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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO .
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
--------------------
DELAWARE 52-2126573
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
510 L STREET, SUITE 500, ANCHORAGE, ALASKA 99501
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (907) 297-3000
- --------------------------------------------------------------------------------
FORMER NAME, FORMER ADDRESS AND FORMER THREE MONTHS, IF CHANGED
SINCE LAST REPORT: Not Applicable
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
---------- ----------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
INDICATE BY CHECK MARK WHETHER THE REGISTRANT HAS FILED ALL DOCUMENTS AND
REPORTS REQUIRED TO BE FILED BY SECTIONS 12, 13, OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 SUBSEQUENT TO THE DISTRIBUTION OF SECURITIES UNDER A PLAN
CONFIRMED BY A COURT.
YES NO
---------- -----------
APPLICABLE ONLY TO CORPORATE ISSUERS:
THE NUMBER OF SHARES OUTSTANDING OF THE REGISTRANT'S COMMON STOCK, AS
OF MAY 3, 2001 WAS 31,470,015.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
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TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION NUMBER
Item 1. Financial Statements:
Consolidated Balance Sheets (unaudited)
As of March 31, 2001 and December 31, 2000..........................3
Consolidated Statements of Operations (unaudited)
For the Three Months Ended March 31, 2001 and 2000..................4
Consolidated Statements of Stockholders' Equity (unaudited)
For the Three Months Ended March 31, 2001 and 2000..................5
Consolidated Statements of Cash Flows (unaudited)
For the Three Months Ended March 31, 2001 and 2000.................6
Notes to Consolidated Financial Statements (unaudited)..............7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..............................................11
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........19
PART II. OTHER INFORMATION
Item 1 Legal Proceedings..................................................20
Item 2 Changes in Securities and Use of Proceeds..........................21
Item 3 Defaults upon Senior Securities....................................21
Item 4 Submission of Matters to a Vote of Security Holders................21
Item 5 Other Information..................................................21
Item 6. Exhibits and Reports on Form 8-K...................................21
SIGNATURE.....................................................................22
2
3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
MARCH 31, DECEMBER 31,
ASSETS 2001 2000
--------- ------------
Current assets:
Cash and cash equivalents $ 35,787 $ 61,896
Accounts receivable-trade, net of allowance of $10,700 and $9,831 46,205 46,337
Materials and supplies 10,432 11,103
Prepayments and other current assets 3,961 4,304
--------- ---------
Total current assets 96,385 123,640
Property, plant and equipment 995,516 953,557
Less: accumulated depreciation 507,799 492,822
--------- ---------
Property, plant and equipment, net 487,717 460,735
Goodwill, net of accumulated amortization of $13,684 and $11,753 256,301 258,236
Investments - 1,370
Other assets 62,962 64,304
--------- ---------
Total assets $ 903,365 $ 908,285
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term obligations 1,564 2,586
Accounts payable-trade 26,954 31,969
Accounts payable-affiliates 1,427 1,145
Advance billings and customer deposits 8,858 8,689
Accrued and other current liabilities 31,032 26,146
--------- ---------
Total current liabilities 69,835 70,535
Long-term obligations, net of current portion 610,841 611,418
Unamortized investment tax credits 148 197
Other deferred credits and long-term liabilities 14,926 10,755
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, 33,002 and
33,000 shares issued and 31,470 and 31,468 outstanding, respectively 330 330
Treasury stock, 1,532 shares at cost (9,735) (9,735)
Paid in capital in excess of par value 275,481 275,468
Accumulated deficit (55,552) (50,683)
Accumulated other comprehensive loss (2,909) -
--------- ---------
Total stockholders' equity 207,615 215,380
--------- ---------
Total liabilities and stockholders' equity $ 903,365 $ 908,285
========= =========
See Notes to Consolidated Financial Statements
3
4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
MARCH 31,
-------------------
2001 2000
-------- --------
Operating revenues:
Local telephone 54,697 58,137
Cellular 9,282 8,631
Directory 7,939 7,463
Internet 3,111 1,135
Interexchange 5,950 2,570
Other 255 290
-------- --------
Total operating revenues 81,234 78,226
Operating expenses:
Local telephone 28,812 35,313
Cellular 5,578 5,482
Directory 3,499 3,289
Internet 3,743 1,430
Interexchange 9,544 3,961
Other 478 391
Depreciation and amortization 19,547 17,126
-------- --------
Total operating expenses 71,201 66,992
-------- --------
Operating income 10,033 11,234
Other income (expense):
Interest expense (16,038) (15,902)
Interest income and other 1,017 1,557
Equity in earnings (loss) of investments 69 (142)
-------- --------
Total other expense (14,952) (14,487)
-------- --------
Loss before income taxes (4,919) (3,253)
Income tax benefit 50 115
-------- --------
Net loss $ (4,869) $ (3,138)
======== ========
Net loss per share - basic and diluted $ (0.15) $ (0.10)
======== ========
Weighted average shares outstanding 31,468 32,696
======== ========
See Notes to Consolidated Financial Statements
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5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2001 AND 2000
(UNAUDITED, IN THOUSANDS EXCEPT SHARE AMOUNTS)
PAID IN ACCUMULATED
CAPITAL IN OTHER
COMMON TREASURY EXCESS OF ACCUMULATED COMPREHENSIVE STOCKHOLDERS'
STOCK STOCK PAR DEFICIT LOSS EQUITY
------ -------- ---------- ----------- ------------- -------------
Balance, December 31, 1999 $ 327 $ - $ 273,119 $ (25,478) $ - $ 247,968
Issuance of 59,706 shares of
common stock, $.01 par - - 428 - - 428
Net loss - - - (3,138) - (3,138)
----- -------- --------- --------- -------- ---------
Balance, March 31, 2000 $ 327 $ - $ 273,547 $ (28,616) $ - $ 245,258
===== ======== ========= ========= ======== =========
Balance, December 31, 2000 $ 330 $ (9,735) $ 275,468 $ (50,683) $ - $ 215,380
Issuance of 2,413 shares of
common stock, $.01 par - - 13 - - 13
Interest rate swap marked
to market - - - - (2,909) (2,909)
Net loss - - - (4,869) - (4,869)
----- -------- --------- --------- -------- ---------
Balance, March 31, 2001 $ 330 $ (9,735) $ 275,481 $ (55,552) $ (2,909) $ 207,615
===== ======== ========= ========= ======== =========
See Notes to Consolidated Financial Statements
5
6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED, IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
---------------------
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,869) $ (3,138)
Adjustments to reconcile net loss to net cash provided (used)
by operating activities:
Depreciation and amortization 19,547 17,126
Amortization of debt issuance costs 1,126 1,138
Investment tax credits (50) (108)
Other deferred credits 1,261 (1,105)
Capitalized interest (396) (29)
Changes in components of working capital:
Accounts receivable and other current assets 1,146 (2,787)
Accounts payable and other current liabilities 322 (10,258)
Other (65) (1,074)
-------- --------
Net cash provided (used) by operating activities 18,022 (235)
CASH FLOWS FROM INVESTING ACTIVITIES:
Construction and capital expenditures, net of capitalized interest (43,915) (13,012)
Proceeds from liquidation of minority interest investment 1,370 -
Cost of acquisitions, net of cash received - (792)
-------- --------
Net cash used by investing activities (42,545) (13,804)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on long-term debt (1,599) (1,636)
Issuance of common stock and warrants 13 428
-------- --------
Net cash used by financing activities (1,586) (1,208)
Decrease in cash (26,109) (15,247)
Cash and cash equivalents at beginning of the period 61,896 101,994
-------- --------
Cash and cash equivalents at the end of the period $ 35,787 $ 86,747
======== ========
SUPPLEMENTAL CASH FLOW DATA:
Interest paid $ 10,999 $ 10,741
Income taxes paid - -
SUPPLEMENTAL NONCASH TRANSACTIONS:
Property acquired under capital lease $ - $ 2,918
Note payable in connection with acquisition - 2,250
Interest rate swap marked to market 2,909 -
See Notes to Consolidated Financial Statements
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7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
1. DESCRIPTION OF COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Alaska Communications Systems Group, Inc. and Subsidiaries (the
"Company" or "ACS Group"), a Delaware corporation, is an integrated
communications provider engaged principally in providing local telephone,
directory, cellular, Internet, and interexchange services to its customers in
the state of Alaska through its telecommunications subsidiaries. The Company was
formed in October of 1998 for the purpose of acquiring and operating
telecommunications properties.
The financial statements for the Company represent the consolidated
financial position, results of operations and cash flows of the following
entities:
o Alaska Communications Systems Group, Inc.
o Alaska Communications Systems Holdings, Inc. ("ACS Holdings")
o ACS of Alaska, Inc. ("ACSAK")
o ACS of the Northland, Inc. ("ACSN")
o ACS of Fairbanks, Inc. ("ACSF")
o ACS of Anchorage, Inc. ("ACSA")
o ACS Wireless ("ACSW")
o ACS Long Distance, Inc. ("ACSLD")
o ACS Television, L.L.C. ("ACSTV")
o ACS Internet, Inc.
o ACS InfoSource, Inc.
On January 1, 2001 the Company established its nonregulated directory
business as a separate operating entity under the name ACS InfoSource, Inc.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to rules and regulations of the Securities and Exchange Commission; however, the
Company believes the disclosures which are made are adequate to make the
information presented not misleading. The consolidated financial statements and
footnotes included in this Form 10-Q should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 2000. Certain
reclassifications have been made to the 2000 financial statements to make them
conform to the current presentation.
Comprehensive loss for the three months ended March 31, 2001 was $7,778.
The difference between net loss and comprehensive loss resulted from the
adoption of Statement of Financial Accounting Standards ("SFAS") 133, Accounting
for Derivative Instruments and Hedging Activities.
In the opinion of management, the financial statements contain all
adjustments (consisting of normal recurring adjustments) necessary to present
fairly the consolidated financial position, results of operations and cash flows
for all periods presented. The results of operations for the three months ended
March 31, 2001 and 2000 are not necessarily indicative of the results of
operations which might be expected for the entire year or any other interim
periods.
2. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
Commencing January 1, 2001, ACS Group adopted SFAS 133, Accounting for
Derivative Instruments and Hedging Activities. ACS Group maintains an interest
rate risk management strategy as a condition of its bank credit agreement that
uses derivatives to minimize significant, unanticipated earnings fluctuations
caused by interest rate volatility. ACS Group's specific goals are (1) to manage
interest rate sensitivity by modifying the repricing characteristics of certain
of its debt and (2) to lower (where possible) the cost of borrowed funds.
7
8
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
2. ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES (CONTINUED)
By using derivative financial instruments to hedge exposure to changes
in interest rates, the Company exposes itself to credit risk and market risk.
ACS Group has minimized its credit risk by entering into a transaction with a
high-quality counterparty and monitoring the financial condition of that
counterparty. Market risk is managed through the setting and monitoring of
parameters that limit the types and degree of market risks that are acceptable.
On January 1, 2001 ACS Group recognized a net charge of $1,243 in
Stockholders' Equity relating to its adoption of SFAS 133 as accumulated other
comprehensive loss. As of March 31, 2001, the Company had recorded $2,909 as
accumulated comprehensive loss. This increase in accumulated comprehensive loss
was due to the change in the fair market value of the Company's interest rate
swap as a result of declining interest rates experienced during the quarter.
3. STOCK INCENTIVE PLANS
Under various plans through the Compensation Committee of the Board of
Directors, ACS Group may grant stock options, stock appreciation rights and
other awards to officers, employees and non-employee directors. At March 31,
2001, ACS Group has reserved a total of 6,060 shares of authorized common stock
for issuance under the various plans. In general, options under the plans vest
ratably over three, four or five years and the plans terminate in approximately
10 years. The plans allow forfeited options to be reissued.
ALEC Holdings, Inc. 1999 Stock Incentive Plan
The Company has reserved 3,410 shares under this plan, which was adopted
in connection with the completion of the acquisition of the acquired companies
on May 14, 1999. At March 31, 2001, 4,003 options have been granted, 809 have
been forfeited, 237 have been exercised and 216 shares are available for grant
under the plan.
On January 4, 2001, the Board of Directors approved the grant of options
to purchase 75,000 shares under the plan to certain members of management at an
exercise price equal to the fair market value of the common stock on the date of
grant, generally vesting over four years ratably.
Alaska Communications Systems Group, Inc. 1999 Stock Incentive Plan
The Company has reserved 1,500 shares under this plan, which was adopted
by the Company in November 1999 in connection with its initial public offering.
At March 31, 2001, 1,247 options have been granted, 175 have been forfeited and
428 shares are available for grant under the plan. The term of options granted
under the plan may not exceed 10 years. Unless otherwise determined by the
Compensation Committee, options will vest ratably on each of the first four
anniversaries after the grant date and will have an exercise price equal to the
fair market value of the common stock on the date of grant.
Alaska Communications Systems Group, Inc. 1999 Non-Employee Director Stock
Compensation Plan
The Company adopted its non-employee director stock compensation plan in
November 1999 in connection with its initial public offering. The Company has
reserved 150 shares under this plan. At March 31, 2001, 36 shares have been
awarded and 114 shares are available for grant under the plan. Directors are
required to receive not less than 25% of their annual retainer and meeting fees
in the form of the Company's stock, and may elect to receive up to 100% of
director's compensation in the form of stock.
On March 30, 2001, 10 shares under the plan were awarded to directors,
of which seven were elected to be deferred until termination of service by the
directors.
8
9
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
3. STOCK INCENTIVE PLANS (CONTINUED)
Alaska Communications Systems Group, Inc. 1999 Employee Stock Purchase Plan
This plan was also adopted in connection with the Company's initial
public offering in November 1999. At March 31, 2001, 132 shares were issued
under the plan and 868 shares are available for issuance and sale. The plan will
terminate on December 31, 2009. All ACS Group employees and all of the employees
of designated subsidiaries generally will be eligible to participate in the
purchase plan, other than employees whose customary employment is 20 hours or
less per week or is for not more than five months in a calendar year, or who are
ineligible to participate due to restrictions under the Internal Revenue Code.
4. BUSINESS SEGMENTS
The Company now has five reportable segments: local telephone, cellular,
directory, Internet and interexchange. Beginning with the first quarter of 2001,
the Company will be reporting directory and interexchange as separate segments.
Prior year amounts have been reclassified to conform with the current
presentation. Local telephone provides landline telecommunications services, and
consists of local telephone service, network access and deregulated and other
revenues; cellular provides wireless telecommunications service; directory
provides yellow page advertising and other related products; Internet provides
Internet service; and interexchange provides long distance and private network
services. Each reportable segment is a strategic business under separate
management and offering different services than those offered by the other
segments. The Company also has a wireless cable television service segment that
does not currently meet the criteria for a reportable segment and is therefore
included in "All Other" below.
The Company also incurs interest expense, interest income, equity in
earnings of investments, goodwill amortization on the original May 14, 1999
purchases, and other operating and non operating income and expense at the
corporate level which are not allocated to the business segments, nor are they
evaluated by the chief operating decision maker in analyzing the performance of
the business segments. These non operating income and expense items are provided
in the accompanying table under the caption "All Other" in order to assist the
users of these financial statements in reconciling the operating results and
total assets of the business segments to the consolidated financial statements.
Common use assets are held at either the Company or ACS Holdings and are
allocated below based on operating revenues. The accounting policies of the
segments are the same as those described in the summary of significant
accounting policies.
The following table illustrates selected financial data for each segment
as of and for the three months ended March 31, 2001:
Local Telephone Cellular Directory Internet Interexchange All Other Eliminations Total
--------------- -------- --------- -------- ------------- --------- ------------ --------
Operating revenues $ 54,697 $ 9,289 $ 7,939 $ 3,111 $ 8,072 $ 4,383 $ (6,257) $ 81,234
Depreciation and amortization 13,047 1,399 - 620 584 3,897 - 19,547
Operating income (loss) 9,509 1,045 4,423 (2,366) (2,219) (359) - 10,033
Interest expense (483) (3) - (34) (75) (15,443) - (16,038)
Interest income 4 12 - - - 1,036 - 1,052
Income tax provision (benefit) 3,675 439 1,818 - - (5,982) - (50)
Net income (loss) 5,323 619 2,605 (2,396) (2,295) (8,725) - (4,869)
Total assets 628,232 101,938 36,933 36,560 73,506 26,196 - 903,365
Capital expenditures 11,749 387 - 11,127 19,504 1,148 - 43,915
Operating revenues disclosed above include intersegment operating
revenues of $4,371 for local telephone, $228 for cellular, $250 for directory
and $6,480 for interexchange. In accordance with SFAS 71, intercompany revenues
between local telephone and all other segments are not eliminated above.
9
10
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
THREE MONTHS ENDED MARCH 31, 2001
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
4. BUSINESS SEGMENTS (CONTINUED)
The following table illustrates selected financial data for each segment
as of and for the three months ended March 31, 2000:
Local Telephone Cellular Directory Internet Interexchange All Other Eliminations Total
--------------- -------- --------- -------- ------------- --------- ------------ --------
Operating revenues $ 58,137 $ 8,636 $ 7,463 $ 1,137 $ 3,801 $ 4,343 $ (5,291) $78,226
Depreciation and amortization 12,009 1,129 - 101 325 3,562 - 17,126
Operating income (loss) 7,604 1,423 4,174 (1,024) (487) (456) - 11,234
Interest expense (287) (2) - - (84) (15,529) - (15,902)
Interest income 74 41 - - - 1,377 - 1,492
Income tax provision (benefit) 4,616 565 - - - (5,296) - (115)
Net income (loss) 2,775 906 4,174 (1,021) (568) (9,404) - (3,138)
Total assets 684,081 114,389 37,854 10,656 44,371 31,114 - 922,465
Capital expenditures 7,560 3,971 - 1,367 3,032 - - 15,930
Operating revenues disclosed above include intersegment operating
revenues of $1,489 for local telephone, $206 for cellular, $2 for Internet and
$1,293 for interexchange. In accordance with SFAS 71, intercompany revenues
between local telephone and all other segments are not eliminated above.
5. RELATED PARTY TRANSACTIONS
Fox Paine & Company, the majority stockholder, receives an annual
management fee in the amount of 1% of the Company's net income before interest
expense, interest income, income taxes, depreciation and amortization and equity
in earnings (losses) of minority investments, calculated without regard to the
fee. The management fee expense for the three months ended March 31, 2001 and
2000 is $282 and $324, respectively. The management fee payable at both March
31, 2001 and 2000 is $300.
6. SEVERANCE AND RESTRUCTURING CHARGES
The Company recorded $3,019 related to severance and restructuring
charges under several plans adopted during 2000. Employee force reductions
resulting from these restructuring plans are expected to total approximately 300
by their completion, which is expected to be during the fourth quarter of 2001.
Employee groups located in Alaska within the local telephone, cellular and
Internet operations are all included within the scope of the severance and
restructuring plans. The plans also call for the closure of a branch operation
in Vancouver, Washington. As of March 31, 2001, $1,086 has been paid under the
plans and approximately 100 employees have been terminated.
7. COMMITMENTS AND CONTINGENCIES
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes
that the disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flows.
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11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS AND ANALYSTS' REPORTS
This report contains forward looking statements within the meaning of
the federal securities laws, including statements concerning future rates,
revenues, costs, capital expenditures, and financing needs and availability and
statements of management's expectations and beliefs. Actual results could differ
materially from these statements as a result of many factors, including future
economic, regulatory and political conditions in Alaska and the United States.
Investors should also be aware that while ACS Group does, at various
times, communicate with securities analysts, it is against ACS Group's policy to
disclose to them any material non-public information or other confidential
information. Accordingly, shareholders should not assume that ACS Group agrees
with any statement or report issued by an analyst irrespective of the content of
the statement or report. To the extent that reports issued by securities
analysts contain any projections, forecasts or opinions, such reports are not
the responsibility of ACS Group.
INTRODUCTION
On May 14, 1999, the Company acquired the incumbent providers of local
telephone services in Anchorage, Juneau, Fairbanks and approximately 70 rural
communities in Alaska, making it the largest provider of local telephone service
in the state and the fourteenth largest provider of local exchange services in
the United States. The Company also acquired on May 14, 1999 interexchange
operations primarily serving the Anchorage market and cellular and Internet
services providing statewide coverage. The Company has unified its statewide
branding under the ACS name.
ACS Group generates revenue through:
o the provision of local telephone services, including:
o basic local service to retail customers within ACS
Group's service areas,
o wholesale service to competitive local exchange carriers
("CLECs"),
o network access services to interexchange carriers for
origination and termination of interstate and intrastate
long distance phone calls,
o universal service payments,
o enhanced services, and
o ancillary services, such as billing and collection
("B&C") ;
o the provision of cellular services;
o the provision of directory advertising;
o the provision of Internet services;
o the provision of interexchange services; and;
o the provision of wireless cable television services.
ACS Group also recognizes its proportionate share of the net income or
loss of its minority-owned investments.
11
12
Within the telecommunications industry, local exchange carriers ("LECs")
have historically enjoyed stable revenue and cash flow from local exchange
operations resulting from the need for basic telecommunications services, the
highly regulated nature of the telecommunications industry and, in the case of
rural LECs, the underlying cost recovery settlement and support mechanisms
applicable to local exchange operations. Basic local service is generally
provided at a flat monthly rate and allows the user to place unlimited calls
within a defined local calling area. Access revenues are generated by providing
interexchange carriers access to the LEC's local network and its customers.
Universal service revenues are a subsidy paid to rural LECs to support the high
cost of providing service in rural markets. Revenue is also generated from
ancillary and enhanced services and Internet access.
Changes in revenue are largely attributable to changes in the number of
access lines, local service rates and minutes of use. Other factors can also
impact revenue, including:
o intrastate and interstate revenue settlement
methodologies,
o authorized rates of return for regulated services,
o whether an access line is used by a business or
residential subscriber,
o intrastate and interstate calling patterns,
o customers' selection of various local rate plan options,
o selection of enhanced calling services, such as voice
mail, or other packaged products, such as cellular and
Internet, and
o other subscriber usage characteristics.
LECs have three basic tiers of customers:
o business and residential customers located in their
local service areas that pay for local phone service,
o interexchange carriers that pay for access to long
distance calling customers located within its local
service areas and
o CLEC's that pay for wholesale access to the Company's
network in order to provide competitive local service on
either a wholesale or unbundled network element ("UNE")
basis as prescribed under the Telecommunications Act of
1996 ("the 1996 Act").
LECs provide access service to numerous interexchange carriers and may
also bill and collect long distance charges from interexchange carrier customers
on behalf of the interexchange carriers. The amount of access charge revenue
associated with a particular interexchange carrier varies depending upon long
distance calling patterns and the relative market share of each long distance
carrier.
ACS Group's local service rates for end users are authorized by the
Regulatory Commission of Alaska ("RCA"). Authorized rates are set by the Federal
Communications Commission ("FCC") and the RCA for interstate and intrastate
access charges, respectively, and may change from time to time.
12
13
RESULTS OF OPERATIONS
The following unaudited table summarizes ACS Group's consolidated
operations for the three months ended March 31, 2001 and 2000. Certain
reclassifications have been made to the 2000 operations to conform to the
current presentation of ACS Group's consolidated operations.
THREE MONTHS ENDED
MARCH 31,
-------------------------
2001 2000
---------- -----------
(UNAUDITED, IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
Operating revenues:
Local telephone 54,697 58,137
Cellular 9,282 8,631
Directory 7,939 7,463
Internet 3,111 1,135
Interexchange 5,950 2,570
Other 255 290
-------- --------
Total operating revenues 81,234 78,226
Operating expenses:
Local telephone 28,812 35,313
Cellular 5,578 5,482
Directory 3,499 3,289
Internet 3,743 1,430
Interexchange 9,544 3,961
Other 478 391
Depreciation and amortization 19,547 17,126
-------- --------
Total operating expenses 71,201 66,992
-------- --------
Operating income 10,033 11,234
Other income (expense):
Interest expense (16,038) (15,902)
Interest income and other 1,017 1,557
Equity in earnings (loss) of investments 69 (142)
-------- --------
Total other expense (14,952) (14,487)
-------- --------
Loss before income taxes (4,919) (3,253)
Income tax benefit 50 115
-------- --------
Net loss $ (4,869) $ (3,138)
======== ========
Net loss per share - basic and diluted $ (0.15) $ (0.10)
======== ========
Weighted average shares outstanding 31,468 32,696
======== ========
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14
THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THREE MONTHS ENDED MARCH 31, 2000
Beginning with the first quarter of 2001, the Company will be reporting
directory and interexchange as separate segments. Prior year amounts have been
reclassified to conform with the current presentation. All amounts are discussed
at the consolidated level after the elimination of intercompany revenue and
expense.
OPERATING REVENUES
Operating revenues increased $3.0 million, or 3.8%, for the three months
ended March 31, 2001 compared to the three months ended March 31, 2000. Local
telephone revenues decreased compared to the prior period, while cellular,
Internet, directory advertising, and interexchange service revenues all
increased compared to the prior period.
Local Telephone
Local telephone revenues, which consist of local network service,
network access revenue and deregulated and other revenues, decreased $3.4
million, or 5.9%, for the three months ended March 31, 2001 compared to the same
period in 2000. The following unaudited table summarizes ACS Groups consolidated
local telephone revenues by category.
THREE MONTHS ENDED
MARCH 31,
----------------------
2001 2000
-------- --------
(UNAUDITED, IN THOUSANDS)
Local telephone revenue:
Local network service $ 23,263 $ 23,845
Network access revenue 26,236 28,963
Deregulated and other revenue 5,198 5,329
-------- --------
Total local telephone revenue $ 54,697 $ 58,137
======== ========
The local network service component of local telephone revenues was
$23.8 million during 2000 compared with $23.3 million during 2001. Revenue
decreased $0.5 million or 2.4% from the prior year, despite growth in average
total access lines in service of 1.4%. The net decrease was due primarily to
increased market penetration of lower margin wholesale lines in the Anchorage
market. Management believes that the continued loss of market share experienced
in the Anchorage market is attributable to below cost interconnection rates for
UNEs currently in place. The RCA has approved arbitrated interconnection rates
for UNEs for the Company's Fairbanks and Juneau markets which, in the opinion of
management, are also below cost. Competition in both Fairbanks and Juneau is
expected to commence during 2001. See "Outlook" under Item 2 of this Part and
"Legal Proceedings" under Item 1 of Part II of this report for further
discussion.
Network access revenues decreased by $2.7 million, or 9.4%, from $29.0
million in 2000 to $26.2 million in 2001. Network access revenues are based on a
regulated return on rate base and recovery of allowable expenses associated with
the origination and termination of interstate and intrastate toll calls.
Universal service support revenue is also included in network access revenue.
The decrease in telephone access revenues from the corresponding period in 2000
is due primarily to reductions in regulated operating expense and its effect on
the interstate access revenue requirement. Also responsible for the decrease is
interstate access revenue recorded in 2000 that resulted from the allocation of
Internet Service Provider ("ISP") traffic minutes to the interstate jurisdiction
for which there is no corresponding revenue in 2001. Management expects that
network access revenues will decline as a component of local telephone revenues
for the foreseeable future.
Deregulated and other revenues, which decreased $0.1 million, or 2.5%
over 2000, consists principally of B&C services, space and power rents,
deregulated equipment sales, paystation revenues, white pages directory listing
revenue, and other miscellaneous telephone revenues.
14
15
Cellular
Cellular revenues increased $0.7 million, or 7.5%, to $9.3 million for
the three months ended March 31, 2001 compared to $8.6 million for the three
months ended March 31, 2000. This growth in revenue is primarily due to a 5.1%
increase in average cellular subscribers from 72,669 in 2000 to 76,368 in 2001.
Average revenue per unit also increased from $39.59 in 2000 to $40.51 in 2001.
The increase in average revenue per unit is due the introduction of new digital
statewide and national pricing programs and an increase in average minutes of
use from approximately 115 minutes per month in 2000 to 141 minutes per month in
2001.
Directory advertising
Directory advertising revenues increased by $0.5 million, or 6.4%, to
$7.9 million in 2001 from $7.4 million in 2000. This increase is attributable to
increased market penetration for the current directory phone book cycles
combined with the growth in average access lines.
Internet
Internet revenues increased $2.0 million, or 174.1%, to $3.1 million in
2001 from $1.1 million in 2000. This increase is primarily due to revenues
resulting from the acquisition of Internet Alaska, Inc. ("IAI") in June of 2000.
Growth in Digital Subscriber Line ("DSL") subscribers also contributed to the
increase in Internet revenues.
Interexchange
Interexchange service revenues increased $3.4 million to $6.0 million in
2001 from $2.6 million in 2000, or an increase of 131.5%. The increase was
primarily due to growth in long distance subscribers from 33,745 in 2000 to
65,372 in 2001. The Company also experienced growth in long distance minutes of
use from 19.0 million in 2000 to 68.8 million in 2001. The growth in both
subscribers and minutes of use was due to the rollout of the Company's "Infinite
Minutes" long distance product offering in the fourth quarter of 2000. The
Company expects growth to continue at a slower pace than that experienced over
the previous two quarters as a result of the replacement of its "Infinite
Minutes" plan with a tiered long distance plan it markets as "Easy Choices," as
of April 20, 2001.
Other
Other revenues, which consist principally of wireless cable television
revenues, were $0.3 million for each of the three month periods ended March 31,
2001 and 2000.
OPERATING EXPENSES
Operating expenses increased $4.2 million, or 6.3%, to $71.2 million for
the quarter ended March 31, 2001 from $67.0 million for the quarter ended March
31, 2000.
Local Telephone
The components of local telephone expense are plant specific operations,
plant non-specific operations, customer operations, corporate operations and
property and other operating tax expense. Depreciation and amortization
associated with the operation of the local telephone segment is included in
total depreciation and amortization. Local telephone expenses decreased $6.5
million, or 18.4%, to $28.8 million for the quarter ended March 31, 2001 from
$35.3 million for the quarter ended March 31, 2000. As a percentage of local
telephone revenues, local telephone operating expenses dropped to 52.7% in 2001
from 60.7% in 2000. These results reflect continued improvements in the
Company's cost structure, including workforce reductions, benefits derived from
the deployment of information systems, and other synergies, realized through the
continued consolidation of the operations the Company acquired in 1999.
15
16
Cellular
Cellular expense increased $0.1 million, or 1.8%, for the three months
ended March 31, 2001 compared to the three months ended March 31, 2000. Cellular
expense was 60.1% of cellular revenue for 2001 compared to 63.5% of cellular
revenue for 2000, reflecting continued improvement in operating margin.
Directory advertising
Directory advertising expense increased $0.2 million, or 6.4%, for the
three months ended March 31, 2001 compared to the three months ended March 31,
2000. Directory advertising expense was 44.1% of directory advertising revenue
for 2001, consistent with 2000 results.
Internet
Internet expense increased by $2.3 million, or 161.7%, and decreased as
a percentage of revenue from 126.0% in 2000 to 120.3% in 2001. The increase in
Internet expenses was due to the acquisition of IAI in June of 2000, costs
associated with developing the Company's statewide Internet infrastructure and
the continued rollout of the Company's DSL product.
Interexchange service
Interexchange services increased $5.6 million, or 140.9%, from $4.0
million for the three months ended March 31, 2000 to $9.5 million for the three
months ended March 31, 2001. As a percentage of revenue, interexchange service
expense increased to 160.4% in 2001 from 154.1% in 2000. The majority of this
increase was the result of additional traffic sensitive, marketing, order
processing, and other costs incurred as a result of the dramatic increase in
customers with the rollout of the Company's flat rate calling plans as discussed
under interexchange service revenues.
Depreciation and Amortization
Depreciation and amortization expense increased $2.4 million, or 14.1%,
due principally to increases in plant in service for the three months ended
March 31, 2001 over the corresponding period of 2000.
INCOME TAXES
Income tax benefit represents the amortization of investment tax credits
of the Company's regulated operations. ACS Group has fully reserved the income
tax benefit resulting from the consolidated losses it has incurred since May 14,
1999 - the date of the acquisition of substantially all of its operations -
since it has no historical income and limited operating history on which to
determine the realizable value of the tax benefit of net operating loss
carryforwards with reasonable certainty. The Company reserved $1.9 million of
income tax benefit resulting from its net loss before income taxes during the
quarter ended March 31, 2001. The Company's cumulative book basis income tax
valuation allowance is $21.4 million at March 31, 2001.
NET LOSS
The increase in net loss is primarily a result of the factors discussed
above.
16
17
LIQUIDITY AND CAPITAL RESOURCES
ACS Group has satisfied its operational and capital cash requirements
primarily through internally generated funds, the sale of stock and debt
financing. For the three months ended March 31, 2001 the Company's cash flows
from operating activities were $18.0 million. At March 31, 2001, the Company had
approximately $35.8 million in cash and cash equivalents. As of March 31, 2001
the Company had $75.0 million of remaining capacity under its revolving credit
facility, representing 100% of available capacity.
The Company has a $435.0 million bank credit agreement ("Senior Credit
Facility"), $150.0 million in 9.375% senior subordinated notes due 2009 and
$17.3 million in 13% senior discount debentures due 2011, representing
substantially all of the Company's long-term debt of $612.4 million as of March
31, 2001. Interest on ACS Group's senior discount debentures and the senior
subordinated notes is payable semiannually. Interest on borrowings under the
Senior Credit Facility is payable monthly, quarterly or semi-annually at the
Company's option. The Senior Credit Facility requires annual principal payments
commencing on May 14, 2002.
The Company employs an interest rate hedge transaction, which fixes at
5.99% the underlying variable rate on one-half of the borrowings under the
Senior Credit Facility, or $217.5 million, expiring in June 2002. The underlying
variable rate for the Senior Credit Facility is based on the London Interbank
Offer Rate ("LIBOR"), which is adjusted at each monthly, quarterly or
semi-annual rollover date.
On April 17, 2001, the Company placed a total of $6.7 million in two
separate escrow accounts pending the outcome of the Company's appeal of a
January 24, 2001 FCC Order awarding damages to an interexchange carrier. These
amounts were fully reserved as of March 31, 2001. See "Legal Proceedings" under
Item 1 of Part II of this report for further discussion.
The local telephone network requires the timely maintenance of plant and
infrastructure. ACS Group's local network is of high quality, is technically
advanced and will have relatively predictable annual capital needs. The
Company's historical capital expenditures have been significant. The
construction and geographic expansion of ACS Group's cellular network has
required significant capital. The implementation of the Company's interexchange
and data services strategy is also capital intensive. ACS Group anticipates
total capital spending in 2001 to be between $75.0 to 80.0 million, including
the Company's purchase of additional fiber capacity for $19.5 million in January
2001. The Company intends to fund its future capital expenditures with cash on
hand, through internally generated cash flows, and if necessary, through
additional borrowings under the revolving credit facility.
ACS Group's capital requirements may change, however, due to, among
other things: the Company's decision to pursue specific acquisition
opportunities, changes in technology, the effects of competition or changes in
the Company's business strategy. ACS Group believes that it will have sufficient
working capital provided by operations and available borrowing capacity under
the existing revolving credit facility to fund its operations and capital
expenditures over the next 12 months. ACS Group's ability to satisfy its capital
requirements will be dependent upon its future financial performance, which is,
in turn, subject to future economic and regulatory conditions and to financial,
business and other factors, many of which are beyond the Company's control.
17
18
OUTLOOK
ACS Group expects demand for telecommunications services in Alaska to
remain strong during 2001. Certain Alaskan economic indicators suggest a number
of factors within the state may help mitigate effects of a general slowdown in
the U.S. economy, including:
o A growth in employment during 2000, with jobs up 2.2%;
o Approval of projects to expand Ted Stevens International Airport
in Anchorage, at which 90% of all freighter jets carrying cargo
between the lower 48 state and the Pacific Rim now stop;
o Low office vacancy rates in Anchorage (2.4%) and projections by
the home builders association of a robust home construction
season; and
o A $100 million redevelopment of the Anchorage Ship Creek
commercial area.
In addition, there is the potential that one or more of the following
proposed undertakings may be approved, any one of which could offer significant
stimulation to the Alaskan economy:
o Construction of a pipeline to transport natural gas from the
North Slope area to commercial markets in Canada and the lower
48 states;
o Development of a new national missile defense system with
deployments at Alaskan sites; and
o Opening of the Arctic National Wildlife Refuge (ANWR) to new oil
exploration.
ACS Group believes it is well-positioned to compete in the Alaska
telecommunications market as an integrated, diversified, facilities-based
provider of local telephone, long distance, cellular and Internet services.
Certain of the markets served by ACS Group experience vigorous competition.
Specifically, ACS Group faces competition in the Anchorage local telephone
market; in the Anchorage, Fairbanks, Southeast, and Kenai Peninsula areas for
cellular telephone and Internet services; and throughout the state for inter-
and intrastate long distance services.
As a result of the June 30, 1999 termination of the "rural exemption"
applicable to ACS Group's operations in Fairbanks and Juneau and the subsequent
adoption of interconnection agreements by the RCA, those markets are expected to
experience competition for local telephone services during 2001. As of the end
of the first quarter of 2001, however, no customers in those markets were being
served by CLECs on either a wholesale or UNE basis. The Company expects to
provision circuits to support interconnection competition in Fairbanks during
the second quarter of 2001 and in Juneau later in the year.
ACS Group is actively pursuing legal and regulatory objectives,
particularly with regard to local telephone services, to improve its competitive
and economic situation. Legal proceedings have been initiated in federal and
state courts challenging termination of the rural exemption and the
interconnection agreements applicable to Fairbanks and Juneau. ACS Group has
been seeking an increase in the rates charged to CLECs for UNE loops in
Anchorage. The current rate was adopted as "temporary" by the regulatory
commission in 1997 and, as it was not based on a forward looking cost
methodology, the Company believes it is not in compliance with the 1996 Act. ACS
Group is filing a request for an interim increased rate with the RCA pending
adjudication of a compliant rate. See "Legal Proceedings" under Item 1 of Part
II of this report for further discussion. ACS Group will also commence rate
proceedings before the RCA in July for all four of its local exchange companies.
These proceedings, which are not expected to be concluded during 2001, will
offer ACS Group the opportunity to rebalance rates and increase its revenues.
As previously reported, the Company has several restructuring plans in
place to reduce costs and continue to realize operating synergies resulting from
a consolidated organization. Effective April 1, 2001, the branch operation in
Vancouver, Washington was closed and severance benefits were paid to the
impacted employees. The Company anticipates achieving additional efficiencies
during 2001, most notably through the implementation of a new automated customer
care system. This system, the first phase of which is scheduled to be on-line
during by the third quarter, will offer the capacity to provide better customer
service with reduced staff.
18
19
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has issued senior discount debentures, senior subordinated
notes and has entered into a bank credit facility. These on-balance sheet
financial instruments, to the extent they provide for variable rates of
interest, expose the Company to interest rate risk, with the primary interest
rate risk exposure resulting from changes in LIBOR or the prime rate, which are
used to determine the interest rates that are applicable to borrowings under the
Company's bank credit facilities. The Company uses off-balance sheet derivative
financial instruments, in particular an interest rate swap agreement, to
partially hedge variable interest transactions. The Company's derivative
financial instrument transaction has been entered into for non-trading purposes.
The terms and characteristics of the derivative financial instruments are
matched with the underlying on-balance sheet instrument or anticipated
transactions and do not constitute speculative or leveraged positions
independent of these exposures. There have been no material changes to the
Company's outstanding debt instruments since December 31, 2000.
19
20
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is involved in various claims, legal actions and regulatory
proceedings arising in the ordinary course of business. The Company believes
that the disposition of these matters will not have a material adverse effect on
the Company's consolidated financial position, results of operations or cash
flows.
As previously reported, the Company filed a formal appeal of the RCA's
order terminating the rural exemption for Fairbanks and Juneau on November 10,
1999. The Company's request for an emergency stay of the RCA's order was denied
by the superior court on February 9, 2001. The Company subsequently filed a
Petition for Review of this decision with the Alaska Supreme Court. On May 1,
2001, the Alaska Supreme Court denied the petition for review. Meanwhile, on
February 22, 2001, the Company filed a motion to vacate the RCA's order in
superior court. That motion has now been fully briefed and oral argument is
scheduled for May 16, 2001. Although the Company believes its appeal is
well-founded, it cannot predict the timing and outcome of this litigation.
The Company also previously reported a dispute concerning the Fairbanks
and Juneau interconnection agreements ordered by the RCA. On September 25, 2000,
the Company filed suit in federal district court in Anchorage, Alaska
challenging the legality of these interconnection agreements. On October 17,
2000, the RCA filed a motion to dismiss the complaint on sovereign immunity
grounds. On March 13, 2001, prior to the district court's March 20, 2001 denial
of the RCA's motion to dismiss, the Company sought to enjoin the RCA from
enforcing the agreements. Shortly thereafter, on March 22, 2001, the RCA filed
an appeal of the district court's sovereign immunity decision and also asked the
district court to stay any further proceedings on the case pending a decision on
its sovereign immunity appeal. On March 29, 2001, the district court granted the
RCA the stay it requested. Although the Company believes its action is
well-founded, it cannot predict the timing and outcome of this litigation.
The Company also previously reported that on February 7, 2001, it filed
an appeal in the United States Court of Appeals for the District of Columbia
Circuit of a January 24, 2001 FCC Order to pay $2.7 million plus interest to
General Communication, Inc. ("GCI") for excess interstate access charges. On
April 4, 2001, the FCC released an order granting the Company's request for a
stay of the payment and allowed the Company to place the funds in question,
already fully reserved, in escrow pending the outcome of the appeal. In
addition, AT&T Alascom, made a demand for payment of approximately $3.5 million
dollars based on the FCC's January 24, 2001 Order in favor of GCI. These funds,
also fully reserved, have been placed in a similar escrow account pending
resolution of the Company's appeal of the FCC Order. The Company believes its
appeal is well-founded but it cannot predict the timing and outcome of this
litigation.
Amongst the most notable regulatory matters, the RCA agreed, on April
23, 2001, to allow the Company to discontinue its intrastate Infinite Minutes
long distance plan. Also, the Company participated, on April 12, 2001, in an
initial RCA pre-hearing and scheduling conference concerning its rate cases
which are due to be filed in July 2001. The Company is involved in a number of
other on-going regulatory proceedings. However, the Company cannot predict the
timing or outcome of those proceedings.
20
21
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
During 1999 ACS Group offered to the public 10,000,000 shares of its
common stock. The effective date of the Company's registration statement (File
#333-88753) filed on Form S-1 under the Securities Act of 1933, as amended,
relating to ACS Group's initial public offering of common stock was November 17,
1999. Goldman, Sachs & Co., Donaldson, Lufkin and Jenrette, CIBC World Markets,
Deutsche Banc Alex. Brown, and Hambrecht & Quist led the underwriting syndicate.
The offering commenced on November 18, 1999 and closed on November 23, 1999,
resulting in aggregate gross proceeds of $140.0 million. ACS Group's net
proceeds from the offering were $127.9 million. Approximately $9.1 million of
offering expenses was attributable to underwriting discounts. Proceeds of the
offering were fully expended as of January 12, 2001. The proceeds were applied
as follows:
o $10.6 million of the proceeds being used to retire 35% of the
Company's senior discount debentures, including a $1.3 million
premium for early retirement,
o $25.0 million was used to repay outstanding obligations under
the Company's senior revolving credit facility and
o $92.3 million was used to fund capital expenditures and
operations.
On December 3, 1999 the Company registered 6,021,489 shares under
various employee and non-employee stock option plans and an employee stock
purchase plan (File # 333-92091) on Form S-8 under the Securities Act of 1933.
As of May 3, 2001, 4,010,250 option grants are outstanding under the employee
stock option plans and 237,228 options have been exercised and converted into
shares of the Company's common stock. As of May 3, 2001, 35,738 shares have been
awarded under the non-employee stock plan, of which 20,210 were elected to be
deferred. As of May 3, 2001, 131,612 shares have been issued under the employee
stock purchase plan. See Note 2, "Stock Incentive Plans" to the Alaska
Communications Systems Group, Inc. Consolidated Financial Statements for further
discussion.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
NONE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
NONE.
ITEM 5. OTHER INFORMATION.
NONE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS:
--------
NONE.
(b) REPORTS ON FORM 8-K:
-------------------
No reports on Form 8-K were filed during the quarter ended
March 31, 2001.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 10-Q to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date: May 7, 2001 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
/s/ Kevin P. Hemenway
----------------------------
Kevin P. Hemenway
Senior Vice President and
Chief Financial Officer
(Signing both in his capacity as Senior Vice
President on behalf of the Registrant and as Chief
Financial Officer of the Registrant)
22