Currently viewing and reading

Alaska Communications Systems Reports Third Quarter 2009 Results

Posted by Dana in November 9th 2009

Alaska Communications Systems Group, Inc. (“ACS”) (NASDAQ: ALSK) reported financial results for its third quarter ended September 30, 2009.

Financial Highlights: Third Quarter 2009 Compared to Third Quarter 2008

* Revenues of $91.3 million in line with $91.3 million in the prior year.
o Enterprise revenues increased $2.7 million, or 31 percent.
o Wireless revenue declined by $2.0 million or 5.0 percent due to declines in roaming revenue and subscribers.
o Retail, wholesale and access wireline revenues declined by $0.7 million, or 1.7 percent, with the current quarter benefiting from $2.5 million in out-of-period network access reserves compared to $1.4 million in 2008.
* EBITDA of $34.9 million was up 2.8 percent from prior year EBITDA of $33.9 million:
o Wireline EBITDA of $18.2 million increased by 6.2 percent, with gains in enterprise and higher levels of network access more than offsetting declines in retail and wholesale.
o Wireless EBITDA of $16.7 million was in line with the prior year with tight expense management offsetting lower contributions from subscriber and roaming revenue.
* Net cash provided by operating activities of $21.3 million was down 26.5 percent from $29.0 million in the prior year period. The annual decline is entirely attributable to working capital changes.
* Net income before extraordinary item of $0.3 million, or $0.01 per diluted share, compared to net income of $1.8 million, or $0.04 per diluted share, in the prior year. The decline in net income is attributable to a $4.9 million increase in depreciation expense resulting from an assessment that with changes in technology, asset salvage values previously set by regulators and historically viewed as reasonable, were no longer appropriate.
* In the third quarter 2009, ACS ceased to follow regulatory accounting rules following its July 1, 2009 conversion to price cap regulation and recognized an extraordinary gain, net of tax, of $37.3 million following the extinguishment of certain regulatory liabilities.

“While we are delighted with the enterprise contracts that we have closed in the quarter and the strength of our provisioning backlog, enterprise revenue did decline by $0.2 million on a sequential basis,” said David Wilson, ACS executive vice president and chief financial officer. “In order to assess the underlying momentum in enterprise, a deeper dive into the major revenue drivers in the quarter is required:

* Firstly, the expiration of a 2007 capacity exchange agreement with another carrier mid way through the quarter resulted in a $0.4 million drop in revenue that had no impact on EBITDA or cash flows;
* Secondly, share shifts that took place one layer below our level of carrier relationship resulted in a $0.4 million sequential decline in voice revenue; and
* Finally, we turned up $0.6 million of new business, significant, but somewhat below our expectations.”

Metric Highlights: Third Quarter 2009 Compared to Second Quarter 2009

* Wireless monthly churn of 2.4 percent compared to 2.0 percent in the second quarter. Key drivers of the increase were a loss of market share to the iPhone and higher ACS initiated disconnects for non-payment.
* Total wireless subscribers decreased by approximately 2,300 to 139,700.
* Wireless ARPU increased by $1.90 to $64.51 from $62.61 with a $0.54 gain in data ARPU and a $1.76 gain in CETC. Data ARPU increased by 7.4 percent to $7.84 from $7.30.
* DSL lines declined by 500 to 46,400 while ISP ARPU increased by 1.0 percent to $34.37.
* Retail local access lines declined by 1.8 percent to 166,600 as a result of cord cutting and seasonality.
* Total local access lines decreased by approximately 2.3 percent to 189,800.

Nine Month Financial Review

For the nine months ended September 30, 2009, revenues were $263.4 million, compared to $264.3 million in the same period last year. Net income before extraordinary item was $3.7 million, or $0.08 per diluted share, compared to net income of $8.3 million, or $0.19 per diluted share, in the same period in 2008. Net cash provided by operating activities for the first nine months of 2009 was $73.0 million compared to $69.2 million in the same period in 2008. EBITDA for the nine months ended September 30, 2009 was $98.6 million, compared to $99.3 million in the same period last year.