
Cash and cash equivalents $ 121,160 $ 18,565
Restricted cash 555 3,440
Accounts receivable-trade, net of allowance of $6,255 and $6,075 39,470 48,820
Materials and supplies 10,327 11,203
Prepayments and other current assets 6,266 6,172
Assets held for sale -- 261
----------- -----------
Total current assets 177,778 88,461
Investments 10 --
Property, plant and equipment 1,055,802 1,090,365
Less: Accumulated depreciation and amortization 671,447 625,276
----------- -----------
Property, plant and equipment, net 384,355 465,089
Goodwill 38,403 77,225
Intangible Assets 22,561 23,269
Debt issuance costs, net of amortization of $32,218 and $16,365 19,676 21,529
Deferred charges and other assets 8,463 26,047
----------- -----------
Total assets $ 651,246 $ 701,620
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations $ 2,020 $ 5,649
Accounts payable-affiliate 898 1,319
Accounts payable, accrued and other current liabilities 49,331 49,796
Advance billings and customer deposits 8,871 9,804
----------- -----------
Total current liabilities 61,120 66,568
Long-term obligations, net of current portion 549,039 602,114
Other deferred credits and long-term liabilities 28,312 32,930
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, 33,568 and
33,481 shares issued and 29,441 and 30,745 outstanding, respectively 336 334
Treasury stock, 4,126 and 2,737 shares, respectively, at cost (16,378) (12,082)
Paid in capital in excess of par value 277,945 277,810
Accumulated deficit (236,603) (247,168)
Accumulated other comprehensive loss (12,525) (18,886)
----------- -----------
Total stockholders' equity 12,775 8
----------- -----------
Total liabilities and stockholders' equity $ 651,246 $ 701,620
=========== ===========
SCHEDULE 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(UNAUDITED, IN THOUSANDS)
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
2003 2002 2003 2002
-------- -------- -------- --------
Local telephone revenues:
Local network service $ 24,022 $ 24,186 $ 73,370 $ 74,870
Network access revenue 23,750 23,862 73,951 83,827
Deregulated and other 5,489 4,767 15,151 13,431
-------- -------- -------- --------
Local telephone revenues $ 53,261 $ 52,815 $162,472 $172,128
======== ======== ======== ========
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 NINE MONTHS ENDED
September 30, September 30,
---------------------- ----------------------
2003 2002 2003 2002
-------- -------- -------- --------
Income (loss) from continuing operations $(75,570) $ (6,909) $ 10,617 $ (3,152)
Add (subtract):
Interest expense 22,586 13,396 51,478 38,402
Income taxes -- -- -- --
Depreciation and amortization 22,044 22,458 66,735 61,690
Gain on foreign exchange (157) -- (4,261) --
Loss (gain) on disposal of assets
and asset impairment charges, net 47,791 1,835 (48,748) 2,108
-------- -------- -------- --------
EBITDA from continuing operations $ 16,694 $ 30,780 $ 75,821 $ 99,048
======== ======== ======== ========
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 SEPTEMBER 30,
2003 2002
------- -------
Local telephone:
Retail access lines 224,744 241,583
Wholesale access lines 18,795 25,074
UNE loop lines 67,542 60,504
UNE platform lines 4,907 --
------- -------
Total local telephone access lines 315,988 327,161
======= =======
Average local telephone access lines for the quarter 317,108 328,037
Average local telephone revenue per line for the quarter $ 55.99 $ 53.67
Quarterly growth rate in local telephone access lines -0.7% -0.5%
Wireless
Covered population 478,413 471,863
Ending subscribers 83,993 81,559
Average subscribers for the quarter 83,444 81,334
Quarterly growth rate 1.3% 0.6%
Activations for the quarter 6,010 5,730
Deactivations for the quarter 4,911 5,280
Penetration 17.6% 17.3%
Quarterly Minutes of use (000's) 64,033 55,471
Average revenue per subscriber for the quarter $ 50.30 $ 48.78
Long Distance:
Long distance subscribers 43,499 67,230
Quarterly Minutes of use (000's) 38,954 38,704
Average subscribers for the quarter 43,894 66,094
Average monthly revenue per subscriber for the quarter $ 31.49 $ 20.16
Internet:
DSL subscribers 16,294 11,045
Dial-Up and other service subscribers 29,057 35,614
------- -------
Total Internet subscribers 45,351 46,659
======= =======
Average subscribers for the quarter 44,978 47,250
Average revenue per subscriber for the quarter $ 30.16 $ 25.13
Enterprise private network lines (State of Alaska) 20,188 11,747
======= =======