EXHIBIT 99.1
Published on November 10, 2005
Exhibit 99.1
November 9, 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 THIRD QUARTER 2005 FINANCIAL RESULTS
o Consolidated revenue of $113.8 million
o Net income of $2.3 million or $0.04 per diluted share
o EBITDA, as adjusted, of $38.2 million
ANCHORAGE, AK -- GCI (NASDAQ:GNCMA) today reported net income of $2.3
million, or earnings per diluted share of $0.04, for the third quarter of 2005.
The company's third quarter net income compares to net income of $9.3 million,
or earnings per diluted share of $0.15 in the same period of 2004. Net income
for the quarter, as expected, was reduced by costs associated with refinancing
the company's senior debt and expenses associated with a reorganization plan
announced on August 22, 2005.
GCI's third quarter 2005 revenues totaled $113.8 million, an increase
of 6.8 percent over the third quarter of 2004. GCI's third quarter 2005 revenues
increased 2.8 percent from the second quarter 2005 revenues of $110.7 million.
Third quarter 2005 earnings before interest, taxes, depreciation,
amortization and accretion (EBITDA), as adjusted, totaled $38.2 million. EBITDA
increased $1.5 million or 4.1 percent over $36.7 million in the third quarter of
2004. Third quarter 2005 EBITDA of $38.2 million compares to EBITDA of $36.4
million in the second quarter of 2005, an increase of $1.8 million or 4.9
percent over the second quarter of 2005. EBITDA for the third quarter of 2005 is
adjusted for the loss associated with the early termination of a capital lease
in the amount of $2.8 million and the out of period costs associated with the
company's plan of reorganization in the amount of $1.3 million.
For the third quarter of 2005, GCI met its revenue and EBITDA guidance.
The company expected revenues and EBITDA to exceed the second quarter results,
excluding the effects of any receivable recovery from MCI. GCI recorded $1.4
million in EBITDA relating to the use of the MCI credit during the quarter.
GCI anticipates revenues of $430 million to $440 million and EBITDA of
$145 million, as adjusted, including the expected recovery of the remaining MCI
receivable, for the year 2005.
"The third quarter results show that we continue to operate on our
plan," said Ron Duncan, GCI President. "We met our financial goals as expected,
but more importantly we announced a plan of reorganization that we believe will
streamline our organization, significantly increase our ability to focus on our
customers and reduce our cost levels. The plan resulted in workforce reductions
that, while painful from a personal perspective, were logical and necessary to
position the company for continued growth."
Highlights
o Long-distance billable minutes increased 21.2 percent to 376.6 million
minutes for the third quarter as compared to the same quarter of 2004,
and increased 8.3 percent sequentially.
o Cable customers, as expected, decreased seasonally by 993 subscribers
during the period and average revenue per equivalent basic subscriber
grew to $82.01 per month. Revenue generating units (RGUs) for the
quarter increased by 14.0 percent over the prior year.
o GCI has provisioned approximately 16,800 lines on its Digital Local
Phone Service (DLPS) facilities at the end of the third quarter. The
company is behind in its deployment schedule but the rate of
installations increased during the quarter. GCI expects to have between
22,000 and 24,000 lines deployed on its own facilities by the end of
2005.
o During the third quarter and through October 2005, GCI repurchased
427,000 shares of its Class A Common shares at an average price of
$9.82 per share. The company has repurchased more than 2,067,000 shares
year to date and through October 2005 at an average price of $9.09 per
share. Since the plan inception in September 2004, GCI has repurchased
6,177,000 Class A Common shares at an average price of $8.67 per share
and retired $10 million face value of Series C Preferred Stock.
Long Distance Results
For the third quarter of 2005, long distance revenues totaled $67.6
million as compared to revenues of $63.2 million in the third quarter of 2004
and $64.2 million in the second quarter of 2005. The increase in revenues is
primarily attributable to an increase in minutes sold to other carriers.
Long distance EBITDA, as adjusted, for the third quarter of 2005
totaled $24.4 million and was relatively unchanged from the third quarter of
2004. Long distance EBITDA for the third quarter of 2005 was up $2.4 million
sequentially, an increase of 10.9 percent, from $22.0 million in the second
quarter of 2005. Long distance EBITDA included MCI bad debt recoveries of $1.4
million in the third quarter of 2005, $1.1 million in the third quarter of 2004
and $1.0 million in the second quarter of 2005. The increase in EBITDA for the
third quarter of 2005 is primarily due to an increase in minutes carried on the
network.
Total minutes-of-use were up 21.2 percent in the third quarter of 2005
when compared to the third quarter of 2004. Minutes-of-use are up 8.3 percent
compared to the second quarter of 2005.
Prior to the billing system conversion on September 1, 2005, the number
of billed long distance customers totaled 91,500, an increase of 1.3 percent
from 90,300 at the end of the third quarter of 2004. Billed long distance
customers increased slightly from 91,300 at the end of the second quarter of
2005.
Cable Television Results
Cable television revenues for the third quarter increased 4.0 percent
to $26.2 million from $25.2 million in the third quarter of 2004, and were
relatively unchanged from $26.3 million in the second quarter of 2005. EBITDA,
as adjusted, of $10.6 million for the third quarter of 2005 was relatively
unchanged from the third quarter of 2004, and decreased $0.4 million when
compared to $11.0 million in the second quarter of 2005. The year-over-year
increase in revenues is primarily due to the sales of new video and cable modem
services. The steady EBITDA in the third quarter, when compared to the prior
year, is due to more subscribers and higher average revenue per subscriber
offset by increasing programming costs, an increase in direct operating costs
and costs associated with the reorganization. The decrease in EBITDA
sequentially is due in part to fewer subscribers and an increase in direct
operating costs and costs associated with the reorganization.
Gross margins in the third quarter of 2005, as a percentage of
revenues, decreased by 100 basis points from the third quarter of 2004 and
increased by 40 basis points sequentially. The decrease in gross margin from the
prior year is primarily due to increasing programming and copyright costs.
As of September 30, 2005, the company's cable television operations
passed 213,146 homes and served 136,435 subscribers (106,551 equivalent basic
subscribers). For the third quarter, average revenue per equivalent basic
subscriber was $82.01, an increase of 3.3 percent when compared to third quarter
2004 average revenue of $79.36. Average revenue is up slightly, from $81.75,
from the second quarter of 2005. The company, as expected, experienced a
seasonal decrease of 993 subscribers from the second quarter of 2005. The
decrease in subscribers for the third quarter of 2005 compares to a decrease of
915 subscribers in the third quarter of 2004.
Eighty percent of GCI's basic cable subscribers receive service through
a digital set-top box. More than 98 percent of the set top boxes deployed in
GCI's systems are digital and 51,265 customers purchase additional special
interest programming through a digital tier. GCI offers 14 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 34.8 percent of homes passed and 62 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
nine-month periods ending September 30, 2005 and 2004 follow (amounts in
thousands):
2005 2004
-------------- -------------
Customer premise equipment $ 12,330 12,136
Upgrade/rebuild 10,291 6,516
Line extensions 2,620 517
Scalable infrastructure 2,315 3,782
Support capital 685 1,013
Commercial 270 348
-------------- -------------
Sub-total 28,511 24,312
Other capital expenditures 37,327 58,498
-------------- -------------
Total capital expenditures $ 65,838 82,810
============== =============
At September 30, 2005 and 2004, GCI's cable business had 124,300 and
122,100 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 September 30, 2005 and 2004, GCI's cable business had 227,400 and
199,400 revenue generating units, respectively. The increase in the revenue
generating units of 6,900 and 28,000 from June 30, 2005 and September 30, 2004,
respectively, is due to an increase in the number of cable modem and 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 third quarter of 2005, local telephone service revenues totaled
$12.5 million, an increase of 8.7 percent, when compared to $11.5 million in the
third quarter of 2004. Revenue was down $0.2 million or 1.6 percent from $12.7
million in the second quarter of 2005. The sequential revenue decrease is
attributable to a USF revenue accrual recorded in the second quarter of 2005.
In the third quarter, local services generated EBITDA, as adjusted, of
$0.0 million, an improvement of $0.8 million over the $(0.8) million of EBITDA
in the third quarter of 2004. The third quarter EBITDA of $0.0 million compares
to EBITDA of $0.4 million in the second quarter of 2005. The sequential decrease
in EBITDA is due in part to lower universal service fund revenues recorded for
the quarter and the restructuring charge.
The rates paid by GCI to lease loops and UNE access elements were
approximately 25 percent higher during the third quarter of 2005 as compared to
the third quarter of 2004. This resulted primarily from a rate increase granted
by state regulators that took effect at the beginning of 2005. GCI estimates
that conversion of customers from leased facilities to its own network has more
than offset all of the impact of this rate increase in the third quarter of 2005
and is now providing approximately $0.6 million in additional annualized savings
of leased loop costs.
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 16,800 customers completely on its
DLPS facilities at the end of the third quarter of 2005. The company is behind
in its deployment schedule but the rate of installations increased during the
quarter. GCI expects to have between 22,000 and 24,000 lines deployed on its own
facilities by the end of 2005.
At the end of the third quarter of 2005, GCI provided local service to
approximately 111,900 access lines statewide. This represents an increase of
approximately 1,500 access lines when compared to the third quarter of 2004.
Access lines for the third quarter are relatively unchanged from reported access
lines at the end of the second quarter of 2005. The company estimates it
maintains a 25 percent share of the total access line market in Alaska.
Approximately 86 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 third quarter of 2005 totaled $7.6
million. Revenues were up 13.4 percent as compared to third quarter 2004
revenues of $6.7 million and 1.3 percent as compared to the prior quarter
revenue of $7.5 million. EBITDA, as adjusted, for the third quarter of 2005
totaled $3.2 million, an improvement of $0.8 million year-over-year and an
improvement of $0.2 million from the second quarter of 2005. Third quarter 2004
EBITDA was $2.4 million and second 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 third quarter of 2005, GCI had 74,200 cable modem
customers, an increase of 13,000 and 4,000 customers, or 21.2 percent from the
third quarter of 2004 and 5.7 percent from the second quarter of 2005,
respectively. GCI's Internet subscribers at the end of the third quarter of 2005
totaled 93,000. Dial-up access customers decreased by 8,900 as a result of
customers migrating to cable modems and due to a non-revenue affecting database
clean-up of "Free Net" customers.
Total cable modem revenues for the third quarter of 2005 increased 0.7
percent when compared to the second quarter of 2005 and increased 9.7 percent
year-over-year. At the end of the third quarter of 2005 GCI's average revenue
per cable modem (ARPM) was $30.48 as compared to $30.87 at the end of the second
quarter of 2005 and $33.51 at the end of the third 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 purchasing GCI's discounted cable modem products.
Other Items
During the third quarter of 2005 GCI's capital expenditures totaled
$18.1 million as compared to $23.3 million in the second quarter of 2005.
GCI will hold a conference call to discuss the quarter's results on
Thursday, November 10, 2005 beginning at 2 p.m. (Eastern.)To access the briefing
on November 10, dial 888-455-3612 (international callers should dial
210-234-0000) 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 800-239-4561, access code 7461
(international callers should dial 402-220-9697.)
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 and Termination of Capital Lease and Restructuring
Charge to be paid in future periods during the three and nine months ended
September 30, 2005 and 2004.