UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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 March 31, 2003
OR
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number 000-28167
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
| Delaware | 52-2126573 | |
| (State or Other Jurisdiction | (I.R.S. Employer | |
| of Incorporation or Organization) | Identification No.) |
600 Telephone Avenue, Anchorage, Alaska 99503
(Address of Principal Executive Offices) (Zip Code)
(907) 297-3000
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former name, former address and former three months, if changed since last report)
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
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
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 o No o
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of the registrant’s Common Stock, as of April 30, 2003 was 30,134,466
DOCUMENTS INCORPORATED BY REFERENCE
None
TABLE OF CONTENTS
| Page | ||||
| Number | ||||
| PART I. | Financial Information | |||
| Item 1. | Financial Statements: | |||
|
Consolidated Balance Sheets (unaudited) As of March 31, 2003 and December 31, 2002 |
3 | |||
|
Consolidated Statements of Operations (unaudited) For the Three Months Ended March 31, 2003 and 2002 |
4 | |||
|
Consolidated Statements of Stockholders’ Equity (unaudited) For the Three Months Ended March 31, 2003 and 2002 |
5 | |||
|
Consolidated Statements of Cash Flows (unaudited) For the Three Months Ended March 31, 2003 and 2002 |
6 | |||
| Notes to Consolidated Financial Statements (unaudited) | 7 | |||
| Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 16 | ||
| Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 26 | ||
| Item 4. | Controls and Procedures | 26 | ||
| PART II. | Other Information | |||
| Item 1. | Legal Proceedings | 27 | ||
| Item 2. | Changes in Securities and Use of Proceeds | 28 | ||
| Item 3. | Defaults upon Senior Securities | 28 | ||
| Item 4. | Submission of Matters to a Vote of Security Holders | 28 | ||
| Item 5. | Other Information | 28 | ||
| Item 6. | Exhibits and Reports on Form 8-K | 28 | ||
| Signatures | 29 | |||
| Certifications | 30 | |||
2
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Consolidated Balance Sheets
(Unaudited, In Thousands Except Per Share Amounts)
| March 31, | December 31, | ||||||||||
| 2003 | 2002 | ||||||||||
Assets |
|||||||||||
Current assets: |
|||||||||||
Cash and cash equivalents |
$ | 33,482 | $ | 18,565 | |||||||
Restricted cash |
310 | 3,440 | |||||||||
Accounts receivable-trade, net of allowance of $6,179 and $6,075 |
45,536 | 48,820 | |||||||||
Materials and supplies |
10,924 | 11,203 | |||||||||
Prepayments and other current assets |
5,091 | 6,172 | |||||||||
Assets held for sale |
— | 261 | |||||||||
Total current assets |
95,343 | 88,461 | |||||||||
Property, plant and equipment |
1,094,131 | 1,090,365 | |||||||||
Less: accumulated depreciation |
643,420 | 625,276 | |||||||||
Property, plant and equipment, net |
450,711 | 465,089 | |||||||||
Goodwill |
77,225 | 77,225 | |||||||||
Intangible assets |
23,026 | 23,269 | |||||||||
Debt issuance costs, net of amortization of $17,410 and $16,365 |
20,484 | 21,529 | |||||||||
Deferred charges and other assets |
26,030 | 26,047 | |||||||||
Total assets |
$ | 692,819 | $ | 701,620 | |||||||
Liabilities and Stockholders’ Equity (Deficit) |
|||||||||||
Current liabilities: |
|||||||||||
Current portion of long-term obligations |
$ | 7,998 | $ | 5,649 | |||||||
Accounts payable-affiliates |
1,624 | 1,319 | |||||||||
Accounts payable, accrued and other current liabilities |
45,596 | 49,796 | |||||||||
Advance billings and customer deposits |
9,852 | 9,804 | |||||||||
Total current liabilities |
65,070 | 66,568 | |||||||||
Long-term obligations, net of current portion |
601,859 | 602,114 | |||||||||
Other deferred credits and long-term liabilities |
31,227 | 32,930 | |||||||||
Commitments and contingencies |
— | — | |||||||||
Stockholders’ equity (deficit): |
|||||||||||
Preferred stock, no par, 5,000 authorized, no shares issued and outstanding |
— | — | |||||||||
Common stock, $.01 par value; 145,000 shares authorized, 33,481 and
33,481 shares issued and 30,555 and 30,745 outstanding, respectively |
334 | 334 | |||||||||
Treasury stock, 2,926 and 2,737 shares, respectively, at cost |
(12,500 | ) | (12,082 | ) | |||||||
Paid in capital in excess of par value |
277,810 | 277,810 | |||||||||
Accumulated deficit |
(253,757 | ) | (247,168 | ) | |||||||
Accumulated other comprehensive loss |
(17,224 | ) | (18,886 | ) | |||||||
Total stockholders’ equity (deficit) |
(5,337 | ) | 8 | ||||||||
Total liabilities and stockholders’ equity (deficit) |
$ | 692,819 | $ | 701,620 | |||||||
See Notes to Consolidated Financial Statements
3
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Consolidated Statements of Operations
(Unaudited, In Thousands Except Per Share Amounts)
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2003 | 2002 | |||||||||
Operating revenue: |
||||||||||
Local telephone |
$ | 54,001 | $ | 55,322 | ||||||
Wireless |
10,330 | 9,355 | ||||||||
Directory |
8,278 | 8,641 | ||||||||
Internet |
6,296 | 3,842 | ||||||||
Interexchange |
4,766 | 4,850 | ||||||||
Total operating revenue |
83,671 | 82,010 | ||||||||
Operating expense: |
||||||||||
Local telephone (exclusive of depreciation and amortization) |
27,847 | 28,998 | ||||||||
Wireless (exclusive of depreciation and amortization) |
6,564 | 6,042 | ||||||||
Directory (exclusive of depreciation and amortization) |
3,449 | 3,426 | ||||||||
Internet (exclusive of depreciation and amortization) |
9,276 | 5,128 | ||||||||
Interexchange (exclusive of depreciation and amortization) |
6,589 | 6,615 | ||||||||
Depreciation and amortization |
22,600 | 19,259 | ||||||||
Loss of disposal of assets |
746 | — | ||||||||
Total operating expense |
77,071 | 69,468 | ||||||||
Operating income |
6,600 | 12,542 | ||||||||
Other income (expense): |
||||||||||
Interest expense |
(13,329 | ) | (13,386 | ) | ||||||
Interest income and other |
192 | 500 | ||||||||
Total other expense |
(13,137 | ) | (12,886 | ) | ||||||
Loss before income taxes, discontinued operations and cumulative
effect of change in accounting principle |
(6,537 | ) | (344 | ) | ||||||
Income tax benefit |
— | — | ||||||||
Loss from continuing operations |
(6,537 | ) | (344 | ) | ||||||
Loss from discontinued operations |
(52 | ) | (6,872 | ) | ||||||
Loss before cumulative effect of change
in accounting principle |
(6,589 | ) | (7,216 | ) | ||||||
Cumulative effect of change in accounting principle |
— | (105,350 | ) | |||||||
Net loss |
$ | (6,589 | ) | $ | (112,566 | ) | ||||
Net loss per share - basic and diluted: |
||||||||||
Loss from continuing operations |
$ | (0.21 | ) | $ | (0.01 | ) | ||||
Loss from discontinued operations |
(0.00 | ) | (0.22 | ) | ||||||
Loss before cumulative effect of change
in accounting principle |
(0.21 | ) | (0.23 | ) | ||||||
Cumulative effect of change in accounting principle |
— | (3.32 | ) | |||||||
Net loss |
$ | (0.21 | ) | $ | (3.55 | ) | ||||
Weighted average shares outstanding: |
||||||||||
Basic and diluted |
30,653 | 31,743 | ||||||||
See Notes to Consolidated Financial Statements
4
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Consolidated Statements of Stockholders’ Equity (Deficit)
Three Months Ended March 31, 2003 and 2002
(Unaudited, In Thousands Except Share Amounts)
| Paid in | Accumulated | ||||||||||||||||||||||||
| Capital in | Other | Stockholders' | |||||||||||||||||||||||
| Common | Treasury | Excess of | Accumulated | Comprehensive | Equity | ||||||||||||||||||||
| Stock | Stock | Par | Deficit | Loss | (Deficit) | ||||||||||||||||||||
Balance, December 31, 2001 |
$ | 332 | $ | (9,735 | ) | $ | 276,840 | $ | (61,921 | ) | $ | (13,829 | ) | $ | 191,687 | ||||||||||
Components of Comprehensive loss: |
|||||||||||||||||||||||||
Net loss |
— | — | — | (112,566 | ) | — | (112,566 | ) | |||||||||||||||||
Interest rate swap marked to market |
— | — | — | — | 2,903 | 2,903 | |||||||||||||||||||
Total comprehensive loss |
(109,663 | ) | |||||||||||||||||||||||
Issuance of 75,300 shares of
common stock, $.01 par |
1 | — | 460 | — | — | 461 | |||||||||||||||||||
Balance, March 31, 2002 |
$ | 333 | $ | (9,735 | ) | $ | 277,300 | $ | (174,487 | ) | $ | (10,926 | ) | $ | 82,485 | ||||||||||
Balance, December 31, 2002 |
$ | 334 | $ | (12,082 | ) | $ | 277,810 | $ | (247,168 | ) | $ | (18,886 | ) | $ | 8 | ||||||||||
Components of Comprehensive loss: |
|||||||||||||||||||||||||
Net loss |
— | — | — | (6,589 | ) | — | (6,589 | ) | |||||||||||||||||
Interest rate swap marked to market |
— | — | — | — | 1,662 | 1,662 | |||||||||||||||||||
Total comprehensive loss |
(4,927 | ) | |||||||||||||||||||||||
Purchase of 189,175 shares of treasury stock |
— | (418 | ) | — | — | — | (418 | ) | |||||||||||||||||
Balance, March 31, 2003 |
$ | 334 | $ | (12,500 | ) | $ | 277,810 | $ | (253,757 | ) | $ | (17,224 | ) | $ | (5,337 | ) | |||||||||
See Notes to Consolidated Financial Statements
5
ALASKA COMMUNICATIONS SYSTEMS GROUP, INC.
Consolidated Statements of Cash Flows
(Unaudited, In Thousands)
| Three Months Ended | ||||||||||
| March 31, | ||||||||||
| 2003 | 2002 | |||||||||
Cash Flows from Operating Activities: |
||||||||||
Net loss |
$ | (6,589 | ) | $ | (112,566 | ) | ||||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||||
Loss on discontinued operations |
52 | 6,872 | ||||||||
Cumulative effect of change in accounting principle |
— | 105,350 | ||||||||
Depreciation and amortization |
22,600 | 19,259 | ||||||||
Loss on disposal of assets |
746 | — | ||||||||
Amortization of debt issuance costs and original issue discount |
1,115 | 1,115 | ||||||||
Capitalized interest |
— | (349 | ) | |||||||
Other deferred credits |
(41 | ) | 3,973 | |||||||
Changes in components of working capital: |
||||||||||
Accounts receivable and other current assets |
4,624 | 688 | ||||||||
Accounts payable and other current liabilities |
(3,856 | ) | 2,922 | |||||||
Other |
17 | (742 | ) | |||||||
Net cash used in discontinued operations |
(41 | ) | (384 | ) | ||||||
Net cash provided by operating activities |
18,627 | 26,138 | ||||||||
Cash Flows from Investing Activities: |
||||||||||
Construction and capital expenditures, net of capitalized interest |
(6,115 | ) | (13,246 | ) | ||||||
Release of funds from escrow |
3,339 | — | ||||||||
Placement of funds in restricted account |
(200 | ) | — | |||||||
Net cash used by investing activities |
(2,976 | ) | (13,246 | ) | ||||||
Cash Flows from Financing Activities: |
||||||||||
Payments on long-term debt |
(316 | ) | (331 | ) | ||||||
Purchase of treasury stock |
(418 | ) | — | |||||||
Issuance of common stock |
— | 461 | ||||||||
Net cash provided (used) by financing activities |
(734 | ) | 130 | |||||||
Increase in cash and cash equivalents |
14,917 | 13,022 | ||||||||
Cash and cash equivalents at beginning of the period |
18,565 | 41,012 | ||||||||
Cash and cash equivalents at the end of the period |
$ | 33,482 | $ | 54,034 | ||||||
Supplemental Cash Flow Data: |
||||||||||
Interest paid |
$ | 8,401 | $ | 9,805 | ||||||
Income taxes paid |
— | — | ||||||||
Supplemental Noncash Transactions: |
||||||||||
Property acquired under capital leases and mortgages |
$ | 2,340 | $ | — | ||||||
Interest rate swap marked to market |
||||||||||