EXHIBIT 99.1
Published on August 4, 2005
Exhibit 99.1
August 3, 2005
John Lowber, (907) 868-5628; jlowber@gci.com
Bruce Broquet, (907) 868-6660; bbroquet@gci.com
David Morris, (907) 265-5396; dmorris@gci.com
FOR IMMEDIATE RELEASE
GCI REPORTS SECOND QUARTER 2005 FINANCIAL RESULTS
o Consolidated revenue of $110.7 million
o Net income of $5.3 million or $0.09 per diluted share
o EBITDA of $36.4 million
ANCHORAGE, AK -- GCI (NASDAQ:GNCMA) today reported net income of $5.3
million, or earnings per diluted share of $0.09, for the second quarter of 2005.
The company's second quarter net income compares to income of $7.7 million, or
earnings per diluted share of $0.13 in the same period of 2004.
GCI's second quarter 2005 revenues totaled $110.7 million, an increase
of 6.6 percent over the second quarter of 2004. GCI's second quarter 2005
revenues increased 3.9 percent from the first quarter 2005 revenues of $106.5
million.
Second quarter 2005 earnings before interest, taxes, depreciation,
amortization and accretion (EBITDA) totaled $36.4 million. EBITDA increased $1.5
million or 4.3 percent over $34.9 million in the second quarter of 2004. Second
quarter 2005 EBITDA of $36.4 million compares to EBITDA of $34.5 million in the
first quarter of 2005, an increase of $1.9 million or 5.5 percent over the first
quarter of 2005.
For the second quarter of 2005, GCI met its revenue and EBITDA
guidance. The company expected revenues and EBITDA to exceed the first quarter
results, excluding the effects of any receivable recovery from MCI. GCI recorded
$1.0 million in EBITDA relating to the use of the MCI credit during the quarter.
Both revenue and EBITDA for the second quarter were in line with
guidance provided by the company. GCI expects third quarter revenue and EBITDA
to exceed those achieved in the second quarter and still anticipates revenues of
$430 million to $440 million and EBITDA of $145 million for 2005, including the
expected recovery of the remaining MCI receivable.
"The second quarter continues our solid performance for the year.
Revenue, EBITDA and free cash flow all increased over the first quarter and we
repurchased 359,125 shares of our stock," said Ron Duncan, GCI president. "We
expect continued growth in all three measurements during the third quarter."
"I'm also pleased to announce that the Board of Directors elected Steve
Brett to serve as our chairman at our most recent meeting. Steve succeeds Donne
Fisher who has served as our chairman since 2002. Mr. Fisher will continue to
serve as a director."
Highlights
o Long-distance billable minutes increased 18.3 percent to 347.6 million
minutes for the second quarter as compared to the same quarter of 2004,
and increased 14.9 percent sequentially.
o Cable customers increased by 1,328 during the period and average revenue
per equivalent basic subscriber grew to $81.75 per month. Revenue
generating units (RGUs) for the quarter increased by 15 percent over the
prior year.
o GCI has provisioned approximately 12,800 customers on its Digital Local
Phone Service (DLPS) facilities at the end of the second quarter and
expects to have more than 25,000 customers using that technology by the
end of 2005.
o During the second quarter GCI repurchased 359,125 shares of its Class A
Common shares at an average price of $8.34. Since the inception of the
stock repurchase program in the third quarter of 2004 the company
repurchased more than 9 percent of its diluted shares outstanding at an
average price of $9.02 per share.
Long Distance Results
For the second quarter of 2005, long distance revenues totaled $64.2
million as compared to revenues of $60.9 million in the second quarter of 2004
and $60.00 million in the first quarter of 2005. The increase in revenues is
primarily attributable to an increase in minutes sold to other carriers.
Long distance EBITDA increased 4.8 percent for the second quarter of
2005 to $22.0 million as compared to $21.0 million in the second quarter of the
prior year. Long distance EBITDA for the second quarter of 2005 was up $3.2
million sequentially, an increase of 17.0 percent, from $18.8 million in the
first quarter. Long distance EBITDA included MCI bad debt recoveries of $1.0
million in the second quarter of 2005, $1.1 million in the second quarter of
2004 and $0.9 million in the first quarter of 2005. The increase in EBITDA for
the first quarter of 2005 is primarily due to an increase in minutes carried on
the network.
Total minutes-of-use were up 18.3 percent in the second quarter of 2005
when compared to the second quarter of 2004. Minutes-of-use are up 14.9 percent
compared to the first quarter of 2005.
The number of billed long distance customers totaled 91,300 at the end
of the second quarter of 2005, an increase of 0.7 percent from 90,700 at the end
of the second quarter of 2004. Billed long distance customers decreased 0.5
percent from 91,800 at the end of the first quarter of 2005.
Cable Television Results
Cable television revenues for the second quarter increased 4.4 percent
to $26.3 million from $25.2 million in the second quarter of 2004, and increased
1.5 percent from $25.9 million in the first quarter of 2005. EBITDA of $11.0
million for the second quarter of 2005 decreased $0.5 million as compared to
$11.5 million in the second quarter of 2004, and decreased $0.6 million when
compared to $11.6 million in the first quarter of 2005. The year-over-year and
sequential increases in revenues are due primarily to the sales of new video and
cable modem services. The decrease in EBITDA in the second quarter as compared
to the prior year is primarily due to refunds and rebates received from cable
television programmers in second quarter of 2004 that were significantly greater
than similar credits received in the second quarter of 2005. EBITDA for the
second quarter of 2005 decreased sequentially from the first quarter of 2005 due
to an increase in operating costs of approximately $0.5 million.
Gross margins in the second quarter of 2005, as a percentage of
revenues, decreased by 354 basis points from the second quarter of 2004 and by
170 basis points sequentially. The decrease in gross margins is primarily due to
the smaller programming refunds and rebates received in the second quarter of
2005.
As of June 30, 2005, the company's cable television operations passed
210,950 homes and served 137,428 subscribers (106,787 equivalent basic
subscribers). For the second quarter, average
revenue per equivalent basic subscriber was $81.75, an increase of 4.4 percent
when compared to second quarter 2004 average revenue of $78.27. Average revenue
increased 2.6 percent, from $79.64, from the first quarter of 2005. The company
experienced an increase of 1,328 subscribers from the first quarter of 2005. The
increase in subscribers for the second quarter of 2005 compares to an increase
of 1,192 subscribers in the second quarter of 2004. The increase in subscribers
is primarily due to the seasonal increase in hotel customers partially offset by
a seasonal decline in residential customers.
The company offers digital programming tiers in all of its major
markets. The Anchorage, Mat-Su Valley, Fairbanks, Kodiak and Ketchikan systems
have been fully converted to digital. Eighty percent of GCI's basic cable
subscribers receive service through a digital set-top box. More than 97 percent
of the set top boxes deployed in GCI's systems are digital and 48,745 customers
purchase additional special interest programming through a digital tier. GCI
offers 10 channels of HDTV to customers in the Anchorage area.
GCI cable modem service is available to more than 90 percent of the
homes in Alaska. Approximately 33.3 percent of homes passed and 60 percent of
GCI residential subscribers have cable modem service.
The operating statistics below include capital expenditures and
customer information from cable services and the components of our local
services and Internet services utilizing our cable services' facilities.
GCI's capital expenditures by standard reporting category for the
six-month periods ending June 30, 2005 and 2004 follow (amounts in thousands):
2005 2004
----------- -----------
Customer premise equipment $ 7,138 6,970
Commercial 169 213
Scalable infrastructure 1,818 2,805
Line extensions 1,362 149
Upgrade/rebuild 7,442 3,355
Support capital 508 595
----------- -----------
Sub-total 18,437 14,087
Remaining capital expenditures 29,253 50,060
----------- -----------
$ 47,690 64,147
=========== ===========
At June 30, 2005 and 2004, GCI's cable business had 125,400 and 123,300
customer relationships, respectively. The standard definition of a customer
relationship is the number of customers who receive at least one level of
service, encompassing voice, video, and data services, without regard to which
services customers purchase. These relationships do not include local telephone
customers except those receiving phone service through the cable television
plant.
At June 30, 2005 and 2004, GCI's cable business had 220,500 and 192,000
revenue generating units, respectively. The increase in the revenue generating
units of 4,700 and 28,500 from March 31, 2005 and June 30, 2004, respectively,
is due to an increase in the number of cable modem and Digital Local Phone
Service (DLPS) customers. The definition of a revenue-generating unit is the sum
of all primary analog video, digital video, high-speed data and telephony
customers, not counting additional outlets.
Local Telephone Results
For the second quarter of 2005, local telephone service revenues
totaled $12.7 million, an increase of 13.4 percent, when compared to $11.2
million in the second quarter of 2004. Revenue was down $0.6 million or 4.5
percent from $13.3 million in the first quarter of 2005. The increase in
year-over-year revenues is primarily attributable to increased receipts from the
Universal Service
Fund (USF.) The decrease in sequential revenues is primarily attributable to an
adjustment of USF during the first quarter, which added $1.2 million in
out-of-period revenues.
In the second quarter, local services generated EBITDA of $0.4 million,
an improvement of $0.2 million over the $0.2 million of EBITDA in the second
quarter of 2004. The second quarter EBITDA of $0.4 million compares to EBITDA of
$1.1 million in the first quarter of 2005. The sequential decrease in EBITDA is
due primarily to the $1.2 million out-of-period adjustment in the first quarter
of 2005.
The rates paid by GCI to lease loops and UNE access elements from ACS
were approximately 20 percent higher during the second quarter of 2005 as
compared to the second quarter of 2004. This resulted primarily from a rate
increase granted to ACS by state regulators in the second half of 2004. GCI
estimates that conversion of customers from leased ACS facilities to its own
network offset approximately 65 percent of the impact of this rate increase in
the second quarter of 2005.
GCI began converting customers to its own network using its DLPS
technology in 2004. The roll out of DLPS enables GCI to avoid wholesale and loop
rental costs from local phone lines leased from the incumbent local exchange
carrier. GCI has provisioned approximately 12,800 customers completely on its
DLPS facilities at the end of the second quarter of 2005 and expects to have
more than 25,000 customers similarly provisioned by the end of 2005.
At the end of the second quarter of 2005, GCI provided local service
to approximately 111,900 access lines statewide. This represents a net decrease
of 700 access lines when compared to the 112,600 access lines reported at the
end of the first quarter of 2005. The decrease in residential and Internet
Service Provider access lines was partially offset by an increase in business
voice access lines. The decrease in access lines were expected as fewer
residential customers are maintaining second voice lines and are migrating from
dial-up internet service to cable modem. The company estimates it maintains a 24
percent share of the total access line market in Alaska. Approximately 85
percent of GCI's access lines are provisioned on its own facilities or on resold
local loops.
Internet Access Results
Internet access revenues for the second quarter of 2005 totaled $7.5
million. Revenues were up 15.4 percent as compared to second quarter 2004
revenues of $6.5 million and 2.7 percent as compared to the prior quarter
revenue of $7.3 million. EBITDA for the second quarter of 2005 totaled $3.0
million, an improvement of $0.8 million year-over-year and relatively unchanged
from the first quarter of 2005. Second quarter 2004 EBITDA was $2.2 million and
first quarter 2005 EBITDA was $3.0 million. The increase in Internet access
revenues and EBITDA results from the migration of existing customers to cable
modem access, customers adding more features and services and increasing
economies of scale.
At the end of the second quarter of 2005, GCI had 70,200 cable modem
customers, an increase of 23.6 percent from the second quarter of 2004 and 1.9
percent from the first quarter of 2005. Dial-up access customers decreased by
4,700 as a result of customers migrating to cable modems and due to a data base
clean-up of "Free Net" customers. GCI is implementing a new customer service
information system and further non-revenue affecting adjustments to the Free Net
customer data base may occur before the transition is completed by the end of
the third quarter of 2005.
Total cable modem revenues for the second quarter of 2005 increased 2.1
percent when compared to the first quarter of 2005 and increased 6.3 percent
year-over-year. At the end of the second quarter of 2005 GCI's average revenue
per cable modem (ARPM) was $30.87 as compared to $30.97 at the end of the first
quarter of 2005 and $36.84 at the end of the second quarter of 2004. The
increase in sequential and year-over-year revenues is due to the increase in the
number of
modem customers. The decline in ARPM is due to an increase in the percentage of
total customers taking GCI's discounted cable modem products.
Other Items
During the second quarter of 2005 GCI's capital expenditures totaled
$23.3 million as compared to $24.4 million in the first quarter of 2005.
GCI will hold a conference call to discuss the quarter's results on
Thursday, August 4, 2005 beginning at 2 p.m. (Eastern). To access the briefing
on August 5, dial 888-603-6970 (international callers should dial 517-308-9002)
and identify your call as "GCI." In addition to the conference call, GCI will
make available net conferencing. To access the call via net conference, log on
to www.gci.com and follow the instructions. A replay of the call will be
available for 72-hours by dialing 866-475-8043, access code 7461 (international
callers should dial 203-369-1516.)
GCI is the largest telecommunications company in Alaska. A pioneer in
bundled services, GCI provides local, wireless, and long distance telephone,
cable television, Internet and data communication services throughout Alaska.
More information about the company can be found at www.gci.com.
The foregoing contains forward-looking statements regarding the
company's expected results that are based on management's expectations as well
as on a number of assumptions concerning future events. Actual results might
differ materially from those projected in the forward looking statements due to
uncertainties and other factors, many of which are outside GCI's control.
Additional information concerning factors that could cause actual results to
differ materially from those in the forward looking statements is contained in
GCI's cautionary statement sections of Form 10-K and 10-Q filed with the
Securities and Exchange Commission.
# # #
General Communication, Inc.
Non-GAAP Financial Reconciliation Schedule
(Unaudited, Amounts in Millions)
Notes:
(1) EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is
the sum of Net Income, Interest Expense, Amortization and Write-off of
Loan and Senior Notes Fees, Interest Income, Income Tax Expense, and
Depreciation, Amortization and Accretion Expense. EBITDA is not presented
as an alternative measure of net income, operating income or cash flow
from
operations, as determined in accordance with accounting principles
generally accepted in the United States of America. GCI's management uses
EBITDA to evaluate the operating performance of its business, and as a
measure of performance for incentive compensation purposes. GCI believes
EBITDA is a measure used as an analytical indicator of income generated to
service debt and fund capital expenditures. In addition, multiples of
current or projected EBITDA are used to estimate current or prospective
enterprise value. EBITDA does not give effect to cash used for debt
service requirements, and thus does not reflect funds available for
investment or other discretionary uses. EBITDA as presented herein may not
be comparable to similarly titled measures reported by other companies.
(2) EBITDA (as defined in Note 1 above) before deducting Loss on Early
Extinguishment of Debt during the six months ended June 30, 2004.