Alaska Communications Systems posts $75.6 million third-quarter loss
ANCHORAGE - Alaska Communications Systems Inc. recorded a huge loss of $75.6 million in the third quarter, compared to a $7 million loss the same quarter of last year.
At the same time, total revenue for the Anchorage-based telecommunications company rose slightly, totaling $78.2 million, compared with $75.1 million in the third quarter of 2002.
ACS recently saw its five-year contract to overhaul the state government's telecommunications systems collapse. Company executives also blame the drop on a sharp decline in the value of some assets.
ACS executives blamed the quarterly results on a series of mostly noncash charges totaling more than $83 million. Of that, $42.2 million was a noncash write-off of the value of assets, including contracts it had to use fiber-optic lines owned by General Communication Inc. and Neptune Communications.
"We purchased those assets in 1999, when the value of fiber was much higher, not only in Alaska but in the country as a whole," said finance chief Kevin Hemenway.
He said part of the write-down also was to account for the fallen value of the network and service centers ACS was building to support the state's telecom systems.
The state contract provided for ACS to take over all aspects of the state's telecommunications and build an advanced communications network, using the same technology that powers the Internet, on which voice, data and video services could be delivered simultaneously on the same line.
ACS had spent some $20 million building the network by the time the state nixed the contract in mid-September. Without the state as an anchor tenant, the profit potential of those assets did not match the value ACS had assigned them on its financial books, Hemenway said.
ACS had to record the charges under new U.S. accounting rules that require companies to acknowledge the fallen market value of certain assets and investments.
Last March, the company reported a $185 million loss for 2002, which it blamed mostly on a $170 million noncash expense acknowledging the fallen market values of the Alaska local phone companies it bought in 1999, creating what is now ACS.
Despite the huge losses on paper, Hemenway said the company remains financially sound.
"These losses were fundamentally paid for in the past," he said.
The company sold its Yellow Pages business and borrowed extra money when it refinanced debt this year to improve its financial condition. The company ended the quarter with roughly $121 million in cash and a $50 million line of credit.
Liane Pelletier, ACS' new chief executive, said apart from the charges the quarter as a whole was a good one, with each of the company's four business units logging revenue growth compared with the same quarter last year.