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TMCNet:  GCI Reports First Quarter 2013 Financial Results

[May 01, 2013]

GCI Reports First Quarter 2013 Financial Results

ANCHORAGE, Alaska, May 1, 2013 /PRNewswire via COMTEX/ -- General Communication, Inc. ("GCI") (NASDAQ:GNCMA) today reported its first quarter 2013 results with revenues increasing to $186.2 million over revenues of $171.9 million in the first quarter of 2012, an increase of $14.3 million or 8.3 percent. Adjusted EBITDA increased $3.8 million or 7.0 percent over the first quarter of 2012 EBITDA of $54.8 million.

GCI's first quarter 2013 net income totaled $3.2 million or earnings per diluted share of $0.08 and compares to net income of $1.4 million or earnings per diluted share of $0.03 for the first quarter of 2012.

First quarter of 2013 revenues increased $2.5 million or 1.4 percent over revenues of $183.7 million in the fourth quarter of 2012. Adjusted EBITDA increased $5.5 million or 10.4 percent over adjusted EBITDA of $53.1 million in the fourth quarter of 2012.

"GCI had a good first quarter," said Ron Duncan, GCI president. "Typically the first quarter is the slowest one of the year. We are off to a good start and I am pleased with both the customer metrics and financial performance." "Yesterday we completed the refinancing of our senior credit facility, taking another step in satisfying the remaining conditions to close the AWN transaction." The AWN transaction is expected to close once all requisite regulatory approvals are received. The timing of such closing during the quarter will impact GCI's 2013 results. GCI will issue guidance on consolidated revenues, EBITDA and AWN's expected preferred distributions for 2013 after the AWN transaction has been approved and completed.

Highlights -- Managed broadband revenues for the first quarter of 2013 totaled $28.0 million, an increase of $3.5 million or 14.1 percent over the first quarter of 2012 and a decrease of $0.5 million on a sequential basis. The year-over-year growth is due to continuing investment in terrestrial broadband facilities in rural Alaska and success in acquiring additional telemedicine and distance learning customers.

-- GCI repurchased 764,380 shares of its Class A common stock in the first quarter of 2013 at an average price per share of $8.64. GCI is authorized to repurchase $99.7 million of its shares depending on company performance, market conditions, liquidity, and subject to board oversight. At the end of the first quarter of 2013, GCI had approximately 41.5 million shares outstanding.

-- GCI received payment of $2.0 million for IRU capacity sold to a large carrier customer in the first quarter of 2013. The IRU sale is treated as deferred revenue and will be recognized into income over the expected life of the capacity.

-- GCI had 130,400 consumer and commercial cable modem customers at the end of the first quarter of 2013, an increase of 8,400 over the end of the first quarter of 2012 and an increase of 1,500 on a sequential basis. Average monthly revenue per cable modem for the first quarter of 2013 was $66.53, an increase of $5.05 over $61.48 posted for the prior year and $0.76 over $65.77 reported for the fourth quarter of 2012.

-- On April 30, 2013, GCI Holdings, Inc., a wholly owned subsidiary of GCI, closed on a $390 million senior secured credit facility with Credit Agricole Corporate and Investment Bank, as administrative agent, Union Bank, N.A., as syndication agent, and SunTrust Bank as documentation agent, and as co-lead arrangers and joint book runners. The pro-rata bank facility provides up to $240.0 million of delayed draw term loans and a $150.0 million revolving credit facility. The interest rate under the loan agreement is LIBOR plus a margin of 2 percent to 3 percent dependent upon the total leverage ratio. The facility will mature on April 30, 2018.

-- In part, in anticipation of closing the AWN transaction, we have changed our segment reporting methodology. Effective the first of this year, we are now organized in two segments, including wireless and wireline. The wireless segment's revenue is derived from wholesale wireless services, which includes revenue that was previously reported in the historical consumer, network access, and commercial segments. The wireline segment's revenue is from all of our other services and products and includes three major customer groups: consumer, business services and managed broadband. The consumer customer group includes the historical consumer segment, the business services customer group includes the historical commercial and network access segments, and the managed broadband customer group includes the historical managed broadband and regulated operations segments. The comparative figures for 2012 have been recast to be consistent with the new segment presentation.

Wireless Wireless revenues of $33.8 million, for the first quarter of 2013, increased $4.4 million or 14.9 percent when compared to the prior year quarter and $1.2 million or 3.5 percent on a sequential basis. The increase is primarily due to increases in roaming revenue and retail non-Lifeline wireless subscribers. GCI served 141,600 wireless subscribers at the end of the first quarter 2013.

GCI served 108,900 postpaid and pre-paid non-Lifeline wireless subscribers at the end of the first quarter of 2013, an increase of 10,300 over the end of the prior year quarter and an increase of 1,300 wireless customers sequentially.

GCI served 32,700 Lifeline customers at the end of the first quarter of 2013, a decrease of 8,700 when compared to the prior year quarter and an increase of 300 on a sequential basis.

Wireline - Consumer Consumer revenues of $68.1 million for the first quarter of 2013 increased 2.0 percent over the first quarter of 2012 and were steady with the fourth quarter of 2012. An increase in data and wireless revenues offset the decreases in voice and video revenues when compared to the first quarter of 2012.

Consumer voice revenues of $9.5 million decreased $1.7 million when compared to the prior year quarter and were steady with the fourth quarter of 2012 as customers continue to abandon wireline service and shift to wireless. Consumer local access lines in service at the end of the first quarter of 2013 totaled 68,000, a decrease of 8,100 lines from the first quarter of 2012 and 1,700 lines from the fourth quarter of 2012.

Consumer video revenues of $28.0 million decreased $1.1 million from the first quarter of 2012 and $0.7 million from the fourth quarter of 2012. The decrease is primarily due to a decline in basic video subscribers. Consumer basic video subscribers totaled 122,000 at the end of the first quarter of 2013, a decrease of 2,200 subscribers from the first quarter of 2012 and 300 subscribers from the fourth quarter of 2012. GCI has had a steady increase in the number of customers who subscribe only to cable modem service. These customers may be purchasing video programming from other sources including over-the-top providers such as Netflix and Hulu.

Consumer data revenues of $24.1 million increased $3.6 million or 17.6 percent over the first quarter of 2012 and $0.9 million or 4.1 percent over the fourth quarter of 2012. The increase in consumer data revenues is due to an increase in cable modem customers and increasing monthly usage. GCI added 6,300 consumer cable modem customers over the first quarter of 2012 and cable modem customer counts increased by 1,400 on a sequential basis.

Consumer wireless revenues of $6.5 million increased $0.5 million or 8.3 percent from the first quarter of 2012. Wireless revenues decreased $0.5 million when compared to the fourth quarter of 2012.

Wireline - Business Services Business services revenues of $56.3 million increased $5.1 million or 10.1 percent over the first quarter of 2012 and $2.2 million or 4.1 percent sequentially.

Voice revenues of $12.3 million were steady with the first quarter of 2012 and increased $0.8 million or 6.7 percent sequentially.

Commercial data service revenues were $40.1 million in the first quarter of 2013, an increase of $5.0 million over the first quarter of 2012 and an increase of $1.7 million over the fourth quarter of 2012. Commercial data service revenues include both transport charges for data circuits, professional services which are time and materials charges for GCI on-site support of customer operations and data center revenues. As summarized in the table below, data transport charges of $23.6 million decreased by $1.2 million as compared to the first quarter of 2012, time and material charges for support activities increased by $6.1 million to $16.2 million and data center revenues increased by $0.1 million over the first quarter of 2012.

Millions $ Q1 2013 Q1 2012 Q4 2012 Data Transport Charges $23.6 $24.8 $24.3 Professional Services 16.2 10.1 13.8 Data Center Revenues 0.3 0.2 0.3 Total Data Revenues $40.1 $35.1 $38.4 Wireline - Managed Broadband Managed broadband revenues for the first quarter of 2013 totaled $28.0 million, an increase of $3.5 million or 14.1 percent over the first quarter of 2012 and a decrease of $0.5 million on a sequential basis. The year-over-year growth is due to continuing investment in terrestrial broadband facilities in rural Alaska and success in acquiring additional telemedicine and distance learning customers. GCI will complete the extension of its terrestrial broadband network to Nome by the end of this year and to Kotzebue by the end of 2014. The sequential decrease in revenues is due to fewer product sales in the first quarter of 2013.

Other Items SG&A expenses for the first quarter of 2013 totaled $64.5 million, an increase of $1.5 million or 2.5 percent as compared to $63.0 million for the first quarter of 2012. The increase is due to labor and related benefits and contract labor related to non-capitalizable network projects for our ConnectMD and SchoolAccess customers. As a percentage of revenues, SG&A expenses decreased to 34.7 percent in the first quarter of 2013 as compared to 36.6 percent in the prior year quarter.

GCI's first quarter 2013 capital expenditures totaled $29.3 million as compared to $26.6 million in the first quarter of 2012.

GCI will hold a conference call to discuss the quarter's results on Thursday, May 2, 2013 beginning at 2 p.m. (Eastern). To access the briefing on May 2, call the conference operator between 1:50-2:00 p.m. (Eastern Time) at 800-475-0222 (International callers should dial 1-517-308-9186) 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 800-967-7626, access code 7461 (International callers should dial 1-203-369-3097).

GCI is the largest telecommunications company in Alaska. GCI's cable plant, which provides broadband data services, video, and voice, passes 78 percent of Alaska households. GCI operates Alaska's most extensive terrestrial/subsea fiber optic network which connects not only Anchorage but also Fairbanks and Juneau/Southeast Alaska to the lower 48 states with a diversely routed, protected fiber network. GCI's TERRA-Southwest fiber/microwave system links 65 communities in the Bristol Bay and Yukon-Kuskokwim Delta to Anchorage bringing terrestrial broadband Internet access to the region for the first time. GCI's satellite network provides communications services to small towns and communities throughout rural Alaska. GCI's statewide mobile wireless network seamlessly links urban and rural Alaska.

A pioneer in bundled services, GCI is the top provider of data, video and voice services to Alaska consumers with a 70 percent share of the consumer broadband market. GCI is also the leading provider of communications services to enterprise customers, particularly large enterprise customers with complex data networking needs. More information about GCI can be found at www.gci.com.

The foregoing contains forward-looking statements regarding GCI'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 Forms 10-K and 10-Q filed with the Securities and Exchange Commission.

GENERAL COMMUNICATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Amounts in thousands) March 31, December 31, Assets 2013 2012 Current assets: Cash and cash equivalents $ 30,773 24,491 Receivables 163,999 150,436 Less allowance for doubtful receivables 2,890 3,215 Net receivables 161,109 147,221 Deferred income taxes 12,897 12,897 Prepaid expenses 10,720 8,441 Inventories 12,688 12,098 Other current assets 1,162 1,678 Total current assets 229,349 206,826 Property and equipment in service, net of depreciation 855,883 838,247 Construction in progress 73,514 94,418 Net property and equipment 929,397 932,665 Cable certificates 191,635 191,635 Goodwill 77,294 77,294 Wireless licenses 25,967 25,967 Restricted cash 26,766 30,933 Other intangible assets, net of amortization 15,939 16,560 Deferred loan and senior notes costs, net of amortization 10,774 11,189 Other assets 13,185 13,453 Total other assets 361,560 367,031 Total assets $1,520,306 1,506,522 (Continued) GENERAL COMMUNICATION, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) (Continued) (Amounts in thousands) March 31, December 31, Liabilities and Stockholders' Equity 2013 2012 Current liabilities: Current maturities of obligations under long-term debt and capital leases $ 8,092 7,923 Accounts payable 37,868 52,384 Deferred revenue 25,543 25,218 Accrued payroll and payroll related obligations 20,684 19,440 Accrued interest 21,508 6,786 Accrued liabilities 15,288 15,242 Subscriber deposits 1,482 1,366 Total current liabilities 130,465 128,359 Long-term debt, net 885,270 875,123 Obligations under capital leases, excluding current maturities 71,143 72,725 Obligation under capital lease due to related party, excluding current maturity 1,889 1,892 Deferred income taxes 126,690 123,661 Long-term deferred revenue 91,078 89,815 Other liabilities 25,675 25,511 Total liabilities 1,332,210 1,317,086 Commitments and contingencies Stockholders' equity: Common stock (no par): Class A. Authorized 100,000 shares; issued 38,396 and 38,534 shares at March 31, 2013 and December 31, 2012, respectively; outstanding 38,297 and 38,357 shares at March 31, 2013 and December 31, 2012, respectively 16,598 22,703 Class B. Authorized 10,000 shares; issued and outstanding 3,167 and 3,169 shares at March 31, 2013 and December 31, 2012, respectively; convertible on a share-per-share basis into Class A common stock 2,675 2,676 Less cost of 99 and 177 Class A common shares held in treasury at March 31, 2013 and December 31, 2012, respectively (906) (1,617) Paid-in capital 26,760 25,832 Retained earnings 110,828 107,584 Total General Communication, Inc. stockholders' equity 155,955 157,178 Non-controlling interests 32,141 32,258 Total stockholders' equity 188,096 189,436 Total liabilities and stockholders' equity $1,520,306 1,506,522 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES CONSOLIDATED INCOME STATEMENTS (Unaudited) Three Months Ended March 31, (Amounts in thousands, except per share amounts) 2013 2012 Revenues $186,216 171,907 Cost of goods sold (exclusive of depreciation and amortization shown separately below) 64,610 56,860 Selling, general and administrative expenses 64,547 62,982 Depreciation and amortization expense 33,999 32,380 Operating income 23,060 19,685 Other expense: Interest expense (including amortization of deferred loan fees) (16,904) (17,155) Other - (129) Other expense (16,904) (17,284) Income before income tax expense 6,156 2,401 Income tax expense 3,029 1,149 Net income 3,127 1,252 Net loss attributable to non-controlling interests 117 177 Net income attributable to General Communication, Inc. $ 3,244 1,429 Basic net income attributable to General Communication, Inc. common stockholders per Class A common share $ 0.08 0.03 Basic net income attributable to General Communication, Inc. common stockholders per Class B common share $ 0.08 0.03 Diluted net income attributable to General Communication, Inc. common stockholders per Class A common share $ 0.08 0.03 Diluted net income attributable to General Communication, Inc. common stockholders per Class B common share $ 0.08 0.03 Common shares used to calculate Class A basic EPS 38,264 38,741 Common shares used to calculate Class A diluted EPS 41,695 42,342 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES SUPPLEMENTAL SCHEDULES (Unaudited) (Amounts in thousands) First Quarter 2013 First Quarter 2012 Wireline Segment Wireline Segment Wireless Business Managed Wireless Business Managed Segment Consumer Services Broadband Sub-total Total Segment Consumer Services Broadband Sub-total Total Revenues Wireless $33,837 6,546 679 - 7,225 41,062 $29,444 6,046 663 - 6,709 36,153 Data - 24,056 40,136 22,680 86,872 86,872 - 20,449 35,133 19,029 74,611 74,611 Video - 27,961 3,125 - 31,086 31,086 - 29,022 3,120 - 32,142 32,142 Voice - 9,530 12,327 5,339 27,196 27,196 - 11,260 12,204 5,537 29,001 29,001 Total 33,837 68,093 56,267 28,019 152,379 186,216 29,444 66,777 51,120 24,566 142,463 171,907 Cost of goods sold 14,412 20,190 24,536 5,472 50,198 64,610 12,571 18,490 19,280 6,519 44,289 56,860 Contribution 19,425 47,903 31,731 22,547 102,181 121,606 16,873 48,287 31,840 18,047 98,174 115,047 Less SG&A 4,417 31,306 16,083 12,741 60,130 64,547 3,864 33,687 16,593 8,838 59,118 62,982 Less Other expense - - - (4) (4) (4) - - - 131 131 131 EBITDA 15,008 16,597 15,648 9,810 42,055 57,063 13,009 14,600 15,247 9,078 38,925 51,934 Add share-based compensation 104 514 407 234 1,155 1,259 - 884 612 234 1,730 1,730 Add accretion 77 24 16 10 50 127 64 69 42 13 124 188 Add loss from noncontrolling interests - - - 200 200 200 - - - 177 177 177 Add non-cash contribution - - - - - - - 444 271 85 800 800 Adjusted EBITDA $15,189 17,135 16,071 10,254 43,460 58,649 $13,073 15,997 16,172 9,587 41,756 54,829 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES SUPPLEMENTAL SCHEDULES (Unaudited) (Amounts in thousands) First Quarter 2013 Fourth Quarter 2012 Wireline Segment Wireline Segment Wireless Business Managed Wireless Business Managed Segment Consumer Services Broadband Sub-total Total Segment Consumer Services Broadband Sub-total Total Revenues Wireless $33,837 6,546 679 - 7,225 41,062 $32,679 7,075 739 - 7,814 40,493 Data - 24,056 40,136 22,680 86,872 86,872 - 23,115 38,407 23,131 84,653 84,653 Video - 27,961 3,125 - 31,086 31,086 - 28,656 3,343 - 31,999 31,999 Voice - 9,530 12,327 5,339 27,196 27,196 - 9,613 11,558 5,360 26,531 26,531 Total 33,837 68,093 56,267 28,019 152,379 186,216 32,679 68,459 54,047 28,491 150,997 183,676 Cost of goods sold 14,412 20,190 24,536 5,472 50,198 64,610 16,933 22,102 22,096 8,683 52,881 69,814 Contribution 19,425 47,903 31,731 22,547 102,181 121,606 15,746 46,357 31,951 19,808 98,116 113,862 Less SG&A 4,417 31,306 16,083 12,741 60,130 64,547 3,878 32,993 16,298 8,821 58,112 61,990 Less Other expense - - - (4) (4) (4) - - - 115 115 115 EBITDA 15,008 16,597 15,648 9,810 42,055 57,063 11,868 13,364 15,653 10,872 39,889 51,757 Add share-based compensation 104 514 407 234 1,155 1,259 - 539 386 125 1,050 1,050 Add accretion 77 24 16 10 50 127 77 (62) (37) (11) (110) (33) Add loss from noncontrolling interests - - - 200 200 200 - - - 336 336 336 Adjusted EBITDA $15,189 17,135 16,071 10,254 43,460 58,649 $11,945 13,841 16,002 11,322 41,165 53,110 GENERAL COMMUNICATION, INC. AND SUBSIDIARIES KEY PERFORMANCE INDICATORS (Unaudited) March 31, 2013 March 31, 2013 as compared to as compared to March 31, March 31, December 31, March 31, December 31, March 31, December 31, 2013 2012 2012 2012 2012 2012 2012 Wireless segment Lifeline lines in service 32,700 41,400 32,400 (8,700) 300 -21.0% 0.9% Non-Lifeline lines in service 108,900 98,600 107,600 10,300 1,300 10.4% 1.2% Total lines in service 141,600 140,000 140,000 1,600 1,600 1.1% 1.1% Wireline segment Consumer Data Cable modem subscribers 117,000 110,700 115,600 6,300 1,400 5.7% 1.2% Video Basic subscribers 122,000 124,200 122,300 (2,200) (300) -1.8% -0.2% Digital programming tier subscribers 72,200 74,600 72,500 (2,400) (300) -3.2% -0.4% HD/DVR converter boxes 90,300 90,300 90,400 - (100) 0.0% -0.1% Homes passed 244,800 242,200 243,600 2,600 1,200 1.1% 0.5% Voice Local access lines in service 68,000 76,100 69,700 (8,100) (1,700) -10.6% -2.4% Local access lines in service on GCI facilities 63,300 70,700 64,900 (7,400) (1,600) -10.5% -2.5% Business Services Data Cable modem subscribers 13,400 11,300 13,300 2,100 100 18.6% 0.8% Video Hotels and mini-headend 16,700 16,100 15,800 600 900 3.7% 5.7% subscribers Basic subscribers 1,900 1,900 1,900 - - 0.0% 0.0% Total basic subscribers 18,600 18,000 17,700 600 900 3.3% 5.1% Voice Local access lines in service 50,400 51,900 51,600 (1,500) (1,200) -2.9% -2.3% Local access lines in service on GCI facilities 30,400 29,900 30,800 500 (400) 1.7% -1.3% Managed Broadband Voice: Local access lines in service 8,100 8,900 8,300 (800) (200) -9.0% -2.4% March 31, 2013 March 31, 2013 Three Months Ended as Compared to as Compared to March 31, March 31, December 31, March 31, December 31, March 31, December 31, 2013 2012 2012 2012 2012 2012 2012 Wireless segment Average monthly revenue per subscriber $ 68.58 $ 66.32 $ 68.21 $ 2.26 $ 0.37 3.4% 0.5% Wireline segment Consumer Data Average monthly revenue per cable modem subscriber $ 66.53 $ 61.48 $ 65.77 $ 5.05 $ 0.76 8.2% 1.2% Video Average monthly revenue per subscriber $ 76.45 $ 77.72 $ 77.99 $ (1.27) $ (1.54) -1.6% -2.0% Total Voice Long-distance minutes carried (in millions) 228.5 238.3 227.2 (9.8) 1.3 -4.1% 0.6% General Communication, Inc.

Non-GAAP Financial Reconciliation Schedule (Unaudited, Amounts in Millions) Three Months Ended March 31, March 31, December 31, 2013 2012 2012 Net income $ 3.1 1.3 0.6 Income tax expense 3.1 1.1 1.7 Income before income tax expense 6.2 2.4 2.3 Other expense: Interest expense (including amortization of deferred loan fees) 16.9 17.2 16.8 Other - 0.1 0.2 Other expense 16.9 17.3 17.0 Operating income 23.1 19.7 19.3 Depreciation and amortization expense 34.0 32.3 32.6 Equity investment - (0.1) (0.1) EBITDA (Note 2) 57.1 51.9 51.8 Share-based compensation 1.2 1.7 1.0 Accretion 0.1 0.2 - Non-controlling interests 0.2 0.2 0.3 Non-cash contribution adjustment - 0.8 - Adjusted EBITDA (Note 1) $ 58.6 54.8 53.1 Notes: (1) EBITDA (as defined in Note 2 below) before deducting share-based compensation, accretion expense, and net loss attributable to non-controlling interests and non-cash contribution adjustment.

(2) Earnings Before Interest, Taxes, Depreciation and Amortization is the sum of Net Income, Interest Expense (including Amortization of Deferred Loan Fees), Interest Income, Income Tax Expense, and Depreciation and Amortization 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.

Source: GCI SOURCE General Communication, Inc.

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