ACS to cut almost 90 jobs due to 2nd-quarter earnings

Posted: Friday, July 26, 2002

ANCHORAGE - Alaska Communications Systems says it posted disappointing second-quarter earnings and is beginning plans to restructure, including phasing out close to 90 jobs.

ACS posted a $3.6 million profit in the second quarter, compared with a $2.8 million loss a year ago. Revenue rose to $92.5 million from $81.5 million in the same period last year. But the company said its cash-flow measure was well-below what it had predicted.

"We were disappointed in our results for the quarter," company president Wes Carson said.

To help cover costs, ACS plans to reduce its work force of 1,200 employees by 7 percent, or between 80 and 90 jobs, Carson said.

All but about 10 positions already have been phased out through attrition and early retirement, said Mary Ann Pease, vice president of corporate communications for ACS. None of the layoffs will take place in Juneau. The downsizing is expected to produce $6 million in savings, she said.

The cash-flow disappointment comes from what ACS called its normalized EBITDA - earnings before interest, taxes, depreciation and amortization - are subtracted. This totaled $27.1 million, "significantly below" the company's more recent performances in the $32 million range, said Kevin P. Hemenway, chief financial officer for the company.

The company also reported a one-time, non-cash expense of $105 million, due to new accounting rules. That charge resulted in a $109 million loss for the first six months of the year.

Carson also cited delays in rolling out new telecom services for the second-quarter performance.

The company has a $92 million contract to provide a variety of telephone and computer services to state government. Because of the delays, the company received only $800,000 in revenue from the state contract in the second quarter when it was expecting $1.5 million.

The cost to ACS of ramping up the new system totaled $1.8 million, the company said.

Richard Klugman, an analyst with Jeffries & Co. in New York, said a tough telecom environment nationwide, combined with stiff local phone service competition from Anchorage-based General Communication Inc., have hurt ACS.

Empire reporter Julia O'Malley contributed to this report.

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