Saturday, July 26, 2014 Last update: 12:33 AM
FreshNews.com - All Company Technology News Since 1996

Alaska Communications Systems Reports Fourth Quarter and Full Year 2013 Results

Companies mentioned in this article: Alaska Communications Systems Group, Inc.

ANCHORAGE, Alaska -- (BUSINESS WIRE) -- Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK) today reported financial results for its fourth quarter and full year ended December 31, 2013.

“We are pleased with our performance in 2013. We generated strong growth in business and wholesale revenues, driven by continued performance in our broadband products. We see this momentum continuing into 2014. Additionally, we also delivered significant value through debt reductions of $105.6 million during the year.

“Looking ahead, our recent acquisition of TekMate positions us to be the leading provider of managed services to business customers in Alaska. Our confidence in the market opportunity remains strong and we are well positioned for solid performance in 2014,” said Anand Vadapalli, president and CEO of Alaska Communications.

Financial Highlights: Fourth Quarter 2013 Compared to Fourth Quarter 2012

  • The quarter experienced strong revenue performance in our key areas of focus: business, wholesale and consumer customers:
    • Year over year was impacted by $15.7 million in lower revenues associated with the AWN transaction, which closed in July 2013. (Historical results have not been pro-formed for this transaction.) The AWN distribution, which is included in our Adjusted EBITDA now serves as the key measure of profitability for our wireless performance. Two events in 2012 also impacted comparability: a $1.5 million wholesale revenue transaction with another carrier and a $1.5 million equipment sale.
    • Excluding the wholesale revenue transaction, business and wholesale service revenue of $25.6 million grew $1.4 million or 5.7%, with broadband revenues growing 19.3%.
    • Consumer service revenue of $10.1 million grew $0.3 million, or 2.8%, with broadband revenues growing 15.0%.
    • Wireless revenue of $20.1 million declined $1.1 million, or 5.1%, as connections continued to experience declines.
  • Adjusted EBITDA was $16.6 million with year over year comparisons impacted by the AWN transaction.
  • Net income in the quarter was impacted by two events, that do not impact Adjusted EBITDA:
    • A $1.3 million impairment charge reflecting the value of the buyout of 51% of TekMate on our original 49% ownership interest.
    • A $1.6 million write off associated with a settlement for a project with a vendor that took place in 2009, $0.8 million of which is recorded as a loss on disposal of assets and $0.8 million as interest expense.

Metric Highlights: Fourth Quarter 2013 Compared to Third Quarter 2013

  • Business broadband connections increased to 19,285 from 19,216 and business broadband ARPU increased to $181.77 from $175.00.
  • Consumer broadband connections increased to 38,677 from 38,117 and consumer broadband ARPU of $48.59 was relatively unchanged.
  • Wireless subscribers decreased by 3,266 to 108,848. The majority of the decline was due to approximately 1,900 fewer lifeline customers. Wireless ARPU increased to $53.14 from $52.08.

“This was a transitional quarter for us, as it reflected our first full quarter under the AWN structure. During the quarter we started implementing a plan to re-position our wireless operations. This included realigning our spending to reflect the new wireless operating model under AWN. These actions will drive performance in 2014 through increased free cash flow, which we continue to target for debt reduction, further strengthening our balance sheet. We ended 2013 with net debt of $413 million, which means our de-leveraging plans are ahead of schedule,” said Wayne Graham, ACS chief financial officer.

2014 Guidance:

Revenue is expected to be approximately $310 million.

Adjusted EBITDA is expected to be approximately $90 million.

Capital spending is expected to be approximately $40 million.

Free cash flow is expected to be approximately $20 million.

Conference Call

The company will host a conference call and live webcast at 5:00 p.m. Eastern time to discuss the results. The live webcast will include a slide presentation. Parties in the United States and Canada can access the call at 1-877-941-0844. Parties outside the United States and Canada can access the call at 1-480-629-9835.

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 two hours after the call and will run until April 3, 2014 at midnight Eastern time. To hear the replay, parties in the United States and Canada can call 1-800-406-7325 and enter pass code 4666717. Parties outside the United States and Canada can call 1-303-590-3030 and enter pass code 4666717.

About Alaska Communications

Alaska Communications is a leading provider of advanced broadband and managed service solutions for businesses and consumers in Alaska. The company operates a highly reliable, advanced statewide data and voice network with the latest technology and the most diverse undersea fiber optic system connecting Alaska to the contiguous United States. For more information, visit http://www.alaskacommunications.com or http://www.alsk.com.

Non-Gaap Measures

In an effort to provide investors with additional information regarding our financial results, in particular with regards to our liquidity and capital resources, we have disclosed certain non-GAAP financial information which management utilizes to assess performance and believes provides useful information to investors. We have disclosed earnings before interest expense and income, loss on extinguishment of debt, depreciation and amortization, gain on sale of long-term investments, gain and loss on disposal of assets, gift of services, AWN transaction related costs, income taxes and stock-based compensation, and including return of capital from equity investment, as defined and reconciled below Adjusted EBITDA, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by operating revenues, because we believe they are important performance indicators and provide information about our ability to service debt, pay dividends to the extent permitted and fund capital expenditures. We also disclose Free Cash Flow, because we believe it is an important measure of our ability to fund business activities. Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow are not GAAP measures and should not be considered a substitute for operating income, net cash provided by operating activities, or net cash provided or used.

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 include, without limitation, Verizon’s retail entry into the Alaska market, Universal Service Fund reforms, AWN’s financial and operational performance, adverse national economic conditions, adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing, adverse local economic conditions, including an unexpected downturn in the Alaskan oil and gas or tourism markets, changes in capital expenditures, the effects of competition in our markets, the entry of one or more additional facilities-based carriers into the Alaska market, the Company’s ability to complete, manage, integrate, market, maintain, and attract sufficient customers to the products and services it may derive, adverse changes in labor matters, including workforce levels, labor negotiations, and benefits costs, disruption of our supplier’s provisioning of critical products or services, the impact of natural or man-made disasters, changes in Company's relationships with large carrier or enterprise customers or its roaming partners, changes in revenue from universal service funds, unforeseen changes in public policies, changes in accounting policies, including the Company’s application of regulatory accounting rules, which could result in an impact on earnings, or disruptive technological developments in the telecommunications industry. 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 and quarterly reports on Form 10-Q. 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 SCHEDULE OF OPERATIONS
(Unaudited, In Thousands Except Per Share Amounts)
 
    Three Months Ended         Twelve Months Ended
December 31, December 31,
2013     2012 2013     2012
 
Operating revenues
Operating revenues, non-affiliates $ 74,489 $ 94,961 $ 345,611 $ 367,574

Operating revenues, affiliates*

  1,778     44     3,313     140  
Total operating revenues   76,267     95,005     348,924     367,714  
 
Operating expenses:
Cost of services and sales, non-affiliates 32,712 36,716 138,124 148,125

Cost of services and sales, affiliates*

13,199 82 25,158 275
Selling, general & administrative 27,317 26,942 111,034 107,316
Depreciation and amortization 8,900 13,035 42,191 51,487
(Gain) loss on disposal of assets, net 2,177 (528 ) (204,200 ) (2,668 )
Loss on impairment of equity investment 1,267 - 1,267 -
Earnings from equity method investments   (4,985 )   (70 )   (13,046 )   (115 )
Total operating expenses   80,587     76,177     100,528     304,420  
 
Operating income (loss) (4,320 ) 18,828 248,396 63,294
 
Other income and expense:
Interest expense (9,820 ) (10,367 ) (39,790 ) (39,570 )
Loss on extinguishment of debt - (252 ) (2,370 ) (575 )
Interest income 16 12 53 43
Other   -     -     (13 )   -  
Total other income and (expense)   (9,804 )   (10,607 )

 

  (42,120 )   (40,102 )
 
Income (loss) before income tax benefit (expense) (14,124 ) 8,221 206,276 23,192
 
Income tax benefit (expense)   6,485     602     (52,846 )   (5,783 )
 
Net (loss) income $ (7,639 ) $ 8,823   $ 153,430   $ 17,409  
 
Net (loss) income per share:
Basic $ (0.16 ) $ 0.19   $ 3.26   $ 0.38  
Diluted $ (0.16 ) $ 0.18   $ 2.69   $ 0.38  
 
Weighted average shares outstanding:
Basic   48,577     45,677     47,092     45,553  
Diluted   48,577     58,920     59,107     45,878  
 
* Affiliate balances are related to activity with our equity method investees TekMate and AWN
 
 

Schedule 2
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
 
        December 31,         December 31,
Assets 2013 2012
 
Current assets:
Cash and cash equivalents $ 43,039 $ 16,839
Restricted cash 467 3,875
Short-term investments - 2,050
Accounts receivable-trade, non-affiliates, net 34,066 39,698

Accounts receivable-trade, affiliates*

137 15
Materials and supplies 10,131 9,409
Prepayments and other current assets 7,300 5,566
Deferred income taxes   7,144     8,301  
Total current assets 102,284 85,753
 
Property, plant and equipment 1,344,949 1,463,320
Less: accumulated depreciation and amortization   (992,936 )   (1,052,459 )
Property, plant and equipment, net 352,013 410,861
 
Goodwill 4,650 8,850
Intangible assets, net - 24,118
Debt issuance costs 6,929 10,558
Deferred income taxes 17,631 69,049
Equity method investments 261,962 2,028
Other assets   502     3,510  
Total assets $ 745,971   $ 614,727  
 
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $ 14,256 $ 21,628
Accounts payable, accrued and other current liabilities, non-affiliates 55,475 56,378

Accounts payable, accrued and other current liabilities, affiliates*

14,703 -
Advance billings and customer deposits   9,104     8,970  
Total current liabilities 93,538 86,976
 
Long-term obligations, net of current portion 442,001 533,772
Other long-term liabilities 16,947 28,662
Deferred AWN capacity revenue, net of current portion   63,263     -  
Total liabilities   615,749     649,410  
 
Commitments and contingencies
 
Stockholders' equity (deficit):
Common stock, $.01 par value; 145,000 authorized 487 458
Additional paid in capital 152,193 144,377
Accumulated deficit (16,849 ) (170,279 )
Accumulated other comprehensive loss   (5,609 )   (9,239 )
Total stockholders' equity (deficit) 130,222 (34,683 )
 
Total liabilities and stockholders' equity (deficit) $ 745,971   $ 614,727  
 
* Affiliate balances are related to activity with our equity method investees TekMate and AWN
 
 

Schedule 3
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands)
 
        Three Months Ended         Twelve Months Ended
December 31, December 31,
2013     2012 2013     2012
Cash Flows from Operating Activities:
Net (loss) income $ (7,639 ) $ 8,823 $ 153,430 $ 17,409

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization 8,900 13,035 42,191 51,487
Gain on sale/contribution of asset to AWN - - (207,318 ) -
(Gain) loss on the disposal of assets 2,177 (528 ) 3,118 (2,668 )
Loss on the impairment of equity investment 1,267 - 1,267 -
Gain on ineffective hedge adjustment - (231 ) (785 ) (231 )
Amortization of debt issuance costs and debt discount 1,178 1,593 6,932 5,975
Amortization of ineffective hedge 359 292 2,307 292
Amortization of deferred AWN capacity revenue (774 ) - (1,512 ) -
Stock-based compensation 592 888 2,860 3,550
Deferred income taxes (5,887 ) (614 ) 52,846 5,771
Provision for uncollectible accounts 1,042 752 1,847 2,588
Cash distribution from equity method investments 7,564 83 12,953 115
Earnings from equity method investments (4,985 ) (70 ) (13,046 ) (115 )
Other non-cash expense, net 67 195 283 293
Changes in operating assets and liabilities   (653 )   3,928     5,443     (110 )
Net cash provided by operating activities 3,208 28,146 62,816 84,356
 
Cash Flows from Investing Activities:
Capital expenditures (20,424 ) (17,887 ) (47,738 ) (54,206 )
Capitalized interest (635 ) (565 ) (1,926 ) (1,961 )
Change in unsettled capital expenditures 4,768 2,922 1,492 (2,726 )
Proceeds on sale of assets - 693 4,747 3,616
Proceeds on sale/contribution of asset to AWN - - 100,000 -
Return of capital from equity investment 4,891 32 4,891 32
Net change in short-term investments - (2,050 ) 2,037 (2,050 )
Change in unsettled acquisition costs - (90 ) (3,345 ) (90 )
Net change in restricted accounts   15     2,152     3,408     1,081  
Net cash provided (used) by investing activities (11,385 ) (14,793 ) 63,566 (56,304 )
 
Cash Flows from Financing Activities:
Repayments of long-term debt (2,183 ) (10,222 ) (99,565 ) (19,477 )
Debt issuance costs - (3,167 ) (206 ) (3,167 )
Payment of cash dividend on common stock - (2,286 ) - (9,117 )
Payment of withholding taxes on stock-based compensation (6 ) (6 ) (638 ) (249 )
Proceeds from issuance of common stock   110     128     227     307  

Net cash used by financing activities

(2,079 ) (15,553 ) (100,182 ) (31,703 )
 
Change in cash and cash equivalents (10,256 ) (2,200 ) 26,200 (3,651 )
 
Cash and cash equivalents, beginning of period   53,295     19,039     16,839     20,490  
 
Cash and cash equivalents, end of period $ 43,039   $ 16,839   $ 43,039   $ 16,839  
 

Supplemental Cash Flow Data:

Interest paid

$

 9,986

$

11,356

$

35,187

$

36,155

Cash paid on extinguishment of hedging instrument

$

-

$

-

$

4,073

$

-

Income tax paid (refunded), net

$

 6

$

12

$

6

$

(12

)

 

Supplemental Non-cash Transactions:

Property (retired) acquired under capital leases, net

$

 188

$

1,459

$

171

$

1,435

Additions to ARO asset

$

49

$

54

$

229

$

132

Exchange of debt with common stock

$

-

$

-

$

6,000

$

-

 

Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
ADJUSTED EBITDA AND FREE CASH FLOW
(Unaudited, In Thousands)
 
        Three Months Ended         Twelve Months Ended
December 31, December 31,
2013     2012 2013     2012
 
Net (loss) income $ (7,639 ) $ 8,823 $ 153,430 $ 17,409
Add (subtract):
Interest expense 9,820 10,367 39,790 39,570
Loss on extinguishment of debt - 252 2,370 575
Interest income (16 ) (12 ) (53 ) (43 )
Depreciation and amortization 8,900 13,035 42,191 51,487
Loss on the impairment of equity investment 1,267 - 1,267 -
Loss on sale of short-term investments - - 13 -
(Gain) loss on disposal of assets 2,177 (528 ) 3,118 (2,668 )
Earnings from equity method investment in TekMate (96 ) (70 ) (93 ) (115 )
Earnings from equity method investment in AWN (4,889 ) - (12,953 ) -
Gain on sale/contribution of asset to AWN - - (207,318 ) -
TekMate distribution received - 115 - 147
AWN distributions received 12,455 - 17,844 -
AWN distributions received for the prior period (4,167 ) - - -
AWN distributions receivable within 12 days 4,167 - 4,167 -
Income tax expense (benefit) (6,485 ) (602 ) 52,846 5,783
Stock-based compensation and long-term cash incentives 741 888 3,491 3,550
AWN transaction-related costs   408     1,080     6,382     6,126  
 
Adjusted EBITDA $ 16,643   $ 33,348   $ 106,492   $ 121,821  
 
Less:
Incurred capital expenditures (20,424 ) (17,887 ) (47,738 ) (54,206 )
Amortization of deferred AWN capacity revenue (774 ) - (1,512 ) -
AWN transaction-related capital costs, net change - 1,238 (41 ) 1,580
Cash interest expense   (9,986 )   (11,356 )   (35,187 )   (36,155 )
Free cash flow $ (14,541 ) $ 5,343   $ 22,014   $ 33,040  
 
Revenue $ 76,267   $ 95,005   $ 348,924   $ 367,714  
 
Adjusted EBITDA Margin 21.8 % 35.1 % 30.5 % 33.1 %
 
Note:   In an effort to provide investors with additional information regarding the Company's results as determined by 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 Adjusted EBITDA as net income before interest, loss on extinguishment of debt, depreciation and amortization, loss on the impairment of equity investments, loss on sale of short-term investments, gain or loss on asset purchases or disposals, earnings on equity method investments, gains and distributions related to AWN, provisions for taxes, stock-based compensation and certain LTCI, and AWN transaction-related costs, and Adjusted EBITDA Margin, defined as Adjusted EBITDA divided by Operating Revenues. Additionally, the Company has disclosed Free cash flow as Adjusted EBITDA, less capital expenditures that create an obligation to pay (“incurred capital expenditures”), less amortization of deferred AWN capacity revenue, less AWN transaction-related capital costs, less cash interest expense. These measures are provided because the Company believes they are important indicators regarding our ability to make principal payments on debt and fund working capital. Adjusted EBITDA, Adjusted EBITDA Margin and Free cash flow are non-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.
 
 

Schedule 5
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
REVENUE GROWTH
(Unaudited, In Thousands)
 
        Three Months Ended         Twelve Months Ended
December 31, December 31,
Service Revenue: 2013     2012 2013     2012
Business and Wholesale Customers
Voice $ 5,644 $ 5,796 $ 22,947 $ 23,842
Broadband 10,518 8,815 40,027 33,972
Other 1,690 1,850 7,659 7,385
Wholesale   7,728     9,245   30,047     33,393
Business and Wholesale service revenue   25,580     25,706   100,680     98,592
 
Consumer Customers
Voice 3,999 4,508 16,818 18,968
Broadband 5,665 4,928 22,108 18,398
Other   464     416   1,739     1,386
Consumer service revenue 10,128 9,852 40,665 38,752
 
Total Service Revenue   35,708     35,558   141,345     137,344
Growth in Service Revenue 0.4 % 2.9 %
Growth in Broadband Service Revenue 17.8 % 18.6 %
 
Other Revenue:
Equipment Sales 632 1,967 2,083 3,021
Access 8,977 9,746 37,033 40,250
High Cost Support   5,218     5,182   18,776     20,223
Total Service and Other Revenue   50,535     52,453   199,237     200,838
Growth in Service and Other Revenue -3.7 % -0.8 %
Growth excluding equipment sales -1.2 % -0.3 %
 
Wireless Revenue:
Business and Consumer service revenue 17,590 18,721 71,197 73,845
Equipment sales 1,062 1,421 4,847 6,015
Other 1,458 1,054 5,049 4,281
 
AWN Related:
Foreign Roaming - 14,110 40,029 55,105
Wireless Backhaul (77 ) 2,182 6,035 6,897
CETC 4,925 5,064 21,018 20,733
Amortization of deferred AWN capacity revenue   774     -   1,512     -
Total AWN Related   5,622     21,356   68,594     82,735
Total Wireless & AWN Related Revenue   25,732     42,552   149,687     166,876
 
Total Revenue $ 76,267   $ 95,005 $ 348,924   $ 367,714
 
 

Schedule 6
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
 
        Three Months Ended
December 31,     September 30,     December 31,
2013 2013 2012
 
Voice:
Consumer access lines 49,297 50,722 55,823
Business access lines 79,816 80,071 80,852
 
Voice ARPU consumer $ 26.65 $ 26.81 $ 26.53
Voice ARPU business $ 23.53 $ 24.04 $ 23.82
 

Broadband: (1)

Consumer connections 38,677 38,117 36,576

Business connections (2)

19,285 19,216 18,718
 
ARPU consumer $ 48.59 $ 48.63 $ 44.40

ARPU business (2)

$ 181.77 $ 175.00 $ 157.06
 
Wireless:
Postpaid connections 85,982 86,423 91,804
Lifeline connections 7,145 9,077 9,106
Prepaid connections   15,721     16,614     14,107  
Total   108,848     112,114     115,017  
 
Retail wireless ARPU $ 53.14 $ 52.08 $ 52.96
 
Churn:
 

Voice connections (3)

1.3 % 1.4 % 1.4 %
Broadband connections (1) (3) 2.1 % 2.4 % 2.1 %
Wireless connections 3.4 % 3.2 % 3.7 %
 
Wireless equipment subsidy (1,100 ) (1,062 ) (2,666 )
 
    (1)   Consumer and business broadband connections, ARPU, and churn have been restated to exclude dial up lines.
 
(2) Business broadband connections counts have been restated to correct how certain high bandwidth circuit types are measured. These change have no affect on our financial results, but will affect connection count and ARPU amounts presented above compared to their presentation in prior periods.
 
(3) Voice and broadband churn have been restated to exclude wholesale lines.
 
 

Schedule 7
 
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Long Term Debt
(Unaudited, In Thousands)
 
    2013         2012
2010 senior credit facility term loan due 2016 $ 345,900 $ 431,200
Debt discount - 2010 senior credit facility term loan due 2016 (1,687 ) (2,796 )
6.25% convertible notes due 2018 114,000 120,000
Debt discount - 6.25% convertible notes due 2018 (9,213 ) (11,602 )
5.75% convertible notes due 2013 - 12,980
Debt discount - 5.75% convertible notes due 2013 - (114 )
Revolving credit facility loan - -
Capital leases and other long-term obligations   7,257     5,732  
456,257 555,400
Less current portion   (14,256 )   (21,628 )
Long-term obligations, net of current portion $ 442,001   $ 533,772  
 
 
        Maturities
 
 
2014 $ 14,310
2015 15,424
2016 318,796
2017 440
2018 114,287
Thereafter   3,900  
$ 467,157  
 
 

Schedule 8
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Summary AWN information
(Unaudited, In Thousands)

 

Alaska Wireless Network, LLC
Stand Alone Selected Operating Results
For the Period July 23, 2013 - December 31, 2013
        Q3     Q4     YTD  
Operating revenues 58,826 44,097 $ 102,923
 
Operating expenses:

 

 

Cost of services and sales

22,258 10,121 32,379

 

Selling, general & administrative

3,908 5,946 9,854

 

Depreciation and amortization

  7,327     11,851     19,178  
 
Total operating expenses 33,493 27,918 61,411
 
Operating income 25,333 16,179 41,512
 
Other income and (expense)   (74 )   (127 )   (201 )
 
Net income 25,259 16,052 41,311 A
 
Plus: Depreciation Expense 7,327 11,851 19,178
Other, net 753 1,335 2,088
Minus: Capital Spending 12,435 9,572 22,007
Management Fee to GCI   836     787     1,623  
Adjusted Free Cash Flow $ 20,068   $ 18,879   $ 38,947  
 
Distributions paid or payable to ACS:
(includes balance to be received with 14 days) 9,556 12,455 22,011
 
Distributions to ACS as a proportion of FCF: 47.6 % 66.0 % 56.5 %

The above information reflects summary unaudited financial performance of AWN, which Alaska Communication owns a 33.3% ownership interest. Certain additional summary information is included in our Form 10-Q and 10-K filings.

 
 
Key AWN Results Included in the ACS Consolidated Balance Sheet:
 
Equity method investment         $ 261,109
Deferred AWN capacity revenue: $ 66,670

Accounts payable, accrued and other current liabilities

$ 3,407
Deferred AWN capacity revenue, net of current portion $ 63,263

Investment in AWN represents the value of ACS's 1/3 ownership interest in AWN. Deferred revenue represents capacity contributions and the operations and maintenance support of these capacity contributions for AWN's network. The benefit of this deferred revenue is recognized over 20 years.

 
 
Key AWN Results included in the ACS Consolidated Income Statement:
        Q3     Q4     YTD  
AWN net income 25,259 16,052 $ 41,311 A
Adjusted for step-up in GCI assets   (1,066 )   (1,385 )   (2,451 ) B
AWN stepped-up earnings 24,193 14,667 $ 38,860 C
 
ACS ownership percentage of AWN 33.33 % 33.33 % 33.33 % D
 
"Adjusted for step-up"(B) reflects the step up on basis on the GCI contributed assets to AWN and associated higher depreciation expense that ACS is required to incorporate in its consolidated financial statements.
 
Earnings on equity method investment in AWN $ 8,064   $ 4,889   $ 12,953   C * D
 

AWN's stepped up net income is used to calculate the equity in earnings at ACS' 1/3 ownership percentage or $12,953.

 
 
Key AWN Results Included in the ACS Non GAAP financial measures:
        Q3     Q4     YTD
Cash distributions received during the quarter $ 5,389 $ 12,455 $ 17,844

 

Less:

 

Distributions received during the quarter related to the previous period

- (4,167 ) -
Plus: Distributions received within 14 business days of quarter-end 4,167 4,167 4,167
Amortization of deferred AWN capacity revenue   738   774     1,512
Equals AWN impact to Adjusted EBITDA $ 10,294 $ 13,229   $ 23,523
 
Less: Amortization of deferred AWN capacity revenue   738   774     1,512
Equals AWN impact to Free Cash Flow $ 9,556 $ 12,455   $ 22,011

In our non-GAAP reporting of Adjusted EBITDA, ACS is using our Senior Credit Agreement definition, as amended, for the AWN distribution, which is distributions received or eligible to be received within 14 business days.


Copyright © Business Wire 2014
Contact:

Alaska Communications
Investors:
Wayne Graham, 907-564-3314
Chief Financial Officer
investors@acsalaska.com