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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Alaska Communications Systems Group Inc | NASDAQ:ALSK | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 3.40 | 3.39 | 3.40 | 0 | 01:00:00 |
-Achieved 2014 Guidance with Adjusted EBITDA of $92.6 million and revenues of $314.9 million-
-Full year Total Service and Other Revenue increased 8.0 percent-
-Full year Total Broadband Revenue increased 10.4 percent-
-Recent sale of wireless operations will bring leverage ratio to one of lowest in industry-
Alaska Communications Systems Group, Inc. (NASDAQ:ALSK) today reported financial results for its fourth quarter and full year ended Dec. 31, 2014.
“Our 2014 results reflect stellar performance to a solid business plan. We have built and continue to expand our broadband and IT managed service franchise in a growing Alaska market. The sale of our wireless operations, which closed Feb. 2, 2015, was a bold strategic move. This transaction has eliminated the wireless overhang on our valuation, reduced our debt, and will bring our leverage ratio to one of the lowest in our industry.
“We enter 2015 with good business momentum, continuing our strong performance in broadband and IT managed services. Our margins will strengthen through the course of the year as we achieve synergies and remove costs associated with the wireless operations. We have turned a page in our journey and look forward to delivering significant value creation for our shareholders,” Anand Vadapalli, president and CEO of Alaska Communications, said.
Revenue Highlights: Year over Year Fourth Quarter
Earnings Highlights: Fourth Quarter and Year ended Dec. 31, 2014 compared to Dec. 31, 2013
Balance Sheet Highlights
Wayne Graham, Alaska Communications chief financial officer, said, “We accomplished our goal of positioning the company to achieve one of the lowest leverage ratios among operators in our industry by using a substantial portion of the proceeds from the sale of the wireless operations to pay down debt. We are performing to a plan to achieve our operational synergies from the sale of the wireless business, and our outlook for future performance is strong. Today, we are increasing our target run rate adjusted EBITDA exiting 2015 from $54 million provided at the time of the wireless sale to a range of $54 million to $56 million. We are poised to generate significant value for our shareholders.”
2015 Guidance:
Management’s focus is continued top line performance, steady deleveraging and achieving run rate adjusted EBITDA exiting 2015 through targeted synergies. Guidance for 2015 is as follows.
Investors are encouraged to listen to the earnings conference call and review page 16 of the earnings call presentation for a better understanding of guidance during this transition year.
Conference Call
The Company will host a conference call and live webcast on Thursday, March 5, 2015 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 1-888-554-1422 and enter pass code 563023. All other parties can access the call at 1-719-457-2663.
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 6, 2015 at 4:00 p.m. Eastern Time. To hear the replay, parties in the United States and Canada can call 1-888-203-1112 and enter pass code 1673988. All other parties can call 1-719-457-0820 and enter pass code 1673988.
About Alaska Communications
Alaska Communications (NASDAQ: ALSK) is a leading provider of advanced broadband and IT 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 such as Adjusted EBITDA, Adjusted EBITDA Margin and Free Cash Flow, 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, 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. Reconciliations of our non-GAAP measures to our nearest GAAP measures can be found 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 ACS.
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, Universal Service Fund changes adverse economic conditions, adverse conditions in the credit markets impacting the cost, including interest rates, and/or availability of financing, and the effects of competition in our markets, 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, 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 customers, unforeseen changes in public policies, and changes in accounting policies, which could result in an impact on earnings. 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, 2014 2013 2014 2013 Operating revenues: Operating revenues, non-affiliates $ 75,886 $ 74,489 $ 307,917 $ 345,611 Operating revenues, affiliates * 1,623 1,778 6,946 3,313 Total operating revenues 77,509 76,267 314,863 348,924 Operating expenses: Cost of services and sales, non-affiliates 32,580 32,712 123,854 138,124 Cost of services and sales, affiliates * 13,821 13,199 57,116 25,158 Selling, general & administrative 26,472 27,317 101,398 111,034 Depreciation and amortization 6,733 8,900 32,583 42,191 (Gain) loss on disposal of assets, net (486 ) 2,177 126 (207,755 ) Loss on impairment of goodwill 5,986 - 5,986 - Loss on impairment of equity investment - 1,267 - 1,267 Earnings from equity method investments (6,713 ) (9,995 ) (35,960 ) (18,056 ) Total operating expenses 78,393 75,577 285,103 91,963 Operating (loss) income (884 ) 690 29,760 256,961 Other income and (expense): Interest expense (8,266 ) (9,820 ) (34,410 ) (39,790 ) Loss on extinguishment of debt - - - (2,370 ) Interest income 41 16 83 53 Other - - - (13 ) Total other income and (expense) (8,225 ) (9,804 )(34,327 ) (42,120 ) Income (loss) before income tax (expense) benefit (9,109 ) (9,114 ) (4,567 ) 214,841 Income tax (expense) benefit 3,751 4,426 1,787 (56,370 ) Net (loss) income $ (5,358 ) $ (4,688 ) $ (2,780 ) $ 158,471 Net (loss) income per share: Net (loss) income applicable to common shares $ (5,358 ) $ (4,688 ) $ (2,780 ) $ 158,471 Tax-effected expense attributable to convertible notes - - - 5,813 Net (loss) income assuming dilution $ (5,358 ) $ (4,688 ) $ (2,780 ) $ 164,284 Basic $ (0.11 ) $ (0.10 ) $ (0.06 ) $ 3.37 Diluted $ (0.11 ) $ (0.10 ) $ (0.06 ) $ 2.78 Basic and Diluted $ (0.11 ) $ (0.10 ) $ (0.06 ) $ 3.37 Weighted average shares outstanding: Basic 49,540 48,577 49,334 47,092 Diluted 49,540 48,577 49,334 59,107 * Affiliate balances are related to activity with our equity method investees TekMate and AWN. The remaining interest in TekMate was purchased on January 31, 2014 at which time it became a wholly owned subsidiary.
Schedule 2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands Except Per Share Amounts) December 31, December 31, Assets 2014 2013 Current assets: Cash and cash equivalents $ 31,709 $ 43,039 Restricted cash 467 467 Accounts receivable-trade, non-affiliates, net 30,900 34,066 Materials and supplies 4,321 10,131 Prepayments and other current assets 6,575 7,300 Deferred income taxes 104,245 7,144 Assets held-for-sale 9,565 - Total current assets 187,782 102,147 Property, plant and equipment 1,333,134 1,344,949 Less: accumulated depreciation and amortization (976,401 ) (992,936 ) Property, plant and equipment, net 356,733 352,013 Goodwill - 4,650 Debt issuance costs 4,469 6,929 Deferred income taxes - 14,107 Equity method investments 252,067 266,972 Non-current assets held-for-sale 14,664 - Other assets 301 502 Total assets $ 816,016 $ 747,320 Liabilities and Stockholders' Equity (Deficit) Current liabilities: Current portion of long-term obligations $ 15,521 $ 14,256 Accounts payable, accrued and other current liabilities, non-affiliates 54,373 55,475 Accounts payable, accrued and other current liabilities, affiliates, net * 4,853 14,309 Advance billings and customer deposits 4,490 9,104 Liabilities held-for-sale 18,728 - Total current liabilities 97,965 93,144 Long-term obligations, net of current portion 418,447 442,001 Deferred income taxes 81,267 - Other long-term liabilities 24,370 16,947 Non-current liabilities held-for-sale 2,107 - Deferred AWN capacity revenue, net of current portion 56,734 59,965 Total liabilities 680,890 612,057 Commitments and contingencies Stockholders' equity (deficit): Common stock, $.01 par value; 145,000 authorized 497 487 Additional paid in capital 154,368 152,193 Accumulated deficit (14,588 ) (11,808 ) Accumulated other comprehensive loss (5,151 ) (5,609 ) Total stockholders' equity 135,126 135,263 Total liabilities and stockholders' equity $ 816,016 $ 747,320
* Affiliate balances are related to activity with our equity method investees TekMate and AWN. The remaining interest in TekMate was purchased on January 31, 2014 at which time it became a wholly owned subsidiary.
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, 2014 2013 2014 2013 Cash Flows from Operating Activities: Net (loss) income $ (5,358 ) $ (4,688 ) $ (2,780 ) $ 158,471 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Depreciation and amortization 6,733 8,900 32,583 42,191 Gain on sale/contribution of asset to AWN - - - (210,873 ) (Gain) loss on the disposal of assets, net (486 ) 2,177 126 3,118 Loss on impairment of goodwill 5,986 - 5,986 - Loss on the impairment of equity investment - 1,267 - 1,267 Gain on ineffective hedge adjustment (273 ) - (273 ) (785 ) Amortization of debt issuance costs and debt discount 1,178 1,178 5,104 6,932 Amortization of ineffective hedge 337 359 1,613 2,307 Amortization of deferred AWN capacity revenue (814 ) (774 ) (3,151 ) (1,512 ) Stock-based compensation 634 592 2,511 2,860 Deferred income tax expense (benefit) (3,755 ) (3,828 ) (2,047 ) 56,370 Provision for uncollectible accounts 387 1,042 3,329 1,847 Earnings from equity method investments (6,713 ) (9,995 ) (35,960 ) (18,056 ) Cash distribution from equity method investments 6,713 12,455 35,960 17,844 Other non-cash (income) expense, net (82 ) 67 (466 ) 283 Changes in operating assets and liabilities 16,168 (653 ) 18,110 5,443 Net cash provided by operating activities 20,655 8,099 60,645 67,707 Cash Flows from Investing Activities: Capital expenditures (12,507 ) (20,424 ) (46,423 ) (47,738 ) Capitalized interest (728 ) (635 ) (2,810 ) (1,926 ) Change in unsettled capital expenditures (10,080 ) 4,768 (11,380 ) 1,492 Proceeds on sale of assets - - 136 4,747 Proceeds on sale/contribution of asset to AWN - - - 100,000 Return of capital from equity investment 5,787 - 14,073 - TekMate acquisition, net of cash received - - (826 ) - Net change in short-term investments - - - 2,037 Change in unsettled acquisition costs - - - (3,345 ) Net change in restricted accounts - 15 - 3,408 Net cash (used) provided by investing activities (17,528 ) (16,276 ) (47,230 ) 58,675 Cash Flows from Financing Activities: Repayments of long-term debt (397 ) (2,183 ) (24,419 ) (99,565 ) Debt issuance costs - - - (206 ) Payment of withholding taxes on stock-based compensation (7 ) (6 ) (593 ) (638 ) Proceeds from issuance of common stock 135 110 267 227 Net cash used by financing activities (269 ) (2,079 ) (24,745 ) (100,182 ) Change in cash and cash equivalents 2,858 (10,256 ) (11,330 ) 26,200 Cash and cash equivalents, beginning of period 28,851 53,295 43,039 16,839 Cash and cash equivalents, end of period $ 31,709 $ 43,039 $ 31,709 $ 43,039 Supplemental Cash Flow Data: Interest paid $ 9,526 $ 9,986 $ 31,562 $ 35,187 Cash paid on extinguishment of hedging instrument $ - $ - $ - $ 4,073 Income tax paid $ 40 $ 6 $ 260 $ 6 Supplemental Non-cash Transactions: Property acquired under capital leases $ 1,487 $ 188 $ 1,877 $ 171 Additions to ARO asset $ 63 $ 49 $ 369 $ 229 Exchange of debt with common stock $ - $ - $ - $ 6,000 Non-cash acquisition purchase price, net of cash received $ - $ - $ 956 $ -
Schedule 4 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ADJUSTED EBITDA (Unaudited, In Thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2014 2013 2014 2013 Net (loss) income $ (5,358 ) $ (4,688 ) $ (2,780 ) $ 158,471 Add (subtract): Interest expense 8,266 9,820 34,410 39,790 Loss on extinguishment of debt - - - 2,370 Interest income (41 ) (16 ) (83 ) (53 ) Depreciation and amortization 6,733 8,900 32,583 42,191 Loss on the impairment of equity investment - 1,267 - 1,267 Loss on impairment of goodwill 5,986 - 5,986 - Loss on sale of short-term investments - - - 13 (Gain) loss on disposal of assets, net (486 ) 2,177 126 3,118 (Earnings) loss from equity method investment in TekMate - (96 ) (12 ) (93 ) Earnings from equity method investment in AWN (6,713 ) (9,899 ) (35,948 ) (17,963 ) Gain on sale/contribution of asset to AWN - - - (210,873 ) AWN distributions received 12,500 12,455 50,000 22,011 AWN distributions received for the prior period (4,167 ) (4,167 ) (4,167 ) (4,167 ) AWN distributions receivable within 12 days 4,167 4,167 4,167 4,167 Income tax (benefit) expense (3,751 ) (4,426 ) (1,787 ) 56,370 Stock-based compensation 634 592 2,511 2,860 Long-term cash incentives 470 149 2,042 631 Earthquake related expense - - 1,228 - Formation of AWN and wireless sale transaction-related costs 4,057 408 4,297 6,382 Adjusted EBITDA $ 22,297 $ 16,643 $ 92,573 $ 106,492 Revenue 77,509 76,267 314,863 348,924 CETC Revenue (4,984 ) (4,925 ) (19,565 ) (21,018 ) Net Revenue $ 72,525 $ 71,342 $ 295,298 $ 327,906 Adjusted EBITDA Margin 30.7 % 23.3 % 31.3 % 32.5 %
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, loss on the impairment of equity investments or other assets, loss on sale of short-term investments, gain or loss on asset purchases or disposals, earnings on equity method investments, provisions for taxes, transaction-related costs, stock-based compensation, and expenses under the company’s long term cash incentive plan (“LTCI”) including adjustments to TekMate purchase price based upon achieving earn out targets. LTCI expenses are considered part of an interim compensation structure to mitigate the dilutive impact of additional share issuances for executive compensation. Transaction related costs include $1,069 of inventory write downs associated with the AWN formation and sale transactions. Distributions from AWN are included in Adjusted EBITDA. Additionally, in July 2014 an undersea cable serving Juneau, Alaska was impacted by a service disruption associated with an earthquake. The costs associated with restoration and repair of this facility is excluded from Adjusted EBITDA.
Due to the AWN structure, ACS receives certain high cost revenues ("CETC") which are reported in operating revenue, non-affiliates, and remits an equal amount to AWN as a component of our consideration for wholesale wireless services, which is reported in Cost of services and sales, affiliated. From a financial reporting perspective CETC grosses up our revenue and expense and has no impact on Adjusted EBITDA, but impacts our core margins. We therefore report Adjusted EBITDA Margin to exclude this impact.
Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. FREE CASH FLOW (Unaudited, In Thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2014 2013 2014 2013 Adjusted EBITDA $ 22,297 $ 16,643 $ 92,573 $ 106,492 Less: Capital spending Incurred capital expenditures (12,507 ) (20,424 ) (46,423 ) (47,738 ) Milestone billings for fiber build project for a carrier customer 3,960 - 5,960 - AWN transaction-related capital costs, net change - - - (41 ) Net capital spending (8,547 ) (20,424 ) (40,463 ) (47,779 ) Amortization of AWN capacity revenue (814 ) (774 ) (3,151 ) (1,512 ) Earthquake related expense - - (1,228 ) - Cash interest expense (9,526 ) (9,986 ) (31,562 ) (35,187 ) Free cash flow $ 3,410 $ (14,541 ) $ 16,169 $ 22,014
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 capital expenditures that create an obligation to pay (“incurred capital expenditures”), plus milestone billings for a fiber build project for a carrier customer, less AWN transaction-related capital costs, less amortization of AWN capacity revenue (which is a non cash revenue item), less earthquake related costs, less cash interest expense. Note that incurred capital spending includes the costs associated with a two year fiber build project with a strategic customer however we are adding back the cash we receive from the customer for the funding of that project to FCF. Accordingly, our capital spending will be elevated because of this project, but the project will be accretive to FCF.
Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. REVENUE GROWTH (Unaudited, In Thousands) Three Months Ended Twelve Months Ended December 31, December 31, Service revenue: 2014 2013 2014 2013 Business and wholesale customers Voice $ 5,551 $ 5,644 $ 22,499 $ 22,947 Broadband 11,125 10,518 43,783 40,027 IT Services 952 - 3,492 - Other 1,848 1,690 7,104 7,659 Wholesale 8,320 7,728 33,043 30,047 Business and wholesale service revenue 27,796 25,580 109,921 100,680 Consumer customers Voice 3,533 3,999 14,932 16,818 Broadband 6,400 5,665 24,841 22,108 Other 372 464 1,563 1,739 Consumer service revenue 10,305 10,128 41,336 40,665 Total service revenue 38,101 35,708 151,257 141,345 Growth in service revenue 6.7 % 7.0 % Growth in broadband service revenue 8.3 % 10.4 % Other revenue: Equipment sales 1,900 632 5,321 2,083 Access 8,591 8,977 35,323 37,033 High cost support 4,921 5,218 23,192 18,776 Total service and other revenue 53,513 50,535 215,093 199,237 Growth in service and other revenue 5.9 % 8.0 % Growth excluding equipment sales 3.4 % 6.4 % Wireless revenue: Business and consumer service revenue 14,906 17,590 65,504 71,197 Equipment sales 2,000 1,062 6,178 4,847 Other 1,292 1,458 5,302 5,049 AWN related: Foreign roaming - - - 40,029 Wireless backhaul - (77 ) 70 6,035 CETC 4,984 4,925 19,565 21,018 Amortization of deferred AWN capacity revenue 814 774 3,151 1,512 Total AWN related 5,798 5,622 22,786 68,594 Total wireless & AWN related revenue 23,996 25,732 99,770 149,687 Total revenue $ 77,509 $ 76,267 $ 314,863 $ 348,924Schedule 7 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) Three Months Ended December 31, September 30, December 31, 2014 2014 2013 Voice: Consumer access lines 43,773 45,177 49,297 Business access lines 79,168 79,563 79,816 Voice ARPU consumer $ 26.48 $ 26.73 $ 26.65 Voice ARPU business $ 23.31 $ 23.65 $ 23.53 Broadband: Consumer connections 37,412 38,257 38,677 Business connections (2) 19,234 19,201 18,739 ARPU consumer $ 55.91 $ 54.18 $ 48.59 ARPU business (1) (2) $ 192.64 $ 190.60 $ 186.92 Wireless: Postpaid connections 74,839 79,963 85,982 Lifeline connections 7,232 7,637 7,145 Prepaid connections 21,267 21,463 15,721 Total 103,338 109,063 108,848 (1) Business broadband ARPU was restated to reflect the movement of IT services revenue into a separate category. (2)
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 (Unaudited, In Thousands) December 31, December 31, 2014 2013 2010 senior credit facility term loan due 2016 $ 322,700 $ 345,900 Debt discount - 2010 senior credit facility term loan due 2016 (1,014 ) (1,687 ) 6.25% convertible notes due 2018 114,000 114,000 Debt discount - 6.25% convertible notes due 2018 (7,242 ) (9,213 ) Capital leases and other long-term obligations 5,524 7,257 433,968 456,257 Less current portion (15,521 ) (14,256 ) Long-term obligations, net of current portion $ 418,447 $ 442,001 Maturities 2016 $ 15,808 2017 309,078 2018 815 2019 114,618 2020 392 Thereafter 3,907 $ 444,618
Our debt balances exclude $2,394 associated with the capital leases held-for-sale in conjunction with the sale of our wireless operations. Our maturity schedule includes these balances.
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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