UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
February 24, 2005 (February 23, 2005)
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ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
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(Exact name of registrant as specified in its charter)
Delaware 000-28167 52-2126573
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
600 Telephone Ave., Anchorage, Alaska 99503
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 907 - 297 - 3000
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(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On February 24, 2005, Alaska Communications Systems Group, Inc. reported its
financial results for the year ended December 31, 2004. The press release is
attached hereto as Exhibit 99.1.
Item 5.02 Election of Director
On February 23, 2005, Alaska Communications Systems Group, Inc. announced the
appointment of Gary R. Donahee to its Board of Directors.
The press release announcing his appointment is attached hereto as Exhibit 99.2
and is incorporated herein by reference.
Item 8.01 Other Events
On February 24, 2005, Alaska Communications Systems Group, Inc. ("ACS") reported
financial results for its fourth quarter and year-ended December 31, 2004.
Quarterly Financial Highlights
For the fourth quarter ending December 31, 2004,
revenues were $75.1 million, which represented a 3.3 percent increase over
fourth quarter 2003 revenues of $72.8 million, adjusted to exclude revenues from
the discontinued State of Alaska contract. Including the State of Alaska
contract revenues, reported revenues for the fourth quarter of 2003 were $77.2
million. Wireless subscribers grew at a record pace for the fifth consecutive
quarter and wireless revenue rose to $15.4 million this quarter compared to
$11.7 million a year ago.
Also during the fourth quarter of 2004 compared to the fourth quarter of 2003:
o Net loss declined to $7.1 million from $17.2 million and to a loss of $0.23
per share from $0.58 per share;
o Adjusted EBITDA increased to $26.2 million from $24.1 million; and
o Interest expense declined to $12.2 million from $20.0 million due to an
$8.0 million charge for the early extinguishment of an interest rate swap
in the fourth quarter of 2003.
ACS generated $19.1 million in cash from operating activities in the fourth
quarter, following up on $15.5 million in cash from operating activities in the
third quarter. ACS closed the quarter with a cash balance of $85.9 million.
Fourth Quarter 2004 Metric Highlights
o Increased total number of retail customer relationships across all product
lines by approximately 7,800 to over 397,000 total, a doubling of net
addition growth rate compared to the third quarter of 2004.
o Added over 5,100 wireless subscribers, growing 5.4 percent compared to the
third quarter of 2004 and bringing the total to over 100,600 wireless
subscribers. Churn remained low at 1.7 percent per month.
o Recorded wireless average revenue per unit (ARPU) of $45.42 compared to the
seasonally stronger third quarter wireless ARPU of $47.43.
o Increased digital subscriber lines (DSL) 9.4 percent to over 24,700
compared to the third quarter of 2004 as a result of consumer and business
bundling programs.
o Increased long distance subscribers by over 2,700 to 47,050 customers, a
6.1 percent increase compared to the third quarter of 2004, principally as
a result of a focused selling effort and the bundling of the long distance
product with other ACS services.
o Recorded over 295,000 access lines, representing a decrease of
approximately 6,300 lines, or 2.1 percent, compared to the third quarter of
2004, which is in line with company expectations and reflective of industry
trends.
Annual Financial Review
For the year ending December 31, 2004, total revenues were $302.7 million, which
represented a 3.6 percent increase over 2003 adjusted revenues of $292.3
million. Including the State of Alaska contract and directory business revenues,
reported revenues for 2003 were $323.8 million. Net loss for the year 2004 was
$39.3 million, or $1.33 per share, as compared to a net loss of $6.6 million, or
$0.22 per share in 2003. Net loss for 2003 was inclusive of a gain on the
disposal of assets of $112.6 million and contract termination and asset
impairment charges of $54.9 million. Adjusted EBITDA for the year 2004 was $97.4
million, an increase of 4.8 percent from $92.9 million in 2003. Net cash
provided by operating activities for 2004 increased 15 percent to $57.8 million,
as compared to $50.4 million in 2003.
Tables Follow
Schedule 1
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months and Twelve Months Ended December 31, 2004 and 2003
(Unaudited, in Thousands, Except per Share Amounts)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------------------------------------
2004 2003 2004 2003
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Operating revenues:
Local telephone $50,961 $52,614 $211,187 $215,686
Wireless 15,428 11,680 56,694 46,548
Directory - - - 11,631
Internet 5,160 8,610 20,173 33,026
Interexchange 3,576 4,333 14,653 16,956
--------------------------------------------------------
Total operating revenues 75,125 77,237 302,707 323,847
Operating expenses:
Local telephone 30,862 31,786 127,918 116,653
Wireless 10,689 9,268 37,918 31,064
Directory - - - 5,249
Internet 4,535 9,694 25,739 45,523
Interexchange 4,262 7,656 19,773 25,542
Contract termination and asset impairment charges - 319 - 54,858
Depreciation and amortization 20,701 15,450 78,387 82,185
Loss (gain) on disposal of assets, net 29 (115) 2,854 (112,622)
--------------------------------------------------------
Goodwill impairment loss - - - -
--------------------------------------------------------
Total operating expenses 71,078 74,058 292,589 248,452
Operating income 4,047 3,179 10,118 75,395
Other income and expense:
Interest expense (12,234) (19,992) (51,288) (71,470)
Interest income and other 903 713 1,657 (9,408)
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Total other income (expense) (11,331) (19,279) (49,631) (80,878)
--------------------------------------------------------
Loss before income taxes and discontinued operations (7,284) (16,100) (39,513) (5,483)
Income tax benefit (expense) 219 (1,095) 219 (1,095)
--------------------------------------------------------
Loss from continuing operations (7,065) (17,195) (39,294) (6,578)
Loss from discontinued operations - - - (52)
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Cumulative effect of change in accounting principle,
net of tax - - - -
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Net loss $(7,065) $(17,195) $(39,294) $(6,630)
========================================================
Loss per share - basic and diluted:
Loss from continuing operations $(0.23) $(0.58) $(1.33) $(0.22)
Loss from discontinued operations - - - (0.00)
Net loss $(0.23) $(0.58) $(1.33) $(0.22)
========================================================
Weighted average shares outstanding:
Basic 30,105 29,429 29,592 29,980
========================================================
Diluted 30,105 29,429 29,592 29,980
========================================================
Schedule 2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
December 31, December 31,
Assets 2004 2003
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Current assets:
Cash and cash equivalents $85,860 $97,798
Restricted cash 4,690 3,635
Accounts receivable-trade, net of allowance of $4,869 and $4,865 39,413 41,718
Materials and supplies 6,623 10,099
Prepayments and other current assets 3,724 5,850
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Total current assets 140,310 159,100
Property, plant and equipment 1,061,767 1,041,904
Less: Accumulated depreciation and amortization 649,455 603,760
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Property, plant and equipment, net 412,312 438,144
Goodwill 38,403 38,403
Intangible Assets 21,871 22,055
Debt issuance costs 15,482 18,939
Deferred charges and other assets 8,749 8,750
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Total assets $637,127 $685,391
===========================
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Current portion of long-term obligations $2,298 $1,982
Accounts payable-affiliate 3,973 5,082
Accounts payable, accrued and other current liabilities 53,843 47,303
Income taxes payable - 1,095
Advance billings and customer deposits 8,948 8,766
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Total current liabilities 69,062 64,228
Long-term obligations, net of current portion 523,591 548,238
Other deferred credits and long-term liabilities 77,916 71,065
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, no par, 5,000 authorized, no shares issued and outstanding - -
Common stock, $.01 par value; 145,000 shares authorized, 35,245 and
33,611 shares issued and 30,695 and 29,343 outstanding, respectively 352 336
Common stock, $.01 par value; 0 and 267 shares subject to mandatory redemption - (1,198)
Treasury stock, 4,549 and 4,268 shares, respectively, at cost (18,443) (17,118)
Paid in capital in excess of par value 287,966 278,181
Accumulated deficit (298,786) (253,798)
Accumulated other comprehensive loss (4,531) (4,543)
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Total stockholders' equity (deficit) (33,442) 1,860
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Total liabilities and stockholders' equity $637,127 $685,391
===========================
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Years ended December 31, 2004 and 2003
(Unaudited, in Thousands)
2004 2003
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Net cash provided by operating activities $57,827 $50,411
Cash Flows from Investing Activities:
Construction & capital expenditures, net of capitalized interest (51,422) (48,566)
Net proceeds from sale of business - 155,269
Placement of funds in restricted account (1,055) (3,725)
Release of funds from escrow - 3,539
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Net cash used by investing activities (52,477) 106,517
Cash Flows from Financing Activities:
Proceeds from the issuance of long-term debt, net of discounts - 375,970
Debt issuance costs - (14,000)
Repayments of long-term debt (26,962) (434,102)
Purchase of treasury stock (127) (5,830)
Issuance of common stock 9,801 267
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Net cash provided (used) by financing
activities (17,288) (77,695)
Increase (decrease) in cash (11,938) 79,233
Cash, Beginning of period 97,798 18,565
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Cash, End of period $85,860 $97,798
========================
Supplemental Cash Flow Data:
Interest paid, net of capitaized interest $45,470 $51,372
========================
Income taxes paid, net of refund $876 $-
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Supplemental Noncash Transactions:
Interest rate swap marked to market $- $(14,152)
========================
Property acquired under a mortgage $- $2,340
========================
Minimum pension liability adjustment $(12) $(191)
========================
Dividend declared, but not paid $(5,694) $-
========================
Schedule 4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF ADJUSTED REVENUES
For the Three Months Ended March 31, 2001 and 2000
(Unaudited, in Thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
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2004 2003 2004 2003
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Total operating revenues $75,125 $77,237 $302,707 $323,847
Adjustment for termination of the State of Alaska TPA contract - (4,479) - (19,927)
Adjustment for sale of the Company's
Directory business - Directory revenues - - - (11,631)
-----------------------------------------------------
Total adjusted operating revenues $75,125 $72,758 $302,707 $292,289
=====================================================
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. The Company has disclosed its total
operating revenues adjusted to exclude the impact of disposed of operations and
the termination of the State of Alaska Telecommunications Partnering Agreement
(TPA) as the Company believes that such data will facilitate more useful
period-to-period comparisons of the Company's ongoing operations.
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF LOCAL TELEPHONE REVENUES
For the Three Months and Twelve Months Ended December 31, 2004 and 2003
(Unaudited, in Thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
----------------------------------------------------
2004 2003 2004 2003
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Local telephone revenues:
Local network service $22,697 $22,686 $91,669 $96,656
Network access revenue 22,174 23,808 97,536 97,759
Deregulated and other 6,090 6,120 21,982 21,271
----------------------------------------------------
Local telephone revenues $50,961 $52,614 $211,187 $215,686
====================================================
Schedule 6
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
SCHEDULE OF EBITDA CALCULATION
For the Three Months and Year Ended December 31, 2004 and 2003
(Unaudited, in Thousands)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------------------------------
2004 2003 2004 2003
--------------------------------------------
Net cash provided (used) by operating activities $19,093 $(59) $57,827 $50,411
Adjustments to reconcile net income to net cash provided by
operating activities:
Loss on discontinued operations - - - (52)
Loss (gain) on disposal of assets and asset impairments (29) 115 (2,854) 48,863
Depreciation and amortization (20,701) (15,450) (78,387) (82,185)
Amortization of debt issuance costs, warrants and original
issue discount (1,085) (935) (6,088) (17,048)
Non-cash stock compensation expense - (900) (900)
Other non-cash expenses (12) (4,118) (12) (4,118)
Other deferred credits (1,478) 100 (3,048) (1,643)
Changes in components of working capital:
Accounts receivable and other current assets (2,811) 1,604 (7,907) (7,451)
Accounts payable and other current liabilities 404 1,932 1,176 6,380
Deferred charges and other assets (446) 515 (1) 1,072
Net cash used in discontinued operations - 1 - 41
--------------------------------------------
Net income (loss) $(7,065) $(17,195) $(39,294) $(6,630)
Add (subtract):
Interest expense 12,234 19,992 51,288 71,470
Income tax (benefit) expense (219) 1,095 (219) 1,095
Depreciation and amortization 20,701 15,450 78,387 82,185
(Gain) loss on disposal of assets and asset impairment
charges, net 29 (115) 2,854 (112,622)
Gain on foreign exchange - - - (4,261)
Goodwill impairment loss - - - -
Impairment charges related to SOA - - - 63,759
Stock based compensation - 900 - 900
Non-cash pension expense 150 238 699 238
Non-cash litigation reserves - 3,880 (300) 3,880
--------------------------------------------
EBITDA 25,830 24,245 93,415 100,014
Adjustment for discontinued operations - - - 52
Adjustment for the termination of airplane lease - - 2,854 -
Adjustment for Neptune capped commitment - - 750 -
Adjustment for sale of the Company's directory business -
Directory EBITDA - (164) - (7,165)
IDS transaction costs 375 - 375 -
--------------------------------------------
Adjusted EBITDA $26,205 $24,081 $97,394 $92,901
============================================
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 and other non-cash charges inclusive of non cash pension expense and
a non cash release of litigation reserves following legal settlement (EBITDA)
because the Company believes it is an important indicator because it provides
information about our ability to service debt, pay dividends and fund capital
expenditures. To further assist the reader in understanding operations,
EBITDA has also been adjusted to exclude the impact of discontinued and
disposed of operations (Adjusted EBITDA) as the Company believes that such
data will facilitate more useful period-to-period comparisons of the
Company's ongoing operations. EBITDA and Adjusted EBITDA are not GAAP
measures and should not be considered a substitute for net income and loss
and other measures of financial performance recorded in accordance with GAAP.
The calculation of "Adjusted 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 "Adjusted EBITDA" only
includes adjustments that meet the criteria of being "non recurring" under
Regulation G.
Schedule 7A
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
December 31, September 30, December 31,
-------------------------------------------------
2004 2004 2003
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Local telephone:
Retail access lines * 207,905 209,442 218,058
Wholesale access lines 16,590 17,500 19,159
UNE loop lines 64,589 68,524 68,916
UNE platform lines 6,365 6,251 5,333
-------------------------------------------------
Total local telephone access lines 295,449 301,717 311,466
=================================================
Average local telephone access lines for the quarter 298,583 304,512 312,333
Average local telephone revenue per line for the
quarter $56.18 $56.10 $56.15
Quarterly growth rate in local telephone access
lines -2.1% -1.8% -0.6%
Wireless
Covered population 482,251 480,422 480,422
Ending subscribers 100,657 95,529 87,017
Average subscribers for the quarter 98,093 93,306 85,505
Quarterly growth rate 5.4% 4.9% 3.6%
Activations for the quarter 10,642 9,219 6,865
Deactivations for the quarter 5,514 4,773 3,841
Average monthly churn for the quarter 1.7% 1.7% 1.4%
Penetration 20.9% 19.9% 18.1%
Quarterly minutes of use (000's) ** 90,483 93,100 69,117
Average revenue per subscriber for the quarter*** $45.42 $47.43 $39.59
Long Distance:
Long distance subscribers 47,050 44,334 43,166
Quarterly minutes of use (000's) 34,779 36,614 35,795
Average subscribers for the quarter 45,692 43,494 43,333
Average revenue per subscriber for the quarter $26.09 $29.72 $33.33
Internet:
DSL subscribers 24,711 22,596 17,784
Dial-Up and other service subscribers 22,842 23,699 28,277
-------------------------------------------------
Total Internet subscribers 47,553 46,295 46,061
=================================================
Average subscribers for the quarter 46,924 45,739 45,706
Average DSL & dial up revenue per subscriber for the
quarter**** $28.86 $28.98 $29.83
* Prior period retail access lines impacted by change in line count methodology.
** Wireless MOU have been restated to include prepaid airtime certificates.
*** Wireless ARPU has been restated to better reflect ongoing revenue derived from ACS's wireless
customers. The restated ARPU excludes equipment sales, foreign roaming (non-ACS customers roaming
on ACS's network) and access termination revenue. Previously, wireless ARPU was based on all
wireless revenues, including those that were not derived from ACS's customer base.
**** Internet ARPU has been restated to include only DSL and dial-up revenues. Previously, internet ARPU
included all internet revenues; however, the customer base included only DSL and dial-up
subscribers. The restated ARPU provides consistency between revenues and customer counts.
Schedule 7B
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
KEY OPERATING STATISTICS
(Unaudited)
December 31, September 30,
2004 2004 Net Movement
------------------------------------------------------------
Local telephone retail access lines 207,905 209,442 (1,537)
Wireless subscribers 100,657 95,529
Less adjustment for resellers (6,425) (6,655)
---------------------------------------
94,232 88,874 5,358
---------------------------------------
Long distance subscribers 47,050 44,334 2,716
DSL and dial up subscribers 47,553 46,295 1,258
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396,740 388,945 7,795
============================================================
Item 9.01 Financial Statements and Exhibits
Exhibit No. Description
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99.1 Alaska Communications Systems Group, Inc.
Press Release dated February 24, 2005.
99.2 Alaska Communications Systems Group, Inc.
Press Release dated February 23, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report on Form 8-K to be signed on its behalf by
the undersigned, thereunto duly authorized.
Date: February 24, 2005 Alaska Communications Systems Group, Inc.
/s/ David Wilson
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David Wilson,
Senior Vice President and Chief
Financial Officer (Principal
Accounting Officer and Principal
Financial Officer)
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Alaska Communications Systems Group, Inc.
Press Release dated February 24, 2005.
99.2 Alaska Communications Systems Group, Inc.
Press Release dated February 23, 2005.