-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KlJXKSX/iZZiuWGmORIzJHEibuacrQYJVCvdnusnOMubpDUYX5ijoCIUQm0lo6bs fNkErz3ZaSN+TPB9pJEFdg== 0001157523-06-010427.txt : 20061026 0001157523-06-010427.hdr.sgml : 20061026 20061026162057 ACCESSION NUMBER: 0001157523-06-010427 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20061026 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20061026 DATE AS OF CHANGE: 20061026 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALASKA COMMUNICATIONS SYSTEMS GROUP INC CENTRAL INDEX KEY: 0001089511 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE COMMUNICATIONS (NO RADIO TELEPHONE) [4813] IRS NUMBER: 522126573 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-28167 FILM NUMBER: 061166159 BUSINESS ADDRESS: STREET 1: 600 TELEPHONE AVENUE STREET 2: - CITY: ANCHORAGE STATE: AK ZIP: 99503 BUSINESS PHONE: 9072973000 MAIL ADDRESS: STREET 1: 600 TELEPHONE AVENUE STREET 2: - CITY: ANCHORAGE STATE: AK ZIP: 99503 FORMER COMPANY: FORMER CONFORMED NAME: ALEC HOLDINGS INC DATE OF NAME CHANGE: 19990624 8-K 1 a5259128.txt ALASKA COMMUNICATIONS SYSTEMS GROUP, 8-K 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): October 26, 2006 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. ---------------------------------------- (Exact name of registrant as specified in its charter) Delaware 000-28167 52-2126573 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 600 Telephone Ave, Anchorage, Alaska 99503 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 907 - 297 - 3000 ------------------------------ - -------------------------------------------------------------------------------- (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 October 26, 2006, Alaska Communications Systems Group, Inc. reported its financial results for the quarter ended September 30, 2006. The press release is attached hereto as Exhibit 99.1. The information in this Form 8-K shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that Section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, regardless of any general incorporation language in such filing. Item 9.01 Financial Statements and Exhibits Exhibit No. Description - ----------- ----------- Exhibit 99.1 Alaska Communications Systems Group, Inc. Press Release dated October 26, 2006 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: October 26, 2006 Alaska Communications Systems Group, Inc. /s/ David Wilson ---------------------------- David Wilson, Senior Vice President and Chief Financial Officer EX-99.1 2 a5259128ex99-1.txt ALASKA COMMUNICATIONS SYSTEMS GROUP, EXHIBIT 99.1 Exhibit 99.1 Alaska Communications Systems Reports Third Quarter 2006 Results - Revenue Increased 5.5% to $90.4 Million Compared to Third Quarter 2005 - - Wireless Revenue Rose 29.6% to $31.4 Million - - Cash Provided by Operating Activities Reached $26.4 Million and Grew 56.0% - - EBITDA of $32.2 Million Grew 10.9% over Third Quarter 2005 - - Increased 2006 Annual Revenue and EBITDA Guidance - ANCHORAGE, Alaska--(BUSINESS WIRE)--Oct. 26, 2006--Alaska Communications Systems Group, Inc. ("ACS") (NASDAQ:ALSK) today reported financial results for its third quarter and nine months ended September 30, 2006. Liane Pelletier, ACS president and chief executive officer, stated, "Fundamental strength in our retail operations and seasonal strength from visitors to Alaska combined to deliver another great quarter. We continue to execute well against our focused strategies -- adding wireless subscribers and stabilizing local retail lines. Our track record of robust top line growth and efficiencies from process improvement continues, resulting in increased cash from operations. The company's vibrant yet disciplined operating model continues to produce best-in-class results: quarterly revenue was up over five percent and EBITDA was up over 10 percent from the year ago quarter." "We are enthusiastic about Alaska's future prospects for growth, and we intend to capitalize on them. The ACS team is evaluating certain incremental investment opportunities in the State that would help maximize long-term shareholder value. These investments are not expected to affect ACS' existing dividend or the Board's current target payout ratio averaging 70 percent to 75 percent over the long term, nor will they substantially alter ACS' credit profile," commented Pelletier. Financial Highlights: Third Quarter 2006 Compared to Third Quarter 2005 -- Revenues were $90.4 million, a 5.5 percent increase over third quarter 2005 revenues of $85.7 million. -- Operating income more than doubled to $16.0 million compared to the third quarter 2005 operating income of $7.2 million. -- The company posted net income of $8.7 million, or $0.21 per share. The net loss for the third quarter 2005 was $7.9 million, or $0.19 per share. -- Net cash provided by operating activities increased to $26.4 million, or 56.0 percent, compared to $16.9 million of net cash in the same period a year ago. -- EBITDA was $32.2 million, an increase of 10.9 percent, compared to $29.0 million for the year ago period. David Wilson, ACS senior vice president and chief financial officer, stated, "Our ability to successfully execute against our organic growth opportunities once again drove exceptional financial results in the quarter. Cash generation was particularly strong with net cash provided by operating activities increasing to $26.4 million from $16.9 million in the prior year quarter, which included a $4.3 million debt redemption charge. After giving effect to this debt redemption charge, cash from operations jumped an impressive 25 percent versus the prior year." "We are well positioned from a liquidity standpoint, exiting the quarter with $39.9 million in cash, restricted cash and short-term investments. I'm particularly proud of the fact that we have been able to grow our cash balances by $14.8 million during our strong summer quarters even as we continue to invest heavily in our pre-funded capex program," added Wilson. "We are committed to a high level of network quality and providing the highest level of service to both our customers and others who roam on our network. Wireless roaming revenue from the lower 48 carriers was a key driver of our strong performance, driven in large part by cruise ship visitors exceeding industry forecasts. To assure we maintain superior network performance, we are allocating $5 million of excess cash generated in 2006 to augment wireless capacity in the tourist corridors, ahead of the 2007 visitors' season," concluded Wilson. Metric Highlights: Third Quarter 2006 Compared to Second Quarter 2006 -- Increased the total number of retail customer relationships across all product lines by approximately 6,600, or 1.5 percent, to more than 439,300. -- Increased wireless post-paid subscribers by 4.6 percent, or almost 5,300. Inclusive of prepaid and wholesale users, the company added nearly 5,700 wireless subscribers, bringing the total number to almost 129,600. -- Recorded average wireless monthly post-paid churn of 1.7 percent compared to 1.6 percent in the prior quarter. Overall average wireless monthly churn was 1.9 percent compared to 1.7 percent. -- Recorded wireless average revenue per user (ARPU) of $60.77, up from $56.51, inclusive of CETC revenue of $9.82 and $9.32, respectively. -- ACS retail subscribers on the CDMA network have increased to 90 percent, up from 85 percent at the second quarter 2006. -- The ACS CDMA wireless network now covers 80 percent of the Alaska population. -- Increased DSL by 4.4 percent, or approximately 1,800 lines, to almost 42,000 lines. -- Increased long distance subscribers by over 1,400 to approximately 62,000 customers. -- Recorded approximately 196,000 local retail access lines, reflecting a retail access line decrease of 1,034 lines, inclusive of the turn up of 138 internal use lines. Pro forma for the turn-up of internal use lines, retail access decline was 0.6 percent. -- Recorded approximately 259,000 total local access lines. Total access lines decreased by 3,600. Nine Months Financial Review For the nine months ended September 30, 2006, total revenues were $258.1 million, which represented a 5.6 percent increase over revenues of $244.3 million for the same period last year. Net income for the nine months ended September 30, 2006, was $13.9 million, or $0.33 per share, compared to a net loss of $36.7 million, or $0.92 per share, in the same period in 2005. Net cash provided by operating activities for the nine months of 2006 was $64.2 million, as compared to $32.0 million in the same period in 2005. EBITDA for the nine months ended September 30, 2006, was $90.6 million, an increase of 5.7 percent from $85.6 million in the same period last year. 2006 Business Outlook For the full-year 2006, ACS is increasing the mid point of revenue guidance. Revenues are now expected to be in the range of $340 million to $345 million, versus prior guidance of $335 million to $345 million. EBITDA, which excludes stock based compensation, is expected to be in the range of $117 million to $119 million, increasing the previous guidance of $112 million to $116 million. For the year 2006, net cash interest expense is expected to be approximately $28 million. ACS has reaffirmed 2006 capital expenditure guidance to be approximately $58 million, comprised of maintenance capital expenditures of approximately $37 million and pre-funded growth capital expenditures, DSL footprint expansion and process improvement initiatives of approximately $21 million. Conference Call The company will host a conference call and live webcast today at 5:00 p.m. Eastern Time to discuss the third quarter results. For parties in the United States and Canada, call 800-240-4186 to access the earnings call. International parties can access the call at 303-205-0066. Additionally, ACS will offer a live webcast of the conference call, accessible from the "Investor Relations" section of the company's website (www.alsk.com). The webcast will be archived on the ACS website. A telephonic replay of the conference call will also be available two hours after the call and will run until Monday, October 30, 2006, at midnight ET. To hear the replay, parties in the United States and Canada should call 800-405-2236 and enter pass code 11073459. International parties should call 303-590-3000 and enter pass code 11073459. About Alaska Communications Systems ACS is the leading integrated communications provider in Alaska, offering local telephone service, wireless, long distance, data, and Internet services to business and residential customers throughout Alaska. More information can be found on the company's website at www.acsalaska.com or at its investor site at www.alsk.com. Forward-Looking EBITDA Guidance This press release includes information related to management's estimate of EBITDA for the year ending December 31, 2006. EBITDA, as defined by the company, may not be similar to EBITDA measures used by other companies and is not a measurement under generally accepted accounting principles (GAAP). Management believes that EBITDA provides useful information to investors about the company's performance because it eliminates the effects of period-to-period changes in costs associated with capital investments, interest and stock-based compensation expense that are not directly attributable to the underlying performance of the company's business operations. Management believes the most directly comparable GAAP measure would be "Net cash provided by operating activities." Due to the difficulty in forecasting and quantifying the amounts that would be required to be included in this comparable GAAP measure, the company is not providing an estimate of year-end net cash provided by operating activities at this time. Forward-Looking Statements This press release includes certain "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's beliefs as well as on a number of assumptions concerning future events made using information currently available to management. Readers are cautioned not to put undue reliance on such forward-looking statements, which are not a guarantee of performance and are subject to a number of uncertainties and other factors, many of which are outside ACS' control. Such factors are, without limitation, fluctuations in wireless revenue, including roaming revenue; changes in company's relationships with its roaming partners; increased competition, including wireline facilities-based competition; changes in capital expenditures or other factors affecting the company's ability to generate sufficient earnings and cash flows to continue to make dividend payments to its stockholders; changes in revenue from Universal Service Funds; regulatory limitations on the company's ability to change its pricing or bundle its communications services or other public policy changes; the continued availability of financing necessary to support future business; changes in accounting policies or practices; changes in the demand for the company's products and services, retail and wholesale; rapid technological developments in the telecommunications industry; changes in interest rates or other general national, regional or local economic conditions, including changes in tourism in Alaska. For further information regarding risks and uncertainties associated with ACS' business, please refer to the company's SEC filings, including, but not limited to, the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our annual report on Form 10-K 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 http://www.alsk.com. All information in this release is as of October 26, 2006. The company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. Schedule 1 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in Thousands, Except per Share Amounts) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2006 2005 2006 2005 -------- --------- --------- --------- Operating revenues: Local telephone $47,862 $ 51,481 $143,623 $153,387 Wireless 31,441 24,260 82,895 62,670 Internet 6,544 5,613 18,619 16,182 Interexchange 4,529 4,347 12,952 12,095 -------- --------- --------- --------- Total operating revenues 90,376 85,701 258,089 244,334 Operating expenses: Local telephone 32,368 32,857 95,996 94,508 Wireless 16,667 14,196 45,412 36,216 Internet 7,050 5,744 21,638 16,584 Interexchange 3,729 4,720 9,155 12,631 Depreciation and amortization 14,538 20,955 47,669 62,060 Loss (gain) on disposal of assets, net - - 1,105 (68) -------- --------- --------- --------- Total operating expenses 74,352 78,472 220,975 221,931 Operating income 16,024 7,229 37,114 22,403 Other income and expense: Interest expense (7,722) (8,578) (23,339) (27,209) Loss on extinguishment of debt - (6,888) (9,650) (33,092) Interest income 492 418 1,286 1,324 Other (74) (44) 8,443 (131) -------- --------- --------- --------- Total other income (expense) (7,304) (15,092) (23,260) (59,108) -------- --------- --------- --------- Net profit (loss) $ 8,720 $ (7,863) $ 13,854 $(36,705) ======== ========= ========= ========= Profit (loss) per share: Basic $ 0.21 $ (0.19) $ 0.33 $ (0.92) ======== ========= ========= ========= Diluted $ 0.20 $ (0.19) $ 0.32 $ (0.92) ======== ========= ========= ========= Weighted average shares outstanding: Basic 42,143 41,468 41,976 39,715 -------- --------- --------- --------- Diluted 43,541 41,468 43,273 39,715 -------- --------- --------- --------- Schedule 2 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONSOLIDATED BALANCE SHEETS (Unaudited, In Thousands Except Per Share Amounts) September 30, December 31, Assets 2006 2005 ------------- ------------ Current assets: Cash and cash equivalents $ 38,242 $ 28,877 Restricted cash 1,700 4,415 Short-term investments - 10,525 Accounts receivable-trade, net of allowance of $6,821 and $6,206 40,679 41,080 Materials and supplies 9,534 7,885 Prepayments and other current assets 3,941 3,445 ------------- ------------ Total current assets 94,096 96,227 Property, plant and equipment 1,145,850 1,116,780 Less: accumulated depreciation and amortization 755,027 718,750 ------------- ------------ Property, plant and equipment, net 390,823 398,030 Goodwill 38,403 38,403 Intangible Assets 21,604 21,688 Debt issuance costs 9,916 11,733 Deferred charges and other assets 10,765 10,332 ------------- ------------ Total assets $ 565,607 $ 576,413 ============= ============ Liabilities and Stockholders' Equity (Deficit) Current liabilities: Current portion of long-term obligations $ 1,024 $ 683 Accounts payable-affiliate 3,097 2,844 Accounts payable, accrued and other current liabilities 53,506 54,920 Advance billings and customer deposits 10,331 9,712 ------------- ------------ Total current liabilities 67,958 68,159 Long-term obligations, net of current portion 437,326 444,895 Other deferred credits and long-term liabilities 85,550 82,223 ------------- ------------ Total liabilities 590,834 595,277 ------------- ------------ Stockholders' equity (deficit): Common stock, $.01 par value; 145,000 shares authorized, 46,743 and 46,230 shares issued and 42,194 and 41,681 shares outstanding, respectively 467 462 Treasury stock, 4,549 shares at cost (18,443) (18,443) Paid in capital in excess of par value 312,395 333,522 Accumulated deficit (320,873) (334,727) Accumulated other comprehensive income 1,227 322 ------------- ------------ Total stockholders' equity (deficit) (25,227) (18,864) ------------- ------------ Commitments and contingencies Total liabilities and stockholders' equity (deficit) $ 565,607 $ 576,413 ============= ============ Schedule 3 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited, in Thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------- -------------------- 2006 2005 2006 2005 --------- --------- --------- ---------- Cash Flows from Operating Activities: Net profit (loss) $ 8,720 $ (7,863) $ 13,854 $ (36,705) Adjustments to reconcile net income to net cash provided (used) by operating activities: Depreciation and amortization 14,538 20,955 47,669 62,060 Loss (gain) on disposal of assets, net - - 1,105 (68) Gain on sale of long-term investments - - (6,685) - Amortization of debt issuance costs and original issue discount 483 3,031 4,696 17,508 Stock based compensation 1,668 844 4,891 1,383 Other deferred credits 4,109 1,932 575 (1,484) Changes in components of working capital: Accounts receivable and other current assets (1,203) (1,685) (1,747) (5,573) Accounts payable and other current liabilities (1,424) (580) 348 (8,483) Deferred charges and other assets (513) 271 (469) 3,384 --------- --------- --------- ---------- Net cash provided by operating activities $ 26,378 $ 16,905 $ 64,237 $ 32,022 Cash Flows from Investing Activities: Construction and capital expenditures (13,484) (12,873) (40,421) (42,838) Purchase of short-term investments (19,675) (14,100) (39,600) (81,845) Proceeds from the sale of short-term investments 19,675 14,720 50,125 97,720 Sale of long-term investments - - 7,663 - Placement of funds in restricted account - - - (300) Release of funds from escrow 1,750 55 2,715 500 --------- --------- --------- ---------- Net cash used by investing activities (11,734) (12,198) (19,518) (26,763) Cash Flows from Financing Activities: Payments of long-term debt (195) (41,503) (61,658) (446,833) Proceeds from the issuance of long-term debt - 40,000 52,900 375,000 Debt issuance costs - (670) (1,349) (11,307) Payment of dividend on common stock (9,047) (8,285) (26,403) (22,087) Issuance of common stock 717 606 1,156 88,812 Stock issuance costs - - - (7,817) --------- --------- --------- ---------- Net cash used by financing activities (8,525) (9,852) (35,354) (24,232) Increase/(decrease) in cash and cash equivalents 6,119 (5,145) 9,365 (18,973) Cash and cash equivalents, beginning of period 32,123 36,832 28,877 50,660 --------- --------- --------- ---------- Cash and cash equivalents, end of period $ 38,242 $ 31,687 $ 38,242 $ 31,687 ========= ========= ========= ========== Supplemental Cash Flow Data: Interest paid $ 7,302 $ 11,463 $ 24,255 $ 33,002 (Increase)/decrease in accounts payable for construction and capital expenditures (4,623) - 1,656 - Supplemental Noncash Transactions: Interest rate swap $ 9,844 $ 5,106 $ (905) $ (2,931) Dividend declared, but not paid (17) (14) (9,077) (8,317) Stock funding of pension plan - - - 599 Schedule 4 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. SCHEDULE OF LOCAL TELEPHONE REVENUES (Unaudited, in Thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------ ------------------- 2006 2005 2006 2005 --------- -------- --------- --------- Local telephone revenue: Local network service $ 20,371 $21,945 $ 60,427 $ 65,675 Network access 22,086 23,395 68,205 69,543 Deregulated and other 5,405 6,141 14,991 18,169 --------- -------- --------- --------- Total local telephone revenue $ 47,862 $51,481 $143,623 $153,387 ========= ======== ========= ========= Schedule 5 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. SCHEDULE OF EBITDA CALCULATION (Unaudited, in Thousands) Three Months Ended Nine Months Ended September 30, September 30, ------------------- ------------------- 2006 2005 2006 2005 --------- --------- --------- --------- Net cash provided by operating activities $ 26,378 $ 16,905 $ 64,237 $ 32,022 Adjustments to reconcile net income to net cash (provided) used by operating activities: Depreciation and amortization (14,538) (20,955) (47,669) (62,060) Gain (loss) on disposal of assets, net - - (1,105) 68 Gain on sale of long-term investments - - 6,685 - Amortization of debt issuance costs and original issue discount (483) (3,031) (4,696) (17,508) Stock based compensation (1,668) (844) (4,891) (1,383) Other deferred credits (4,109) (1,932) (575) 1,484 Changes in components of working capital: Accounts receivable and other current assets 1,203 1,685 1,747 5,573 Accounts payable and other current liabilities 1,424 580 (348) 8,483 Deferred charges and other assets 513 (271) 469 (3,384) --------- --------- --------- --------- Net profit (loss) $ 8,720 $ (7,863) $ 13,854 $(36,705) Add (subtract): Interest expense 7,722 8,578 23,339 27,209 Loss on extinguishment of debt - 6,888 9,650 33,092 Interest income (492) (418) (1,286) (1,324) Depreciation and amortization 14,538 20,955 47,669 62,060 (Gain) loss on disposal of assets, net - - 1,105 (68) Gain on Crest asset purchase - - (1,979) - Gain on sale of long-term investment - - (6,685) - Stock based compensation 1,668 844 4,891 1,383 --------- --------- --------- --------- EBITDA $ 32,156 $ 28,984 $ 90,558 $ 85,647 ========= ========= ========= ========= 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 of intangibles and stock based compensation expense (EBITDA) because the Company believes it is an important indicator as it provides information about our ability to service debt, pay dividends and fund capital expenditures. EBITDA is not a GAAP measure and should not be considered a substitute for net cash provided by operating activities and other measures of financial performance recorded in accordance with GAAP. Schedule 6 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Allocation of Stock Based Compensation between Segments (Unaudited, in Thousands) Three Months Ended September 30, 2006 ---------------------------------------- As reported on Stock Based Schedule 1 Compensation Adjusted --------------- ------------- ---------- Operating expenses: Local telephone 32,368 (1,424) 30,944 Wireless 16,667 (166) 16,501 Internet 7,050 (66) 6,984 Interexchange 3,729 (12) 3,717 Depreciation and amortization 14,538 - 14,538 --------------- ------------- ---------- Total operating expenses $ 74,352 $ (1,668) $ 72,684 =============== ============= ========== Nine Months Ended September 30, 2006 ---------------------------------------- As reported on Stock Based Schedule 1 Compensation Adjusted --------------- ------------- ---------- Operating expenses: Local telephone 95,996 (4,198) 91,798 Wireless 45,412 (474) 44,938 Internet 21,638 (188) 21,450 Interexchange 9,155 (31) 9,124 Depreciation and amortization 47,669 - 47,669 (Gain) loss on disposal of assets, net 1,105 - 1,105 --------------- ------------- ---------- Total operating expenses $ 220,975 $ (4,891) $ 216,084 =============== ============= ========== Three Months Ended September 30, 2005 ---------------------------------------- As reported on Stock Based Schedule 1 Compensation Adjusted --------------- ------------- ---------- Operating expenses: Local telephone 32,857 (734) 32,123 Wireless 14,196 (75) 14,121 Internet 5,744 (31) 5,713 Interexchange 4,720 (4) 4,716 Depreciation and amortization 20,955 - 20,955 --------------- ------------- ---------- Total operating expenses $ 78,472 $ (844) $ 77,628 =============== ============= ========== Nine Months Ended September 30, 2005 ---------------------------------------- As reported on Stock Based Schedule 1 Compensation Adjusted --------------- ------------- ---------- Operating expenses: Local telephone 94,508 (1,203) 93,305 Wireless 36,216 (123) 36,093 Internet 16,584 (51) 16,533 Interexchange 12,631 (6) 12,625 Depreciation and amortization 62,060 - 62,060 (Gain) loss on disposal of assets, net (68) - (68) --------------- ------------- ---------- Total operating expenses $ 221,931 $ (1,383) $ 220,548 =============== ============= ========== The balances reported on Schedule 1 - Statement of Operations, include the Company's adoption of FAS 123R Accounting for Stock Based Compensation. This schedule shows the Company's operating performance prior to that expense being recorded to allow analysis of the operating segments without these noncash charges. Prior year comparison numbers have also been adjusted for a reclassification of costs from Interexchange to Wireless to better reflect underlying product profitability. Schedule 7 ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. Investment in Construction and Capital Expenditures (Unaudited, in Thousands) Three Months Nine Months Twelve Months Ended Ended Ended September 30, September 30, December 31, 2006 2006 2005 ------------- ------------- ------------- Construction and capital expenditures 13,484 40,421 58,422 Increase/(decrease) in accounts payable for construction and capital expenditures 4,623 (1,656) 5,975 ------------- ------------- ------------- Investment in construction and capital $ 18,107 $ 38,765 $ 64,397 ============= ============= ============= Growth 5,913 17,534 26,735 Maintenance 12,194 21,231 35,044 Investment funded by excess 2005 cash - - 2,618 ------------- ------------- ------------- Investment in construction and capital $ 18,107 $ 38,765 $ 64,397 ============= ============= ============= Schedule 8A ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) September 30, June 30, September 30, 2006 2006 2005 ------------- --------- ------------- Local telephone: Retail access lines 195,997 197,031 201,284 Resale access lines 12,045 12,504 14,323 UNE lines 51,089 53,231 62,418 ------------- --------- ------------- Total local telephone access lines 259,131 262,766 278,025 ============= ========= ============= Average local telephone access lines for the quarter 260,949 264,124 281,042 Average monthly local telephone revenue per line for the quarter $ 61.14 $ 59.93 $ 61.06 Quarterly growth rate in local telephone access lines -1.4% -1.0% -2.1% Wireless: Covered population 534,542 533,930 509,996 Post-paid wireless subscribers 121,066 115,770 100,297 Average post-paid wireless subscribers 118,418 113,474 97,721 Quarterly growth rate - post-paid wireless subscribers 4.6% 4.1% 5.4% Average monthly churn for the quarter 1.7% 1.6% 2.0% Average monthly revenue per subscriber for the quarter(a) $ 62.94 $ 58.85 $ 61.22 Prepaid wireless subscribers 5,023 4,540 6,292 Resale wireless subscribers 3,481 3,582 5,049 Total wireless subscribers 129,570 123,892 111,638 Average subscribers for the quarter 126,731 121,516 109,680 Quarterly growth rate 4.6% 4.0% 3.6% Average monthly churn for the quarter 1.9% 1.7% 2.2% Penetration 24.2% 23.2% 21.9% Average monthly revenue per subscriber for the quarter(a) $ 60.77 $ 56.51 $ 57.12 Long Distance: Long distance subscribers 61,984 60,556 53,558 Average subscribers for the quarter 61,270 59,554 52,130 Average monthly revenue per subscriber for the quarter $ 24.64 $ 25.47 $ 27.80 Internet: DSL subscribers 41,744 39,982 33,070 Dial-up subscribers 13,555 14,738 19,187 ------------- --------- ------------- Total Internet subscribers 55,299 54,720 52,257 ============= ========= ============= Average subscribers for the quarter 55,010 54,373 51,337 Average monthly DSL & dial-up revenue per subscriber for the quarter $ 29.40 $ 29.09 $ 30.06 (a) Wireless ARPU has been restated to exclude late fees and early termination charges and to allocate competitive eligible telecommunications carrier (CETC) revenue only to post-paid and wholesale subscribers. CETC added $10.20 and $9.66 to post-paid wireless ARPU in the third and second quarter of 2006, respectively and $9.39 in the third quarter of 2005. CETC added $9.82 and $9.32 to total wireless ARPU in the third and second quarter of 2006, respectively and $8.81 in the third quarter of 2005. Schedule 8B ALASKA COMMUNICATIONS SYSTEMS GROUP, INC. KEY OPERATING STATISTICS (Unaudited) September 30, June 30, 2006 2006 Net Movement -------------- --------- ------------ Local telephone retail access lines 195,997 197,031 (1,034) Less: internal lines installed (138) ------------ (1,172) Post-paid wireless subscribers 121,066 115,770 Prepaid wireless subscribers 5,023 4,540 -------------- --------- 126,089 120,310 5,779 -------------- --------- Long distance subscribers 61,984 60,556 1,428 DSL and dial up subscribers 55,299 54,720 579 -------------- --------- ------------ Total retail relationships 439,369 432,617 6,614 (a) ============== ========= ============ (a) Net movement in total retail relationships inclusive of a 138 adjustment for internal use lines activated during the quarter. CONTACT: Alaska Communications Systems Meghan Stapleton, 907-297-3000 (Media) Director, Corporate Communications meghan.stapleton@acsalaska.com or Lippert/Heilshorn & Associates Kirsten Chapman, 415-433-3777 (Investors) kchapman@lhai.com -----END PRIVACY-ENHANCED MESSAGE-----