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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q
     
(Mark One)    
x   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
OR
 
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from _______________ to ______________

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.

(Exact name of registrant as specified in its charter)

         
Delaware       52-2126573
(State or Other Jurisdiction
of Incorporation or Organization)		       (I.R.S. Employer
Identification No.)

600 Telephone Avenue, Anchorage, Alaska 99503

(Address of Principal Executive Offices)    (Zip Code)

Registrant’s Telephone Number, Including Area Code: (907) 297-3000

Former name, former address and former three months, if changed since last report: Not Applicable

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  þ    No  o

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  þ    No  o

APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares outstanding of the registrant’s Common Stock, as of July 29, 2002 was 31,821,362.

DOCUMENTS INCORPORATED BY REFERENCE
None

 

TABLE OF CONTENTS

Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
ITEM 5. OTHER INFORMATION.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
SIGNATURES
EXHIBIT 10.12

Table of Contents

TABLE OF CONTENTS
             
        Page
        Number
       
PART I.   Financial Information      
 
Item 1.   Financial Statements:      
 
    Consolidated Balance Sheets (unaudited)
As of June 30, 2002 and December 31, 2001 		    3  
 
    Consolidated Statements of Operations (unaudited)
For the Three and Six Months Ended June 30, 2002 and 2001 		    4  
 
    Consolidated Statements of Stockholders’ Equity (unaudited)
For the Six Months Ended June 30, 2002 and 2001 		    5  
 
    Consolidated Statements of Cash Flows (unaudited)
For the Six Months Ended June 30, 2002 and 2001 		    6  
 
    Notes to Consolidated Financial Statements (unaudited)     7  
 
Item 2.   Management’s Discussion and Analysis of
Financial Condition and Results of Operations 		    18  
 
Item 3.   Quantitative and Qualitative Disclosures
About Market Risk 		    31  
 
PART II.   Other Information      
 
Item 1.   Legal Proceedings     32  
 
Item 2.   Changes in Securities and Use of Proceeds     33  
 
Item 3.   Defaults upon Senior Securities     33  
 
Item 4.   Submission of Matters to a Vote of Security Holders     33  
 
Item 5.   Other Information     33  
 
Item 6.   Exhibits and Reports on Form 8-K     33  
 
Signatures         34  

2

Table of Contents

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.

Consolidated Balance Sheets
(Unaudited, In Thousands Except Per Share Amounts)
                                     
            June 30,   December 31,
            2002   2001
           
 
       
Assets
                
Current assets:
                
 
Cash and cash equivalents
   $ 28,594     $ 41,012  
 
Restricted cash
     7,104       6,932  
 
Accounts receivable-trade, net of allowance of $4,613 and $4,944
     48,123       46,912  
 
Materials and supplies
     9,499       8,723  
 
Prepayments and other current assets
     11,139       6,032  
 
Assets held for sale
     277       —  
 
    
     
 
   
Total current assets
     104,736       109,611  
Property, plant and equipment
     1,065,161       1,036,829  
Less: accumulated depreciation
     591,807       557,849  
 
    
     
 
 
Property, plant and equipment, net
     473,354       478,980  
Goodwill
     141,980       250,495  
Intangible assets
     23,323       26,785  
Debt issuance costs, net of amortization of $14,228 and $12,126
     23,666       25,768  
Deferred charges and other assets
     9,482       9,875  
 
    
     
 
Total assets
   $ 776,541     $ 901,514  
 
    
     
 
     
Liabilities and Stockholders’ Equity
                
Current liabilities:
                
 
Current portion of long-term obligations
   $ 5,543     $ 4,823  
 
Accounts payable-affiliates
     659       1,303  
 
Accounts payable, accrued and other current liabilities
     53,671       63,081  
 
Advance billings and customer deposits
     9,278       9,190  
 
    
     
 
   
Total current liabilities
     69,151       78,397  
Long-term obligations, net of current portion
     600,871       606,427  
Other deferred credits and long-term liabilities
     23,689       25,003  
Commitments and contingencies
     —       —  
Stockholders’ equity:
                
 
Preferred stock, no par, 5,000 authorized, no shares issued and outstanding
     —       —  
 
Common stock, $.01 par value; 145,000 shares authorized, 33,354 and 33,221 shares issued and 31,821 and 31,688 outstanding, respectively
     334       332  
 
Treasury stock, 1,532 shares at cost
     (9,735 )     (9,735 )
 
Paid in capital in excess of par value
     277,538       276,840  
 
Accumulated deficit
     (170,901 )     (61,921 )
 
Accumulated other comprehensive loss
     (14,406 )     (13,829 )
 
    
     
 
   
Total stockholders’ equity
     82,830       191,687  
 
    
     
 
Total liabilities and stockholders’ equity
   $ 776,541     $ 901,514  
 
    
     
 

See Notes to Consolidated Financial Statements

3

Table of Contents

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.

Consolidated Statements of Operations
(Unaudited, In Thousands Except Per Share Amounts)
                                                 
        Three Months Ended   Six Months Ended
        June 30,   June 30,
       
 
        2002   2001   2002   2001
       
 
 
 
Operating revenues:
                                
 
Local telephone
   $ 63,991     $ 54,461     $ 119,313     $ 109,158  
 
Cellular
     10,771       10,411       19,749       19,693  
 
Directory
     8,381       8,213       17,022       16,152  
 
Internet
     4,551       3,203       8,393       6,314  
 
Interexchange
     4,820       5,212       9,670       11,162  
 
    
     
     
     
 
   
Total operating revenues
     92,514       81,500       174,147       162,479  
Operating expenses:
                                
 
Local telephone
     32,571       30,428       61,569       59,323  
 
Cellular
     6,678       5,972       12,343       11,550  
 
Directory
     3,532       3,363       6,958       6,862  
 
Internet
     7,317       3,266       12,445       7,009  
 
Interexchange
     6,997       6,821       13,612       16,365  
 
Depreciation and amortization
     19,973       19,554       39,232       38,964  
 
    
     
     
     
 
   
Total operating expenses
     77,068       69,404       146,159       140,073  
 
    
     
     
     
 
Operating income
     15,446       12,096       27,988       22,406  
Other income (expense):
                                
 
Interest expense
     (11,620 )     (15,197 )     (25,006 )     (31,202 )
 
Interest income and other
     275       739       775       1,825  
 
    
     
     
     
 
   
Total other expense
     (11,345 )     (14,458 )     (24,231 )     (29,377 )
 
    
     
     
     
 
Income (loss) before income taxes
     4,101       (2,362 )     3,757       (6,971 )
Income tax benefit
     —       49       —       99  
 
    
     
     
     
 
Income (loss) from continuing operations
     4,101       (2,313 )     3,757       (6,872 )
Loss from discontinued operations, net of tax
     (515 )     (491 )     (7,387 )     (801 )
 
    
     
     
     
 
Income (loss) before cumulative effect of change in accounting principle
     3,586       (2,804 )     (3,630 )     (7,673 )
Cumulative effect of change in accounting principle
     —       —       (105,350 )     —  
 
    
     
     
     
 
Net income (loss)
   $ 3,586     $ (2,804 )   $ (108,980 )   $ (7,673 )
 
    
     
     
     
 
Net income (loss) per share — basic and diluted:
                                
 
Income (loss) from continuing operations
   $ 0.13     $ (0.07 )   $ 0.12     $ (0.22 )
 
Loss from discontinued operations
     (0.02 )     (0.02 )     (0.23 )     (0.03 )
 
    
     
     
     
 
 
Income (loss) before cumulative effect of change in accounting principle
     0.11       (0.09 )     (0.11 )     (0.24 )
 
Cumulative effect of change in accounting principle
     —       —       (3.32 )     —  
 
    
     
     
     
 
 
Net income (loss)
   $ 0.11     $ (0.09 )   $ (3.43 )   $ (0.24 )
 
    
     
     
     
 
Weighted average shares outstanding:
                                
 
Basic
     31,767       31,472       31,755       31,470  
 
    
     
     
     
 
 
Diluted
     31,808       31,472       31,775       31,470  
 
    
     
     
     
 

See Notes to Consolidated Financial Statements

4

Table of Contents

ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.

Consolidated Statements of Stockholders’ Equity
Six Months Ended June 30, 2002 and 2001
(Unaudited, In Thousands Except Share Amounts)
                                                                 
                      Paid in           Accumulated        
                      Capital in           Other        
      Common   Treasury   Excess of   Accumulated   Comprehensive   Stockholders'
      Stock   Stock   Par   Deficit   Loss   Equity
     
 
 
 
 
 
Balance, December 31, 2000
   $ 330     $ (9,735 )   $ 275,468     $ (50,683 )   $ —     $ 215,380  
Components of Comprehensive loss:
                                                
 
Net loss
     —       —       —       (7,673 )     —       (7,673 )
 
Interest rate swap marked to market
     —       —       —       —       (4,616 )     (4,616 )
 
                                            
 
Total comprehensive loss
                                             (12,289 )
Issuance of 81,119 shares of common stock, $.01 par
     1       —       495       —       —       496  
 
    
     
     
     
     
     
 
Balance, June 30, 2001
   $ 331     $ (9,735 )   $ 275,963     $ (58,356 )   $ (4,616 )   $ 203,587  
 
    
     
     
     
     
     
 
Balance, December 31, 2001
   $ 332     $ (9,735 )   $ 276,840     $ (61,921 )   $ (13,829 )   $ 191,687  
Components of Comprehensive loss:
                                                
 
Net loss
     —       —       —       (108,980 )     —       (108,980 )
 
Interest rate swap marked to market
     —       —       —       —       (577 )     (577 )
 
                                            
 
Total comprehensive loss
                                             (109,557 )
Issuance of 132,920 shares of common stock, $.01 par
     2       —       698       —