-Posted Total Wireline Revenues of $56.3
million, a 2.8% increase-
-Reported Business and Wholesale Revenue
growth of 8.6%-
Alaska Communications Systems Group, Inc. (NASDAQ: ALSK) today
reported financial results for the second quarter of 2016.
“We are performing to our business plan, delivering consistent
results in-line with our long-term directional guidance. For the
second quarter 2016 compared to a year ago, revenue grew 2.8
percent for total wireline and 8.6 percent for business and
wholesale. Revenue contribution from Business and Wholesale as a
percentage of total wireline revenue has grown from 51.7 percent in
the first quarter 2014 to 60.2 percent in the second quarter 2016,
reflecting our steady progress as a fiber broadband and managed IT
services focused company. With strong customer wins in the quarter,
and investments in a flagship Business Technology Center, we remain
confident in the growth opportunities ahead of us and look forward
to reporting continued progress in upcoming quarters,” Anand
Vadapalli, president and CEO of Alaska Communications, said.
Revenue Highlights: Second Quarter 2016 Compared to Second
Quarter 2015
- Total Wireline revenues:
- Revenue increased to $56.3 million from
$54.7 million, up 2.8 percent.
- Total broadband revenue reached $28.4
million from $26.2 million, up 8.4 percent.
- Business and wholesale:
- Comprised 60.2 percent of total
wireline revenue.
- Revenue grew to $33.9 million from
$31.2 million, up 8.6 percent.
- Broadband revenues reached $22.2
million from $19.6 million, up 13.2 percent.
- Consumer:
- Comprised 16.9 percent of total
wireline revenue.
- Revenue was $9.5 million, down 6.4
percent from $10.1 million.
- Broadband revenue was $6.2 million,
down 5.8 percent from $6.6 million.
- Regulatory:
- Comprised 22.9 percent of total
wireline revenue.
- Revenue was $12.9 million, down 3.6
percent from $13.4 million.
Financial Metrics: Second Quarter 2016 compared to Second
Quarter 2015 and Year to Date June 30, 2016
- Net income was $0.3 million, compared
to a net loss of $4.9 million. Year to date net income was $0.4
million.
- Net cash provided by operating
activities was $8.7 million, compared to net cash used of $9.6
million. Year to date cash provided by operating activities was
$18.9 million.
- Capital expenditures were $8.5 million,
compared to $20.2 million. Year to date capital expenditures were
$13.7 million.
Balance Sheet Metrics: June 30, 2016 compared to December 31,
2015
- Cash remained strong at $22.2 million,
compared to $36.0 million.
- Net debt was $163.8 million, compared
to $161.7 million.
Non-GAAP Metrics: Second Quarter 2016 compared to Second
Quarter 2015 and Year to Date June 30, 2016
- Adjusted EBITDA was $14.0 million,
compared to $11.1 million. Year to date Adjusted EBITDA was $28.0
million.
- Free cash flow was ($5.0) million,
compared to ($6.7) million. Year to date free cash flow was $4.1
million.
Reconciliations of non-GAAP financial measures to GAAP financial
measures can be found in tables at the end of this release and on
the company’s website at http://www.alsk.com in the investment data
section.
Laurie Butcher, Alaska Communications senior vice-president of
finance, said, “We are pleased with our results for the quarter,
which are aligned with our business plan. We remain committed to
growing Adjusted EBITDA and free cash flow and reaffirm our
guidance for 2016.”
2016 Guidance:
The company reaffirmed 2016 guidance as follows:
- Total Wireline Revenue of approximately
$228 million
- Adjusted EBITDA of approximately $59
million
- Capital Expenditures of approximately
$35 million
- Free Cash Flow of approximately $5
million
Conference Call
The Company will host a conference call and live webcast on
Thursday, Aug. 4, 2016, at 3:00 p.m. Eastern Time to discuss the
results. Parties in the United States and Canada can access the
call at 1-888-481-2848 and enter pass code 410670. All other
parties can access the call at 1-719-325-2219 and use the same
code.
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 Sept. 3,
2016, at 6:00 p.m. Eastern Time. To hear the replay, parties in the
U.S. and Canada can call 1-888-203-1112 and enter pass code
7519974. All other parties can call 1-719-457-0820 and enter pass
code 7519974.
About Alaska Communications
Alaska Communications (NASDAQ: ALSK) is the leading provider of
advanced broadband and IT managed services for businesses and
consumers in Alaska. The company operates a highly reliable,
advanced statewide data network with the latest technology and the
most diverse undersea fiber optic system connecting Alaska to the
contiguous U.S. For more information, visit
www.alaskacommunications.com or 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 such as Adjusted EBITDA, Free Cash Flow and
Net Debt, which management utilizes to assess performance and
believes provides useful information to investors. The definition
of these non-GAAP measures are on Schedules 4 and 5 to this press
release. Adjusted EBITDA and Free Cash Flow are non-GAAP measures
and should not be considered a substitute for Net Income, Net Cash
Provided (Used) By Operating Activities and other measures of
financial performance recorded in accordance with GAAP.
Reconciliations of our non-GAAP measures to our nearest GAAP
measures can be found in the tables at the end of this release or
on our website at http://www.alsk.com in the investment data
section. Other companies may not calculate non-GAAP measures in the
same manner as Alaska Communications. We do not provide guidance
for Net Income and Net Cash Provided (Used) By Operating
Activities.
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 the Company’s control. Such
factors include, without limitation, Federal and Alaska Universal
Service Fund changes, adverse economic conditions, the effects of
competition in our markets, our relatively small size compared with
our competitors, the Company’s ability to compete, manage,
integrate, market, maintain, and attract sufficient customers for
its products and services, adverse changes in labor matters,
including workforce levels, our ability to service our debt and
refinance as required, labor negotiations, including renegotiating
our collective bargaining agreement, employee benefit costs, our
ability to control other operating costs, disruption of our
supplier’s provisioning of critical products or services, the
impact of natural or man-made disasters, changes in the Company’s
relationships with large customers, unforeseen changes in public
policies, regulatory changes, changes in technology and standards,
our internal control over financial reporting, and changes in
accounting standards or policies, which could affect reported
financial results. For further information regarding risks and
uncertainties associated with the Company’s 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 Six Months
Ended June 30, June 30,
2016
2015 2016
2015 Operating
revenues: Operating revenues, non-affiliates $ 56,262 $ 55,665 $
112,590 $ 120,876 Operating revenues, affiliates
- -
- 575 Total
operating revenues
56,262
55,665 112,590
121,451 Operating expenses: Cost
of services and sales, non-affiliates 25,543 30,078 51,671 56,383
Cost of services and sales, affiliates - - - 4,961 Selling, general
& administrative 17,586 22,611 34,926 50,595 Depreciation and
amortization 8,640 8,075 17,160 17,016 Loss (gain) on disposal of
assets, net 128 (724 ) 152 (39,386 ) Earnings from equity method
investments
- -
- (3,056
) Total operating expenses
51,897 60,040
103,909 86,513
Operating income (loss) 4,365 (4,375 ) 8,681 34,938
Other income and (expense): Interest expense (3,852 ) (4,257 )
(7,721 ) (11,676 ) Loss on extinguishment of debt - - (336 ) (2,628
) Interest income
6
17 11
42 Total other income and (expense)
(3,846 ) (4,240
)
(8,046 )
(14,262 ) Income before income tax
(expense) benefit 519 (8,615 ) 635 20,676 Income tax
(expense) benefit
(236 )
3,755 (299 )
(9,319 ) Net income (loss)
283 (4,860 ) 336 11,357 Less net loss attributable to
noncontrolling interest
(34 )
(19 ) (67
) (19 ) Net
income (loss) attributable to Alaska Communications
$
317 $ (4,841
) $ 403
$ 11,376 Basic
$ 0.01 $
(0.10 ) $ 0.01
$ 0.23 Diluted
$ 0.01 $
(0.10 ) $ 0.01
$ 0.22 Weighted
average shares outstanding: Basic
51,231
50,252 50,986
50,085 Diluted
52,138 50,252
52,006 51,082
Schedule 2 ALASKA COMMUNICATIONS
SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS
(Unaudited, In Thousands Except Per Share Amounts)
June 30, December 31, Assets
2016 2015
Current assets: Cash and cash equivalents $ 22,248 $
36,001 Restricted cash 1,811 1,824 Accounts receivable, net of
allowance of $1,215 and $1,693 23,348 25,225 Materials and supplies
4,984 4,674 Prepayments and other current assets
4,280 8,068 Total
current assets 56,671 75,792 Property, plant and equipment
1,346,470 1,337,098 Less: accumulated depreciation and amortization
(979,952 )
(967,776 ) Property, plant and equipment,
net 366,518 369,322 Deferred income taxes 16,063 16,660
Other assets
1,762
1,827 Total assets
$
441,014 $ 463,601
Liabilities and Stockholders' Equity Current
liabilities: Current portion of long-term obligations $ 4,018 $
3,671 Accounts payable, accrued and other current liabilities
38,381 51,275 Advance billings and customer deposits
4,052 4,513 Total
current liabilities 46,451 59,459 Long-term obligations, net
of current portion 175,483 185,018 Other long-term liabilities, net
of current portion
63,622
65,265 Total liabilities
285,556 309,742
Commitments and contingencies Alaska Communications stockholders'
equity: Common stock, $.01 par value; 145,000 authorized 513 505
Additional paid in capital 157,954 156,971 Accumulated deficit
(1,231 ) (1,634 ) Accumulated other comprehensive loss
(2,889 ) (3,086
) Total Alaska Communications stockholders' equity
154,347 152,756
Noncontrolling interest
1,111
1,103 Total stockholders' equity
155,458 153,859
Total liabilities and stockholders' equity
$
441,014 $ 463,601
Schedule 3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited, In Thousands) Three Months Ended
Six Months Ended June 30, June
30, 2016
2015 2016
2015 Cash Flows from
Operating Activities: Net income (loss) $ 283 $ (4,860 ) $ 336 $
11,357
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation and amortization 8,640 8,075 17,160 17,016 Gain on
wireless sale - (1,421 ) - (41,140 ) Loss on the disposal of
assets, net 128 697 152 1,754 Unrealized gain on ineffective hedge
- (275 ) - (542 ) Amortization of debt issuance costs and debt
discount 1,005 990 2,021 2,043 Amortization of ineffective hedge -
10 - 1,970 Loss on extinguishment of debt - - 336 2,628
Amortization of deferred capacity revenue (855 ) (694 ) (1,702 )
(1,469 ) Stock-based compensation 642 795 1,447 1,279 Deferred
income tax expense (benefit) 228 (136 ) 495 (3,394 ) Charge
(benefit) for uncollectible accounts 209 (204 ) 77 1,319 Cash
distribution from equity method investments - - - 3,056 Earnings
from equity method investments - - - (3,056 ) Other non-cash
expense, net 197 273 414 543 Income taxes payable (receivable) 8
(5,574 ) (722 ) 8,038 Changes in operating assets and liabilities
(1,780 )
(7,303 ) (1,077
) (9,648 ) Net cash
provided (used) by operating activities
8,705
(9,627 )
18,937 (8,246
) Cash Flows from Investing Activities: Capital
expenditures (8,487 ) (20,233 ) (13,662 ) (26,133 ) Capitalized
interest (245 ) (297 ) (548 ) (788 ) Change in unsettled capital
expenditures (4,931 ) 5,117 (9,156 ) 674 Proceeds on wireless sale
- 1,680 - 278,068 Proceeds on sale of assets - 3,126 2,663 3,126
Return of capital from equity investment - - - 1,875 Net change in
restricted cash
(86 )
- 13
- Net cash (used) provided by investing
activities
(13,749 )
(10,607 ) (20,690
) 256,822 Cash Flows
from Financing Activities: Repayments of long-term debt (869 )
(1,119 ) (11,486 ) (242,837 ) Debt issuance costs (7 ) (15 ) (44 )
(1,042 ) Cash paid for debt extinguishment - - (150 ) - Cash paid
in acquisition of business - - - (291 ) Cash proceeds from
non-controlling interest 75 250 75 250 Payment of withholding taxes
on stock-based compensation - (3 ) (472 ) (402 ) Excess tax
(expense) benefit from share-based payments - (10 ) (51 ) 733
Proceeds from issuance of common stock
128
135 128
135 Net cash used by financing
activities
(673 )
(762 ) (12,000
) (243,454 )
Change in cash and cash equivalents (5,717 ) (20,996 ) (13,753 )
5,122 Cash and cash equivalents, beginning of period
27,965 57,827
36,001 31,709
Cash and cash equivalents, end of period
$
22,248 $ 36,831
$ 22,248 $
36,831 Supplemental Cash Flow Data:
Interest paid $ 4,562 $ 5,557 $ 6,359 $ 8,941 Income taxes paid,
net $ - $ 1,965 $ 577 $ 3,942
Schedule 4 ALASKA COMMUNICATIONS SYSTEMS
GROUP, INC. ADJUSTED EBITDA (Unaudited, In
Thousands) Three Months Ended Six Months
Ended June 30, June 30,
2016
2015 2016
2015 Net cash
provided (used) by operating activities $ 8,705 $ (9,627 ) $ 18,937
$ (8,246 )
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities:
Depreciation and amortization 8,640 8,075 17,160 17,016 Gain on
wireless sale - (1,421 ) - (41,140 ) Loss on the disposal of
assets, net 128 697 152 1,754 Unrealized gain on ineffective hedge
- (275 ) - (542 ) Amortization of debt issuance costs and debt
discount 1,005 990 2,021 2,043 Amortization of ineffective hedge -
10 - 1,970 Loss on extinguishment of debt - - 336 2,628
Amortization of deferred capacity revenue (855 ) (694 ) (1,702 )
(1,469 ) Stock-based compensation 642 795 1,447 1,279 Deferred
income tax expense (benefit) 228 (136 ) 495 (3,394 ) Charge
(benefit) for uncollectible accounts 209 (204 ) 77 1,319 Cash
distribution from equity method investments - - - 3,056 Earnings
from equity method investments - - - (3,056 ) Other non-cash
expense, net 197 273 414 543 Income taxes payable (receivable) 8
(5,574 ) (722 ) 8,038 Changes in operating assets and liabilities
(1,780 )
(7,303 ) (1,077
) (9,648 ) Net income
(loss) $ 283 $ (4,860 ) $ 336 $ 11,357 Add (subtract): Interest
expense 3,852 4,257 7,721 11,676 Loss on extinguishment of debt - -
336 2,628 Interest income (6 ) (17 ) (11 ) (42 ) Depreciation and
amortization 8,640 8,075 17,160 17,016 Loss (gain) on disposal of
assets, net 128 (724 ) 152 (39,386 ) Earnings from equity method
investments - - - (3,056 ) AWN distributions received/receivable,
net - - - 765 Income tax (expense) benefit 236 (3,755 ) 299 9,319
Stock-based compensation 642 795 1,447 1,279 Long-term cash
incentives 194 308 405 642 Pension adjustment 20 - 41 - Net loss
attributable to noncontrolling interest 34 19 67 19 Wireless sale
transaction-related and wind down costs
-
6,962 -
11,308 Adjusted EBITDA
$ 14,023 $
11,060 $ 27,953
$ 23,525
Non-GAAP Measures:
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 recurring
performance and believes provides useful information to investors
regarding baseline operating results.
The Company has disclosed Adjusted EBITDA
as net income before interest, loss on extinguishment of debt,
depreciation and amortization, gain or loss on asset purchases or
disposals including the gain on the sale of our wireless
operations, earnings from equity method investments, taxes,
wireless transaction-related costs, loss attributable to
noncontrolling interest, stock-based compensation, pension
adjustments, and expenses under the company’s long term cash
incentive plan (“LTCI”). LTCI expenses are considered part of an
interim compensation structure to mitigate the dilutive impact of
additional share issuances for executive compensation.
Distributions from AWN are included in Adjusted EBITDA.
Schedule 5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. FREE CASH
FLOW (Unaudited, In Thousands) Three Months
Ended Six Months Ended June 30,
June 30, 2016
2015
2016 2015
Adjusted EBITDA
$ 14,023
$ 11,060 $
27,953 $ 23,525
Less: Capital expenditures excluding acquisition
price of North Slope fiber network (8,487 ) (9,233 ) (13,662 )
(15,133 ) Milestone billings for fiber build project for a carrier
customer
- -
- 2,500 Net
capital expenditures
(8,487 )
(9,233 )
(13,662 ) (12,633
) Purchase of North Slope fiber network
Acquisition price - (11,000 ) - (11,000 ) (Paid) less: 50% due in
2016 (5,500 ) 5,500 (5,500 ) 5,500 Proceeds on sale of fiber to
joint venture partner - 2,650 2,650 2,650 Less: other cash proceeds
- 400
- 400 Net North
Slope purchase
(5,500 )
(2,450 ) (2,850
) (2,450 )
Amortization of GCI/AWN capacity revenue (516 ) (514 ) (1,025 )
(1,129 ) Interest paid
(4,562 )
(5,557 )
(6,359 ) (8,941
) Free cash flow*
$
(5,042 ) $
(6,694 ) $
4,057 $ (1,628
) * Quarterly FCF fluctuates and should
not be viewed as an indicator of annual performance. While onetime
events, seasonality of capital spend and the timing of interest
payments may result in negative FCF in one or more quarters, we
reaffirm our guidance for annual FCF.
Non-GAAP Measures:
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 recurring
performance and believes provides useful information to investors
regarding baseline operating results.
Free cash flow ("FCF") is defined as
Adjusted EBITDA, less recurring operating cash requirements which
include capital expenditures, net of cash received for a fiber
build for a carrier customer, less cash interest expense,
significant non-cash revenue associated with our interconnection
agreement with AWN and GCI, and proceeds on sale of fiber to our
joint venture partner.
Alaska Communications continues to have net operating losses
and is not a significant taxpayer on ordinary income. Income taxes
paid in 2015 and 2016 are related to the Wireless retail sale and
are not included in free cash flow. See Schedule 3 for Net
cash provided (used) by operating activities, Net cash (used)
provided by investing activities, and Net cash used by financing
activities.
Schedule
6 ALASKA COMMUNICATIONS SYSTEMS GROUP,
INC. REVENUE GROWTH FROM CONTINUING OPERATIONS
(Unaudited, In Thousands) Three Months Ended
Six Months Ended June 30, June
30, 2016
2015 2016
2015 Business and wholesale revenue Business
broadband $ 14,392 $ 12,618 $ 28,572 $ 24,420 Business voice and
other 7,022 7,240 14,112 14,175 Managed IT services 818 810 1,899
1,539 Equipment sales and installations 2,097 1,305 3,684 2,853
Wholesale broadband 7,791 6,984 15,389 13,600 Wholesale voice and
other
1,743 2,216
3,758 4,566 Total business
and wholesale revenue
33,863
31,173 67,414
61,153 Growth in business and wholesale 8.6% 10.2%
Consumer revenue Broadband 6,234 6,621 12,376 13,259 Voice and
other
3,259 3,519
6,641 7,126 Total consumer
revenue
9,493 10,140
19,017 20,385 Total
business, wholesale, and consumer revenue
43,356 41,313
86,431 81,538 Growth in business,
wholesale and consumer revenue 4.9% 6.0% Growth in broadband
revenue 8.4% 9.9% Regulatory revenue Access 7,986 8,471
16,158 17,057 High cost support
4,920
4,920 10,001
9,841 Total regulatory revenue
12,906 13,391
26,159 26,898 Total
wireline revenue 56,262
54,704 112,590
108,436 Growth in wireline revenue 2.8%
3.8% Total wireless & AWN related revenue
- 961 -
13,015 Total revenue
$ 56,262
$ 55,665
$ 112,590
$ 121,451
Schedule 7 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING
STATISTICS (Unaudited) Three Months Ended
June 30, March 31, June 30,
2016 2016
2015 Voice: Business access lines
75,646 76,302 78,544 Consumer access lines 35,600 36,567 40,888
Voice ARPU business $ 23.79 $ 23.35 $ 23.53 Voice ARPU
consumer $ 28.61 $ 28.39 $ 26.73
Broadband: Business
connections (1) 15,347 15,189 15,781 Consumer connections 33,913
33,850 34,895 Broadband ARPU business (1) $ 314.31 $ 309.36
$ 267.97 Broadband ARPU consumer $ 60.91 $ 60.59 $ 61.28
Churn: Business voice 1.0% 1.0% 0.8% Consumer broadband 2.5%
2.2% 2.9% Consumer voice 1.5% 1.6% 1.8% (1)
How we calculate broadband connections has changed to exclude
certain internal use circuits. Historical amounts have been
restated to reflect appropriate comparisons period over period.
Schedule 8 ALASKA
COMMUNICATIONS SYSTEMS GROUP, INC. Long Term Debt and Net
Debt (Unaudited, In Thousands) June 30,
December 31, 2016
2015 2015 senior secured credit
facilities due 2018 $ 88,250 $ 89,750 Debt issuance costs - 2015
senior secured credit facilities due 2018 (2,584 ) (3,406 ) 6.25%
convertible notes due 2018 94,000 104,000 Debt discount - 6.25%
convertible notes due 2018 (3,240 ) (4,641 ) Debt issuance costs -
6.25% convertible notes due 2018 (685 ) (1,010 ) Capital leases and
other long-term obligations
3,760
3,996 Total debt 179,501 188,689 Less current
portion
(4,018 )
(3,671 ) Long-term obligations, net of
current portion
$ 175,483
$ 185,018 Total debt $
179,501 $ 188,689 Plus debt discounts and debt issuance costs
6,509 9,057
Gross debt 186,010 197,746 Cash and cash equivalents
(22,248 ) (36,001
) Net debt
$ 163,762
$ 161,745
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160804005458/en/
Alaska Communications Systems Group, Inc.Investor
Contact:Tiffany Dunn, 907-297-3103Manager, Board and Investor
Relationsinvestors@acsalaska.comorMedia Contact:Hannah Blankenship,
907-564-1326Associate Manager, Corporate
CommunicationsHannah.Blankenship@acsalaska.com
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