Exhibit 99.1
Alaska Communications Systems Reports Second Quarter Results; Company
Achieves a Record 3,092 Net Wireless Additions Over 130 New Business
Wins Added in the Quarter
ANCHORAGE, Alaska--(BUSINESS WIRE)--July 29, 2004--Alaska
Communications Systems Group, Inc. ("ACS") (Nasdaq:ALSK) today
reported financial results for its second quarter ended June 30, 2004.
Revenues for the second quarter of 2004 were $75.3 million and the
Company's net loss for the second quarter of 2004 was $7.2 million or
$0.24 per share (basic and diluted). EBITDA for the second quarter of
2004 was $27.0 million.
"This was a very successful quarter for the Company as we showed
continued momentum in the business market, posted record results in
wireless and had a strong sequential increase in our EBITDA,"
commented Liane Pelletier, President and CEO of ACS. "Momentum from
our business sales team continues to build and we added 130 new
business customers during the quarter. Our strong results from the
business market were marked by our ability to reverse the trend of
access line erosion to business customers as we sequentially increased
the number of access lines to commercial accounts for the first time
in the last two years. Businesses account for approximately two-thirds
of our local telephone retail revenue and our success in this area is
a clear indication of our progress and future potential."
"Our quarter was also highlighted by a record 3,092 wireless adds
with sector leading churn of only 1.7%. Our success against the
competition was clearly apparent as 70% of customers who ported their
wireless numbers in the second quarter moved to ACS. Capitalizing on
the state's implementation of wireless number portability, ACS
launched its new CDMA 1xRTT and EVDO network," added Pelletier. "Being
first to market with next generation picture phones, PDAs and PC air
cards was a huge differentiator for us. Interest in our new wireless
data services is exciting as customers experience the highest
available mobile speeds on EVDO with average speeds of 500 kbps and
peak speeds of 2.4Mbps. All of these competitive advantages give ACS
the opportunity to use wireless as a door opener to present its full
product line to new customers and increase our share of wallet with
existing customers."
"We continued to make progress in our business model in the second
quarter as our total revenues increased by 1% over the same period
last year excluding the Company's exited Directories business and the
discontinued State of Alaska contract and we improved EBITDA from the
first quarter of 2004 to $27 million during the second quarter," added
David Wilson, Senior Vice President and CFO of ACS. "This improvement
in EBITDA is a clear indication of our successful cost cutting
initiatives and our ability to streamline our operations. For example,
during the quarter we completed the conversion of our wireless
provisioning and billing systems. Now our enhanced wireless front and
back offices can provision a wireless customer four times faster. In
addition, we improved our customer service operations to reduce wait
times, more quickly manage customer provisioning requests and more
efficiently utilize our customer facing resources. These efforts,
coupled with increasing retail customer counts, lengthening our
customer lives through improved churn management and increasing ARPUs,
will be key drivers of EBITDA going forward."
Second Quarter Financial Highlights
-- During the quarter the Company grew its total number of retail
customers across all product lines by 1,400 with strong growth
in wireless and net line gains from the business segment of
its LEC operations.
-- The Company added 3,092 wireless subscribers from the
preceding quarter. In the second quarter, Average Revenue per
Unit, or ARPU, improved by $1.87 to $50.11 and MOU (Minutes of
Use) increased by 13.8% over the same period last year.
-- The Company ended the quarter with 20,963 DSL subscribers, an
increase of 7.9% subscribers on a sequential basis. Each of
these subscribers enjoys full broadband access speeds of up to
1.2 MB per second.
-- Access lines, excluding the impact of a change in line
counting methodology which resulted in the reduction of 2,538
lines, declined 0.6% sequentially to 307,523, in line with
many LECs. Importantly, retail local access lines to business
customers increased sequentially during the quarter for the
first time in two years.
-- Long distance subscribers increased by 600 to 42,653 customers
from the preceding quarter principally as a result of a
focused selling effort and the bundling of the LD product with
other ACS services.
-- During the quarter, the Company generated $10.5 million of
free cash flow, exclusive of $3.8 million of growth capex used
to fund the roll out of our CDMA 1xRTT and EV-DO network.
Recent Business Highlights
-- On June 28, the Company announced that the UNE loop rate in
Anchorage will increase by 28%, from $14.92 to $19.15,
pursuant to the Regulatory Commission of Alaska's order dated
June 25, 2004. The increase in the Anchorage UNE loop rate
will raise revenue to ACS by approximately $262,000 per month
based upon the current level of UNE loops.
-- On May 24, the Company launched the initial phase of its new
next generation CDMA network to coincide with the advent of
wireless local number portability (LNP) in Alaska. Combined
with newly available ACS mobile phones the CDMA network
enables internet browsing, mobile shopping for downloads like
ringers, picture taking and sending capability, and much more.
-- On June 15, the Company announced the introduction of Wireless
Broadband Access -- a broadband wireless data service powered
by its next generation CDMA network. Utilizing 1xEV-DO
technology, ACS' Wireless Broadband Access is the fastest
available wide area wireless data service available today.
-- In the second quarter, the Company introduced a new, high
profile advertising campaign focusing on the benefits of the
Company's full product line of local, wireless, long distance
and internet. The campaign features a common look and feel and
communicates ACS's integrated approach to solving customer
needs.
-- On June 21, the Company announced that its stock will join the
Russell 3000(R) Index.
Revenues for the second quarter of 2004 were $75.3 million, an
increase of 1% from the second quarter 2003 revenues of $74.5 million,
excluding revenue from the Company's Directory business sold in 2003
and the State of Alaska contract terminated in 2003. Reported
revenues, including Directory and the State of Alaska, for the second
quarter of 2003 were $84.0 million. The Company's net loss for the
second quarter of 2004 was $7.2 million or $0.24 per share (basic and
diluted), which compares to a net gain of $92.7 million, or $3.08 per
share (basic and diluted) for the same period in 2003 which included a
one-time gain of $97.6 million attributable to the sale of the
Company's Directory business.
ACS will host a conference call at 5:00 P.M. Eastern time today to
discuss its first quarter results. For parties in the United States
and Canada, call 800-257-3401 to access the earnings call.
International parties can access the call at 303-262-2211.
Additionally, ACS will offer a live webcast of the conference call,
accessible from the "Investor Relations" section of the Company's
website (www.alsk.com). The webcast will be archived for a period of
45 days. A telephonic replay of the conference call will also be
available 2 hours after the call and will run until Saturday, July 31,
2004, at 7:00 p.m. ET. To hear the replay, parties in the United
States and Canada should call 800-405-2236 and enter pass code
11003166. International parties should call 303-590-3000 and enter
pass code 11003166.
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. More information
can be found on the Company's website at http://www.acsalaska.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
ACS. 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 ACS's ability to change its
pricing for communications services; the possible future
unavailability of SFAS No. 71 to ACS's wireline subsidiaries; and
possible changes in the demand for ACS'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 ACS's future business. These and other
uncertainties related to ACS's business are described in greater
detail in ACS's Annual Report on Form 10-K for the year ended Dec. 31,
2003. The information contained in this release is as of July 29,
2004. ACS 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 STATEMENTS OF OPERATIONS AND OTHER FINANCIAL DATA
For the Three and Six Months Ended June 30, 2004 and 2003
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
Operating revenues:
Local telephone $ 52,948 $ 55,210 $108,730 $109,211
Wireless 13,461 11,947 25,062 22,277
Directory - 3,353 - 11,631
Internet 5,105 9,037 9,718 16,193
Interexchange 3,790 4,449 7,199 8,476
-------- -------- -------- --------
Total operating revenues 75,304 83,996 150,709 167,788
Operating expenses:
Local telephone 29,112 26,852 61,636 54,107
Wireless 8,331 7,341 16,259 14,251
Directory - 1,800 - 5,249
Internet 6,407 13,485 13,913 24,099
Interexchange 4,858 6,212 9,874 11,830
Depreciation and
amortization 18,810 22,091 37,916 44,691
Gain (Loss) on disposal of
assets, net (2) (97,285) 225 (96,539)
-------- -------- -------- --------
Total operating expenses 67,516 (19,504) 139,823 57,688
-------- -------- -------- --------
Operating income 7,788 103,500 10,886 110,100
Other income and expense:
Interest expense (15,239) (15,563) (27,336) (28,892)
Interest income and other 232 4,787 462 4,979
-------- -------- -------- --------
Total other income
(expense) (15,007) (10,776) (26,874) (23,913)
-------- -------- -------- --------
Income (Loss) before income
taxes (7,219) 92,724 (15,988) 86,187
Income taxes - - - -
-------- -------- -------- --------
Income (Loss) from continuing
operations (7,219) 92,724 (15,988) 86,187
Loss from discontinued
operations, net of tax - - - (52)
-------- -------- -------- --------
Net income (loss) $ (7,219) $ 92,724 $(15,988) $ 86,135
======== ======== ======== ========
Net income (loss) per share -
basic and diluted:
Income (Loss) from
continuing operations (0.24) 3.08 (0.54) 2.84
Loss from discontinued
operations, net of tax - - - (0.00)
-------- -------- -------- --------
Net income (loss) $ (0.24) $ 3.08 $ (0.54) $ 2.84
======== ======== ======== ========
Weighted average shares
outstanding:
Basic and diluted 29,539 30,095 29,437 30,373
======== ======== ======== ========
Adjusted EBITDA $ 27,011 $ 27,436 $ 49,555 $ 52,745
======== ======== ======== ========
Note:Certain reclassifications have been made to the 2003 data to
conform with the current presentation.
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
June 30, Dec. 31,
Assets 2004 2003
---------- ----------
Current assets:
Cash and cash equivalents $ 81,585 $ 97,798
Restricted cash 4,885 3,635
Accounts receivable-trade, net of allowance
of $4,001 and $4,432 37,033 41,718
Materials and supplies 8,962 10,099
Prepayments and other current assets 7,039 5,850
---------- ----------
Total current assets 139,504 159,100
Property, plant and equipment 1,051,458 1,041,904
Less: Accumulated depreciation and
amortization 628,112 603,760
---------- ----------
Property, plant and equipment, net 423,346 438,144
Goodwill 38,403 38,403
Intangible Assets 21,963 22,055
Debt issuance costs, net of amortization of
$6,631 and $5,417 17,153 18,939
Deferred charges and other assets 9,494 8,750
---------- ----------
Total assets $ 649,863 $ 685,391
========== ==========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $ 2,290 $ 1,982
Accounts payable-affiliates 3,370 5,082
Accounts payable, accrued and other current
liabilities 40,790 47,303
Income taxes payable - 1,095
Advance billings and customer deposits 8,557 8,766
---------- ----------
Total current liabilities 55,007 64,228
Long-term obligations, net of current portion 531,493 548,238
Other deferred credits and long-term
liabilities 75,766 71,065
Stockholders' equity (deficit):
Preferred stock, no par, 5,000 authorized,
no shares issued and outstanding - -
Common stock, $.01 par value; 145,000
shares authorized, 33,933 and 33,611
shares issued and 29,384 and 29,343
outstanding, respectively 339 336
Common stock, $.01 par value; 267 shares
subject to mandatory redemption - (1,198)
Treasury stock, 4,549 and 4,268 shares,
respectively, at cost (18,443) (17,118)
Paid in capital in excess of par value 280,030 278,181
Accumulated deficit (269,786) (253,798)
Accumulated other comprehensive loss (4,543) (4,543)
---------- ----------
Total stockholders' equity (deficit) (12,403) 1,860
---------- ----------
Total liabilities and stockholders' equity
(deficit) $ 649,863 $ 685,391
========== ==========
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF ADJUSTED REVENUES
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -------------------
2004 2003 2004 2003
------- ------- -------- --------
Total operating revenues $75,304 $83,996 $150,709 $167,788
Adjustment for sale of the
Company's directory business -
Directory revenues - (3,353) - (11,631)
------- ------- -------- --------
Total adjusted operating
revenues $75,304 $80,643 $150,709 $156,157
======= ======= ======== ========
Note: In an effort to provide investors with additional information
regarding the Company's results as determined by generally accepted
accounting principles (GAAP), the Company also discloses certain non-
GAAP information which management utilizes to assess performance.
Within this press release, the Company has disclosed its total
operating revenues adjusted to exclude the impact of disposed of
operations (Total adjusted operating revenues) as the Company believes
that such data will facilitate more useful period-to-period
comparisons of the Company's ongoing operations.
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
2004 2003 2004 2003
-------- -------- -------- --------
Local telephone revenues:
Local network service $ 22,995 $ 25,219 $ 45,748 $ 49,348
Network access revenue 24,539 25,140 52,234 50,201
Deregulated and other 5,414 4,851 10,748 9,662
-------- -------- -------- --------
Local telephone revenues $ 52,948 $ 55,210 $108,730 $109,211
======== ======== ======== ========
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF ADJUSTED EBITDA CALCULATION
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------------------
2004 2003 2004 2003
----------------------------------------
Net income (loss) $(7,219) $92,724 $(15,988) $86,135
Add (subtract):
Interest expense 15,239 15,563 27,336 28,892
Income tax benefit - - - -
Depreciation and
amortization 18,810 22,091 37,916 44,691
Gain (Loss) on disposal
of assets, net (2) (97,285) 225 (96,539)
Gain on Foreign Exchange - (4,104) - (4,104)
Non-cash pension expense 183 - 366 -
Non-cash adjustment to
litigation reserves - - (300) -
----------------------------------------
EBITDA 27,011 28,989 49,555 59,075
Adjustment for
discontinued operations - - - 52
Adjustment for sale of
the Company's directory
business -
Directory EBITDA - (1,553) - (6,382)
----------------------------------------
Adjusted EBITDA $27,011 $27,436 $49,555 $52,745
========================================
Note: In an effort to provide investors with additional information
regarding the Company's results as determined by generally accepted
accounting principles (GAAP), the Company also discloses certain non-
GAAP information which management utilizes to assess performance and
believes provides useful information to investors. Within this press
release, the Company has disclosed its net gain before interest
expense, provisions for taxes, depreciation expense, amortization
expense and other non-cash charges inclusive of non cash pension
expense and a non cash release of litigation reserves following legal
settlement (EBITDA) because the Company believes it is an important
indicator because it provides information about our ability to service
debt, pay dividends and fund capital expenditures.
To further assist the reader in understanding operations, EBITDA has
also been adjusted to exclude the impact of discontinued and disposed
of operations (Adjusted EBITDA) as the Company believes that such data
will facilitate more useful period-to-period comparisons of the
Company's ongoing operations. EBITDA and adjusted EBITDA are not GAAP
measures and should not be considered a substitute for net income and
loss and other measures of financial performance recorded in
accordance with GAAP.
Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
As of June 30,
-------------------
2004 2003
-------- --------
Local telephone:
Retail access lines 212,737 227,604
Wholesale access lines 21,310 18,868
UNE loop lines 68,662 66,864
UNE platform lines 4,814 4,892
-------- --------
Total local telephone access lines 307,523 318,228
======== ========
Average local telephone access lines for the
quarter 309,721 319,388
Average local telephone revenue per line for
the quarter $ 56.98 $ 57.62
Quarterly growth rate in local telephone
access lines -1.4% -0.7%
Wireless
Covered population 480,422 478,413
Ending subscribers 91,083 82,894
Average subscribers for the quarter 89,537 82,560
Quarterly growth rate 3.5% 0.8%
Activations for the quarter 7,615 6,273
Deactivations for the quarter 4,523 5,604
Average monthly churn for the quarter 1.7% 2.1%
Penetration 19.0% 17.3%
Quarterly Minutes of use (000's) 68,708 60,383
Average revenue per subscriber for the quarter $ 50.11 $ 48.24
Long Distance:
Long distance subscribers 42,653 44,289
Quarterly Minutes of use (000's) 33,119 36,721
Average subscribers for the quarter 42,353 50,983
Average revenue per subscriber for the quarter $ 29.83 $ 29.09
Internet:
DSL subscribers 20,963 14,817
Dial-Up and other service subscribers 24,215 29,787
-------- --------
Total Internet subscribers 45,178 44,604
======== ========
Average subscribers for the quarter 45,432 44,944
Average revenue per subscriber for the quarter $ 33.56 $ 27.84
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF FREE CASHFLOWS
(Unaudited, in Thousands)
Three Months Three Months Six Months
Ended Ended Ended
March 31, June 30, June 30,
--------- --------- ---------
2004 2004 2004
--------- --------- ---------
Net cash provided by operating
activities $ 5,719 $ 17,259 $ 22,978
Total construction and
capital expenditures (10,311) (10,475) (20,786)
--------- --------- ---------
Free Cashflow (4,592) 6,784 2,192
CDMA growth 2,050 3,753 5,803
--------- --------- ---------
Free cashflow adjusted for CDMA
growth $ (2,542) $ 10,537 $ 7,995
========= ========= =========
CONTACT: Alaska Communications Systems
David Wilson, 907-297-3000
www.acsalaska.com
or
The Blueshirt Group
Chris Danne, Rakesh Mehta, 415-217-7722
chris@blueshirtgroup.com
rakesh@blueshirtgroup.com