Exhibit 99.1 Alaska Communications Systems Reports First Quarter 2006 Results ANCHORAGE, Alaska--(BUSINESS WIRE)--April 27, 2006--Alaska Communications Systems Group, Inc. (NASDAQ:ALSK): -- Revenue Increased 6.8% to $82.6 Million from $77.4 Million in First Quarter 2005 -- Wireless Revenue Up 43.7% to a Record $24.5 Million -- Cash Provided by Operating Activities Reached $15.2 Million -- EBITDA of $28.3 Million Grew 2.3% Over First Quarter 2005 -- Retail Relationships Expanded to More Than 425,200 Alaska Communications Systems Group, Inc. ("ACS") (NASDAQ:ALSK) today reported financial results for its first quarter ended March 31, 2006. "ACS is vested in producing a superior customer experience and in establishing premium positions in the rapidly growing wireless and data markets," said Liane Pelletier, ACS president and chief executive officer. "Our success in executing against these goals is once again evident in our first quarter results, with robust growth in revenue and continued EBITDA expansion." Pelletier added: "Our strategy to drive future revenue growth includes completing our CDMA network, moving TDMA subscribers to CDMA, expanding our DSL footprint, and leveraging momentum in the wireless and DSL markets. We continue to stimulate adoption of local and long distance services, as well as promote customer loyalty, through our bundling programs." "Our product roadmap will continue to position ACS as a market leader and differentiate us from the competition as we tap into trends transforming our industry. We will soon introduce a bundle offering the convenience of mobile broadband access at home, work and virtually anyplace else. ACS is the only provider in Alaska able to present this valuable solution to busy and on-the-go customers." Financial Highlights: First Quarter 2006 Compared to First Quarter 2005 -- Revenue of $82.6 million increased 6.8 percent. -- Operating income increased 27.4 percent to $8.9 million. -- Net cash provided by operating activities increased to $15.2 million compared to $5.2 million of net cash used in 2005. Cash provided by operating activities was net of early redemption premiums and settlements of accrued cash interest of $8.9 million for 2006 and $20.2 million for 2005. -- EBITDA was $28.3 million including $200,000 of costs incurred to execute the March 2006 secondary stock offering. Net loss decreased to $8.4 million, or $0.20 per share, of which $9.6 million is attributable to the extinguishment of debt and $1.6 million attributable to stock-based compensation. The net loss for the first quarter 2005 was $28.5 million, or $0.78 per share, of which $26.2 million was attributable to the extinguishment of debt and $330,000 attributable to stock-based compensation. The year-over-year decrease in net loss is attributable to higher revenues and lower interest and early extinguishment of debt expenses. David Wilson, ACS senior vice president and chief financial officer, said: "Wireless continues to drive cash flow expansion at ACS and revenue increased an impressive 44 percent over the prior year fueled by post-paid wireless. Subscribers and ARPU increased by 26 percent and 14 percent, respectively, over 2005 levels. We are also excited by the prospect of additional revenue growth from our expanded CDMA footprint, which will provide enhanced wireless coverage to an estimated two million visitors to Alaska in 2006, most of whom come in the summer months." "During the quarter operational cash generation was particularly strong as we posted $15.2 million in 'Cash Flows from Operations,' inclusive of $8.9 million in cash outflows for redemption charges and accrued interest settlements associated with February's accretive debt restructuring transaction. Major uses of cash in the quarter included construction and capital expenditures of $15.7 million, comprising $4.3 million in maintenance capex, $4.1 from our prefunded capital program and $7.3 million for the settlement of capital expenditures owing from 2005; and a net buy down of debt of $8.4 million. We closed the quarter with a cash, restricted cash and investment balance of $25.1 million, providing adequate liquidity to complete our pre-funded capital expenditure program this summer," added Wilson. "We also continued to execute our financial strategy of further reducing our cost of capital and interest rate risk. During the quarter, we completed transactions that fixed the interest rate on 100 percent of our debt and will reduce recurring gross cash interest expense by approximately $2.5 million per annum. This debt restructuring activity together with our operational performance, enabled us to increase our annual dividend by 7.5 percent to $0.86 per share," Wilson concluded. Metric Highlights: First Quarter 2006 Compared to Fourth Quarter 2005 -- Increased the total number of retail customer relationships across all product lines by approximately 3,900 to more than 425,200. -- Increased post-paid subscribers by 3.8 percent, or over 4,000. Net of prepaid and wholesale wireless shifts, the company added 1,600 wireless subscribers, bringing the total number of wireless subscribers to more than 119,000. -- Recorded post-paid churn of 1.9 percent compared to 1.8 percent in the prior quarter. Overall average wireless monthly churn was 2.4 percent compared to 2.0 percent, with churn concentrated in our legacy TDMA prepaid and TDMA wholesale customer segments. -- Recorded wireless average revenue per user (ARPU) of $57.30, up slightly from $56.71, inclusive of CETC revenue of $8.93 and $8.84, respectively. -- ACS has converted 73 percent of its TDMA subscribers to the CDMA network, up by 10 percent from year-end 2005. -- Customers enjoying free mobile to home calling from the ON ACS program increased by over 3,000, and now exceeds 19,000. -- The ACS CDMA wireless network now covers 77 percent of the Alaskan population, approaching the 80 percent plus population coverage target. -- Increased DSL by 6.5 percent, or 2,300 lines, to over 38,100 lines. -- Increased long distance subscribers by approximately 2,200 to approximately 58,500 customers. -- Recorded over 197,400 retail local access lines, reflecting a retail access line decrease of approximately 1,900 lines, inclusive of the turn-down of 450 internal use lines. Pro forma for the turn-down of internal use lines, retail access decline was 0.74 percent. -- Recorded approximately 265,500 total local access lines. Total access lines decreased by 5,400, reflecting wireless and broadband substitution and migration to cable telephony. 2006 Business Outlook Reaffirming guidance for the full-year 2006, revenues are expected to be in the range of $335 million to $345 million, and EBITDA is expected to be in the range of $112 million to $116 million. For the year 2006, net cash interest expense is expected to be approximately $28 million. ACS has also reaffirmed 2006 capital expenditure guidance to be approximately $58 million, comprised of maintenance capital expenditures of approximately $37 million and pre-funded growth capital expenditures, DSL footprint expansion and process improvement initiatives of approximately $21 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 800-257-7087 to access the earnings call. International parties can access the call at 303-262-2050. 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 on the ACS website. A telephonic replay of the conference call will also be available two hours after the call and will run until Monday, May 1, 2006 at midnight ET. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11058339. International parties should call 303-590-3000 and enter pass code 11058339. 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, 2006. 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. Forward Looking Statements We have included in this press release certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made using information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside ACS' control. Such factors are, without limitation, rapid technological developments and changes in the telecommunications industry; ongoing deregulation and increased competition; changes in our revenue from Universal Service Funds; regulatory limitations on our ability to change our pricing for communications services; changes in accounting policies or practices; our ability to bundle our products and services; changes in the demand for our products and services; changes in general industry and market conditions; changes in interest rates or other general national, regional or local economic conditions; governmental and public policy changes; our ability to generate sufficient earnings and cash flows to continue to make dividend payments to our stockholders; the continued availability of financing necessary to support our future business; and the success of any future acquisitions. For further information regarding risks and uncertainties associated with ACS' business, please refer to the company's SEC filings, including, but not limited to, the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" on our annual report on Form 10-K for the year ended December 31, 2005. Copies of our SEC filings may be obtained by contacting our investor relations department at (907) 564-7556 or by visiting our investor relations website at http://www.alsk.com. All information in this release is as of April 27, 2006. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. Schedule 1 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in Thousands, Except per Share Amounts) Three Months Ended March 31, --------------------------- 2006 2005 ------------ ------------ Operating revenues: Local telephone $ 48,275 $ 51,565 Wireless 24,508 17,056 Internet 5,986 5,061 Interexchange 3,873 3,726 ------------ ------------ Total operating revenues 82,642 77,408 Operating expenses: Local telephone 32,109 30,811 Wireless 13,814 10,030 Internet 7,892 5,249 Interexchange 2,104 3,982 Depreciation and amortization 17,097 20,413 Loss (gain) on disposal of assets, net 722 (68) ------------ ------------ Total operating expenses 73,738 70,417 ------------ ------------ Operating income 8,904 6,991 Other income and expense: Interest expense (7,974) (9,766) Loss on extinguishment of debt (9,650) (26,204) Interest income 392 494 Equity in income of investments 4 4 Other (48) (49) ------------ ------------ Total other income (expense) (17,276) (35,521) ------------ ------------ Net loss $ (8,372) $ (28,530) ============ ============ Loss per share - basic and diluted: Net loss $ (0.20) $ (0.78) ============ ============ Weighted average shares outstanding: Basic and diluted 41,790 36,730 ============ ============ Schedule 2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands Except Per Share Amounts) March 31, December 31, Assets 2006 2005 ------------ ------------ Current assets: Cash and cash equivalents $ 18,679 $ 28,877 Restricted cash 4,415 4,415 Short-term investments 2,000 10,525 Accounts receivable-trade, net of allowance of $6,448 and $6,206 36,135 41,080 Materials and supplies 8,263 7,885 Prepayments and other current assets 3,597 3,445 ------------ ------------ Total current assets 73,089 96,227 Property, plant and equipment 1,118,905 1,116,780 Less: accumulated depreciation and amortization 729,366 718,750 ------------ ------------ Property, plant and equipment, net 389,539 398,030 Goodwill 38,403 38,403 Intangible Assets 21,650 21,688 Debt issuance costs 10,869 11,733 Deferred charges and other assets 16,507 10,332 ------------ ------------ Total assets $ 550,057 $ 576,413 ============ ============ Liabilities and Stockholders' Equity (Deficit) Current liabilities: Current portion of long-term obligations $ 985 $ 683 Accounts payable-affiliate 2,791 2,844 Accounts payable, accrued and other current liabilities 47,926 54,920 Advance billings and customer deposits 9,598 9,712 ------------ ------------ Total current liabilities 61,300 68,159 Long-term obligations, net of current portion 437,744 444,895 Other deferred credits and long-term liabilities 80,181 82,223 ------------ ------------ Total liabilities 579,225 595,277 ------------ ------------ Stockholders' equity (deficit): Common stock, $.01 par value; 145,000 shares authorized, 46,501 and 46,230 shares issued and 41,952 and 41,681 shares outstanding, respectively 465 462 Treasury stock, 4,549 shares at cost (18,443) (18,443) Paid in capital in excess of par value 325,938 333,522 Accumulated deficit (343,099) (334,727) Accumulated other comprehensive income 5,971 322 ------------ ------------ Total stockholders' equity (deficit) (29,168) (18,864) ------------ ------------ Commitments and contingencies - - Total liabilities and stockholders' equity $ 550,057 $ 576,413 ============ ============ Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, in Thousands) Three Months Ended March 31, 2006 2005 ---------- ---------- Cash Flows from Operating Activities: Net loss $ (8,372) $ (28,530) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 17,097 20,413 Loss (gain) on disposal of assets, net 722 (68) Amortization of debt issuance costs and original issue discount 3,734 13,807 Stock compensation costs 1,576 330 Other deferred credits (2,917) (4,082) Changes in components of working capital: Accounts receivable and other current assets 4,415 (155) Accounts payable and other current liabilities (538) (8,784) Deferred charges and other assets (526) 1,869 ---------- ---------- Net cash (used) provided by operating activities $ 15,191 $ (5,200) Cash Flows from Investing Activities: Construction & capital expenditures (15,734) (7,182) Purchase of short-term investments (7,500) (50,950) Proceeds from the sale of short-term investments 16,025 54,800 ---------- ---------- Net cash used by investing activities (7,209) (3,332) Cash Flows from Financing Activities: Repayments of long-term debt (61,270) (405,157) Proceeds from the issuance of long-term debt 52,900 335,000 Debt issuance costs (1,349) (10,637) Payment of dividend on common stock (8,336) (5,679) Issuance of common stock (125) 84,278 Stock issuance costs - (7,817) ---------- ---------- Net cash used by financing activities (18,180) (10,012) Decrease in cash and cash equivalents (10,198) (18,544) Cash and cash equivalents, beginning of period 28,877 50,660 ---------- ---------- Cash and cash equivalents, end of period $ 18,679 $ 32,116 ========== ========== Supplemental Cash Flow Data: Interest paid $ 9,992 $ 16,302 (Increase) decrease in accounts payable for construction and capital expenditures 7,319 - Supplemental Noncash Transactions: Interest rate swap $ (5,649) $ (2,457) Dividend declared, but not paid (9,032) (8,140) Schedule 4 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. SCHEDULE OF LOCAL TELEPHONE REVENUES (Unaudited, in Thousands) Three Months Ended March 31, --------------------------- 2006 2005 ------------ ------------ Local telephone revenue: Local network service $ 19,897 $ 22,218 Network access 24,026 23,350 Deregulated and other 4,352 5,997 ------------ ------------ Total local telephone revenue $ 48,275 $ 51,565 ============ ============ Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. SCHEDULE OF EBITDA CALCULATION (Unaudited, in Thousands) Three Months Ended March 31, ------------------- 2006 2005 --------- --------- Net cash provided (used) by operating activities $ 15,191 $ (5,200) Adjustments to reconcile net income to net cash (provided) used by operating activities: Gain (loss) on disposal of assets, net (722) 68 Depreciation and amortization (17,097) (20,413) Amortization of debt issuance costs and original issue discount (3,734) (13,807) Stock based compensation (1,576) (330) Other deferred credits 2,917 4,082 Changes in components of working capital: Accounts receivable and other current assets (4,415) 155 Accounts payable and other current liabilities 538 8,784 Deferred charges and other assets 526 (1,869) --------- --------- Net loss $ (8,372) $(28,530) Add (subtract): Interest expense 7,974 9,766 Loss on extinguishment of debt 9,650 26,204 Interest income (392) (494) Depreciation and amortization 17,097 20,413 (Gain) loss on disposal of assets, net 722 (68) Stock based compensation 1,576 330 --------- --------- EBITDA $ 28,255 $ 27,621 ========= ========= 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 of intangibles and stock based compensation 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. Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Allocation of Stock Based Compensation between Segments (Unaudited, in Thousands, Except per Share Amounts) Three Months Ended Three Months Ended March 31, 2006 March 31, 2005 -------------------------- -------------------------- Stock Stock Based Based As Compen- As Compen- reported sation Adjusted reported sation Adjusted -------- -------- -------- -------- -------- -------- Operating expenses: Local telephone 32,109 (1,358) 30,751 30,811 (288) 30,523 Wireless 13,814 (150) 13,664 10,030 (29) 10,001 Internet 7,892 (59) 7,833 5,249 (12) 5,237 Interexchange 2,104 (9) 2,095 3,982 (1) 3,981 Depreciation and amortization 17,097 - 17,097 20,413 - 20,413 (Gain) loss on disposal of assets, net 722 - 722 (68) - (68) -------- -------- -------- -------- -------- -------- Total operating expenses $73,738 $(1,576) $72,162 $70,417 $ (330) $70,087 ======== ======== ======== ======== ======== ======== The balances reported on Schedule 1 -- Statement of Operations, include the company's adoption of FAS 123R Accounting for Stock-Based Compensation. The adoption resulted in a non-cash charge of $1,576 and $330 for the three months ended March 31, 2006 and 2005, respectively. This schedule shows the company's operating performance prior to that expense being recorded to allow analysis of the operating segments without this noncash charge. Schedule 7A ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) March 31, December 31, March 31, 2006 2005 2005 --------- ------------ --------- Local telephone: Retail access lines 197,415 199,341 203,272 Wholesale access lines 13,030 13,966 15,897 UNE loop lines 48,231 50,875 62,263 UNE platform lines 6,805 6,703 6,551 --------- ------------ --------- Total local telephone access lines 265,481 270,885 287,983 ========= ============ ========= Average local telephone access lines for the quarter 268,183 274,455 290,868 Average monthly local telephone revenue per line for the quarter $ 60.00 $ 60.06 $ 59.09 Quarterly growth rate in local telephone access lines -2.0% -2.6% -2.0% Wireless Covered population 527,509 523,827 482,251 Post-paid cellular subscribers 111,178 107,144 88,174 Average post-paid cellular subscribers 109,161 103,721 86,001 Quarterly growth rate - post-paid cellular subscribers 3.8% 6.8% 5.2% Activations for the quarter 10,654 13,133 8,653 Deactivations for the quarter 6,620 6,286 4,307 Average monthly churn for the quarter 1.9% 1.8% 1.6% Average monthly revenue per subscriber for the quarter(a) $ 60.36 $ 60.74 $ 52.85 Prepaid cellular subscribers 4,103 5,710 8,560 Wholesale cellular subscribers 3,859 4,683 5,545 Total cellular subscribers 119,140 117,537 102,279 Average subscribers for the quarter 118,339 114,588 101,468 Quarterly growth rate 1.4% 5.3% 1.6% Activations for the quarter 10,714 13,290 9,382 Deactivations for the quarter 9,111 7,391 7,760 Average monthly churn for the quarter 2.4% 2.0% 2.4% Penetration 22.6% 22.4% 21.2% Quarterly minutes of use (000's) 152,220 127,498 92,907 Average monthly revenue per subscriber for the quarter(a) $ 57.30 $ 56.71 $ 47.87 Long Distance: Long distance subscribers 58,552 56,317 48,542 Quarterly minutes of use (000's) 47,737 48,544 36,557 Average subscribers for the quarter 57,435 54,938 47,796 Average monthly revenue per subscriber for the quarter $ 22.48 $ 24.06 $ 25.99 Internet: DSL subscribers 38,179 35,844 27,115 Dial-up and other service subscribers 15,846 17,401 21,984 --------- ------------ --------- Total Internet subscribers 54,025 53,245 49,099 ========= ============ ========= Average subscribers for the quarter 53,635 52,751 48,326 Average monthly DSL & dial up revenue per subscriber for the quarter $ 29.23 $ 29.15 $ 30.55 (a) Wireless ARPU has been restated to exclude late fees and early termination charges and to allocate competitive eligible telecommunications carrier (CETC) revenue only to postpaid and wholesale subscribers. CETC added $8.93 to wireless ARPU in the first quarter of 2006 and $3.37 and $8.84 in the first and fourth quarter of 2005. Schedule 7B ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) March 31, December 31, Net 2006 2005 Movement --------- ------------ -------- Local telephone retail access lines 197,415 199,341 (1,926) Add back: Internal use lines disconnected 452 -------- (1,474) Wireless subscribers 119,140 117,537 Less adjustment for resellers (3,859) (4,683) --------- ------------ 115,281 112,854 2,427 --------- ------------ Long distance subscribers 58,552 56,317 2,235 DSL and dial up subscribers 54,025 53,245 780 --------- ------------ -------- Total retail relationships 425,273 421,757 3,968 (a) ========= ============ ======== (a) Net movement in total retail relationships inclusive of a 452 adjustment for disconnected internal use lines. CONTACT: Alaska Communications Systems Meghan Stapleton, 907-297-3000 (Media) meghan.stapleton@acsalaska.com or Lippert/Heilshorn & Associates Kirsten Chapman, 415-433-3777 (Investors) kirsten@lhai-sf.com