Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ:ALSK) today reported financial results for its third quarter and nine months ended September 30, 2007. In addition, the company today separately announced that it had entered into an agreement to construct a long haul fiber facility from Alaska to the Lower 48.
“As we announce strong third quarter results–double digit top and bottom line growth–and increase guidance for the year, we also mark today as the three year anniversary of initiating the ALSK dividend and the commitment to a major investment into a new line of business at ACS designed to continue the track record of significant shareholder value creation,” said Liane Pelletier, ACS president, chief executive officer and chair.
“Over the last three years, ACS has grown revenue by $70 million, or 23 percent, and EBITDA by $25 million, or 25 percent, largely due to a strategic investment to bring third generation CDMA wireless service to the Alaskan market when penetration was estimated at a low 49 percent. With statewide penetration now at approximately 67 percent, ACS clearly succeeded in capturing growth with targeted investment and quality execution. In the third quarter 2007, wireless comprised 37 percent of total company sales and 49 percent of company EBITDA.”
“The next growth engine for ACS will be in the enterprise market, including carrier and government, where needs for end-to-end data and voice solutions span Alaska and the Lower 48. Building a submarine fiber with superior performance characteristics, diverse routing and the most modern and cost effective technology positions ACS to compete profitably in a $200 million and growing market. ACS has been participating in this market for some time; in fact, much of the wireline growth in the third quarter and year-to-date comes from new sales to Lower 48 carriers and large commercial accounts,” added Pelletier.
Financial Highlights: Third Quarter 2007 Compared to Third Quarter 2006
- Revenues were $99.8 million, a 10.5 percent increase over third quarter 2006 revenues of $90.4 million.
- Operating income increased 15.8 percent to $18.6 million compared to third quarter 2006 operating income of $16.0 million.
- The company posted net income of $10.7 million, or $0.24 per diluted share, compared to $0.20 per diluted share during the third quarter of 2006.
- Net cash provided by operating activities increased to $31.1 million, or 16.4 percent, compared to $26.7 million of net cash in the same period a year ago.
- EBITDA was $36.1 million, an increase of 11.2 percent, compared to $32.5 million for the year-ago period. Third quarter 2007 performance includes $1.0 million in non-recurring expense benefits.
David Wilson, ACS senior vice president and chief financial officer, said, “The business continued to perform ahead of expectations in the third quarter with double digit percentage gains in revenue, EBITDA and cash from operations over the prior year quarter. We remain focused on ARPU growth in our traditional subscriber-based business with wireless and retail local line ARPU growing 5.5 percent and 1.9 percent, respectively, over the prior year. Complementing the success in our traditional subscriber-based business is our focus on the strategically important enterprise market, where revenues grew by 70 percent to $6.5 million. Given year-to-date performance, we are increasing annual guidance today for revenue, EBITDA and capital expenditures.”
“Our focus on capturing profitable growth in strategic telecom segments, while stringently managing our cost base through our process improvement initiatives, continues to drive cash flow expansion with cash from operations reaching $31.1 million for the quarter, up 16.4 percent over the prior year. Major investments and uses of cash in the quarter included capital expenditures of $15.9 million, comprising $9.7 million in maintenance capital and $6.2 million in growth capital expenditures, $4.2 million in debt redemptions, and $9.2 million in dividend payments,” added Wilson.
“We are comfortably positioned to fund our long haul fiber investment, having closed the quarter with $41.8 million in unrestricted cash, full access to our $45 million revolver, a net debt to EBITDA leverage ratio of only 3.0 times, and a dividend payout ratio of less than 60 percent,” concluded Wilson.
Metric Highlights: Third Quarter 2007 Compared to Second Quarter 2007
- Increased wireless subscribers by 1.3 percent, or 1,900, bringing the total to approximately 143,800.
- Average wireless monthly churn of 1.7 percent was up from 1.4 percent in the prior quarter. Approximately 99 percent of retail wireless subscribers are now on the CDMA network, with conversion of retail TDMA and analog users largely complete.
- Increased wireless ARPU, now $64.11, up from $61.62 in Q2, inclusive of CETC revenue of $10.89 and $9.92, respectively, and with data ARPU now exceeding $3.00.
- DSL lines increased by 570 to approximately 46,200 with retail line penetration growing to 24.5 percent.
- Retail local access lines declined by 1.7 percent to 188,500. The rate of retail line loss compares favorably to publicly reported CLEC line losses within the ACS LEC footprint of 1.9 percent.
- Recorded approximately 231,600 total local access lines. Total local access lines decreased by approximately 6,900 or 2.9 percent.
Nine Months Financial Review
For the nine months ended September 30, 2007, total revenues were $283.6 million, which represented a 9.9 percent increase over revenues of $258.1 million for the same period last year. Net income for the nine months ended September 30, 2007, was $25.3 million, or $0.57 per diluted share, compared to net income of $13.9 million, or $0.32 per diluted share, in the same period in 2006. Net cash provided by operating activities for the first nine months of 2007 was $77.7 million, compared to $64.6 million in the same period in 2006. EBITDA for the nine months ended September 30, 2007, was $101.0 million, an increase of 11.1 percent from $90.9 million in the same period last year.
2007 Business Outlook
For the full-year 2007, ACS is increasing its revenue, EBITDA and capital expenditure guidance. Revenues are now expected to be in the range of $370 million to $375 million versus prior guidance of $360 million to $370 million, EBITDA to be in the range of $128 million to $130 million versus prior guidance of $120 million to $124 million, and capital expenditures are expected to be approximately $67 million versus prior guidance of approximately $46 million. ACS is increasing its maintenance capital expenditure guidance to a range of $37 million to $39 million versus prior guidance of $37 million and its growth capex guidance to $29 million versus $9 million with the increase in growth capex guidance solely attributable to its long haul fiber investment. ACS is reaffirming its cash interest expense guidance which is expected to be approximately $27 million.
Long Haul Fiber Investment
ACS and Tyco Telecommunications announced today the signing of a contract to construct an undersea fiber optic cable system between Anchorage, Alaska and Florence, Oregon. ACS expects the total cost of the system to be approximately $95 million, including the undersea portions of the project to be managed and constructed by Tyco Telecommunications and the complementary terrestrial system work, to be managed by ACS. Of the total cost of the system, $3 million was settled during the third quarter 2007, leaving a residual $92 million to be funded over the next 15 months through a combination of cash on hand, cash expected to be generated during the build period and incremental debt of no more than $40 million. ACS expects the fiber system to be operational early in first quarter 2009 with annual cash costs, inclusive of financing costs, of approximately $10 million.
Conference Call
The company will host a conference call and live webcast today at 5:00 p.m. ET. Parties in the United States and Canada can call 800-219-6110 to access the conference call. Parties outside the United States and Canada can access the call at 303-205-0033. The live webcast of the conference call will be accessible from the “Events Calendar” 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 Monday, October 29, 2007, at midnight ET. To hear the replay, parties in the United States and Canada can call 800-405-2236 and enter pass code 11098890. Parties outside the United States and Canada can call 303-590-3000 and enter pass code 11098890.
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 information related to management’s estimate of EBITDA for the year ending December 31, 2007. EBITDA, as defined by the company, may not be similar to EBITDA measures used by other companies and is not a measurement under generally accepted accounting principles (GAAP). Management believes that EBITDA provides useful information to investors about the company’s performance because it eliminates the effects of period-to-period changes in costs associated with capital investments, interest and stock-based compensation expense that are not directly attributable to the underlying performance of the company’s business operations. 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
This press release includes 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, the company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may derive from the construction of the long-haul fiber facility; fluctuations in wireless revenue, including roaming revenue; changes in company’s relationships with its roaming partners; increased competition, including from national wireless and local wireline facilities-based competitors; changes in revenue from Universal Service Funds; changes in capital expenditures, or other factors affecting the company’s ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; regulatory limitations on the company’s ability to change its pricing or bundle its communications services or other public policy changes; the continued availability of financing necessary to support future business; changes in accounting policies or practices; changes in the demand for the company’s products and services; rapid technological developments in the telecommunications industry; changes in interest rates or other general national, regional or local economic conditions, including changes in tourism in Alaska. 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” in our annual report on Form 10-K for the year ended December 31, 2006, and on Forms 10-Q filed subsequently. Copies of the company’s SEC filings may be obtained by contacting its investor relations department at 907-564-7556 or by visiting its investor relations website at www.alsk.com.
| Schedule 1 | ||||||||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | ||||||||||||||||||
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||||||||||||
| (Unaudited, in Thousands, Except per Share Amounts) | ||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||
| Operating revenues: | ||||||||||||||||||
| Wireline | $ | 62,672 | $ | 58,935 | $ | 181,409 | $ | 175,194 | ||||||||||
| Wireless | 37,159 | 31,441 | 102,227 | 82,895 | ||||||||||||||
| Total operating revenues | 99,831 | 90,376 | 283,636 | 258,089 | ||||||||||||||
| Operating expenses: | ||||||||||||||||||
| Wireline (exclusive of depreciation and amortization) | 45,801 | 43,147 | 134,166 | 126,789 | ||||||||||||||
| Wireless (exclusive of depreciation and amortization) | 19,695 | 16,667 | 53,394 | 45,412 | ||||||||||||||
| Depreciation and amortization | 15,672 | 14,538 | 48,368 | 47,669 | ||||||||||||||
| Loss on disposal of assets, net | 113 | - | 137 | 1,105 | ||||||||||||||
| Total operating expenses | 81,281 | 74,352 | 236,065 | 220,975 | ||||||||||||||
| Operating income | 18,550 | 16,024 | 47,571 | 37,114 | ||||||||||||||
| Other income and expense: | ||||||||||||||||||
| Interest expense | (7,739 | ) | (7,722 | ) | (23,064 | ) | (23,339 | ) | ||||||||||
| Loss on extinguishment of debt | (355 | ) | - | (355 | ) | (9,650 | ) | |||||||||||
| Interest income | 485 | 492 | 1,520 | 1,286 | ||||||||||||||
| Other | (72 | ) | (74 | ) | (64 | ) | 8,443 | |||||||||||
| Total other income and expense | (7,681 | ) | (7,304 | ) | (21,963 | ) | (23,260 | ) | ||||||||||
| Income before income tax expense | 10,869 | 8,720 | 25,608 | 13,854 | ||||||||||||||
| Income tax expense | (170 | ) | - | (275 | ) | - | ||||||||||||
| Net income | $ | 10,699 | $ | 8,720 | $ | 25,333 | $ | 13,854 | ||||||||||
| Net income per share: | ||||||||||||||||||
| Basic | $ | 0.25 | $ | 0.21 | $ | 0.59 | $ | 0.33 | ||||||||||
| Diluted | $ | 0.24 | $ | 0.20 | $ | 0.57 | $ | 0.32 | ||||||||||
| Weighted average shares outstanding: | ||||||||||||||||||
| Basic | 42,812 | 42,143 | 42,649 | 41,976 | ||||||||||||||
| Diluted | 44,159 | 43,541 | 44,185 | 43,273 | ||||||||||||||
| Schedule 2 | ||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | ||||||||||
| CONSOLIDATED BALANCE SHEETS | ||||||||||
| (In Thousands Except Per Share Amounts) | ||||||||||
| Unaudited | ||||||||||
| September 30, | December 31, | |||||||||
| Assets | 2007 | 2006 | ||||||||
| Current assets: | ||||||||||
| Cash and cash equivalents | $ | 41,765 | $ | 36,860 | ||||||
| Restricted cash | 2,559 | 1,700 | ||||||||
| Accounts receivable-trade, net of allowance of $8,465 and $7,434 | 39,750 | 39,801 | ||||||||
| Materials and supplies | 9,835 | 7,977 | ||||||||
| Prepayments and other current assets | 4,270 | 3,514 | ||||||||
| Total current assets | 98,179 | 89,852 | ||||||||
| Property, plant and equipment | 1,196,228 | 1,164,450 | ||||||||
| Less: accumulated depreciation and amortization | 807,920 | 767,907 | ||||||||
| Property, plant and equipment, net | 388,308 | 396,543 | ||||||||
| Goodwill | 38,403 | 38,403 | ||||||||
| Intangible Assets | 21,604 | 21,604 | ||||||||
| Debt issuance costs | 7,934 | 9,437 | ||||||||
| Deferred charges and other assets | 2,705 | 6,482 | ||||||||
| Total assets | $ | 557,133 | $ | 562,321 | ||||||
| Liabilities and Stockholders' Equity (Deficit) | ||||||||||
| Current liabilities: | ||||||||||
| Current portion of long-term obligations | $ | 957 | $ | 1,025 | ||||||
| Accounts payable-affiliate | - | 2,942 | ||||||||
| Accounts payable, accrued and other current liabilities | 63,575 | 62,307 | ||||||||
| Advance billings and customer deposits | 9,905 | 10,667 | ||||||||
| Total current liabilities | 74,437 | 76,941 | ||||||||
| Long-term obligations, net of current portion | 432,497 | 437,188 | ||||||||
| Other deferred credits and long-term liabilities | 78,463 | 72,881 | ||||||||
| Total liabilities | 585,397 | 587,010 | ||||||||
| Stockholders' equity (deficit): | ||||||||||
| Common stock, $.01 par value; 145,000 authorized | 428 | 423 | ||||||||
| Paid in capital in excess of par value | 312,234 | 311,975 | ||||||||
| Accumulated deficit | (337,169 | ) | (338,653 | ) | ||||||
| Accumulated other comprehensive income (loss) | (3,757 | ) | 1,566 | |||||||
| Total stockholders' equity (deficit) | (28,264 | ) | (24,689 | ) | ||||||
| Commitments and contingencies | ||||||||||
| Total liabilities and stockholders' equity (deficit) | $ | 557,133 | $ | 562,321 | ||||||
Schedule 3 | ||||||||||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | ||||||||||||||||||||
| CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||||||||||||||||
| (Unaudited, in Thousands) | ||||||||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | September 30, | |||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||||||||||
| Cash Flows from Operating Activities: | ||||||||||||||||||||
| Net income | $ | 10,699 | $ | 8,720 | $ | 25,333 | $ | 13,854 | ||||||||||||
| Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||||||||||||||||
| Depreciation and amortization | 15,672 | 14,538 | 48,368 | 47,669 | ||||||||||||||||
| Loss on disposal of assets, net | 113 | - | 137 | 1,105 | ||||||||||||||||
| Gain on sale of long-term investment | - | - | (152 | ) | (6,685 | ) | ||||||||||||||
| Amortization of debt issuance costs and original issue discount | 634 | 483 | 1,586 | 4,696 | ||||||||||||||||
Stock based compensation(a) | 1,839 | 1,990 | 5,172 | 5,275 | ||||||||||||||||
| Other non-cash expenses | 131 | - | 394 | - | ||||||||||||||||
| Changes in components of assets and liabilities: | ||||||||||||||||||||
| Accounts receivable and other current assets | 496 | (1,203 | ) | (2,563 | ) | (1,747 | ) | |||||||||||||
| Accounts payable and other current liabilities | 5 | (1,424 | ) | (3,471 | ) | 348 | ||||||||||||||
| Deferred charges and other assets | (370 | ) | (513 | ) | (208 | ) | (469 | ) | ||||||||||||
| Other deferred credits | 1,860 | 4,109 | 3,123 | 575 | ||||||||||||||||
Net cash provided by operating activities(a) | 31,079 | 26,700 | 77,719 | 64,621 | ||||||||||||||||
| Cash Flows from Investing Activities: | ||||||||||||||||||||
| Investment in construction and capital expenditures | (15,938 | ) | (18,107 | ) | (39,502 | ) | (38,765 | ) | ||||||||||||
| Change in unsettled construction and capital expenditures | 1,716 | 4,623 | 908 | (1,656 | ) | |||||||||||||||
| Purchase of short-term investments | (19,575 | ) | (19,675 | ) | (55,615 | ) | (39,600 | ) | ||||||||||||
| Proceeds from sale of short-term investments | 19,575 | 19,675 | 55,615 | 50,125 | ||||||||||||||||
| Proceeds from liquidation of long-term investments | - | - | 162 | 7,663 | ||||||||||||||||
| Placement of funds in restricted account | - | - | (2,979 | ) | - | |||||||||||||||
| Release of funds from escrow account | - | 1,750 | 2,120 | 2,715 | ||||||||||||||||
| Net cash used by investing activities | (14,222 | ) | (11,734 | ) | (39,291 | ) | (19,518 | ) | ||||||||||||
| Cash Flows from Financing Activities: | ||||||||||||||||||||
| Payments of long-term debt | (4,261 | ) | (195 | ) | (4,893 | ) | (61,658 | ) | ||||||||||||
| Proceeds from the issuance of long-term debt | - | - | - | 52,900 | ||||||||||||||||
| Debt issuance costs | - | - | - | (1,349 | ) | |||||||||||||||
| Payment of cash dividend on common stock | (9,204 | ) | (9,047 | ) | (27,487 | ) | (26,403 | ) | ||||||||||||
| Payment of withholding taxes on stock-based compensation | (12 | ) | (11 | ) | (2,323 | ) | (864 | ) | ||||||||||||
| Issuance of common stock | 110 | 406 | 1,180 | 1,636 | ||||||||||||||||
| Net cash used by financing activities | (13,367 | ) | (8,847 | ) | (33,523 | ) | (35,738 | ) | ||||||||||||
| Increase in cash and cash equivalents | 3,490 | 6,119 | 4,905 | 9,365 | ||||||||||||||||
| Cash and cash equivalents, beginning of period | 38,275 | 32,123 | 36,860 | 28,877 | ||||||||||||||||
| Cash and cash equivalents, end of period | $ | 41,765 | $ | 38,242 | $ | 41,765 | $ | 38,242 | ||||||||||||
| Supplemental Cash Flow Data: | ||||||||||||||||||||
| Interest paid | $ | 7,279 | $ | 7,302 | $ | 21,564 | $ | 24,255 | ||||||||||||
| Income taxes paid | 155 | - | 508 | - | ||||||||||||||||
| Supplemental Noncash Transactions: | ||||||||||||||||||||
| Property acquired under capital leases | $ | - | $ | - | $ | 51 | $ | - | ||||||||||||
| Dividend declared, but not paid | 5 | 17 | 9,215 | 9,077 | ||||||||||||||||
(a)Stock compensation has been adjusted by $322 and $384, for the three and nine months ended September 30, 2006, to include stock based compensation costs for non-employee directors. This adjustment also increases cash provided by operations in those same periods by the same amounts. | ||||||||||||||||||||
| Schedule 4 | |||||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | |||||||||||||||
| SCHEDULE OF WIRELINE REVENUES AND EXPENSES | |||||||||||||||
| (Unaudited, in Thousands) | |||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||||
| Local network service | $ | 19,285 | $ | 20,371 | $ | 58,728 | $ | 60,427 | |||||||
| Network access | 23,290 | 22,086 | 67,848 | 68,205 | |||||||||||
| Deregulated and other | 6,054 | 5,405 | 16,873 | 14,991 | |||||||||||
| Local telephone | 48,629 | 47,862 | 143,449 | 143,623 | |||||||||||
| Internet/Data | 7,986 | 6,544 | 22,768 | 18,619 | |||||||||||
| Interexchange | 6,057 | 4,529 | 15,192 | 12,952 | |||||||||||
| Total wireline revenue | $ | 62,672 | $ | 58,935 | $ | 181,409 | $ | 175,194 | |||||||
| Local telephone | $ | 31,779 | $ | 32,368 | $ | 96,687 | $ | 95,996 | |||||||
| Internet/Data | 9,941 | 7,050 | 26,600 | 21,638 | |||||||||||
| Interexchange | 4,081 | 3,729 | 10,879 | 9,155 | |||||||||||
Total wireline expense(a) | $ | 45,801 | $ | 43,147 | $ | 134,166 | $ | 126,789 | |||||||
(a)Expenses are shown exclusive of depreciation and amortization. | |||||||||||||||
| Schedule 5 | |||||||||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | |||||||||||||||||||
| SCHEDULE OF EBITDA CALCULATION | |||||||||||||||||||
| (Unaudited, in Thousands) | |||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||
| 2007 | 2006 | 2007 | 2006 | ||||||||||||||||
Net cash provided by operating activities(a) | $ | 31,079 | $ | 26,700 | $ | 77,719 | $ | 64,621 | |||||||||||
| Adjustments to reconcile net income to net cash (provided) used by operating activities: | |||||||||||||||||||
| Depreciation and amortization | (15,672 | ) | (14,538 | ) | (48,368 | ) | (47,669 | ) | |||||||||||
| Loss on disposal of assets, net | (113 | ) | - | (137 | ) | (1,105 | ) | ||||||||||||
| Gain on sale of long-term investment | - | - | 152 | 6,685 | |||||||||||||||
| Amortization of debt issuance costs and original issue discount | (634 | ) | (483 | ) | (1,586 | ) | (4,696 | ) | |||||||||||
| Stock based compensation | (1,839 | ) | (1,990 | ) | (5,172 | ) | (5,275 | ) | |||||||||||
| Other non-cash expenses | (131 | ) | - | (394 | ) | - | |||||||||||||
| Changes in components of assets and liabilities: | |||||||||||||||||||
| Accounts receivable and other current assets | (496 | ) | 1,203 | 2,563 | 1,747 | ||||||||||||||
| Accounts payable and other current liabilities | (5 | ) | 1,424 | 3,471 | (348 | ) | |||||||||||||
| Deferred charges and other assets | 370 | 513 | 208 | 469 | |||||||||||||||
| Other deferred credits | (1,860 | ) | (4,109 | ) | (3,123 | ) | (575 | ) | |||||||||||
| Net income | $ | 10,699 | $ | 8,720 | $ | 25,333 | $ | 13,854 | |||||||||||
| Add (subtract): | |||||||||||||||||||
| Interest expense | 7,739 | 7,722 | 23,064 | 23,339 | |||||||||||||||
| Loss on extinguishment of debt | 355 | - | 355 | 9,650 | |||||||||||||||
| Interest income | (485 | ) | (492 | ) | (1,520 | ) | (1,286 | ) | |||||||||||
| Depreciation and amortization | 15,672 | 14,538 | 48,368 | 47,669 | |||||||||||||||
| Loss on disposal of assets, net | 113 | - | 137 | 1,105 | |||||||||||||||
| Gain on Crest asset purchase | - | - | - | (1,979 | ) | ||||||||||||||
| Gain on sale of long-term investments | - | - | (152 | ) | (6,685 | ) | |||||||||||||
| Income tax expense | 170 | - | 275 | - | |||||||||||||||
| Stock based compensation | 1,839 | 1,990 | 5,172 | 5,275 | |||||||||||||||
EBITDA(a) | $ | 36,102 | $ | 32,478 | $ | 101,032 | $ | 90,942 | |||||||||||
(a)Stock compensation has been adjusted by $322 and $384, for the three and nine months ended September 30, 2006, to include stock based compensation costs for non-employee directors. This adjustment also increases cash provided by operations and EBITDA in those same periods by those same amounts. | |||||||||||||||||||
| 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 income before interest, provisions for taxes, depreciation expense, gain or loss on asset purchases or disposals, 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 | ||||||||||||||||||||||
| (Unaudited, in Thousands) | ||||||||||||||||||||||
| Three Months Ended | Three Months Ended | |||||||||||||||||||||
| September 30, 2007 | September 30, 2006(a) | |||||||||||||||||||||
| As reported on Schedule 1 | Stock Based Compensation | Adjusted | As reported on Schedule 1 | Stock Based Compensation | Adjusted | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Wireline (exclusive of depreciation and amortization) | $ | 45,801 | $ | (1,632 | ) | $ | 44,169 | $ | 43,147 | $ | (1,792 | ) | $ | 41,355 | ||||||||
| Wireless (exclusive of depreciation and amortization) | 19,695 | (207 | ) | 19,488 | 16,667 | (198 | ) | 16,469 | ||||||||||||||
| Depreciation and amortization | 15,672 | - | 15,672 | 14,538 | - | 14,538 | ||||||||||||||||
| Loss on disposal of assets, net | 113 | - | 113 | - | - | - | ||||||||||||||||
| Total operating expenses | $ | 81,281 | $ | (1,839 | ) | $ | 79,442 | $ | 74,352 | $ | (1,990 | ) | $ | 72,362 | ||||||||
| Nine Months Ended | Nine Months Ended | |||||||||||||||||||||
| September 30, 2007 | September 30, 2006(a) | |||||||||||||||||||||
| As reported on Schedule 1 | Stock Based Compensation | Adjusted | As reported on Schedule 1 | Stock Based Compensation | Adjusted | |||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||
| Wireline (exclusive of depreciation and amortization) | $ | 134,166 | $ | (4,632 | ) | $ | 129,534 | $ | 126,789 | $ | (4,763 | ) | $ | 122,026 | ||||||||
| Wireless (exclusive of depreciation and amortization) | 53,394 | (540 | ) | 52,854 | 45,412 | (512 | ) | 44,900 | ||||||||||||||
| Depreciation and amortization | 48,368 | - | 48,368 | 47,669 | - | 47,669 | ||||||||||||||||
| Loss on disposal of assets, net | 137 | - | 137 | 1,105 | - | 1,105 | ||||||||||||||||
| Total operating expenses | $ | 236,065 | $ | (5,172 | ) | $ | 230,893 | $ | 220,975 | $ | (5,275 | ) | $ | 215,700 | ||||||||
(a)Stock compensation has been adjusted by $322 and $384, for the three and nine months ended September 30, 2006, to include stock based compensation costs for non-employee directors. | ||||||||||||||||||||||
| Note:The balances reported on Schedule 1 - Consolidated Statements of Operations, include the company's adoption of SFAS 123(R) – Share-Based Payment. This schedule shows the company's operating performance prior to that expense being recorded to allow analysis of the operating segments without these non-cash charges. | ||||||||||||||||||||||
| Schedule 7 | ||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | ||||||||||||
| INVESTMENT IN CONSTRUCTION AND CAPITAL | ||||||||||||
| (Unaudited, in Thousands) | ||||||||||||
| Three Months Ended | Three Months Ended | Nine Months Ended | Nine Months Ended | |||||||||
| September 30, | September 30, | September 30, | September 30, | |||||||||
| 2007 | 2006 | 2007 | 2006 | |||||||||
| Cash outlay for construction and capital expenditures | $ | 15,938 | $ | 18,107 | $ | 39,502 | $ | 38,765 | ||||
| Non-cash capital lease | - | - | 51 | - | ||||||||
| Investment in construction and capital | $ | 15,938 | $ | 18,107 | $ | 39,553 | $ | 38,765 | ||||
| Growth | 6,228 | 5,913 | 12,144 | 16,629 | ||||||||
| Maintenance and other | 9,710 | 12,194 | 27,409 | 22,136 | ||||||||
| Investment in construction and capital | $ | 15,938 | $ | 18,107 | $ | 39,553 | $ | 38,765 | ||||
| Schedule 8 | |||||||||||||||
| ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. | |||||||||||||||
| KEY OPERATING STATISTICS | |||||||||||||||
| (Unaudited) | |||||||||||||||
| September 30, | June 30, | September 30, | |||||||||||||
| 2007 | 2007 | 2006 | |||||||||||||
| Local telephone: | |||||||||||||||
| Retail access lines | 188,549 | 191,767 | 195,997 | ||||||||||||
| Resale access lines | 9,976 | 9,989 | 12,045 | ||||||||||||
| UNE lines | 33,111 | 36,822 | 51,089 | ||||||||||||
| Total local telephone access lines | 231,636 | 238,578 | 259,131 | ||||||||||||
| Average monthly local telephone revenue per line for the quarter | $ | 68.95 | $ | 65.35 | $ | 61.14 | |||||||||
| Quarterly growth rate in local telephone access lines | -2.9 | % | -3.0 | % | -1.4 | % | |||||||||
| Wireless: | |||||||||||||||
| Retail wireless subscribers | 141,501 | 139,384 | 126,089 | ||||||||||||
| Average monthly churn for the quarter | 1.7 | % | 1.4 | % | 1.5 | % | |||||||||
Average monthly revenue per subscriber for the quarter(b) | $ | 64.43 | $ | 62.18 | $ | 62.94 | |||||||||
| Resale wireless subscribers | 2,307 | 2,539 | 3,481 | ||||||||||||
| Total wireless subscribers | 143,808 | 141,923 | 129,570 | ||||||||||||
Average monthly churn for the quarter(a) | 1.7 | % | 1.4 | % | 1.6 | % | |||||||||
Average monthly revenue per subscriber for the quarter(b) | 64.11 | $ | 61.62 | $ | 60.77 | ||||||||||
| Long Distance: | |||||||||||||||
| Long distance subscribers | 64,511 | 64,684 | 61,984 | ||||||||||||
| Average monthly retail revenue per subscriber for the quarter | $ | 24.19 | $ | 23.81 | $ | 24.64 | |||||||||
| Internet: | |||||||||||||||
| DSL subscribers | 46,239 | 45,670 | 41,744 | ||||||||||||
| Dial-up subscribers | 10,059 | 10,968 | 13,555 | ||||||||||||
| Total Internet subscribers | 56,298 | 56,638 | 55,299 | ||||||||||||
| Average monthly DSL & dial-up revenue per subscriber for the quarter | $ | 29.83 | $ | 29.53 | $ | 29.40 | |||||||||
(a)Prior year churn has been restated to negate the gross up of installs and disconnects that were caused by certain account changes. In prior periods, September 30, 2006 churn was reported at 1.9%. | |||||||||||||||
(b)CETC added $10.89 and $9.92 to retail and total wireless ARPU in the third and second quarters of 2007, respectively. It also added $9.81 to retail and $9.82 to total ARPU, in the third quarter of 2006. | |||||||||||||||
Contacts:
Director, Corporate
Communications
Mary Gasperlin, 907-297-3000
mary.gasperlin@acsalaska.com
or
ACS
Investors:
Investor Relations
Alaska Communications
Systems, 907-564-7556
investors@acsalaska.com
