Exhibit 99.1
Alaska Communications Reports First Quarter 2005 Results;
Revenue Increases to $77.4 Million from $75.4 Million in
Fourth Quarter 2004; EBITDA Up 23% to $27.6 Million Compared
to First Quarter 2004
ANCHORAGE, Alaska--(BUSINESS WIRE)--May 2, 2005--
Wireless Revenue Up 47% Compared to First Quarter 2004 and Sixth
Consecutive Quarter of Record Subscriber Growth
Alaska Communications Systems Group, Inc. ("ACS") (Nasdaq:ALSK)
today reported financial results for its first quarter ended March 31,
2005.
"Execution of ACS' strategic priorities remains on track in 2005,"
stated Liane Pelletier, ACS president and chief executive officer.
"Completing a series of key financial transactions in the first
quarter, we strengthened our financial structure and lowered our cost
of capital. Consequently, the company has never been better positioned
financially."
Pelletier added, "We continue to drive profitable revenue growth
by increasing retail relationships. In both the business and consumer
segments, our wireless and data product lines are most often used to
establish new relationships, into which we upsell local and long
distance. With those steps, we help make the customer's life easier as
we grow ACS' share of wallet. The full range of market-facing
activities is complemented by an organization-wide emphasis on process
improvement. Each to varying degrees, the ten process improvement
teams launched at the end of 2004 are focused on streamlining the
customer experience, driving cost efficiency and stimulating revenue
productivity."
"In terms of investing behind the growth, we have found that the
market reception of our CDMA-based products coupled with our more
efficient build procedures are allowing ACS to complete the deployment
of our statewide CDMA network on an accelerated basis and remain
within capex guidance. Finally, the volumes of traffic generated
across our various network platforms prompted us to initiate the
process of exercising ACS' option to assume additional fiber capacity
within the state."
Financing Transactions
During the quarter, ACS issued and sold approximately 9.9 million
new common shares in a public offering, receiving total net proceeds
of approximately $76.5 million after payment of underwriting discounts
and other stock issuance costs. Additionally, a series of debt
transactions were completed, including:
-- Entry into a new $380 million senior secured credit facility,
consisting of a $335 million term loan facility and a $45
million revolving credit facility;
-- Entry into two 5-year interest rate swaps: one rate swap
fixing $135 million of the new senior secured term loan at
6.13% and a second swap fixing $85 million of the senior
secured term loan at 6.50%;
-- Repayment of the outstanding balance of $198.0 million under
the previous senior secured credit facility;
-- Repurchase of approximately $59.4 million outstanding
principal amount of 9.875% senior notes due 2011; and
-- Repurchase of all of the $147.5 million outstanding principal
amount of 9.375% senior subordinated notes due 2009.
As a result, total debt declined by $66.5 million from December
31, 2004, to $461.1 million, as of March 31, 2005. In addition, as of
the end of first quarter 2005, ACS had fixed rates on 75 percent of
its total debt and floating rates on the remaining $115 million
generally bearing interest at LIBOR plus 200 basis points.
David Wilson, ACS senior vice president and chief financial
officer, said, "This lower cost capital structure, in conjunction with
our confidence in the continued strength of our cash flows,
contributed to the decision in March to increase ACS' quarterly cash
dividend to $0.20 per share, an 8 percent increase over the prior
dividend rate of $0.185. In addition, we have initiated a dividend
reinvestment and direct stock purchase plan providing a convenient and
cost-effective way for investors to purchase ACS common stock."
Quarterly Financial Highlights
For the first quarter ending March 31, 2005:
-- Revenues were $77.4 million, which represented a 2.6 percent
increase over first quarter 2004 revenues of $75.4 million;
-- EBITDA increased by 23.5 percent to $27.6 million from $22.4
million for the first quarter of 2004, which was impacted by
$3.5 million of restructuring charges;
-- Operating income increased 136 percent to $7.3 million
compared to the first quarter 2004; and
-- Net loss increased to $28.2 million from $8.8 million and to a
loss of $0.77 per share from $0.30 per share in the prior
year. The increase in net loss is attributable to an increase
in interest expense, which rose to $36.0 million from $12.1
million. Interest expense included $26.2 million of
non-recurring charges associated with our accretive debt
restructuring, comprised of $12.8 million of tender premiums
and $13.4 million for the write off of unamortized debt
issuance costs and settlement of original issue discounts.
Wilson added, "Our effective execution against strategic
priorities is evident in our first quarter results. Standout areas of
performance include wireless, in which a 47.0 percent increase in
revenue paired with an operating expense increase of just 20.9 percent
drove wireless EBITDA margins from 31.7 percent to 43.8 percent. In
addition, Internet and interexchange services recorded year-over-year
revenue increases and simultaneous decreases in associated costs."
"Cash used in operating activities in the quarter was $5.2 million
and uses included a settlement of tender premiums and accrued interest
expense of $12.8 million and $7.3 million, respectively. As a result,
ACS closed the quarter with a cash balance of $68.2 million. Looking
ahead, we are confident that we have the right business model and mix
of assets in the right market to sustain and grow cash flow over
time."
Metric Highlights: First Quarter 2005 Compared to Fourth Quarter
2004
Wilson commented, "Postpaid wireless is the primary driver of
growth for ACS, and we continue to deliver compelling results against
four key factors that demonstrate the strength of our product
offerings and customer loyalty. We are rapidly growing our postpaid
subscriber base, which increased by 5.2 percent sequentially to
88,200. Postpaid ARPU continues to move higher resulting from the
depth of our product offering and the advent of CETC revenue,
increasing 21.1 percent to $53.28 compared to $43.98 in the first
quarter of last year. The cost of gross additions remains consistently
low at ACS and was less than $200 per subscriber in the first quarter.
Lastly, our postpaid churn rate is industry leading coming in at 1.6
percent per month for the latest quarter.
"At the end of the first quarter, we performed a review of our
subscriber count methodology for prepaid wireless and determined that
we would cease to count subscribers whose accounts had been inactive
for six months. While this resulted in a 2,300 reduction in our
prepaid base, it had no impact on previously reported revenue, net
income or cash flows."
ACS recorded the following for the first quarter 2005 compared to
the fourth quarter 2004:
-- Increased the total number of retail customer relationships
across all product lines by approximately 2,600 to over
398,800 total.
-- Recorded a sixth consecutive quarter of record subscriber
growth by adding approximately 1,600 wireless subscribers,
bringing the total to approximately 102,300. Churn, inclusive
of a 2,300 reduction in prepaid subscribers, averaged 2.4
percent per month.
-- Recorded wireless average revenue per unit (ARPU) of $48.65,
inclusive of CETC revenue of $3.37, compared to $45.17.
-- Increased digital subscriber lines (DSL) 9.7 percent to over
27,100 as a result of increased emphasis on marketing
activities.
-- Increased long distance subscribers almost 1,500 to 48,500
customers, a 3.2 percent increase, principally as a result of
a focused selling effort and the bundling of the long distance
product with other ACS services.
-- Recorded over 289,100 total local network access lines, which
reflects a 510 line reduction due to a reclassification of
revenue generating trunk lines used to service cellular
carriers rather than end user lines. Net of this
reclassification, access lines decreased by approximately
5,800 lines, or 2.0 percent, which is reflective of industry
trends.
Business Outlook
For the year 2005, ACS reiterates its previous outlook: Revenue
for the full year is expected to be in the range from $310 million to
$320 million and EBITDA to be in the range from $108 million to $112
million.
Net cash interest expense is expected to decline to approximately
$31 million, pro forma for the first quarter debt restructuring being
in place from January 1, 2005. ACS expects capital expenditures for
2005 to range from $65 million to $70 million, comprised of
maintenance capital expenditures of approximately $35 million and
pre-funded growth capital expenditures of between $30 million and $35
million.
Conference Call
The company will host a conference call and live webcast today at
5:00 p.m. Eastern Time to discuss first quarter results. For parties
in the United States and Canada, call 800-218-0204 to access the
earnings call. International parties can access the call at
303-262-2075.
The live webcast of the conference call is accessible from the
"Investor Relations" section of the company's website www.alsk.com.
The webcast will be archived for a period of 90 days. A telephonic
replay of the conference call will also be available 2 hours after the
call and will run until Friday, May 6, 2005 midnight Eastern time. To
hear the replay, parties in the United States and Canada should call
800-405-2236 and enter pass code 11028616. International parties
should call 303-590-3000 and enter pass code 11028616.
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
www.acsalaska.com or at its investor site at www.alsk.com.
Forward Looking EBITDA Guidance
This press release includes management's estimate of EBITDA for
the year ended December 31, 2005. Management believes the most
directly comparable GAAP measure would be "Net cash provided by
operating activities." Due to the difficulty in forecasting and
quantifying the amounts that would be required to be included in this
comparable GAAP measure, the Company is not providing an estimate of
year-end net cash provided by operating activities at this time.
Safe Harbor Statement
Statements about future results and other expectations constitute
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements are based
on current expectations and the current economic environment. The
company cautions that these statements are not guarantees of future
performance. Actual results may differ materially from those expressed
or implied in the forward-looking statements. A number of factors in
addition to those discussed herein could cause actual results to
differ materially from expectations. The company's financial planning
is affected by business and economic conditions and changes in
customer order patterns. Any projections are inherently subject to
significant economic and competitive uncertainties and contingencies,
many of which are beyond the control of ACS. Important assumptions and
other important factors, including risk factors, which could cause
actual results to differ materially from those in the forward-looking
statements, are specified in the company's Form 10-K for the year
ended December 31, 2004 and other filings with the SEC, including
under headings such as "Risk factors" and "Management's discussion and
analysis of financial condition and results of operations." The
company undertakes no obligation to update forward-looking statements,
whether as a result of new information, future events, or otherwise.
Tables Follow
Schedule 1
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended
March 31,
--------------------
2005 2004
----------- --------
Operating revenues:
Local telephone $51,565 $55,832
Wireless 17,056 11,601
Internet 5,061 4,613
Interexchange 3,726 3,409
----------- --------
Total operating revenues 77,408 75,455
Operating expenses:
Local telephone 30,523 32,574
Wireless 9,582 7,928
Internet 5,237 7,506
Interexchange 4,400 5,016
Depreciation and amortization 20,413 19,106
Loss (gain) on disposal of assets, net (68) 227
----------- --------
Total operating expenses 70,087 72,357
Operating income 7,321 3,098
Other income and expense:
Interest expense (35,970) (12,052)
Interest income 494 242
Equity in income of investments 4 4
Other (49) (61)
----------- --------
Total other income (expense) (35,521) (11,867)
----------- --------
Loss before income taxes (28,200) (8,769)
Income tax benefit (expense) - -
----------- --------
Net loss $(28,200) $(8,769)
=========== ========
Loss per share - basic and diluted:
Net loss $(0.77) $(0.30)
=========== ========
Weighted average shares outstanding:
Basic 36,730 29,333
=========== ========
Diluted 36,730 29,333
=========== ========
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
March 31, December 31,
Assets 2005 2004
----------- ------------
Current assets:
Cash and cash equivalents $63,466 $85,860
Restricted cash 4,690 4,690
Accounts receivable-trade, net of
allowance of $4,895 and $4,869 38,440 39,413
Materials and supplies 7,056 6,623
Prepayments and other current assets 4,419 3,724
----------- ------------
Total current assets 118,071 140,310
Property, plant and equipment 1,068,740 1,061,767
Less: Accumulated depreciation and
amortization 668,596 649,455
----------- ------------
Property, plant and equipment, net 400,144 412,312
Goodwill 38,403 38,403
Intangible Assets 21,826 21,871
Debt issuance costs 14,294 15,482
Deferred charges and other assets 9,337 8,749
---------- ------------
Total assets $602,075 $637,127
========== ============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $393 $2,298
Accounts payable-affiliate 2,686 3,973
Accounts payable, accrued and other
current liabilities 48,862 53,843
Advance billings and customer deposits 8,893 8,948
---------- ------------
Total current liabilities 60,834 69,062
Long-term obligations, net of current portion 457,321 523,591
Other deferred credits and long-term
liabilities 74,784 77,916
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, no par, 5,000 authorized,
no shares issued and outstanding - -
Common stock, $.01 par value; 145,000
shares authorized, 45,167 and
35,245 shares issued and 40,617 and
30,695 outstanding, respectively 452 352
Treasury stock, 4,549 shares at cost (18,443) (18,443)
Paid in capital in excess of par value 350,493 287,966
Accumulated deficit (321,292) (298,786)
Accumulated other comprehensive loss (2,074) (4,531)
---------- ------------
Total stockholders' equity (deficit) 9,136 (33,442)
---------- ------------
Total liabilities and stockholders' equity $602,075 $637,127
========== ============
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in Thousands)
Three Months Ended
March 31,
2005 2004
--------- --------
Cash Flows from Operating Activities:
Net loss $(28,200) $(8,769)
Adjustments to reconcile net income to net cash
provided by operating activities:
Loss (gain) on disposal of assets and asset
impairments (68) 227
Depreciation and amortization 20,413 19,106
Amortization of debt issuance costs,
warrants and original issue discount 13,807 928
Other deferred credits (4,082) (2,285)
Changes in components of working capital:
Accounts receivable and other current
assets (155) 4,964
Accounts payable and other current
liabilities (8,784) (8,658)
Deferred charges and other assets 1,869 206
--------- --------
Net cash (used) provided by operating activities $(5,200) $5,719
Cash Flows from Investing Activities:
Construction & capital expenditures (7,182) (10,356)
--------- --------
Net cash used by investing activities (7,182) (10,356)
Cash Flows from Financing Activities:
Repayments of long-term debt (405,157) (828)
Proceeds from the issuance of long-term debt,
net of discounts 335,000 -
Debt issuance costs (10,637) -
Payment of stock dividend (5,679) -
Purchase of treasury stock - (63)
Issuance of common stock 84,278 9
Stock issuance costs (7,817) -
--------- --------
Net cash used by financing activities (10,012) (882)
Decrease in cash (22,394) (5,519)
Cash, Beginning of period 85,860 97,798
--------- --------
Cash, End of period $63,466 $92,279
========= ========
Supplemental Cash Flow Data:
Interest paid $30,915 $11,876
========= ========
Income taxes paid, net of refund $- $1,120
========= ========
Supplemental Noncash Transactions:
Interest rate swap marked to market $2,457 $-
========= ========
Dividend declared, but not paid $(8,140) $-
========= ========
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
(Unaudited, in Thousands)
Three Months Ended
March 31,
==================
2005 2004
========= ========
Local telephone revenues:
Local network service $22,218 $22,753
Network access revenue 23,350 27,695
Deregulated and other 5,997 5,384
--------- --------
Local telephone revenues $51,565 $55,832
========= ========
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF EBITDA CALCULATION
(Unaudited, in Thousands)
Three Months Ended
March 31,
=================
2005 2004
======== ========
Net loss $(28,200) $(8,769)
Add (subtract):
Interest expense 35,970 12,052
Interest income (494) (242)
Depreciation and amortization 20,413 19,106
(Gain) loss on disposal of assets and asset
impairment charges, net (68) 227
-------- --------
EBITDA $27,621 $22,374
======== ========
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. The Company has disclosed its net
gain before interest expense, provisions for taxes,
depreciation expense, amortization expense (EBITDA) because
the Company believes it is an important indicator as it
provides information about our ability to service debt, pay
dividends and fund capital expenditures. EBITDA is not a
GAAP measure and should not be considered a substitute for
net income and loss and other measures of financial
performance recorded in accordance with GAAP.
The calculation of "EBITDA" as presented in this press
release differs from the calculation of, and therefore is
not directly comparable to, "Indenture EBITDA" as presented
in ACS' prospectus supplement, dated January 26, 2005,
primarily because the calculation of "Indenture EBITDA"
allows for adjustments that meet the criteria of being "non-
cash", "extraordinary" or otherwise "non recurring" in
nature.
Schedule 6A
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
March December March
31, 31, 31,
2005 2004 2004
======== ======== ========
Local telephone:
Retail access lines(a) 204,458 207,395 213,784
Wholesale access lines 15,897 16,590 20,068
UNE loop lines 62,263 64,589 69,624
UNE platform lines 6,551 6,365 5,178
-------- -------- --------
Total local telephone access lines 289,169 294,939 308,654
======== ======== ========
Average local telephone access lines
for the quarter 292,054 298,073 309,805
Average local telephone revenue per
line for the quarter $58.85 $56.99 $60.07
Quarterly growth rate in local
telephone access lines -2.0% -2.1% -0.7%
Wireless
Covered population 482,251 482,251 480,422
Post paid cellular subscribers 88,174 83,828 72,998
Average post paid cellular
subscribers 86,001 81,478 72,191
Quarterly growth rate - post paid
cellular subscribers 5.2% 5.9% 2.3%
Activations for the quarter 8,653 9,393 4,029
Deactivations for the quarter 4,307 4,692 2,414
Average monthly churn for the
quarter 1.6% 1.8% 1.1%
Average monthly revenue per
subscriber for the quarter(c) $53.28 $50.34 $43.98
Prepaid cellular subscribers 8,560 10,404 8,393
Wholesale cellular subscribers 5,545 6,425 6,600
Total cellular subscribers 102,279 100,657 87,991
Average subscribers for the
quarter 101,468 98,093 87,504
Quarterly growth rate 1.6% 5.4% 1.1%
Activations for the quarter 9,382 10,642 5,561
Deactivations for the quarter 7,760 5,514 4,587
Average monthly churn for the
quarter 2.4% 1.7% 1.7%
Penetration 21.2% 20.9% 18.3%
Quarterly minutes of use (000's)(b) 92,907 90,483 72,156
Average monthly revenue per
subscriber for the quarter(c) $48.65 $45.17 $40.30
Long Distance:
Long distance subscribers 48,542 47,050 42,053
Quarterly minutes of use (000's) 36,557 34,779 32,139
Average subscribers for the quarter 47,796 45,692 42,610
Average monthly revenue per subscriber
for the quarter $25.99 $26.09 $26.67
Internet:
DSL subscribers 27,115 24,711 19,433
Dial-Up and other service subscribers 21,984 22,842 26,257
-------- -------- --------
Total Internet subscribers 49,099 47,553 45,690
======== ======== ========
Average subscribers for the quarter 48,326 46,924 45,876
Average monthly DSL & dial up revenue
per subscriber for the quarter(d) $30.55 $28.86 $28.06
(a) Prior period retail access lines impacted by change in line count
methodology.
(b) Wireless MOU have been restated to include prepaid airtime
certificates.
(c) Wireless ARPU has been restated to better reflect ongoing revenue
derived from ACS's wireless customers. The restated ARPU excludes
equipment sales, space and power, foreign roaming (non-ACS
customers roaming on ACS's network) and access termination
revenue. Previously, wireless ARPU was based on all wireless
revenues, including those that were not derived from ACS's
customer base. In addition, ACS has been granted competitive
eligible telecommunications carrier status (CETC) in the first Q
of 2005 which added $3.37 to cellular ARPU.
(d) Internet ARPU has been restated to include only DSL and dial-up
revenues. Previously, internet ARPU included all internet
revenues; however, the customer base included only DSL and dial-
up subscribers. The restated ARPU provides consistency between
revenues and customer counts.
Schedule 6B
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
March 31, December 31, Net
2005 2004 Movement
========= ============= ==========
Local telephone retail access lines 204,458 207,395 (2,937)
Wireless subscribers 102,279 100,657
Less adjustment for resellers (5,545) (6,425)
--------- -------------
96,734 94,232 2,502
========= =============
Long distance subscribers 48,542 47,050 1,492
DSL and dial up subscribers 49,099 47,553 1,546
--------- ------------- ----------
Total 398,833 396,230 2,603
========= ============= ==========
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF FREE CASHFLOWS
(Unaudited, in Thousands)
Three Months Ended
March 31,
==================
2005 2004
========= ========
Net cash (used) provided by operating activities $(5,200) $5,719
Total construction and capital expenditures (7,182) (10,356)
--------- --------
Free Cashflow (12,382) (4,637)
CDMA Growth 597 2,050
--------- --------
Adjusted free cashflow $(11,785) $(2,587)
========= ========
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. The Company has
disclosed net cashflow provided by operations net of total
construction and capital expenditures (free cashflow) and free
cashflow adjusted for growth capital investments in CDMA wireless
technology, which the Company plans to fund from existing cash
reserves (Adjusted free cashflow). The Company believes it is an
important indicator because it provides information about our ability
to service debt and pay dividends. Free cashflow and adjusted free
cashflow are not GAAP measures and should not be considered a
substitute for increase (decrease) in cash and other measures of
financial performance recorded in accordance with GAAP.
CONTACT: ACS
Mary Ann Pease, 907-297-3000 (Media)
mpease@acsalaska.com
or
Lippert/Heilshorn & Associates (for ACS Investors)
Kirsten Chapman, 415-433-3777
David Barnard, 415-433-3777
david@lhai-sf.com