Exhibit 99.1
Alaska Communications Systems Reports Second Quarter 2005 Results
ANCHORAGE, Alaska--(BUSINESS WIRE)--July 28, 2005--Alaska
Communications Systems Group, Inc. (Nasdaq:ALSK):
-- Revenues Increase 7.8% to $81.2 Million from $75.4 Million in
Second Quarter 2004
-- Net Cash Provided by Operating Activities Increases 17.7% to
$20.3 Million
-- EBITDA Increases to $29.0 Million Up 9.4% Compared to Second
Quarter 2004
Alaska Communications Systems Group, Inc. ("ACS") (Nasdaq:ALSK)
today reported financial results for its second quarter and six months
ended June 30, 2005.
"Our revenue, cash flow and EBITDA performance demonstrate strong
execution across the board. We delivered record sequential growth
across all product lines," stated Liane Pelletier, ACS president and
chief executive officer. "Total retail relationships reached over
408,100, up roughly 10,500 during the quarter. Wireless made an
exceptionally strong showing this quarter, with net retail wireless
adds of about 7,000 and wireline subscriber additions making up the
balance, an estimated 3,500. While subscriber growth typically
pressures margins in the short run, the ACS Process Improvement
initiatives are decreasing expenses and helping to fund the growth."
Pelletier added, "In addition to delivering solid operating
performance, we are also taking advantage of refinancing opportunities
to drive increased free cash flow. Year-to-date 2005, we have
completed a series of debt transactions to reduce cash interest costs,
improve our interest coverage ratio and lower our interest rate
exposure."
Financial Highlights for the Second Quarter Ending June 30, 2005
-- Revenues were $81.2 million, which represented a 7.8 percent
increase over second quarter 2004 revenues of $75.4 million.
-- Net cash provided by operations increased 17.7% to $20.3
million compared to the second quarter of 2004.
-- EBITDA increased to $29.0 million, up 9.4 percent compared to
$26.6 million for the second quarter of 2004.
-- Operating income increased 7.8 percent to $8.4 million
compared to the second quarter 2004.
-- Net loss decreased to $103,000 from $7.2 million and to a
breakeven of $0.00 per share from a loss of $0.24 per share in
the prior year. The decrease in net loss is primarily
attributable to a decrease in net interest expense, which
declined to $8.5 million from $15.0 million. In addition, the
second quarter 2005 performance benefited from an $800,000
release of reserves for Infinite Minutes (Turner) litigation
precipitated by a lower than forecasted level of class
participation.
David Wilson, ACS senior vice president and chief financial
officer, said, "Results in all business segments contributed to a
solid quarter. Revenues, EBITDA and operating income all increased
significantly compared to a year ago, and we broke even on a per share
basis."
"Cash generated from operating activities in the quarter was $20.3
million, and we closed the quarter with a cash and investment balance
of $61.3 million. While total cash and investments fell sequentially
by $6.8 million, we utilized $14.5 million of cash on hand for our
pre-funded CDMA and fiber capacity growth capital projects. During the
quarter, we also utilized cash from operations to fund $8.3 million of
maintenance capital and $8.1 million for payment of dividends on our
common stock," added Wilson.
Wilson commented, "This is our strongest quarter to date for
wireless. We grew the total number of subscribers by 6.6 percent
sequentially while increasing ARPU by $7.38 to $56.03, inclusive of
CETC benefits. Our subscriber acquisition cost remains below $200, or
about half the cost per new customer in comparison to market leaders
in the lower 48 states, and our monthly churn rate remains industry
leading at 1.8 percent. Strength in wireless was coupled with growth
in wireline, where we maintained the level of retail LEC lines through
the quarter while driving significant subscriber growth in DSL and
long distance."
Metric Highlights: Second Quarter 2005 Compared to First Quarter
2005
-- Increased the total number of retail customer relationships
across all product lines by 10,460 to approximately 408,100.
-- Recorded a seventh consecutive quarter of record subscriber
growth by adding approximately 6,800 wireless subscribers,
bringing the total to approximately 109,100.
-- Recorded overall average monthly churn of 1.8 percent, down
from 2.4 percent; prior quarter churn was impacted by a change
in count methodology that resulted in a 2,300 reduction in
non-using prepaid subscribers but had no financial impact.
-- Recorded wireless average revenue per unit (ARPU) of $56.03,
benefiting in part from seasonality and up 15.2 percent
sequentially from $48.65, inclusive of CETC revenue of $7.92,
compared to $3.37.
-- Maintained the level of local retail access lines at 203,200,
exclusive of network grooming that reduced non-cash generating
internal use trunk lines by 1,200.
-- Increased digital subscriber lines (DSL) 8.8 percent to over
29,500 as a result of a targeted DSL promotion.
-- Increased long distance subscribers approximately 2,160 to
50,700 customers, a 4.4 percent increase, a result of
continued upselling long distance to each ACS customer.
-- Recorded over 284,000 total local network access lines. Net of
internal network grooming, access lines decreased by
approximately 3,900 or 1.4 percent, substantially all of which
were wholesale lines.
Six Months Financial Review
For the six months ended June 30, 2005, total revenues were $158.6
million, which represented a 5.2 percent increase over the same period
in 2004 revenues of $150.8 million. Net loss for the six months ended
June 30, 2005, was $28.3 million, or $0.73 per share, as compared to a
net loss of $16.0 million, or $0.54 per share in the same period in
2004. Included in the net loss for the six months ended June 30, 2005,
was $26.2 million of loss on extinguishment of debt consisting of
non-recurring charges associated with ACS' 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. Net cash provided by operating
activities for the first half 2005 was negatively impacted by the debt
refinancing during the period and was $15.1 million, as compared to
$23.0 million in the same period in 2004. EBITDA for the six months
ended June 30, 2005 was $56.7 million, an increase of 15.8 percent
from $48.9 million in the comparable period in 2004.
Business Outlook
For the year 2005, ACS updates its outlook for revenue, EBITDA,
net cash interest expense and capital expenditures. Revenue for the
full year is now expected to be in the range of $315 million to $320
million, revised from its previous outlook of $310 million to $320
million. ACS reiterates its previous outlook for EBITDA to be in the
range of $108 million to $112 million.
Net cash interest expense is expected to decline from previous
guidance of approximately $31 million to approximately $30 million,
pro forma for the 2005 debt restructuring activities 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 second quarter results. For parties
in the United States and Canada, call 800-866-5043 to access the
earnings call. International parties can access the call at
303-205-0033.
The live webcast of the conference call is accessible from the
"Investor Relations" section of the company's Web site 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 Monday, August 1 midnight Eastern Time. To
hear the replay, parties in the United States and Canada should call
800-405-2236 and enter pass code 11034807. International parties
should call 303-590-3000 and enter pass code 11034807.
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 ending 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.
Schedule 1
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Operating revenues:
Local telephone $50,341 $52,998 $101,906 $108,830
Wireless 21,354 13,461 38,410 25,062
Internet 5,508 5,105 10,569 9,718
Interexchange 4,022 3,790 7,748 7,199
-------- -------- --------- ---------
Total operating revenues 81,225 75,354 158,633 150,809
Operating expenses:
Local telephone 30,659 29,162 61,182 61,736
Wireless 11,338 8,331 20,920 16,259
Internet 5,583 6,407 10,820 13,913
Interexchange 4,561 4,858 8,961 9,874
Depreciation and amortization 20,692 18,810 41,105 37,916
Loss (gain) on disposal of
assets, net - (2) (68) 225
-------- -------- --------- ---------
Total operating expenses 72,833 67,566 142,920 139,923
-------- -------- --------- ---------
Operating income 8,392 7,788 15,713 10,886
Other income and expense:
Interest expense (8,865) (11,774) (18,631) (23,826)
Loss on extinguishment of debt - (3,423) (26,204) (3,423)
Interest income 412 236 906 478
Other (42) (46) (87) (103)
-------- -------- --------- ---------
Total other income (expense) (8,495) (15,007) (44,016) (26,874)
-------- -------- --------- ---------
Loss before income taxes (103) (7,219) (28,303) (15,988)
Income tax benefit (expense) - - - -
-------- -------- --------- ---------
Net loss $(103) $(7,219) $(28,303) $(15,988)
======== ======== ========= =========
Loss per share - basic and
diluted:
Net loss $(0.00) $(0.24) $(0.73) $(0.54)
======== ======== ========= =========
Weighted average shares
outstanding:
Basic and diluted 40,896 29,539 38,824 29,437
======== ======== ========= =========
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
June 30, Dec. 31,
Assets 2005 2004
---------- ----------
Current assets:
Cash and cash equivalents $36,832 $50,660
Restricted cash 4,545 4,690
Short-term investments 19,945 35,200
Accounts receivable-trade, net of allowance
of $5,218 and $4,869 40,422 39,413
Materials and supplies 8,124 6,623
Prepayments and other current assets 5,102 3,724
---------- ----------
Total current assets 114,970 140,310
Property, plant and equipment 1,090,230 1,061,767
Less: accumulated depreciation and amortization 687,010 649,455
---------- ----------
Property, plant and equipment, net 403,220 412,312
Goodwill 38,403 38,403
Intangible Assets 21,780 21,871
Debt issuance costs 13,755 15,482
Deferred charges and other assets 6,235 8,749
---------- ----------
Total assets $598,363 $637,127
========== ==========
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $413 $2,298
Accounts payable-affiliate 2,856 3,973
Accounts payable, accrued and other current
liabilities 49,192 53,843
Advance billings and customer deposits 9,454 8,948
---------- ----------
Total current liabilities 61,915 69,062
Long-term obligations, net of current portion 457,259 523,591
Other deferred credits and long-term liabilities 78,564 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
authorized, 45,975 and 35,245 issued and
41,426 and 30,695 outstanding, respectively 460 352
Treasury stock, 4,549 shares at cost (18,443) (18,443)
Paid in capital in excess of par value 346,709 282,272
Accumulated deficit (321,395) (293,092)
Accumulated other comprehensive loss (6,706) (4,531)
---------- ----------
Total stockholders' equity (deficit) 625 (33,442)
---------- ----------
Total liabilities and stockholders' equity $598,363 $637,127
========== ==========
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, in Thousands)
Six Months Ended
June 30,
2005 2004
--------- --------
Net cash provided by operating activities $15,117 $22,978
Cash Flows from Investing Activities:
Construction & capital expenditures (29,965) (20,873)
Purchase of short-term investments (67,745) (66,200)
Sale of short-term investments 83,000 52,700
Placement of funds in restricted account (300) (1,250)
Release of funds from escrow 445 -
--------- --------
Net cash used by investing activities (14,565) (35,623)
Cash Flows from Financing Activities:
Repayments of long-term debt (405,330) (18,793)
Proceeds from the issuance of long-term debt,
net of discounts 335,000 -
Debt issuance costs (10,637) -
Payment of stock dividend (13,802) -
Issuance of common stock 88,206 1,852
Stock issuance costs (7,817) -
Purchase of treasury stock - (127)
--------- --------
Net cash used by financing activities (14,380) (17,068)
Decrease in cash (13,828) (29,713)
Cash, Beginning of period 50,660 65,398
--------- --------
Cash, End of period $36,832 $35,685
========= ========
Supplemental Cash Flow Data:
Interest paid $15,380 $22,693
Income taxes paid, net of refund - 1,120
Supplemental Noncash Transactions:
Interest rate swap $(2,175) $ -
Dividend declared, but not paid (8,303) -
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,
------------------ -------------------
2005 2004 2005 2004
--------- -------- --------- ---------
Local telephone revenues:
Local network service $21,512 $22,995 $43,730 $45,748
Network access revenue 22,798 24,539 46,148 52,234
Deregulated and other 6,031 5,464 12,028 10,848
--------- -------- --------- ---------
Local telephone revenues $50,341 $52,998 $101,906 $108,830
========= ======== ========= =========
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF EBITDA CALCULATION
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -------------------
2005 2004 2005 2004
-------- -------- --------- ---------
Net cash provided by operating
activities $20,317 $17,259 $15,117 $22,978
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and
amortization (20,692) (18,810) (41,105) (37,916)
(Loss) gain on disposal of
assets and asset
impairments - 2 68 (225)
Amortization of debt
issuance costs, warrants
and original issue discount (670) (3,214) (14,477) (4,142)
Other deferred credits (666) (4,847) 3,416 (2,562)
Changes in components of
working capital:
Accounts receivable and
other current assets 3,733 570 3,888 (4,394)
Accounts payable and other
current liabilities (881) 871 7,903 9,529
Deferred charges and other
assets (1,244) 950 (3,113) 744
-------- -------- --------- ---------
Net (loss) $(103) $(7,219) $(28,303) $(15,988)
Add (subtract):
Interest expense 8,865 11,774 18,631 23,826
Loss on extinguishment of
debt - 3,423 26,204 3,423
(Loss) gain on disposal of
assets and asset
impairments - (2) (68) 225
Interest income (412) (236) (906) (478)
Depreciation and
amortization 20,692 18,810 41,105 37,916
-------- -------- --------- ---------
EBITDA $29,042 $26,550 $56,663 $48,924
======== ======== ========= =========
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 cash
provided by operating activities 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)
June 30, March 31, June 30,
2005 2005 2004
-------- --------- --------
Local telephone:
Retail access lines (A) 203,224 203,272 210,819
Wholesale access lines 15,109 15,897 21,312
UNE loop lines 59,271 62,263 68,664
UNE platform lines 6,454 6,551 4,815
-------- --------- --------
Total local telephone access lines 284,058 287,983 305,610
======== ========= ========
Average local telephone access lines for
the quarter 286,021 290,868 306,539
Average monthly local telephone revenue
per line for the quarter $58.67 $59.09 $57.63
Quarterly growth rate in local telephone
access lines -1.4% -2.0% -0.6%
Wireless
Covered population 482,251 482,251 480,422
Post paid cellular subscribers 95,145 88,174 75,393
Average post paid cellular subscribers 91,660 86,001 74,196
Quarterly growth rate - post paid
cellular subscribers 7.9% 5.2% 3.3%
Activations for the quarter 12,089 8,653 6,245
Deactivations for the quarter 5,118 4,307 3,850
Average monthly churn for the quarter 1.7% 1.6% 1.6%
Average monthly revenue per subscriber
for the quarter (C) $60.46 $53.28 $48.17
Prepaid cellular subscribers 8,620 8,560 9,055
Wholesale cellular subscribers 5,296 5,545 6,635
Total cellular subscribers 109,061 102,279 91,083
Average subscribers for the quarter 105,670 101,468 89,537
Quarterly growth rate 6.6% 1.6% 3.5%
Activations for the quarter 12,912 9,382 8,054
Deactivations for the quarter 6,130 7,760 4,962
Average monthly churn for the quarter 1.8% 2.4% 1.7%
Penetration 22.6% 21.2% 19.0%
Quarterly minutes of use (000's) (B) 128,063 92,907 85,088
Average monthly revenue per subscriber
for the quarter (C) $56.03 $48.65 $44.33
Long Distance:
Long distance subscribers 50,701 48,542 42,653
Quarterly minutes of use (000's) 41,297 36,557 33,119
Average subscribers for the quarter 49,622 47,796 42,353
Average monthly revenue per subscriber
for the quarter 27.02 25.99 29.83
Internet:
DSL subscribers 29,502 27,115 20,967
Dial-Up and other service subscribers 20,915 21,984 24,215
-------- --------- --------
Total Internet subscribers 50,417 49,099 45,182
======== ========= ========
Average subscribers for the quarter 49,758 48,326 45,436
Average monthly DSL & dial up revenue per
subscriber for the quarter $30.38 $30.55 $29.32
(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) ACS was granted competitive eligible telecommunications carrier
status (CETC) in the first quarter of 2005, which added $7.92 to
wireless ARPU in the second quarter of 2005 and $3.37 in the first
quarter of 2005.
Schedule 6B
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
June 30, March 31, Net
2005 2005 Movement
--------- --------- -----------
Local telephone retail access lines 203,224 203,272 (48)
Wireless subscribers 109,061 102,279
Less adjustment for resellers (5,296) (5,545)
--------- ---------
103,765 96,734 7,031
--------- ---------
Long distance subscribers 50,701 48,542 2,159
DSL and dial up subscribers 50,417 49,099 1,318
--------- --------- -----------
Total retail relationships 408,107 397,647 10,460
========= ========= ===========
Schedule 7
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF FREE CASHFLOWS
(Unaudited, in Thousands)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -----------------
2005 2004 2005 2004
--------- -------- -------- --------
Net cash provided by operating
activities $20,317 $17,259 $15,117 $22,978
Total construction and capital
expenditures (22,783) (10,517) (29,965) (20,873)
--------- -------- -------- --------
Free Cashflow (2,466) 6,742 (14,848) 2,105
CDMA Growth & Neptune optical
fiber capacity 14,510 3,753 15,107 5,803
--------- -------- -------- --------
Adjusted free cashflow $12,044 $10,495 $259 $7,908
========= ======== ======== ========
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 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 net cash provided by operating activities and other
measures of financial performance recorded in accordance with GAAP.
CONTACT: Alaska Communications Systems
Melinda Taylor, 907-297-3000 (Media)
melinda.taylor@acsalaska.com
or
Lippert/Heilshorn & Associates
Kirsten Chapman, 415-433-3777 (ACS Investors)
David Barnard, CFA, 415-433-3777 (ACS Investors)
david@lhai-sf.com