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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1995
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from to
Commission File No. 0-15279
GENERAL COMMUNICATION, INC.
---------------------------
(Exact name of registrant as specified in its charter)
ALASKA 92-0072737
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2550 Denali Street Suite 1000 Anchorage, Alaska 99503
---------------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (907) 265-5600
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Class A common stock Class B common stock
-------------------- --------------------
(Title of class) (Title of class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No .
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, computed by reference to the average bid and asked prices of such
stock as of the close of trading on February 29, 1996 was approximately
$38,439,000.
The number of shares outstanding of the registrant's common stock as of February
29, 1996, was:
Class A common stock - 19,681,207 shares; and
Class B common stock - 4,175,434 shares.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of the registrant's definitive Proxy Statement to be filed
pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended,
in connection with the Annual Meeting of Stockholders of the registrant to be
held on or after June 5, 1996 are incorporated by reference into Part III of
this report.
GENERAL COMMUNICATION, INC.
1995 ANNUAL REPORT ON FORM 10-K
TABLE OF CONTENTS
PAGE
PART I.........................................................................1
Item 1. BUSINESS.......................................................1
Item 2. PROPERTIES....................................................13
Item 3. LEGAL PROCEEDINGS.............................................14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...........14
PART II.......................................................................15
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS...........................................15
Item 6. SELECTED FINANCIAL DATA.......................................16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS...........................17
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA..........................................................22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE...........................45
PART III
Incorporated by reference from the Company's Proxy Statement for its
1996 Annual Shareholders' Meeting
PART IV.......................................................................46
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K.......................................46
PART I
Item 1. BUSINESS
Background and Description of Business
General Communication, Inc. ("GCI") is an Alaska-based corporation that
supplies common-carrier long-distance and other telecommunication products and
services to residential, commercial and government users. Telecommunication
services that GCI and its subsidiaries ("the Company") provides are carried over
facilities that are owned by the Company or are leased from other companies.
GCI began commercial operations in November 1982 in competition with the
former monopoly carrier, Alascom, Inc. ("Alascom"). In many respects, GCI's
entry into the market parallels that of MCI Telecommunications Corporation
("MCI") which, in the contiguous United States, entered the market to compete
with the former monopoly carrier American Telephone and Telegraph Company
("AT&T"). GCI followed in MCI's footsteps approximately a decade later.
MCI acquired an approximate 30 percent ownership interest in GCI during 1993.
Industry
The U.S. telecommunication industry remains in a state of flux, with
companies faced with the challenges of new technologies and rapid changes in the
competitive and regulatory environment. Growing competition has resulted in
lower prices, which should stimulate ongoing volume gains, even in the heavily
saturated U.S. market. The policies of President Clinton's Administration, the
Telecommunications Act of 1996, emerging technologies, and a blurring of
distinctions among industry sectors all portend new revenue possibilities for
the industry. Where the focus was once on regulation of a closely guarded
monopoly, regulators are now ushering the telecommunication industry into an era
of competition and reduced regulation. Decisions made now will influence the
industry's future in ways difficult to foresee, as technology continues to
catapult the industry forward.
What once was a $94 billion telephone service industry before divestiture of
the Bell System in 1984 has evolved into an estimated $200 billion-plus
communications marketplace, comprised of the following:
(1) $40 billion -- digitally priced long distance services;
(2) $97 billion -- analog-priced local services;
(3) $25 billion -- analog-priced cable TV services;
(4) $15 billion -- analog-priced cellular services;
(5) $4 billion -- digitally priced messaging/paging services; and
(6) $20 billion -- digital private data and value-added services.
Industry analysts in trade journals estimate that long distance revenues
received by U.S. based interexchange carriers for public network services will
grow to $77 billion in the year 2000 at a 5 percent compound annual rate.
International revenues for these carriers are expected to continue to pace
market growth, growing more than twice as fast as the mature domestic market,
growing to $16.5 billion in 2000 at a better than 10 percent compound annual
rate. International revenues for these carriers are roughly divided into thirds
in terms of the region of the world from which they are generated: the Western
Hemisphere, Europe and the remainder of the world, with the latter growing most
rapidly, paced by traffic with the Pacific Rim.
Expanding voice markets such as computer-telephony integration, and
wireline and wireless PBXs, are expected to drive growth in the
telecommunications market in 1996. These newer market segments contributed to a
15 percent overall increase in U.S. telecommunications revenues. The revenue
growth is attributed to businesses' greater need for communications equipment,
software and
1
services. Telecommuting, Private Branch Exchanges ("PBXs") and internetworking
are among the market forces pushing the growth.
Trade journal analysts predicted that sales of wireless PBXs--systems that
interface a wireless controller with an existing PBX--would grow from $394
million in 1995 to $3.3 billion in 1998. Wireless PBXs give employees wireless
capabilities at their desktops. Improvements in high-speed wireline networking,
such as building asynchronous transfer mode local area networks, also are
allowing powerful messaging capabilities to connect workers. Video conferencing
and unified messaging are two applications analysts expect to become popular in
1996. Data communications and internetworking revenue increased 19.4 percent
last year as a result of added demand for enterprise networking.
Sudden, widespread use of the Internet caused the modem market to grow by
50 percent, while integrated services digital network ("ISDN") lines became both
widely available and desired, expanding 126 percent last year. Industry players
expect the Internet phenomenon to spark growing interest in ISDN. Major vendors
now are looking at linking voice mail systems through use of internetworking
techniques over the Internet, such as standardized protocols and messaging
features similar to E-mail.
Communication sectors not traditionally competitive with telephone
companies, such as cable and wireless services, are projected to grow an average
10.9% per year. This compares with the 3% average per year growth in revenue for
traditional local telephone service from 1993 to 1998. Cable TV companies may
gain a competitive advantage through marketing of cable modems. Computer-based
services likely will be a strong market for cable TV firms. Cable modems may
give them the ability to offer a competitive alternative to the second telephone
line into the home, providing high-speed access to data services. Content is
expected be the ultimate driver of Cable TV profits and may determine which
companies gain the most market share.
The emergence of new services -- especially digital cellular radio,
personal communications services ("PCS"), interactive TV, and video dial tone --
has created opportunities for significant growth in local loop services. These
opportunities are also laying the foundation for a restructuring of the newly
competitive local loop services market. Not only are competitors entering the
core business of the local telephone companies, but they are beginning to pursue
the fast-growing markets that previously were closed to them, such as consumer
video. Competition between telephony, cable TV, and PCS markets will
increasingly overlap in the 1990s. As opportunities for new wireless and video
services arise and competitors expand beyond their traditional markets,
competition between existing telephone companies and these major industries is
expected to intensify.
Future mergers are expected throughout the telecommunications industry
aimed at creating geographic clustering and expansion of the breadth of services
offered to customers (i.e., local, long distance, cable and wireless). In
addition, interexchange carriers are poised to enter the local service market.
At the core of several of currently existing ventures are the integration of
wireless and wireline technology. The ventures plan to provide services in which
customers would use a phone similar to a portable cordless device linked to the
existing wired infrastructure of the partners. When customers leave their homes
or offices, the phones would become mobile and would be serviced through the
wireless network that would be created by the venture. Moreover, the venture's
local telephone services will be packaged with cable and multimedia services,
long-distance service and entertainment services. Customers will be able to
select the mix of services and products that fit their needs. Increased
competition in 1996 may result in fewer players providing more expanded services
- -- growth by acquisition will be a key component of the survivors' strategy.
On September, 23, 1993, the Federal Communications Commission ("FCC")
adopted a broad set of rules for the licensing of PCS. The FCC concluded an
auction of spectrum to be used for the provision of PCS in March, 1995. PCS
systems are expected to make an individual carrying a pocket-
2
sized phone available at the same number, whether at home, at work or traveling.
Unlike cellular systems, a caller using PCS will not need to know the location
of the person he or she is trying to reach. The difference in the way PCS
systems are configured as compared to cellular systems means that PCS systems
could be less costly to operate than cellular systems and therefore less
expensive for users. Rapid growth of cellular telephone services and the
anticipation of PCS services has generated substantial interest in wireless
communications. The FCC's efforts are expected to encourage reduction of
communication prices and put the technology within financial reach of most
American homes and businesses.
It is predicted that PCS will grow rapidly, reaching 17.9 million
subscribers by 2005. By then, PCS services will be generating annual revenues of
nearly $8 billion. PCS's success is expected to occur even with competition from
other wireless services such as cellular, paging and enhanced specialized mobile
radio. Increases in services are expected to be fueled by declining usage rates
and expanded coverage.
PCS licensees will be required to offer service to at least one-third of
their market population within five years or risk losing their licenses. Service
must be extended to two-thirds of the population within seven years and must
reach 90% population coverage within 10 years.
The Telecommunications Act of 1996 ("Act") was signed into law Feb. 8,
1996. It is expected to have a dramatic impact on the telecommunications
industry, resulting in even greater changes than the 1984 breakup of the Bell
System. Bell Operating Companies (BOCs) can immediately begin manufacturing,
research and development; GTE Corp. can begin providing interexchange services
through its telephone companies nationwide; laws in 27 states that foreclose
competition are knocked down; co-carrier status for competitive local exchange
carriers is ratified; and the concept of "physical collocation" of competitors'
facilities in Local Exchange Carriers ("LECs") central offices, which an appeals
court rejected, is resurrected.
The legislation breaks down the old barriers that prevented three groups of
companies--the LECs, including the BOCs, the long distance carriers, and the
cable TV operators--from competing head-to-head with each other.
The Act requires LECs to let new competitors into their business. It also
requires the LECs to open up their networks to ensure that new market entrants
have a fair chance of competing. The bulk of the legislation is devoted to
establishing the terms under which the LECs, and more specifically the BOCs,
must open up their networks.
The principal beneficiaries of this "unbundling" are expected to be the
interexchange carriers ("IXCs"), however the new regime offers opportunities for
other service providers, particularly commercial mobile radio service ("CMRS")
providers. Within the local exchange market, estimated to be worth more than $90
billion annually, consumers likely will be presented with an array of choices
for local telephone service.
The new legislation sets up four classes of carriers, with an increasing
number of obligations placed on each one. The first group, telecommunications
carriers, includes any provider that offers subscription-based telecommunication
services.
The second group includes LECs, which have five specific duties:
(1) Resale: LECs cannot prohibit or impose unreasonable or
discriminatory conditions or limitations on the resale of their
services.
(2) Number portability: LECs must provide to the extent technically
feasible number portability, which would permit LEC subscribers to
switch to another carrier without losing their existing phone
numbers.
3
(3) Dialing parity: LECs must provide dialing parity to competing
providers so that their customers can access the services of
another without special dialing requirements or delays.
(4) Access: LECs must provide competing carriers with access to their
rights-of-way, including poles, ducts, and conduits.
(5) Reciprocal compensation: LECs must pay other carriers, including
CMRS providers, the same fee to terminate calls originating on the
LEC's network as the competing carrier has to pay to terminate
calls on the LEC's network.
The next class of carriers includes incumbent local exchange carriers,
which are tasked with six duties. These include a duty
(1) to negotiate interconnection agreements;
(2) to provide interconnection on request that is at least equal in
quality to the services it provides itself;
(3) to provide unbundled access to network elements, so that a
competitor can buy only those LEC services that it needs (such as
unbundled access to the local loop);
(4) to offer its services at wholesale rates for resale;
(5) to provide notice of changes in its network; and
(6) to offer co-location of competing carriers' equipment in its
switching offices.
The final classification includes the BOCs, which are given authority to
enter the intercity market, but only after they have satisfied a long list of
requirements, including a fourteen-point checklist of specific actions--all
aimed at easing the lot of the competing carrier.
The Act is expected to require the Federal Communications Commission to
begin no fewer than 50 rulemaking proceedings. The legislation calls for the
establishment of a new federal-state joint board on universal service within 30
days of enactment. That board will have to develop proposals to revamp the
universal service subsidy system that has evolved over the years which could be
among the most far-reaching provisions of the Act.
Enactment of the bill affects local exchange service markets almost
immediately by requiring states to authorize local exchange service resale.
Resellers will be able to market new bundled service packages to attract
customers. Over the long term, the requirement that local exchange carriers
unbundle access to their networks may lead to increased price competition. Local
exchange service competition may not take hold immediately because
interconnection arrangements are not in place in most areas.
General
GCI was incorporated under the laws of the State of Alaska in 1979. From
1980 to January, 1987, GCI was a wholly-owned subsidiary of WestMarc
Communications, Inc. ("WSMC"), formerly Western Tele-Communications, Inc., then
a microwave communication common carrier. On January 23, 1987, WSMC distributed
all of the outstanding shares of the Class A and Class B common stock of GCI to
its shareholders. This distribution was made as a dividend to WSMC's
shareholders of record at the close of business on December 29, 1986, on the
basis of one share of GCI Class A common stock for each outstanding share of
WSMC Class A common stock, and one share of GCI Class B common stock for each
outstanding share of WSMC Class B common stock. Following the distribution GCI
became an independent publicly-held company.
Effective November 30, 1990, GCI transferred substantially all of its
operating assets to its wholly owned subsidiary, GCI Communication Corp.
("GCC"), an Alaska corporation, which assumed all of GCI's liabilities and
became the operating company. GCI serves as a holding company and remains liable
as a guarantor on certain of GCC's obligations. All of the issued and
outstanding shares of GCC were pledged as security under GCC's credit agreement
with its senior lenders.
4
The Company was authorized to and began providing intrastate services on
May 15, 1991 on its own facilities in the areas where it provided interstate
service and through resale of others' services where it has no facilities.
GCI Communication Services, Inc. ("Communication Services"), an Alaska
corporation, is a wholly-owned subsidiary of GCI and was incorporated in 1992.
Communication Services provides private network point-to-point data and voice
transmission services between Alaska, Hawaii and the western contiguous United
States. Communication Services products are marketed directly by GCC.
GCI Leasing Co., Inc. ("Leasing Company"), an Alaska corporation, is a
wholly-owned subsidiary of Communication Services and was incorporated in 1992.
Leasing Company owns and leases undersea fiber optic cable capacity for carrying
a majority of the Company's interstate switched message and private line long
distance services between Alaska and the remaining United States.
Products
The Company offers a broad spectrum of telecommunication services to
residential, commercial and government customers primarily throughout Alaska.
The Company operates in two industry segments and offers five primary product
lines. The message and data transmission services industry segment offers
message toll, private line and private network services, and the system sales
and service industry segment offers data communication equipment sales and
technical services.
The Company's message and data transmission services industry segment is
engaged in the transmission of interstate and intrastate switched message toll
service ("MTS") and private line and private network communication service
between the major communities in Alaska, and the remaining United States and
foreign countries. GCI's message toll services include intrastate, interstate
and international direct dial, 800, calling card, operator and enhanced
conference calling, as well as termination of northbound toll service for MCI,
U.S. Sprint ("Sprint") and several large resellers without facilities in Alaska.
GCI also provides origination of southbound calling card and 800 toll services.
Private line and private network services utilize voice and data transmission
circuits, dedicated to particular subscribers, which link a device in one
location to another in a different location. Regulated telephone relay services
for the deaf, hard-of-hearing and speech impaired are provided though the
Company's operator service center. The Company offers its message services to
commercial and residential subscribers. Subscribers may cancel service at any
time. Toll related services account for approximately 93%, 90% and 90% of the
Company's 1995, 1994 and 1993 total revenues, respectively.
GCI has positioned itself as the price leader in the Alaska
telecommunication market and, as such, rates charged for the Company's
telecommunication services are designed to be equal to or below those for
comparable services provided by the only other significant competitor in the
Alaska telecommunications market, AT&T Alascom.
In addition to providing communication services, GCC sells, services and
operates, on behalf of certain customers, dedicated communication and computer
networking equipment and provides field/depot, third party, technical support,
consulting and outsourcing services through its systems sales and service
industry segment.
The Company also supplies integrated voice and data communication systems
incorporating interstate and intrastate digital private lines, point-to-point
and multipoint private network and small earth station services operating at
data rates up to 1.544 mbs. In addition, the Company designs, installs and
maintains data communication systems for commercial and government customers
throughout Alaska. Presently, there are five companies in Alaska that actively
sell and maintain data and voice communication systems. The Company's unique
ability to integrate telecommunication
5
networks and data communication equipment has allowed it to maintain its
dominant market position on the basis of "value added" support rather than price
competition.
GCI has expanded its technical services business to include outsourcing,
onsite technical contract services and telecommunication consulting. GCI was
awarded a five year contract, effective April 1, 1992, to assume management
responsibility for all of BP Exploration (Alaska) ("BP") telecommunication and
computer networking assets in Alaska. BP is the largest oil company presently
operating in Alaska. GCI was awarded a five year contract, effective October 31,
1995, to assume management responsibility for all of National Bank of Alaska
telecommunication and computer networking assets in Alaska.
Expenditures of approximately $2.5 million were made in 1994 developing
new demand assigned multiple access ("DAMA") satellite communication technology.
A four-module demonstration system was constructed in 1994 and was integrated
into the Company's telecommunication network in 1995. Existing satellite
technology relies on fixed channel assignments to a central hub. DAMA technology
assigns satellite capacity on an as needed basis. The digital DAMA system allows
calls to be made between remote villages using only one satellite hop thereby
reducing satellite delay and capacity requirements while improving quality.
The Company obtained the necessary APUC and FCC approvals waiving current
prohibitions against construction of competitive facilities in rural Alaska,
allowing for deployment of DAMA technology in 56 sites in rural Alaska on a
demonstration basis. Construction and deployment will occur in 1996, with
services expected to be provided during the fourth quarter of 1996. Total
construction and deployment costs are expected to total $18 to $20 million.
The FCC concluded an auction of spectrum to be used for the provision of
PCS in March, 1995. The Company was named by the FCC as the high bidder for one
of the two 30 megahertz blocks of spectrum, with Alaska statewide coverage.
Acquisition of the license for a cost of $1.65 million will allow GCI to
introduce new PCS services in Alaska. The Company began developing plans for PCS
deployment in 1995 with technology service trials expected to take place in 1996
and service to be offered as early as 1997 or 1998.
Neither GCI or any of its subsidiaries has revenues that are materially
affected by seasonality. The Company has not expended material amounts during
the last three fiscal years on customer-sponsored research activities.
Facilities
Currently, GCI's facilities comprise earth stations at Eagle River,
Fairbanks, Juneau, Prudhoe Bay, Valdez, Kodiak, Sitka, Ketchikan, Unalaska and
Cordova, all in Alaska and at Issaquah, Washington, serving the communities in
their vicinity. The Eagle River and Fairbanks earth stations are linked by
digital microwave facilities to distribution centers in Anchorage and Fairbanks,
respectively. The Issaquah earth station is connected with the Seattle
distribution center by means of diversely routed fiber optic cable transmission
systems, each having the capability to restore the other in the event of
failure. The Juneau earth station and distribution center are co-located. The
Ketchikan, Prudhoe Bay, Valdez, Kodiak, Sitka, Unalaska and Cordova
installations consist only of an earth station. GCI constructed microwave
facilities serving the Kenai Peninsula communities and owns a 49 percent
interest in an earth station located on Adak Island in Alaska. GCI maintains an
operator service center in Wasilla, Alaska. Each of the distribution centers
contains electronic switches to route calls to and from local exchange companies
and, in Seattle, to obtain access to MCI and other facilities to distribute GCI
southbound traffic to the remaining 49 states and international destinations.
Leasing Company owns a portion of an undersea fiber optic cable which
allows the Company to carry its Anchorage, Eagle River, Wasilla, Palmer, Kenai
Peninsula, Glenallen and approximately one-
6
half of its Fairbanks area traffic to and from the contiguous lower 48 states
over a terrestrial circuit, eliminating the one-quarter second delay associated
with a satellite circuit. The Company's preferred routing for this traffic is
via the undersea fiber optic cable which makes available satellite capacity to
carry the Company's intrastate traffic.
The Company employs satellite transmission for certain other major routes
and uses advanced digital transmission technology throughout its system. The
Company leases C-band transponders on AT&T's Telstar 303 satellite. The lease
expires June 1996 and may be renewed, at the Company's option, through the end
of the satellite's useful life, currently projected to be 1998. The Company will
redirect its earth stations toward the Hughes Communications Galaxy, Inc.
("Hughes") Galaxy IX satellite upon its successful delivery by Hughes expected
to occur in June 1996.
GCI employs advanced transmission technologies to carry as many voice
circuits as possible through a satellite transponder without sacrificing voice
quality. Other technologies such as terrestrial microwave systems, metallic
cable, and fiber optics tend to be favored more for point-to-point applications
where the volume of traffic is substantial. With a sparse population spread over
a wide geographic area, neither terrestrial microwave nor fiber optic
transmission technology will be economically feasible in rural Alaska in the
foreseeable future.
Customers
The Company had approximately 85,600, 73,100 and 73,600 active Alaska
subscribers to its message telephone service at December 31, 1995, 1994 and
1993, respectively. Approximately 9,500, 9,300 and 9,500 of these were business
users at December 31, 1995, 1994 and 1993, respectively, and the remainder were
residential customers. MTS revenues currently amount to approximately $9,050,000
per month.
Substantially all service areas, except Bethel, Alaska, in which GCI has
facilities have completed the equal access balloting process. GCI carries 33% to
49% of the southbound interstate MTS traffic and 21% to 48% of the intrastate
MTS traffic originating in those service areas.
In January, 1993 GCI entered into a five-year contract with MCI to provide
facilities for MCI's Alaska message toll and 800 service traffic. The contract
supplanted a previous contract and provides for expanded usage by MCI of GCI's
facilities and usage by GCI of MCI's facilities. Revenues attributed to the
contract in 1995, 1994 and 1993 totaled approximately $23,939,000, $19,512,000
and $16,068,000, or approximately 18.5%, 16.7%, and 15.7% of total revenues,
respectively. The contract was amended in March 1996 extending its term three
years to March 31, 2001.
Services provided pursuant to a contract with Sprint resulted in revenues
in 1995, 1994 and 1993 of approximately $14,885,000, $12,412,000 and $10,123,000
or approximately 11.5%, 10.6%, and 9.9% of total revenues, respectively.
Both MCI and Sprint are major customers of the Company in its message and
data transmission services industry segment. Loss of one or both of these
customers would have a significant detrimental effect on the Company's revenues
and contribution. There are no other individual customers, the loss of which
would have a material impact on the Company's revenues or gross profit.
The Company provided private line and private network communication
products and services to approximately 566 commercial and government accounts in
1995. Private line and private network communication products and services
currently generate approximately $1,050,000 in monthly, revenues.
7
A summary of switched MTS traffic minutes follows:
Interstate Minutes
-------------------------------------------------
For Calling Intrastate
Quarter Ended Southbound Northbound Card Minutes
------------- ---------- ---------- ---- -------
(amounts in thousands)
March 31, 1993 47,100 34,713 3,947 16,178
June 30, 1993 49,928 34,651 3,811 17,283
September 30, 1993 54,403 36,282 4,043 18,770
December 31, 1993 56,549 39,348 4,459 17,989
------- ------- ------ ------
Total 1993 207,980 144,994 16,260 70,220
======= ======= ====== ======
March 31, 1994 56,118 39,664 4,431 18,910
June 30, 1994 58,809 38,293 4,220 20,534
September 30, 1994 61,715 39,678 4,210 21,253
December 31, 1994 59,902 40,424 4,605 19,786
------- ------- ------ ------
Total 1994 236,544 158,059 17,466 80,483
======= ======= ====== ======
March 31, 1995 60,140 41,600 4,351 21,208
June 30, 1995 65,031 43,721 4,113 23,051
September 30, 1995 71,918 45,027 4,233 23,883
December 31, 1995 72,319 46,545 5,518 25,228
------- ------- ------ ------
Total 1995 269,408 176,893 18,215 93,370
======= ======= ====== ======
All minutes data were taken from GCC's billing statistics reports.
Markets
The dominant carrier and GCI's primary competition in the Alaska market
for interstate and intrastate MTS, private line and private network
telecommunication services continues to be AT&T Alascom. Other carriers, such as
MCI and Sprint can enter the market by constructing their own facilities in
Alaska. At the present time, however, MCI, Sprint and several other carriers
interconnect with GCC in Seattle and Dallas for delivery of their Alaska bound
interstate traffic. Sprint and MCI also originate 800 services in Alaska on
GCI's facilities.
Five companies in Alaska actively sell and service data and voice
communication systems. Other companies can enter the market at any time.
Financial Information About Industry Segments
For financial information with respect to industry segments of GCI,
reference is made to the information set forth in Note 8 of the Notes to
Consolidated Financial Statements included in Part II of this Report, which Note
is included herein by reference.
8
History of Telecommunication in Alaska
The first telecommunication facilities in Alaska were telegraph lines
operated by the U.S. Army. Later, telephone service was added, and the Alaska
Communications System ("the ACS") grew to cover much of the state. Wherever
military communication was not hampered, the Army allowed its circuits to be
used for civilian purposes. Control of the ACS was transferred to the U.S. Air
Force and eventually, the ACS supplied long distance trunks to local exchanges
in the state's growing communities.
As the civilian population increased, the need for a transition to
commercial operation became apparent. In 1969, ten years after Alaska statehood,
the Alaska Communications Disposal Act ("the Act") was passed by Congress. The
RCA Corporation was the successful bidder under the Act and purchased the ACS.
RCA formed a subsidiary, RCA Alaska Communications, later Alascom, to own and
operate the system.
Through its purchase of the ACS, Alascom became the sole long lines
carrier in Alaska. In the lower 48 states, Alascom interconnected with AT&T. In
Alaska, it interconnected with the telephone companies providing local exchange
service. Additionally, Alascom was required to maintain a number of thin-line
links to remote areas of the state. Under the terms of the ACS purchase
agreement, Alascom was required to expand service to the less developed areas of
Alaska. In 1979 Alascom was acquired by Pacific Power and Light, Inc., a utility
holding company, which has since transferred Alascom to its publicly-traded
subsidiary, Pacific Telecom, Inc. ("PTI").
Rates initially charged for Alaska telecommunication services had been
substantially higher than interstate rates in the contiguous states. In 1972 the
FCC established a policy of rate integration intended to equalize all domestic
interstate rates. This policy was used to support a subsidy mechanism to help
Alascom cover higher costs associated with rural operations.
When GCI began operations in 1982, AT&T provided almost all of the
telecommunication services in the lower 48 states and Alascom provided almost
all of the long distance telecommunication services in Alaska and between Alaska
and the lower 48 states, Hawaii, and foreign countries. Although Alascom's
business was highly subsidized, GCI competed with Alascom with no subsidy
whatsoever.
In 1983 the State of Alaska petitioned the FCC to initiate a rule making
to determine how to rationalize the policies of rate integration and competition
in the Alaska market in light of the rapid changes in the telecommunication
industry brought on by the AT&T divestiture and changing FCC competition
policies. This led the FCC to initiate a rule making proceeding ("the Alaska
rule making proceeding") in 1984. Issues involved in the Alaska rule making
proceeding, namely the harmonizing of the FCC's policies of competition and rate
integration for the Alaska market and the implementation of a permanent
structure for that market, were referred to a Federal-State Joint Board ("Joint
Board"). Joint Board activity, including the consideration of several
alternative market structures, continued through the adoption of a recommended
transition mechanism in 1993, which was later adopted by the full FCC in 1994.
This FCC action led to a negotiated buyout of Alascom by AT&T, as further
described in Part I, History of Regulatory Affairs and Recent Developments
below.
History of Regulatory Affairs
The Company's activities in the telecommunication market are regulated by
two agencies. The Communications Act of 1934 gives the FCC the authority to
certificate market entry and regulate rates for interstate telecommunication.
Intrastate telecommunication services are regulated by the Alaska Public
Utilities Commission ("APUC").
9
The Company's entry into the intrastate telecommunication market had been
hampered because the APUC had no policy on intrastate competition. In May 1990
the Alaska legislature passed legislation mandating competition in the Alaska
intrastate telecommunication market. The legislature further directed the APUC
to adopt regulations governing a competitive telecommunication market and to
begin accepting applications for service on February 15, 1991. On February 15,
1991 GCI, through its wholly-owned operating subsidiary GCC, filed an
application to provide competitive intrastate telecommunication services. The
Company was authorized to and began providing intrastate services on May 15,
1991 on its own facilities in the areas where it provided interstate service and
through resale of others' services where it has no facilities.
In the first quarter of 1992 the APUC granted GCC a Certificate of Public
Convenience and Necessity to provide telephone relay services ("TRS") for the
deaf, hard-of-hearing and speech impaired though the Company's operator service
center in Wasilla, Alaska. GCC commenced its regulated TRS operations on June
21, 1992. Intrastate TRS operating costs, capital costs and a rate of return are
being funded through a universal access surcharge billed by all local telephone
companies in the state of Alaska. Under an FCC decision, starting in 1993, a
portion of the TRS operating costs are recovered through an interstate pool
administered by the National Exchange Carrier Association ("NECA").
The FCC regulates dominant interstate carriers, such as the Company's only
interstate competitor, AT&T/Alascom. Company's only interstate competitor,
Alascom. Because, under the terms of the AT&T acquisition of Alascom, Alascom
rates and services must "mirror" those offered by AT&T, changes in AT&T prices
indirectly affect the rates and services of the Company. AT&T's prices, and thus
those of Alascom, are regulated under a price cap plan whereby AT&T's rate of
return is no longer regulated or restricted. AT&T is allowed to raise and lower
prices for three groups of services within pre-established floor and ceiling
levels with little regulatory oversight. These services include products offered
to: 1) small businesses or residential customers; 2) users of 800 services and
3) large business customers. Price increases by AT&T generally improve the
Company's ability to raise its prices while price decreases pressure the Company
to follow. The Company has, so far, successfully adjusted its pricing and
marketing strategies to respond to AT&T pricing practices.
In 1983 the State of Alaska petitioned the FCC to commence a rulemaking
proceeding to determine how to harmonize the FCC's policies of rate integration
and competition in the Alaska market in light of the rapid changes in the
telecommunications industry brought on by the AT&T divestiture and changing FCC
competition policies. In 1984 the FCC initiated the Alaska rulemaking proceeding
in response to the State's request. Issues involved in the Alaska rulemaking
proceeding, namely the harmonizing of the FCC's policies of competition and rate
integration for the Alaska market and the implementation of a permanent
structure for that market, were referred to a Federal-State Joint Board ("Joint
Board"), consisting of state utility commissioners and FCC commissioners.
On May 17, 1993 the Joint Board issued a Tentative Recommendation and
Order Inviting Comments. Comments were filed by the various parties, with the
Company supporting this Tentative Recommendation. On October 26, 1993, the Joint
Board made its Final Recommended Decision, rejecting the market structure plans
previously advanced by Alascom and AT&T and, instead, recommended a market
structure based on that set forth in the Tentative Recommendation.
The Final Recommended Decision proposes to end the AT&T/Alascom Joint
Services Arrangement ("JSA") on September 1, 1995, subject to the adoption and
implementation of certain transition mechanisms. These include requiring AT&T to
provide interstate MTS/WATS between Alaska and the other 49 states at integrated
rates and under terms and conditions applicable to AT&T's services in the rest
of the country. After the JSA is terminated, Alascom could offer interstate
MTS/WATS independently from AT&T, under its own tariff and with no obligation to
charge AT&T's integrated rates. During a four year transition, AT&T would be
required to purchase services from Alascom to meet its MTS/WATS obligations. For
the first one and one-half years AT&T would obtain
10
such services under the continued JSA. For the remaining two and one-half years,
after the termination of the JSA, AT&T would be required to purchase a declining
amount of service from Alascom, with this obligation declining to zero at the
end of this second phase.
Final FCC action on the Joint Board's Final Recommended Decision, took
place on May 19, 1994, and is contained in its Memorandum Opinion and Order,
released May 19, 1994. In the Memorandum Opinion and Order, the FCC adopted the
provisions of the Final Recommended Decision and set the termination of the JSA
to be effective January 1, 1996. AT&T/Alascom has filed an appeal of the
Memorandum Opinion and Order.
On October 17, 1994, Pacific Telecom, Inc. ("PTI") announced a definitive
agreement to sell the stock of Alascom to AT&T, subject to certain conditions,
including state and federal regulatory approvals. AT&T, PTI and Alascom filed
for such approvals before the FCC and the APUC on December 15, 1994, alleging
that the buyout would further the Joint Board objectives and fulfill the
provisions of the FCC Order. The Company participated fully in both transfer
proceedings. The buyout was approved, with conditions, by the APUC on March 31,
1995 and the FCC on August 2, 1995.
In the normal course of the Company's operations, it is involved in legal
and regulatory matters before the FCC and the APUC. While management does not
anticipate abrupt changes in the competitive structure of the Alaska market, no
assurances can be given that such changes will not occur and that such changes
would not be materially adverse to the Company.
Recent Developments
The Company announced March 15, 1996 that it has signed letters of intent
to acquire three Alaska cable companies that offer cable television service to
more than 101,000 subscribers serving 74 percent of households throughout the
state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska
Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable
operates the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and
operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer,
Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in
Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the
Company to integrate cable services to bring more information not only to more
customers, but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase will facilitate consolidation of the
cable operations and will provide a platform for developing new customer
products and services over the next several years.
The total purchase price is $280.7 million. According to terms of the
letters of intent, GCI will issue 16.3 million shares of Class A Common stock to
the owners of the three cable companies valued at $105.7 million. The balance of
the purchase will be provided by approximately $175 million of bank financing.
Additional capital will be provided from the sale of 2 million shares of GCI's
Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share.
Definitive agreements are expected to be finalized in April 1996 at which
time GCI will apply to the APUC to transfer the licenses of the cable companies.
Once all regulatory approvals are granted, the cable companies will be
consolidated into a single organization owned by the Company.
11
Employees
GCC and affiliated companies employ approximately 435 persons as of
February 20, 1996 in operations, engineering, marketing, network services,
customer and operator services, data processing, billing, accounting, and
administration. GCC and affiliated companies are not parties to any union
contracts with their employees. In general, relations with employees have been
satisfactory.
Environmental Regulations
The Company and its subsidiaries may undertake activities which, under
certain circumstances may affect the environment. Accordingly, they are subject
to federal, state, and local regulations designed to preserve or protect the
environment. The FCC, the Bureau of Land Management, the U.S. Forest Service,
and the National Park Service are required by the National Environmental Policy
Act of 1969 to consider the environmental impact prior to the commencement of
facility construction. Management believes that compliance with such regulations
has no material effect on the Company's consolidated operations. The principal
effect of Company facilities on the environment would be in the form of
construction of the facilities at various locations in Alaska. Company
facilities have been constructed in accordance with federal, state, and local
building codes and zoning regulations whenever and wherever applicable. Some of
the facilities may be on lands which may be subject to state and federal wetland
regulation.
Uncertainty as to the applicability of environmental regulations is caused
in major part by the federal government's decision to consider a change in the
definition of wetlands, however, none of the Company's facilities has been
constructed in areas which are subject to flooding, tsunami's, etc. and as such
are most likely to fall outside any new wetland designation. Most of the
Company's facilities are on lands leased by the Company, and, with respect to
all of these facilities, the Company is unaware of any violations of lease terms
or federal, state or local regulations pertaining to preservation or protection
of the environment.
Foreign and Domestic Operations and Export Sales
Although the Company has several agreements to facilitate the origination
and termination of international toll traffic, it has neither foreign operations
nor export sales. The Company conducts operations throughout the western
contiguous United States, Alaska and Hawaii and believes that any subdivision of
its operations into distinct geographic areas would not be meaningful. Revenues
associated with international toll traffic were $5,643,000, $4,427,000 and
$3,734,000 for the years ended December 31, 1995, 1994 and 1993, respectively.
Backlog of Orders and Inventory
As of December 31, 1995 and 1994, the Company's systems sales and service
industry segment had a backlog of equipment sales orders of approximately
$258,000 and $608,000, respectively. The decrease in backlog as of December 31,
1995 can be attributed primarily to faster completion of outstanding sales
orders in 1995. The Company expects that all of the orders in backlog at the end
of 1995 will be delivered during 1996.
Patents, Trademarks and Licenses
Neither GCI nor its affiliates hold patents, trademarks, franchises or
concessions. The Communications Act of 1934 gives the FCC the authority to
license and regulate the use of the electromagnetic spectrum for radio
communication. The Company through its message and data transmission services
industry segment holds licenses for its satellite and microwave transmission
facilities for provision of its telecommunication services. The Company acquired
a license for use of a
12
30 megahertz block of spectrum for provision of PCS services in Alaska. The
Company's operations may require additional licenses in the future.
Other
GCC has filed FCC tariffs for its international service, interstate
domestic services, and domestic operator services.
Each tariff contains the rates and other contractual terms applicable to
customers who purchase the services covered by the tariff. In accord with the
FCC's deregulatory approach with respect to non-dominant carriers, tariffs and
tariff revisions filed by such carriers routinely become effective without
intervention by the FCC or third parties.
The State of Alaska has the authority to regulate telecommunications that
originate and terminate within the state. In 1990 the State legislature
introduced intrastate competition in Alaska. Subsequently, the APUC developed
regulations that allow for the certification of additional carriers for such
intrastate telecommunications and, to varying degrees, requires filing of
tariffs and regulation of the rates for such services. Under the APUC's current
policy and regulations, all certified carriers are required to file tariffs for
the provision of intrastate services. When filing for a rate increase, the
dominant carrier is required to file an accompanying rate case. Non-dominant
carriers are not rate regulated. Tariff revisions filed by non-dominant carriers
routinely become effective without intervention by the APUC or third parties.
Tariffs can be filed or revised on 30 days notice.
On March 15, 1996 the Company filed a tariff with the APUC requesting
approval for provision of local services based on the terms of the
Telecommunications Act of 1996 which, in part, requires local exchange carriers
to open up their networks and allow resale of their services. Once APUC approval
is obtained, the Company intends to offer local services through its facilities
or resale of local exchange carrier facilities.
No material portion of the businesses of the Company is subject to
renegotiation of profits or termination of contracts at the election of the
federal government.
Item 2. PROPERTIES
The Company leases its message and data transmission services industry
segment's executive, corporate and administrative facilities in Anchorage,
Fairbanks and Juneau, Alaska. GCC owns a 49 percent interest in an earth station
located on Adak Island in Alaska. GCC's message and data transmission services
segment owns properties and facilities including satellite earth stations, and
distribution, transportation and office equipment. Additionally, GCC acquired in
December 1992, access to capacity on an undersea fiber optic cable from Seward,
Alaska to Pacific City, Oregon.
The Company's systems sales and service industry segment occupies space in
the buildings housing its executive offices and operating facilities in
Anchorage, Fairbanks and Juneau, Alaska, and Seattle, Washington. Facilities in
Fairbanks and Juneau, Alaska, and Seattle, Washington are occupied under
short-term operating lease agreements. The Anchorage property is leased pursuant
to a 15 year capital lease agreement.
The undersea fiber optic cable capacity is owned subject to an outstanding
mortgage. Substantially all of the Company's properties secure its senior credit
agreement. See Note 5 to the Consolidated Financial Statements in Item 8 for
further discussion.
The two wideband transponders the Company owned reached the end of their
expected useful life in August, 1994, at which time the Company leased temporary
replacement capacity. The Company leased replacement transponder capacity
subsequent to a transition period utilizing four C band
13
transponders on AT&T's Telstar 303 satellite. The lease expires June 1996. The
Company entered into a purchase and lease-purchase option agreement in August
1995 for the acquisition of satellite transponders to meet its long-term
satellite capacity requirements. The agreement provides for interim the interim
lease of transponder capacity from June 1996 through the delivery of the
purchased transponders as early as the fourth quarter of 1997. The amount of the
down payment required in 1996 and the balance payable upon delivery of the
transponders are dependent upon a number of factors including the number of
transponders required and the timing of their delivery and acquisition. The
Company does not expect the down payment to exceed $10.1 million and the
remaining balance payable coinciding with a staged delivery to exceed $46
million. The Company amended its existing senior credit facility and provided a
letter of credit to accommodate the payment in 1996 and expects to further amend
or refinance its credit agreement to fund its remaining commitment.
The Company's operating, executive, corporate and administrative
properties are in good condition. The Company considers its properties suitable
and adequate for its present needs and are being fully utilized.
Item 3. LEGAL PROCEEDINGS
Neither the Company or any if its subsidiaries is a party to any material
pending legal proceedings. Neither the Company's property nor that of any if its
subsidiaries is subject to any material pending legal proceedings.
The Company and its subsidiaries are a party to various claims and pending
litigation as part of the normal course of business. In the opinion of
management, the disposition of these matters is not expected to have a material
adverse effect on the Company's financial statements. Neither the Company's
property nor that of any if its subsidiaries is subject to any material pending
legal proceedings.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of stockholders of the Company during
the fourth quarter of 1995.
14
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information for Common Stock
Shares of the Company's Class A common stock are traded on the Nasdaq
National Market tier of the Nasdaq Stock Market under the symbol GNCMA. Shares
of the Company's Class B common stock are traded on the Over-the-Counter market.
The Company's Class B common stock is convertible into the Company's Class A
common stock. The following table sets forth the high and low sales price for
the above-mentioned common stock for the periods indicated. The prices, rounded
up to the nearest eighth, represent prices between dealers, do not include
retail markups, markdowns, or commissions, and do not necessarily represent
actual transactions.
Class A Class B
----------------------------------- -----------------------------------
High Low High Low
---- --- ---- ---
1994:
First Quarter 5 7/8 4 1/8 5 7/8 4 1/8
Second Quarter 4 5/8 3 1/8 4 5/8 3 1/8
Third Quarter 5 3 1/2 5 3 1/2
Fourth Quarter 5 4 1/8 5 4 1/8
1995:
First Quarter 4 5/8 3 3/4 4 5/8 3 3/4
Second Quarter 4 1/4 3 7/8 4 1/4 3 7/8
Third Quarter 4 1/8 3 1/4 4 1/8 3 1/4
Fourth Quarter 5 1/8 3 3/4 5 1/8 3 3/4
Holders
As of March 5, 1996 there were approximately 1,830 holders of record of
the Company's Class A common stock and approximately 750 holders of record of
the Company's Class B common stock (amounts do not include the number of
shareholders whose shares are held of record by brokers, but do include the
brokerage house as one shareholder).
Dividends
The Company has never paid cash dividends on its Class A or Class B common
stock and has no present intention of doing so. Payment of cash dividends in the
future, if any, will be determined by the Company's Board of Directors in light
of the Company's earnings, financial condition and other relevant
considerations. GCC's existing bank loan agreements contain provisions that
prohibit payment of dividends, other than stock dividends (see note 5(a) to the
financial statements included in Part II of this Report).
15
Item 6. SELECTED FINANCIAL DATA
The following table presents selected historical information relating to
financial condition and results of operations over the past five years.
Years ended December 31,
-------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands except per share amounts)
Revenues $129,279 116,981 102,213 96,499 75,522
Net earnings (loss) before income taxes $12,601 11,681 6,715 1,524 (1,422)
Net earnings (loss) $7,502 7,134 3,951 890 (1,092)
Earnings (loss) per share $0.31 0.30 0.17 0.02 (0.12)
Total assets $84,765 74,249 71,610 72,351 70,167
Long-term debt, including current portion 1 $9,980 12,554 20,823 37,235 24,850
Obligations under capital leases, including current portion 2 $1,047 1,297 1,522 1,720 10,975
Preferred stock 3 $0 0 0 3,282 3,282
Total stockholders' equity 4 $43,016 35,093 27,210 14,870 13,554
Dividends declared per Common share 5 $0.00 0.00 0.00 0.00 0.00
Dividends declared per Preferred share 6 $0.00 0.00 0.44 1.78 1.69
1 The Company exercised the purchase option described in footnote (2) below
in December 1992 to acquire capacity on a fiber optic undersea cable from
Seward, Alaska to Pacific City, Oregon. Long term debt associated with this
purchase is recorded in long-term debt and current portion of long-term
debt in the Consolidated Financial Statements included in Part II of this
Report.
2 The Company entered into a capital lease agreement in May 1991 for access
to capacity on an undersea fiber optic cable from Seward, Alaska to Pacific
City, Oregon. The lease term was ten years with monthly payments including
maintenance of approximately $230,000 per month commencing August 22, 1991,
the date the fiber optic cable became operational. The Company had an
option expiring December 31, 1992 to purchase the leased capacity for
$10.12 million, less the prior six month's lease payments, excluding
maintenance. The lease was capitalized in 1991 at the underlying asset's
fair market value and the related obligation was recorded in the
Company's Consolidated Financial Statements.
3 In January, 1991, the Company sold 347,047 shares of non-voting Series A
15% Convertible Cumulative Preferred Stock to WestMarc Communications, Inc.
for $9.5088 per share. The preferred stock accrued dividends on each share
in cash or stock at the Company's discretion. The accrued dividends were
payable semi-annually at the rate of 15% per annum if paid in cash or at
the rate of 18.75% if paid in Class B Common Stock. Pursuant to an
agreement with WestMarc Communications, Inc. the Company acquired and
retired the preferred stock in 1993.
4 The 1993 increase in stockholders' equity is primarily attributed to the
Company's issuance of common stock to MCI.
5 The Company has never paid a cash dividend on its common stock and does not
anticipate paying any dividends in the foreseeable future. The Company
intends to retain its earnings, if any, for the development of its
business. Payment of cash dividends in the future, if any, will be
determined by the board of directors of the Company in light of the
Company's earnings, financial condition, credit agreements and other
relevant considerations. The Company's existing bank loan agreements
contain provisions that prohibit payment of dividends, other than stock
dividends, as further described in Note (5)(a) to the financial statements
included in Part II of this Report.
6 The Company declared and issued stock dividends of approximately 304,000
and 286,000 shares of Class B Common Stock in 1992 and 1991, respectively,
and paid dividends totaling $153,000 in 1993 on its non-voting Series A 15%
Convertible Cumulative Preferred Stock.
16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Year ended December 31, 1995 ("1995"), compared with year ended December
31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993").
The Company's liquidity (ability to generate adequate amounts of cash to
meet the Company's need for cash) was affected by a net increase in the
Company's cash and cash equivalents of $2.4 million from 1994 to 1995. Sources
of cash in 1995 included the Company's operating activities which generated
positive cash flow of $14.3 million net of changes in the components of working
capital, proceeds from the sale of investment securities held for sale totaling
$832,000, repayments of notes receivable totaling $184,000, and proceeds from
the issuance of common stock of $82,000. Uses of cash during 1995 included
repayment of $2.8 million of long-term borrowings and capital lease obligations,
investment of $8.9 million in distribution and support equipment, and payment of
the final installment for a PCS spectrum license totaling approximately
$521,000.
Net receivables increased $4.8 million from 1994 to 1995 resulting from
increased sales and receipt of a payment from a major customer in January 1996,
beyond the cutoff date for recording in the current year.
Payments of approximately $1.9 million of accrued payroll and payroll
related obligations resulted in reduced balances at 1995 as compared to 1994.
Working capital totaled $5.1 million and $1.8 million at December 31, 1995
and 1994, respectively. Working capital generated by operations exceeded
expenditures for property, equipment and other assets, repayment of long-term
borrowings and capital lease obligations, and the additional investment in the
PCS license resulting in the $3.3 million increase at December 31, 1995 as
compared to 1994.
Cash flow from operating activities, as depicted in the Consolidated
Statements of Cash Flows, decreased $4.2 million in 1995 as compared 1994. Cash
flow generated from operating activities was reduced by payment of current
obligations. Cash flow from operating activities increased $6.8 million during
1994 as compared to 1993 primarily as a result of revenue growth and decreased
distribution costs as a percentage of revenues as further described below.
The Company's expenditures and other additions to property and equipment
totaled $8.9 million, $10.6 million, and $5.7 million during 1995, 1994 and
1993, respectively. Management's capital expenditures plan for 1996 includes
approximately $30 to $50 million in capital necessary to pursue strategic
initiatives, to maintain the network and to enhance transmission capacity to
meet projected traffic demands.
The two wideband transponders the Company owned reached the end of their
expected useful life in August, 1994, at which time the Company leased
replacement capacity. The cost of the leased capacity contributed to an increase
in distribution costs during 1995 as compared to 1994. The existing leased
capacity is expected to meet the Company's requirements until such time that
capacity is available pursuant to the terms of a new long-term agreement
described below.
The Company entered into a purchase and lease-purchase option agreement in
August 1995 for the acquisition of satellite transponders to meet its long-term
satellite capacity requirements. The amount of the down payment required in 1996
and the balance payable upon delivery of the transponders as early as the fourth
quarter of 1997 are dependent upon a number of factors including the number of
transponders required and the timing of their delivery and acquisition. The
Company
17
does not expect the down payment to exceed $10.1 million and the remaining
balance payable coinciding with a staged delivery to exceed $46 million. The
Company amended its existing senior credit facility to provide a letter of
credit to accommodate the required down payment in 1996 and expects to further
amend or refinance its credit agreement to fund its remaining commitment.
The Company continues to evaluate the most effective means to integrate
its telecommunications network with that of MCI. Such integration will require
capital expenditures by the Company in an amount yet to be determined. Any
investment in such capital expenditures is expected to be recovered by increased
revenues from expanded service offerings and reductions in costs resulting from
integration of the networks.
The FCC concluded an auction of spectrum to be used for the provision of
PCS in March, 1995. The Company was named by the FCC as the high bidder for one
of the two 30 megahertz blocks of spectrum, with Alaska statewide coverage.
Acquisition of the license for a cost of $1.65 million will allow GCI to
introduce new PCS services in Alaska. The Company began developing plans for PCS
deployment in 1995 with limited technology service trials planned for 1996 and
service to be offered as early as 1997 or 1998. Expenditures for PCS deployment
could total $50 to $100 million over the next 10 year period. The estimated cost
for PCS deployment is expected to be funded through income from operations and
additional debt and perhaps, equity financing. The Company expects to arrange
additional debt financing capacity in 1996. The Company's ability to deploy PCS
services will be dependent on its available resources.
Expenditures of approximately $2.5 million were made in 1994 developing
new DAMA satellite communication technology. A four-module demonstration system
was constructed in 1994 and was integrated into the Company's telecommunication
network in 1995. Existing satellite technology relies on fixed channel
assignments to a central hub. DAMA technology assigns satellite capacity on an
as needed basis. The digital DAMA system allows calls to be made between remote
villages using only one satellite hop thereby reducing satellite delay and
capacity requirements while improving quality.
The Company obtained the necessary APUC and FCC approvals waiving current
prohibitions against construction of competitive facilities in rural Alaska,
allowing for deployment of DAMA technology in 56 sites in rural Alaska on a
demonstration basis. Construction and deployment will occur in 1996, with
services expected to be provided during the fourth quarter of 1996. Construction
and deployment costs are expected to total $18 to $20 million, and are expected
to be funded through a combination of cash generated from operations and bank
financing.
The Company announced March 15, 1996 that it has signed letters of intent
to acquire three Alaska cable companies that offer cable television service to
more than 101,000 subscribers serving 74 percent of households throughout the
state of Alaska. The Company intends to acquire Prime Cable of Alaska, Alaska
Cablevision, Inc. of Kirkland, Washington and Alaskan Cable Network. Prime Cable
operates the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision owns and
operates cable stations in Petersburg, Wrangell, Cordova, Valdez, Kodiak, Homer,
Seward, Nome and Kotzebue, Alaska. Alaskan Cable Network operates stations in
Fairbanks, Juneau, Ketchikan and Sitka, Alaska. This acquisition will allow the
Company to integrate cable services to bring more information not only to more
customers, but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase will facilitate consolidation of the
cable operations and will provide a platform for developing new customer
products and services over the next several years.
The total purchase price is $280.7 million. According to terms of the
agreements, GCI will issue 16.3 million shares of Class A Common stock to the
owners of the three cable companies valued at $105.7 million. The balance of the
purchase will be provided by approximately $175 million of bank financing.
Additional capital will be provided from the sale of 2 million shares of GCI's
Class A Common Stock to MCI Telecommunications Corporation for $6.50 per share.
18
Definitive agreements are expected to be executed in April 1996 at which
time GCI will apply to the APUC to transfer the licenses of the cable companies.
Once all regulatory approvals are granted, the cable companies will be
consolidated into a single organization owned by the Company.
Management expects that cash flow generated by the Company will be
sufficient to meet no less than the minimum required for maintenance level
capital expenditures and scheduled debt repayment. The Company's ability to
invest in discretionary capital and other projects will depend upon its future
cash flows and access to additional debt and/or equity financing.
Results of Operations
Year ended December 31, 1995 ("1995"), compared with year ended December
31, 1994 ("1994"), compared with year ended December 31, 1993 ("1993").
The Company's message data and transmission services industry segment
provides interstate and intrastate long distance telephone service to all
communities within the state of Alaska through use of its facilities and
interconnect agreements with other carriers. The Company's average rate per
minute for message transmission during 1995, 1994, and 1993 was 19.1(cent),
18.6(cent), and 18.2(cent), respectively. Total revenues for 1995 were $129.3
million, an approximate 10.5 percent increase over 1994 revenues of $117.0
million, which revenues increased 14.4 percent over 1993 revenues of $102.2
million. Revenue growth is attributed to the increase in the average rate per
minute and to four fundamental factors, as follows:
(1) Growth in interstate telecommunication services which resulted in
billable minutes of traffic carried totaling 465, 415 and 365 million
minutes in 1995, 1994 and 1993, respectively, or 83.2, 83.9 and 83.9
percent of total 1995, 1994 and 1993 minutes, respectively.
(2) Provision of intrastate telecommunication services which resulted in
billable minutes of traffic carried totaling 93.4, 79.6 and 70.1
million minutes in 1995, 1994 and 1993, respectively, or 16.8, 16.1,
and 16.1 percent of total 1995, 1994 and 1993 minutes, respectively.
(3) Increases in revenues derived from other common carriers ("OCC")
including MCI and Sprint. OCC traffic accounted for $38.8 million or
30.0 percent, $31.9 million or 27.3 percent, $26.2 million or 25.6
percent of total revenues in 1995, 1994 and 1993, respectively. Both
MCI and Sprint are major customers of the Company. Loss of one or
both of these customers would have a significant detrimental effect
on revenues and on contribution. There are no other individual
customers, the loss of which would have a material impact on the
Company's revenues or gross profit.
(4) Increased revenues associated with private line and private network
transmission services, which increased 8 percent in 1995 as compared
to 1994, increased 6 percent in 1994 as compared to 1993, and
increased 8 percent in 1993 as compared to 1992.
System sales and service revenues totaled $7.2 million, $9.1 million and
$8.3 million in 1995, 1994 and 1993, respectively. The decrease in system sales
and service revenues is attributed to fewer larger dollar equipment sales orders
received during 1995 as compared to 1994 as well as a reduction of the company's
outsourcing services provided to the oil field services industry.
Transmission access and distribution costs, which represent cost of sales
for transmission services, amounted to approximately 56.5 percent, 55.4 percent,
58.9 percent of transmission revenues during 1995, 1994 and 1993, respectively.
The increase in distribution costs as a percentage of transmission revenues for
1995 as compared to 1994 results primarily from increases in costs associated
with the Company's lease of transponder capacity as previously described. The
decrease in distribution costs as a percentage of transmission revenues during
1994 as compared to 1993 results from proportionate increases in revenues as
compared to costs and decreases in access tariff charges commencing July 1993,
offset by increases in costs associated with the Company's lease of
19
replacement transponder capacity as previously described. Changes in
distribution costs as a percentage of revenues will occur as the Company's
traffic mix changes. The Company is unable to predict if or when access charge
rates will change in the future and the impact of such changes on the Company's
distribution costs.
Sales and service cost of sales as a percentage of sales and service
revenues amounted to approximately 73.3 percent, 70.4 percent and 65.7 percent
during 1995, 1994 and 1993, respectively. Increases in cost of sales as a
percentage of sales and service revenues result from reduced margins associated
with equipment sales and service contracts.
Contribution increased 5.3 percent during 1995 as compared to 1994, and
increased 22.5 percent during 1994 as compared to 1993. Increases in
distribution costs associated with the Company's lease of transponder capacity
as previously described reduced the rate of growth in 1995 contribution as
compared to 1994. Proportionate decreases in distribution costs during 1994 as
compared to 1993 coupled with proportionate increases in revenues during the
same period resulted in the 1994 increase.
Total operating costs and expenses increased 5.7 percent during 1995 as
compared to the same period in 1994, and increased 16.5 percent during 1994 as
compared to the same period in 1993. 1995 and 1994 increases in operating and
engineering, service, sales and communications, and general and administrative
costs were necessary to support the Company's expansion efforts and the increase
in minutes of traffic carried. During 1995 the Company incurred approximately
$450,000 for what is expected to be nonrecurring costs related to breaks in the
undersea fiber optic cable and promotion of its new DAMA technology. Additional
costs were incurred during the fourth quarter of 1995 attributed to the
promotion of the Company's calling plans. Significant marketing, telemarketing,
and promotional expenditures were incurred in 1994 to promote the Company's
introduction of new services and programs resulting from its strategic alliance
with MCI, including MCI's Friend's and Family calling plan, 1-800-COLLECT,
PhoneCash prepaid calling cards, and an Amway distributor resale program.
Additional general and administrative costs were incurred in 1994 resulting from
the Company's performance based bonus and incentive compensation plans which are
funded from incremental operating cash flow. Increases in 1994 expenses were
offset in part by reductions in bad debt and depreciation and amortization
costs. In general, the Company has dedicated additional resources in certain
areas to pursue longer term opportunities. It must balance the desire to pursue
such opportunities with the need to continue to improve current performance.
Continuing legal and regulatory costs are, in large part, associated with
regulatory matters involving the FCC, the APUC, and the Alaska Legislature.
Interest expense decreased 25.5 percent during 1995 as compared to 1994
and decreased 31.7 percent during 1994 as compared to 1993. The decreases in
interest expense result primarily from reduction in the Company's outstanding
indebtedness.
Income tax expense totaled $5,099,000, $4,547,000 and $2,764,000 in 1995,
1994 and 1993, respectively, resulting from the application of statutory income
tax rates to net earnings before income taxes
The Company has capital loss carryovers totaling approximately $56,000
which expire in 1997. Tax benefits associated with recorded deferred tax assets,
net of valuation allowances, are considered to be more likely than not
realizable through taxable income earned in carryback years, future reversals of
existing taxable temporary differences, and future taxable income exclusive of
reversing temporary differences and carryforwards.
The Alaska economy is supported in large part by the oil and gas industry.
ARCO announced a 715 person downsizing in July 1994. Similar downsizing was
announced in 1994 by other companies operating in the oil and gas industry in
Alaska for 1995.
20
The Alaska economy is also supported by the United States armed services
and the United States Coast Guard which maintain bases in Anchorage, Fairbanks,
Adak, Kodiak, and other communities in Alaska. The military presence in the
state of Alaska provides a significant source of revenues to the economy of the
state. The Company provides message telephone services in a variety of ways to
the United States government and its armed forces personnel. The Company
provides private lines for secured point-to-point data and voice transmission
services and long distance services individually to military personnel.
A reduction in federal military spending or closure of a major facility in
Alaska would have a substantial adverse impact on the state and would both
directly and indirectly affect the Company. A reduction in the number of
military personnel served by the Company and a reduction in the number of
private lines required by the armed forces would have a direct effect on
revenues. Indirect effects would include a reduction of services provided across
the state in support of the military community and as a result, a reduction in
the number of customers served by the Company and volume of traffic carried.
On July 13, 1995, the president approved and Congress subsequently
accepted the independent Defense Base Closure and Realignment Commission report
to close 79 military bases and downsize 26 others. The commission estimates its
list would save $19.3 billion over 20 years, at a cost nationwide of 43,742
military and civilian jobs and 49,823 indirect jobs. Since its first round of
action in 1991, the Defense Base Closure and Realignment Commission has claimed
more than $5 billion in savings by closing or realigning military bases.
The following military installations located in Alaska were recommended
for closure or realignment in the 1995 report: Fort Greely (realign, estimated
loss of 438 military and 286 civilian jobs), Fort Wainwright (realign, estimated
gain of 205 military and 56 civilian jobs), NAF Adak (closure, estimated loss of
540 military and 138 civilian jobs).
The loss of jobs and associated revenues attributed to oil and gas
industry and military workforce reductions is not expected to have a material
effect on the Company's operations. No assurance can be given that funding for
existing military installations in Alaska will not be adversely affected by
reprioritization of needs for military installations or federal budget cuts in
the future.
In October 1994, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instrument" ("SFAS No. 119"). SFAS No.
119 requires disclosures regarding amount, nature and terms of derivative
financial instruments, for instance futures, forward, swap and option contracts
and other instruments with similar characteristics. The Company anticipates that
the adoption of SFAS No. 119 in 1996 will not have a material effect on its
consolidated financial statements.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed of" ("SFAS No. 121").
This statement sets forth new standards for determining when long-lived assets
are impaired and requires such impaired assets to be written down to fair value.
The Company anticipates that the adoption of SFAS No. 121 in 1996 will not have
a material effect on its consolidated financial statements.
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation" ("SFAS No. 123"). SFAS No. 123 establishes financial accounting
and reporting standards for stock-based employee compensation plans. Those plans
include all arrangements by which employees receive shares of stock or other
equity instruments of the employer or the employer incurs liabilities to
employees in amounts based on the price of the employer's stock. This statement
also applies to transactions in
21
which an entity issues its equity instruments to acquire goods or services from
nonemployees. The Company anticipates that the adoption of SFAS No. 123 in 1996
will not have a material effect on its consolidated financial statements.
The Company generally has experienced increased costs in recent years due
to the effect of inflation on the cost of labor, material and supplies, and
plant and equipment. A portion of the increased labor and material and supplies
costs directly affects income through increased maintenance and operating costs.
The cumulative impact of inflation over a number of years has resulted in higher
depreciation expense and increased costs for current replacement of productive
facilities. However, operating efficiencies have partially offset this impact,
as have price increases, although the latter have generally not been adequate to
cover increased costs due to inflation. Competition and other market factors
limit the Company's ability to price services and products based upon
inflation's effect on costs.
Item 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company are filed under this
Item, beginning on Page 23. The financial statement schedules required under
Regulation S-X are filed pursuant to Item 14 of this Report.
22
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
General Communication, Inc.:
We have audited the accompanying consolidated balance sheets of General
Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of General
Communication, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
results of their operations and their cash flows for each of the years in the
three-year period ended December 31, 1995 in conformity with generally accepted
accounting principles.
/s/KPMG PEAT MARWICK LLP
Anchorage, Alaska
March 15, 1996
23
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
ASSETS 1995 1994
--------------------------------------- ---- ----
(Amounts in thousands)
Current assets:
Cash and cash equivalents ........................................................................... $ 4,017 1,649
------- ------
Receivables:
Trade ....................................................................................... 21,737 17,036
Other ....................................................................................... 253 221
------- ------
21,990 17,257
Less allowance for doubtful receivables ............................................................. 295 409
------- ------
Net receivables ............................................................................. 21,695 16,848
------- ------
Prepaid and other current assets .................................................................... 1,566 1,344
Deferred income taxes, net (note 6) ................................................................. 746 884
Inventory ........................................................................................... 991 674
Notes receivable (note 3) ........................................................................... 167 200
------- ------
Total current assets ........................................................................ 29,182 21,599
------- ------
Property and equipment, at cost (notes 5, 8 and 9)
Land ................................................................................................ 73 73
Distribution systems ................................................................................ 67,434 63,272
Support equipment ................................................................................... 11,610 10,223
Property and equipment under capital leases ......................................................... 2,030 2,030
------- ------
81,147 75,598
Less amortization and accumulated depreciation ...................................................... 33,789 28,085
------- ------
Net property and equipment in service ....................................................... 47,358 47,513
Construction in progress ............................................................................ 3,096 --
------- ------
Net property and equipment .................................................................. 50,454 47,513
Notes receivable (note 3) ............................................................................. 904 767
Investment securities available for sale (note 4) ..................................................... -- 785
Other assets, at cost, net of amortization ............................................................ 4,225 3,585
------- ------
Total assets ................................................................................ $ 84,765 74,249
======= ======
See accompanying notes to consolidated financial statements.
24 (Continued)
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
--------------------------------------------------- ---- ----
(Amounts in thousands)
Current liabilities:
Current maturities of long-term debt (note 5) ....................................................... $ 1,689 1,585
Current maturities of obligations under
capital leases (note 9) .......................................................................... 282 249
Accounts payable .................................................................................... 16,861 11,841
Accrued payroll and payroll related obligations ..................................................... 2,108 4,036
Accrued liabilities ................................................................................. 1,134 711
Accrued income taxes (note 6) ....................................................................... 547 217
Accrued interest .................................................................................... 132 101
Deferred revenues ................................................................................... 1,317 1,097
-------- ------
Total current liabilities ................................................................... 24,070 19,837
Long-term debt, excluding current maturities (note 5) ................................................. 8,291 10,969
Obligations under capital leases, excluding
current maturities (note 9) ........................................................................ 26 257
Obligations under capital leases due to related parties,
excluding current maturities (note 9) .............................................................. 739 791
Deferred income taxes, net (note 6) ................................................................... 7,004 6,522
Other liabilities ..................................................................................... 1,619 780
-------- ------
Total liabilities ........................................................................... 41,749 39,156
-------- ------
Stockholders' equity (notes 2, 6 and 7): Common stock (no par):
Class A. Authorized
50,000,000 shares; issued and
outstanding 19,680,199 and 19,616,614
shares at December 31, 1995 and
1994, respectively ....................................................................... 13,912 13,830
Class B. Authorized
10,000,000 shares; issued and
outstanding 4,175,434 and 4,179,019
shares at December 31, 1995 and
1994, respectively ....................................................................... 3,432 3,432
Less cost of 122,611 and 105,111 Class A common
shares held in treasury at December 31, 1995
and 1994, respectively ........................................................................... (389) (328)
Paid-in capital ..................................................................................... 4,041 3,641
Retained earnings ................................................................................... 22,020 14,518
-------- ------
Total stockholders' equity .................................................................. 43,016 35,093
-------- ------
Commitments, contingencies and subsequent
event (notes 9, 11 and 12)
Total liabilities and stockholders' equity .................................................. $ 84,765 74,249
======== ======
See accompanying notes to consolidated financial statements
25
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
(Amounts in thousands except per share amounts)
Revenues (note 8):
Transmission services ..................................................................... $ 120,005 105,789 91,838
Systems sales and service ................................................................. 7,193 9,138 8,299
Other ..................................................................................... 2,081 2,054 2,076
-------- ------- -------
Total revenues ..................................................................... 129,279 116,981 102,213
Cost of sales ............................................................................... 70,221 60,896 56,437
-------- ------- -------
Contribution ....................................................................... 59,058 56,085 45,776
-------- ------- -------
Operating costs and expenses:
Operating and engineering ................................................................ 9,182 7,607 5,588
Service .................................................................................. 2,793 4,751 3,798
Sales and communications ................................................................. 9,865 7,040 4,992
General and administrative ............................................................... 14,492 14,788 13,037
Legal and regulatory ..................................................................... 1,540 1,334 1,372
Bad debt ................................................................................. 1,459 829 1,207
Depreciation and amortization ............................................................ 6,223 6,739 6,978
-------- ------- -------
Total operating costs and expenses ................................................. 45,554 43,088 36,972
-------- ------- -------
Operating income (note 8) .......................................................... 13,504 12,997 8,804
-------- ------- -------
Other income (expense):
Interest expense (notes 2 and 5) ......................................................... (1,146) (1,539) (2,254)
Interest income .......................................................................... 243 223 165
-------- ------- -------
Total other income (expense) ....................................................... (903) (1,316) (2,089)
-------- ------- -------
Earnings before income taxes ........................................................ 12,601 11,681 6,715
Income tax expense (notes 2 and 6) .......................................................... (5,099) (4,547) (2,764)
-------- ------- -------
Net earnings ........................................................................ $ 7,502 7,134 3,951
========= ======== ========
Net earnings per common share ...................................................... $ .31 .30 .17
========= ======== ========
See accompanying notes to consolidated financial statements.
26
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1995, 1994 and 1993
Shares of Class A Class B Class A
Common Stock Preferred Common Common Shares Held Paid-in Retained
Class A Class B Stock Stock Stock in Treasury Capital Earnings
(Amounts in thousands) (Amounts in thousands)
Balances at December 31, 1992 ......................... 12,639 2,853 $3,282 2,430 1,210 (328) 4,690 3,586
Net earnings .......................................... -- -- -- -- -- -- -- 3,951
Class B shares converted to Class A ................... 15 (15) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 514 -- --
Retirement of shares .................................. (562) (3,282) (359) -- -- (1,987) --
Preferred stock dividend paid ......................... -- -- -- -- -- -- -- (153)
Shares issued under stock option plan ................. 118 -- -- 124 -- -- -- --
Shares issued and issuable under
officer stock option agreements .................... 539 -- -- 385 -- -- 35 --
Shares issued, net of associated costs ................ 6,252 1,276 -- 10,890 2,222 -- -- --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1993 ......................... 19,001 4,114 -- 13,470 3,432 (328) 3,252 7,384
Net earnings .......................................... -- -- -- -- -- -- -- 7,134
Class B shares converted to Class A ................... 9 (9) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 371 -- --
Shares issued under stock option plan ................. 37 -- -- 96 -- -- -- --
Shares issued under warrant agreement, net ............ 254 -- -- 185 -- -- -- --
Shares issued and issuable under
officer stock option agreements ..................... 316 74 -- 79 -- -- 18 --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1994 ......................... 19,617 4,179 $ -- 13,830 3,432 (328) 3,641 14,518
Net earnings .......................................... -- -- -- -- -- -- -- 7,502
Class B shares converted to Class A ................... 3 (3) -- -- -- -- -- --
Tax effect of excess stock compensation
expense for tax purposes over amounts
recognized for financial reporting purposes ......... -- -- -- -- -- 397 -- --
Shares purchased and held in Treasury ................. -- -- -- -- -- (61) -- --
Shares issued under stock option plan ................. 40 -- -- 82 -- -- -- --
Shares issued and issuable under
officer stock option agreements ..................... 20 -- -- -- -- -- 3 --
------ ----- ----- ------ ----- ------ ----- ------
Balances at December 31, 1995 ......................... 19,680 4,176 $ -- 13,912 3,432 (389) 4,041 22,020
====== ===== ===== ====== ===== ======= ====== =======
See accompanying notes to consolidated financial statements.
27
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1995, 1994 and 1993
1995 1994 1993
---- ---- ----
(Amounts in thousands)
Cash flows from operating activities:
Net earnings ......................................... $ 7,502 7,134 3,951
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization .................. 6,223 6,739 6,978
Deferred income tax expense .................... 1,017 1,588 1,136
Deferred compensation and compensatory
stock options ................................ 433 343 183
Disposals of property and equipment ............ 170 -- --
Bad debt expense, net of write-offs ............ (114) (312) 46
Other noncash income and expense items ......... 354 (36) 7
Change in operating assets and
liabilities (note 2) ............................... (1,307) 3,063 (591)
-------- ------- ------
Net cash provided by operating activities ...... 14,278 18,519 11,710
-------- ------- ------
Cash flows from investing activities:
Purchases of property and equipment ................... (8,938) (10,604) (5,744)
Cash received from disposal of property and equipment . -- -- 105
Purchases of other assets including long-term deposits (934) (1,110) (303)
Proceeds from the sale of available for sale security 832 -- --
Notes receivable issued .............................. (251) (339) (602)
Payments received on notes receivable ................ 184 10 964
Restricted cash investments .......................... -- 684 2,268
-------- ------- ------
Net cash used in investing activities .......... (9,107) (11,359) (3,312)
-------- ------- ------
Cash flows from financing activities:
Long-term borrowings ................................. -- -- 10,000
Repayments of long-term borrowings and
capital lease obligations .......................... (2,824) (8,494) (26,610)
Proceeds from common stock issuance .................. 82 360 13,641
Purchase of treasury stock ........................... (61) -- --
Disbursements to retire common and
preferred stock ................................... -- -- (5,627)
Dividends paid on preferred stock .................... -- -- (153)
-------- ------- ------
Net cash used by financing activities .......... (2,803) (8,134) (8,749)
-------- ------- ------
Net increase (decrease) in cash and cash equivalents . 2,368 (974) (351)
Cash and cash equivalents at beginning of year ......... 1,649 2,623 2,974
-------- ------- ------
Cash and cash equivalents at end of year ............... $ 4,017 1,649 2,623
======== ======= ======
See accompanying notes to consolidated financial statements.
28
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(l) Summary of Significant Accounting Principles
(a) General
General Communication, Inc. ("GCI"), an Alaska corporation, was
incorporated in 1979. GCI Communication Corp. ("GCC") , an Alaska
corporation, is a wholly owned subsidiary of GCI and was incorporated
in 1990. GCI Network Systems, Inc. ("Network Systems"), formerly
Transalaska Network Systems, Inc., an Alaska corporation, was a
wholly-owned subsidiary of GCC and was incorporated in 1988.
Effective December 31, 1993 Network Systems operations were merged
into GCC. Both GCC and Network Systems operations continue to be
provided by the surviving corporation, GCC, subsequent to the merger.
GCI Communication Services, Inc. ("Communication Services"), an
Alaska corporation, is a wholly-owned subsidiary of GCI and was
incorporated in 1992. GCI Leasing Co., Inc. ("Leasing Company"), an
Alaska corporation, is a wholly-owned subsidiary of Communication
Services and was incorporated in 1992. GCI and GCC are engaged in the
transmission of interstate and intrastate private line and switched
message long distance telephone service between Anchorage, Fairbanks,
Juneau, and other communities in Alaska and the remaining United
States and foreign countries. GCC also provides northbound services
to certain common carriers terminating traffic in Alaska and sells
and services dedicated communications systems and related equipment.
Communication Services provides private network point-to-point data
and voice transmission services between Alaska, Hawaii and the
western contiguous United States. Leasing Company owns and leases
capacity on an undersea fiber optic cable used in the transmission of
interstate private line and switched message long distance services
between Alaska and the remaining United States and foreign countries.
(b) Principles of Consolidation
The consolidated financial statements include the accounts of GCI,
its wholly-owned subsidiaries GCC and Communication Services, and
Communication Services wholly owned subsidiary Leasing Company. All
significant intercompany balances and transactions have been
eliminated in consolidation.
(c) Net Earnings Per Common Share
Primary earnings per common share are determined by dividing net
earnings (after deducting preferred stock dividends of $153,000 in
1993) by the weighted number of common and common equivalent shares
outstanding:
1995 1994 1993
---- ---- ----
(in thousands)
Weighted average common
shares outstanding 23,723 23,199 21,085
Common equivalent shares
outstanding 703 884 1,243
------ ------ ------
24,426 24,083 22,328
====== ====== ======
The difference between shares for primary and fully diluted earnings
per share was not significant in any period presented.
29 (Continued)
(d) Cash and Cash Equivalents
Cash equivalents consist of short-term, highly liquid investments
which are readily convertible into cash.
(e) Inventory
Inventory of merchandise for resale and parts is stated at the lower
of cost or market. Cost is determined using the first-in, first-out
method for parts and the specific identification method for equipment
held for resale.
(f) Property and Equipment
Property and equipment is stated at cost. Construction costs of
transmission facilities are capitalized. Equipment financed under
capital leases is recorded at the lower of fair market value or the
present value of future minimum lease payments. Construction in
progress represents distribution systems and support equipment not
placed in service at December 31, 1995; management intends to place
this equipment in service during 1996.
Depreciation and amortization is computed on a straight-line basis
based upon the shorter of the lease term or the estimated useful
lives of the assets ranging from 3 to 20 years for distribution
systems and 5 to 10 years for support equipment. Amortization of
equipment financed under capitalized leases is included in
depreciation expense.
Repairs and maintenance are charged to operations, and renewals and
additions are capitalized. Gains or losses are recognized at the time
of ordinary retirements, sales or other dispositions of property.
(g) Marketable Securities
Effective January 1, 1994, GCI and subsidiaries ("the Company")
adopted Statement of Financial Accounting Standards No. 115 ("SFAS
No. 115"), Accounting for Certain Investments in Debt and Equity
Securities. Under SFAS No. 115, securities when purchased, are
classified in either the trading account securities portfolio, the
securities available for sale portfolio, or the securities held to
maturity portfolio. Securities are classified as trading account
securities when the intent is profit maximization through market
appreciation and resale. Securities are classified as available for
sale when management intends to hold the securities for an indefinite
period of time. Securities are classified as held to maturity when it
is management's intent to hold these securities until maturity.
Unrealized gains or losses on securities available for sale are
excluded from earnings and reported as a net amount in a separate
component of stockholders' equity. There was no cumulative effect on
the financial statements from the adoption of SFAS No. 115.
Securities available for sale are stated at fair market value which
approximates cost.
(h) Other Assets
Other assets, excluding deferred loan costs and goodwill, are
recorded at cost and are amortized on a straight-line basis over 2 to
15 years. Deferred loan costs are recorded at cost and are amortized
on a straight-line basis over the life of the associated loan.
Goodwill totaled approximately $1,286,000 and $1,387,000 at December
31, 1995 and 1994, respectively, net of amortization of approximately
$697,000 and $596,000,
30 (Continued)
respectively. Goodwill represents the excess of cost over fair value
of net assets acquired and is being amortized on a straight-line
basis over twenty years.
(i) Revenue From Services and Products
Revenues generated from long distance telecommunication services are
recognized when the services are provided. Revenues from the sale of
equipment are recognized at the time the equipment is delivered or
installed. Service revenues are derived primarily from maintenance
contracts on equipment and are recognized on a prorated basis over
the term of the contract. Other revenues are recognized when the
service is provided.
(j) Interest Expense
Interest costs incurred during the construction period of significant
capital projects are capitalized. Interest capitalized by the Company
totaled $112,000 during the year ended December 31, 1995.
(k) Income Taxes
In February, 1992, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"),
"Accounting for Income Taxes". SFAS No. 109 requires a change from
the deferred method of accounting for income taxes of APB Opinion 11
to the asset and liability method of accounting for income taxes.
Under the asset and liability method of SFAS No. 109, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable earnings in the years in which
those temporary differences are expected to be recovered or settled.
Under SFAS No. 109, the effect on deferred tax assets and liabilities
of a change in tax rates is recognized in earnings in the period that
includes the enactment date.
Effective January 1, 1993, the Company adopted SFAS No. 109. The
adjustment required for this change in accounting for income taxes
was recorded in the first quarter of 1993 and resulted in increases
in current deferred tax assets and net long-term deferred tax
liabilities, and provision of a valuation allowance for deferred tax
assets. No cumulative effect adjustment to the Company's consolidated
statement of operations was required.
(l) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
(m) Reclassifications
Reclassifications have been made to the 1994 financial statements to
make them comparable with the 1995 presentation.
31 (Continued)
(2) Consolidated Statements of Cash Flows Supplemental Disclosures
For purposes of the Statement of Cash Flows, the Company's cash
equivalents includes cash and all invested assets with original
maturities of less than three months.
Changes in operating assets and liabilities consist of (in
thousands):
Year ended December 31, 1995 1994 1993
---- ---- ----
(Increase) decrease in trade receivables $ (4,701) 63 (2,287)
(Increase) decrease in other receivables (32) (91) 535
(Increase) decrease in prepaid and other
current assets (222) 312 (477)
(Increase) decrease in inventory (317) (38) 70
Decrease in income taxes receivable --- --- 17
Increase in accounts payable 5,020 1,434 621
Increase (decrease) in accrued liabilities 423 195 (64)
Increase (decrease) in accrued payroll
and payroll related obligations (1,928) 1,238 857
Increase in accrued income taxes 330 163 54
Increase (decrease) in accrued interest 31 14 (43)
Increase (decrease) in deferred revenues 220 (90) 126
Decrease in components of other liabilities (131) (137) ---
-------- ----- ------
$ (1,307) 3,063 (591)
========= ===== ======
Income taxes paid totaled $3,752,000, $2,796,000 and $1,558,000
during 1995, 1994 and 1993, respectively.
Interest paid totaled approximately $1,227,000, $1,525,000 and
$2,297,000 during 1995, 1994 and 1993, respectively.
The Company recorded $397,000, $371,000 and $514,000 in 1995, 1994
and 1993, respectively, in paid-in capital in recognition of the
income tax effect of excess stock compensation expense for tax
purposes over amounts recognized for financial reporting purposes.
32 (Continued)
(3) Notes Receivable
A summary of notes receivable follows:
December 31,
1995 1994
---- ----
(Amounts in thousands)
Note receivable from officer bearing interest at the rate paid by the
Company on its senior indebtedness, secured by GCI Class A common
stock, due on the 90th day after termination of employment or July
30, 1998,whichever is earlier. $ 500 500
Note receivable from officer bearing interest at 10%, secured by
Company stock; payable in equal annual installments of $36,513
through August 26, 2004. 224 224
Notes receivable from officers and others bearing interest at 7% to
10%, unsecured and secured by Company common stock, shares of other
common stock and equipment; due September 20, 1996
through August 26, 2004. 261 194
------ -----
Total notes receivable 985 918
Less current portion (167) (200)
Plus long-term accrued interest 86 49
------ -----
$ 904 767
====== =====
(4) Investment Securities Available for Sale
As of January 1, 1994 the Company adopted SFAS No. 115. Accordingly,
the Company's marketable equity securities have been classified as
available for sale securities and are reported at fair market value
which approximate cost at December 31, 1994. The Company held no
trading account investment securities or available for sale
securities at December 31, 1995.
33 (Continued)
(5) Long-term Debt
Long-term debt is summarized as follows:
December 31,
--------------------
1995 1994
---- ----
(Amounts in thousands)
Credit Agreement (a) $ 1,000 2,000
Undersea Fiber and Equipment
Loan Agreement (b) 8,271 9,500
Financing Obligation (c) 709 1,054
------- ------
9,980 12,554
Less current maturities 1,689 1,585
------- ------
Long-term debt, excluding
current maturities $ 8,291 10,969
======= ======
(a) GCI completed a refinancing of its senior indebtedness on
May 14, 1993. The facility was amended on October 31, 1995
to provide financing for the initial letter of credit and
subsequent down payment required pursuant to the terms of
the Company's transponder purchase agreement with Hughes.
The facility is comprised of two components, the first of
which is a $15,750,000 reducing revolver requiring payments
or reductions of $650,000 per quarter through December 31,
1996, and $812,500 thereafter through its expiration on
December 31, 1997. $2.65 million of this component has been
used to provide a letter of credit to secure payment of
certain access charges associated with the Company's
provision of telecommunications services within the state of
Alaska. $4.6 million of this portion of the facility was
available for additional borrowings at December 31, 1995,
$3.3 million of which was drawn down in March 1996. The
other component totals $10.08 million, and has been used to
provide a $9.1 million letter of credit to Hughes. The
letter of credit is expected to be drawn down by Hughes
after delivery of transponder capacity scheduled for May or
June of 1996. Once drawn upon, the facility will be repaid
in quarterly installments of $455,000 beginning September
30, 1996, with all remaining outstanding principal due on
December 31, 1997.
The Credit agreement provides for interest (8.18% at
December 31, 1995), among other options, at LIBOR plus two
and one-quarter to two and three-quarters percent depending
on the Company's leverage ratio as defined in the Agreement.
A fee of .50% per annum is assessed on the unused portion of
the facility.
The credit agreement contains, among others, covenants
requiring maintenance of specific levels of operating cash
flow to indebtedness, to interest expense, to fixed charges,
and to pro forma debt service. The credit agreement includes
limitations on acquisitions and additional indebtedness, and
prohibits payment of dividends, other than stock dividends.
The Company was in compliance with all credit agreement
covenants during the period commencing May 14, 1993 (date of
the refinancing) through December 31, 1995.
34 (Continued)
Security for the credit agreement includes a pledge of the
stock of GCC and Communication Services, and a first lien on
substantially all of GCC's assets. GCI and its subsidiaries,
Communication Services and Leasing Company, are liable as
guarantors.
In June, 1993, the Company entered into a two-year interest
rate swap agreement with a bank whereby the rate on
$18,200,000 of debt (reduced by $422,500 per quarter
beginning July 1, 1993) was fixed at 4.45 percent plus
applicable margins. The interest effect of the difference
between the fixed rate and the three-month LIBOR rate was
either added to or served to reduce interest expense
depending on the relative interest rates. The agreement
expired June 30, 1995.
(b) On December 31, 1992, Leasing Company entered into a
$12,000,000 loan agreement, of which approximately
$9,000,000 of the proceeds were used to acquire capacity on
the undersea fiber optic cable linking Seward, Alaska and
Pacific City, Oregon. Concurrently, Leasing Company leased
the capacity under a ten year all events, take or pay,
contract to MCI, who subleased the capacity back to the
Company. The lease and sublease agreements provide for
equivalent terms of 10 years and identical monthly payments
of $200,000. The proceeds of the lease agreement with MCI
were pledged as primary security for the financing. The loan
agreement provides for monthly payments of $170,000
including principal and interest through the earlier of
January 1, 2003, or until repaid. The loan agreement
provides for interest at the prime rate plus one-quarter
percent. Additional collateral includes substantially all of
the assets of Leasing Company including the fiber capacity
and a security interest in all of its outstanding stock. MCI
has a second position security interest in the assets of
Leasing Company.
(c) As consideration for MCI's role in enabling Leasing Company
to finance and acquire the undersea fiber optic cable
capacity described at note 5(b) above, Leasing Company
agreed to pay MCI $2,040,000 in sixty monthly payments of
$34,000. For financial statement reporting purposes, the
obligation has been recorded at its remaining present value,
using a discount rate of 10% per annum. The agreement is
secured by a second position security interest in the assets
of Leasing Company.
As of December 31, 1995 maturities of long-term debt were as follows
(in thousands):
Year ending
December 31,
1996 $ 1,689
1997 2,882
1998 1,631
1999 1,780
2000 1,942
2001 and thereafter 56
-------
$ 9,980
=======
35 (Continued)
(6) Income Taxes
Total income tax expense (benefit) for the years ended December 31,
1995, 1994 and 1993 were allocated as follows (amounts in thousands):
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
Earnings from continuing operations $5,099 4,547 2,764
Stockholders' equity, for stock option compensation
expense for tax purposes in excess of amounts
recognized for financial reporting purposes (397) (371) (514)
----- ----- -----
$4,702 4,176 2,250
===== ===== =====
Income tax expense consists of the following:
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(Amounts in thousands)
Current tax expense:
Federal taxes $3,077 2,604 1,615
State taxes 1,005 355 13
----- ----- -----
4,082 2,959 1,628
----- ----- -----
Deferred tax expense:
Federal taxes 780 816 508
State taxes 237 772 628
----- ----- -----
1,017 1,588 1,136
----- ----- -----
$5,099 4,547 2,764
===== ===== =====
Total income tax expense differed from the "expected" income tax
expense determined by applying the statutory federal income tax rate
of 34% as follows:
Years ended December 31,
------------------------
1995 1994 1993
---- ---- ----
(Amounts in thousands)
"Expected" statutory tax expense $4,284 3,971 2,283
State income taxes, net of federal benefit 820 742 424
Income tax effect of goodwill
amortization, nondeductible
expenditures and other items, net (5) (166) 57
----- ----- -----
$5,099 4,547 2,764
===== ===== =====
36 (Continued)
The tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities at December 31, 1995 and 1994 are presented below.
December 31,
1995 1994
---- ----
(Amounts in thousands)
Net current deferred tax assets:
Accounts receivable, principally due to allowance for
for doubtful accounts ................................................................ $ 119 199
Compensated absences, accrued for financial reporting purposes ......................... 400 333
Federal and state alternative minimum tax credit carryforwards ......................... -- 330
Workers compensation and self insurance health reserves,
principally due to accrual for financial reporting purposes .......................... 183 185
Other .................................................................................. 133 36
------- -----
Total gross current deferred tax assets ......................................... 835 1,083
Less valuation allowance ........................................................ (89) (199)
------- -----
Net current deferred tax assets ................................................. $ 746 884
======= =====
Net long-term deferred tax assets:
Deferred compensation expense for financial
reporting purposes in excess of amounts recognized
for tax purposes ..................................................................... $ 587 511
Employee stock option compensation expense for financial
reporting purposes in excess of amounts recognized
for tax purposes ..................................................................... 206 234
Capital loss carryforwards ............................................................. 23 168
Other .................................................................................. 453 311
------- -----
Total gross long-term deferred tax assets ....................................... 1,269 1,224
Less valuation allowance ........................................................ (136) (226)
------- -----
Net long-term deferred tax assets ............................................... 1,133 998
------- -----
Net long-term deferred tax liabilities:
Plant and equipment, principally due to differences in
depreciation ......................................................................... 7,997 7,507
Other .................................................................................. 140 13
------- -----
Total gross long-term deferred tax liabilities .................................. 8,137 7,520
------- -----
Net combined long-term deferred tax liabilities ................................. $ 7,004 6,522
======= =====
The valuation allowance for deferred tax assets was $225,000,
$425,000 and $425,000 as of December 31, 1995, 1994 and 1993,
respectively.
Tax benefits associated with recorded deferred tax assets, net of
valuation allowances, are considered to be more likely than not
realizable through taxable income earned in carryback years, future
reversals of existing taxable temporary differences, and future
taxable income exclusive of reversing temporary differences and
carryforwards. The amount of deferred tax asset considered
realizable, however, could be reduced in the near term if estimates
of future taxable income during the carryforward period are reduced.
For income tax reporting purposes, the Company has available capital
loss carryovers totaling approximately $56,000 which expire in 1997.
The Company's U.S. income tax return for 1993 was selected for
examination by the Internal Revenue Service during 1995. The
examination commenced during the fourth
37 (Continued)
quarter of 1995. Management believes this examination will not
adversely affect the consolidated financial statements.
(7) Stockholders' Equity
Common Stock
GCI's Class A common stock and Class B common stock are identical in
all respects, except that each share of Class A common stock has one
vote per share and each share of Class B common stock has ten votes
per share. In addition, each share of Class B common stock
outstanding is convertible, at the option of the holder, into one
share of Class A common stock.
MCI owns a total of 6,251,509 shares of GCI's Class A and 1,275,791
shares of GCI's Class B common stock which on a fully diluted basis
represented approximately 31 and 30 percent of the issued and
outstanding shares of the respective class.
Stock Warrants
On May 18, 1994 an officer of the Company exercised warrants. In
exchange for $114, the Company issued 160,297 and 74,028 shares of
GCI Class A and Class B common stock, respectively.
Pursuant to the terms of a stock appreciation right granted in 1988,
the Company issued to its former senior lender warrants to acquire
1,021,373 shares of GCI Class A common stock for $.85669 per share.
Warrants to purchase 600,000 shares of Class A common stock were
exercised in April and May, 1991, an additional 168,085 were
exercised in September, 1991 and the remaining warrants to purchase
253,288 shares were exercised in September and October, 1994.
Stock Option Plan
In December 1986, GCI adopted a Stock Option Plan (the "Option Plan")
in order to provide a special incentive to officers, non-employee
directors, and employees by offering them an opportunity to acquire
an equity interest in GCI. The Option Plan provides for the grant of
options for a maximum of 3,200,000 shares of GCI Class A common
stock, subject to adjustment upon the occurrence of stock dividends,
stock splits, mergers, consolidations or certain other changes in
corporate structure or capitalization. If an option expires or
terminates, the shares subject to the option will be available for
further grants of options under the Option Plan. The Option Plan is
administered by GCI's Board of Directors or a committee of
disinterested persons.
Employees of GCI (including officers and directors), employees of
affiliated companies and non-employee directors of GCI are eligible
to participate in the Option Plan. Options granted under the Option
Plan must expire not later than ten years after the date of grant.
The exercise price may be less than, equal to, or greater than the
fair market value of the shares on the date of grant. Options granted
pursuant to the Option Plan are only exercisable if at the time of
exercise the option holder is an employee or non-employee director of
GCI.
38 (Continued)
Information for the years 1993, 1994 and 1995 with respect to the Plan
follows:
Shares Option Price
------ ------------
Outstanding at December 31, 1992 1,660,677 $0.75-$3.00
---------
Granted 298,500 $4.00
Exercised (129,519) $0.75-$2.25
Forfeited (6,000) $4.00
---------
Outstanding at December 31, 1993 1,823,658 $0.75-$4.00
---------
Granted --- ---
Exercised (72,459) $0.75-$3.00
Forfeited (21,500) $4.00
---------
Outstanding at December 31, 1994 1,729,699 $0.75-$4.00
Granted 610,000 $4.00
Exercised (40,000) $1.87-$2.25
Forfeited (11,500) $4.00
---------
Outstanding at December 31, 1995 2,288,199 $0.75-$4.00
=========
Available for grant at December 31, 1995 349,553
=========
Exercisable at December 31, 1995 986,999
=========
The options expire at various dates through October 2005.
Stock Options Not Pursuant to a Plan
In June 1989, officer John Lowber was granted options to acquire
100,000 Class A common shares at $.75 per share. The options vested
in equal annual increments over a five-year period and expire
February, 1999.
The Company entered into an incentive agreement in June 1989 with Mr.
Behnke, an officer of the Company. The incentive agreement provides
for the acquisition of 85,190 remaining shares of Class A common
stock of the Company for $.001 per share exercisable through June 16,
1997. The shares under the incentive agreement vested in equal annual
increments over a three-year period.
Class A Common Shares Held in Treasury
The Company acquired 105,111 shares of its Class A common stock in
1989 for approximately $328,000 to fund a deferred bonus agreement
with Mr. Duncan, an officer of the Company. The agreement provides
that the balance is payable after the later of a) termination of
employment or b) six months after the effective date of the
agreement. In September 1995, the Company acquired an additional
17,500 shares of Class A common stock for approximately $61,000 to
fund additional deferred compensation agreements for two of its
officers, including Mr. Duncan.
39 (Continued)
Employee Stock Purchase Plan
In December 1986, GCI adopted an Employee Stock Purchase Plan (the
"Plan") qualified under Section 401 of the Internal Revenue Code of
1986 (the "Code"). The Plan provides for acquisition of the Company's
Class A and Class B common stock at market value. The Plan permits
each employee of GCI and affiliated companies who has completed one
year of service to elect to participate in the Plan. Eligible
employees may elect to reduce their compensation in any even dollar
amount up to 10 percent of such compensation up to a maximum of
$9,240 in 1995; they may contribute up to 10 percent of their
compensation with after-tax dollars, or they may elect a combination
of salary reductions and after-tax contributions.
GCI may match employee salary reductions and after tax contributions
in any amount, elected by GCI each year, but not more than 10 percent
of any one employee's compensation will be matched in any year. The
combination of salary reductions, after tax contributions and GCI
matching contributions cannot exceed 25 percent of any employee's
compensation (determined after salary reduction) for any year. GCI's
contributions vest over six years. Prior to July 1, 1995 employee and
GCI contributions were invested in GCI common stock and employee
contributions received up to 100% matching, as determined by the
Company each year, in GCI common stock. Beginning July 1, 1995
employee contributions may be invested in GCI common stock, MCI
common stock, Tele-Communications, Inc. common stock or various
mutual funds. Beginning July 1, 1995 employee contributions invested
in GCI common stock receive up to 100% matching, as determined by the
Company each year, in GCI common stock. Employee contributions
invested in other than GCI common stock receive up to 50% matching,
as determined by the Company each year, in GCI common stock. The
Company's matching contributions allocated to participant accounts
totaled approximately $864,000, $792,000 and $485,000 for the years
ended December 31, 1995, 1994, and 1993, respectively. The Plan may,
at its discretion, purchase shares of common stock from the Company
at market value or may purchase GCI common stock on the open market.
40 (Continued)
(8) Industry Segments Data
The Company is engaged in the design, development, sale and service
of telecommunication services and products in two principal
industries: (1) message and data transmission services and (2)
telecommunication systems sales and service.
1995 1994 1993
---- ---- ----
(Amounts in thousands)
Net sales
Message and data transmission svcs. $122,086 107,843 93,914
Systems sales and service 7,193 9,138 8,299
------- ------- -------
Total net sales $129,279 116,981 102,213
======= ======= =======
Operating income
Message and data transmission svcs. $ 25,183 24,952 18,707
System sales and service 1,847 2,112 428
Corporate (13,526) (14,067) (10,331)
------- ------- -------
Total operating income $ 13,504 12,997 8,804
======= ======= =======
Identifiable assets
Message and data transmission svcs. $ 69,715 60,335 59,277
Systems sales and service 2,554 2,838 4,306
Corporate 12,496 11,076 8,027
------- ------- -------
Total identifiable assets $ 84,765 74,249 71,610
======= ======= =======
Capital expenditures
Message and data transmission svcs. $ 5,946 10,003 4,457
Systems sales and service --- --- 369
Corporate 2,992 601 918
------- ------- -------
Total capital expenditures $ 8,938 10,604 5,744
======= ======= =======
Depreciation and amortization expense
Message and data transmission svcs. $ 5,385 6,194 6,572
Systems sales and service 84 103 132
Corporate 754 442 274
------- ------- -------
Total depreciation and
amortization expense $ 6,223 6,739 6,978
======= ======= =======
Intersegment sales approximate market and are not significant.
Identifiable assets are assets associated with a specific industry
segment. General corporate assets consist primarily of cash,
temporary cash investments and other assets and investments which are
not specific to an industry segment. Goodwill and the related
amortization associated with the acquisition of Network Systems is
allocated to the message and data telephone services segment.
Goodwill and the related amortization related to the acquisition of
the Transalaska Data Systems, Inc. assets is allocated to the systems
sales and service segment. Revenues derived from leasing operations
are allocated to the message and data transmission services segment.
The Company provides message telephone service to MCI and Sprint,
major customers. Pursuant to the terms of a contract with MCI, the
Company earned revenues of approximately $23,939,000, $19,512,000 and
$16,068,000 for the years ended December 31, 1995, 1994 and 1993,
respectively. Amounts receivable from MCI totaled $4,256,000
41 (Continued)
and $3,257,000 at December 31, 1995 and 1994, respectively. The
Company earned revenues pursuant to a contract with Sprint totaling
approximately $14,885,000, $12,412,000 and $10,123,000 for the years
ended December 31, 1995, 1994 and 1993 respectively. Amounts
receivable from Sprint totaled $2,362,000 and $981,000 at December
31, 1995 and 1994, respectively.
(9) Leases
The Company leases business offices, has entered into site lease
agreements and uses certain equipment and satellite transponder
capacity pursuant to operating lease arrangements. Rental costs under
such arrangements amounted to approximately $4,353,000, $4,258,000
and $4,029,000 for the years ended December 31, 1995, 1994 and 1993,
respectively.
A summary of future minimum lease payments for all leases as of
December 31, 1995 follows:
Year ending December 31: Operating Capital
------------------------ --------- -------
(Amounts in thousands)
1996 $ 6,343 435
1997 7,493 221
1998 1,441 202
1999 1,343 204
2000 1,247 211
2001 and thereafter 778 1,301
------- ------
Total minimum lease payments $ 18,645 2,574
=======
Less amount representing interest (1,527)
Less current maturities of obligations
under capital leases (282)
Subtotal - long-term obligations under capital
leases 765
Less long-term obligations under capital leases due
to related parties, excluding current maturities (739)
------
Long-term obligations under capital leases,
excluding current maturities $ 26
======
The Company entered into a long-term capital lease agreement in 1991
with the wife of the Company's president for property occupied by the
Company. The lease term is 15 years with monthly payments of $14,400,
increasing in $800 increments at each two year anniversary of the
lease. Monthly lease costs increased to $15,200 effective October
1993 and $16,000 effective October 1995. Monthly lease costs will
increase to $16,800 in October 1997. If the owner sells the premises
prior to the end of the tenth year of the lease, the owner will
rebate to the Company one-half of the net sales price received in
excess of $900,000. If the property is not sold prior to the tenth
year of the lease, the owner will pay the Company the greater of
one-half of the appreciated value of the property over $900,000, or
$500,000. The leased asset was capitalized in 1991 at the owner's
cost of $900,000 and the related obligation was recorded in the
accompanying financial statements.
The leases generally provide that the Company pay the taxes,
insurance and maintenance expenses related to the leased assets.
It is expected that in the normal course of business, leases that
expire will be renewed or replaced by leases on other properties.
42 (Continued)
(10) Disclosure about Fair Value of Financial Instruments
Statement of Financial Standards No. 107, "Disclosures about Fair
Value of Financial Instruments" ("SFAS No. 107") requires disclosure
of the fair value of financial instruments for which it is
practicable to estimate that value. SFAS No. 107 specifically
excludes certain items from its disclosure requirements. The fair
value of a financial instrument is the amount at which the instrument
could be exchanged in a current transaction between willing parties,
other than in a forced sale or liquidation. The carrying amounts at
December 31, 1995 for the Company's assets and liabilities
approximate their fair values.
(11) Commitments and Contingencies
During 1995, the Company adopted a non-qualified, unfunded deferred
compensation plan to provide a means by which certain employees may
elect to defer receipt of designated percentages or amounts of their
compensation and to provide a means for certain other deferrals of
compensation. The Company may, at its discretion, contribute matching
deferrals equal to the rate of matching selected by the Company.
Participants immediately vest in all elective deferrals and all
income and gain attributable thereto. Matching contributions and all
income and gain attributable thereto vest over a six-year period.
Participants may elect to be paid in either a single lump sum payment
or annual installments over a period not to exceed 10 years. Vested
balances are payable upon termination of employment, unforeseen
emergencies, death and total disability. Participants are general
creditors of the Company with respect to deferred compensation plan
benefits. Compensation deferred pursuant to the plan totaled $340,000
as of December 31, 1995.
The Company entered into a purchase and lease-purchase option
agreement in August 1995 for the acquisition of satellite
transponders to meet its long-term satellite capacity requirements.
The amount of the down payment required in 1996 and the balance
payable upon delivery of the transponders as early as the fourth
quarter of 1997 are dependent upon a number of factors. The Company
does not expect the down payment to exceed $10.1 million and the
remaining balance payable at delivery to exceed $46 million.
In the normal course of the Company's operations, it is involved in
various legal and regulatory matters before the FCC and the APUC.
While the Company does not anticipate that the ultimate disposition
of such matters will result in abrupt changes in the competitive
structure of the Alaska market or of the business of the Company, no
assurances can be given that such changes will not occur and that
such changes would not be materially adverse to the Company.
(12) Subsequent Event
Subsequent to year-end, the Company announced that it has signed
letters of intent to acquire three Alaska cable companies that offer
cable television service to more than 101,000 subscribers serving 74
percent of households throughout the state of Alaska. The Company
intends to acquire Prime Cable of Alaska, Alaska Cablevision, Inc. of
Kirkland, Washington and Alaskan Cable Network. Prime Cable operates
the state's largest cable television system including stations in
Anchorage, Bethel, Kenai and Soldotna, Alaska. Alaska Cablevision
owns and operates cable stations in Petersburg, Wrangell, Cordova,
Valdez, Kodiak, Homer, Seward, Nome and Kotzebue, Alaska. Alaskan
Cable Network operates stations in Fairbanks, Juneau, Ketchikan and
Sitka, Alaska. This acquisition will allow the Company to integrate
cable services to bring more information not only to more customers,
but in a manner that is quicker, more efficient and more cost
effective than ever before. The purchase
43 (Continued)
will facilitate consolidation of the cable operations and will
provide a platform for developing new customer products and services
over the next several years. Upon closing and after all approvals are
obtained, the cable companies will be consolidated into a single
organization owned by the Company.
The total purchase price is $280.7 million. According to terms of the
letters of intent, GCI will issue 16.3 million shares of Class A
Common stock to the owners of the three cable companies valued at
$105.7 million. The balance of the purchase will be provided by
approximately $175 million of bank financing. Additional capital will
be provided from the sale of 2 million shares of GCI's Class A Common
Stock to MCI Telecommunications Corporation for $6.50 per share.
The more significant contingencies which must be resolved include
negotiation and execution of definitive agreements with the owners of
the cable companies and MCI, approval of the transactions and
transfer of licenses by the APUC and the FCC, and approval of the
transactions by the Company's shareholders and senior lender and the
cable companies' shareholders, partners and lenders.
Management is confident that once the contingencies are resolved, the
transactions will be financed through modification or assumption of
an existing or negotiation of a new bank credit agreement facility.
Although the Company has held discussions with existing lenders
regarding such a facility, no agreement exists concerning the amounts
or terms of such a facility.
(13) Selected Quarterly Information (Unaudited)
Three months ended
-------------------------------------------------------------
Dec. 31, 1995 Sept. 30, 1995 June 30, 1995 Mar. 31, 1995
------------- -------------- ------------- -------------
(Amounts in thousands, except per share amounts)
Total revenues $34,363 33,363 31,860 29,693
Contribution $15,808 15,548 14,026 13,676
Net earnings $1,807 2,252 1,836 1,607
Net earnings per share $.07 .09 .08 .07
Three months ended
-------------------------------------------------------------
Dec. 31, 1994 Sept. 30, 1994 June 30, 1994 Mar. 31, 1994
------------- -------------- ------------- -------------
(Amounts in thousands, except per share amounts)
Total revenues $29,143 30,685 28,962 28,191
Contribution $14,061 14,740 14,387 12,897
Net earnings $1,320 1,994 2,122 1,698
Net earnings per share $.06 .08 .09 .07
44 (Continued)
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
45
PART IV
Item 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a)(l) Consolidated Financial Statements Page No.
Included in Part II of this Report:
Independent Auditors' Report ...............................23
Consolidated Balance Sheets, December 31, 1995
and 1994 .............................................24 -- 25
Consolidated Statements of Operations,
Years ended December 31, 1995, 1994 and 1993 ............26
Consolidated Statements of Stockholders' Equity,
Years ended December 31, 1995, 1994 and 1993 ............27
Consolidated Statements of Cash Flows,
Years ended December 31, 1995, 1994 and 1993 ............28
Notes to Consolidated Financial Statements ...........29 -- 44
(a)(2) Consolidated Financial Statement Schedules
Included in Part IV of this Report:
Independent Auditors' Report................................51
Schedule VIII - Valuation and Qualifying Accounts,
Years ended December 31, 1995, 1994 and 1993 ............52
Other schedules are omitted as they are not required or are not
applicable, or the required information is shown in the applicable
financial statements or notes thereto.
46
(b) Exhibits
Listed below are the exhibits which are filed as a part of this
Report (according to the number assigned to them in Item 601 of Regulation
S-K):
3 - Articles of Incorporation and By-laws:
Restated Articles of Incorporation of General Communication,
Inc. dated August 16, 1993.
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31,
1994
Bylaws of General Communication, Inc., as amended and
restated dated March 24, 1993
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31,
1994
4 - Instruments defining the rights of security holders:
Registration Rights Agreement, dated as of January 18, 1991,
between General Communication, Inc. and WestMarc
Communications, Inc.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990.
Employee stock option agreements issued to individuals
Spradling, O'Hara, Strid, Behnke, Lewkowski and Snyder.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1991.
Lease agreement between GCI Communication Services, Inc. and
National Bank of Alaska Leasing Corporation dated January
15, 1992.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.
Stock Purchase Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated March
31, 1993.
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated June 4, 1993.
Voting Agreement by and between MCI Telecommunications
Corporation, Ronald A. Duncan, Robert M. Walp, and
WestMarc Communications, Inc., dated March 31, 1993.
Incorporated herein by reference to the Company's Quarterly
Report on Form 10-Q for the period ended March 31, 1994
47
10 - Material Contracts:
Denali Towers Lease
MCI Telecommunications Corporation Carrier Agreement
Westin Building Lease
All the above incorporated herein by reference to the
Company's Registration Statement on Form 10 (File No.
0-15279), mailed to the Securities and Exchange
Commission on December 30, 1986.
Denali Towers Lease, Suites 1000 and 1105
Denali Towers Lease, Suites 910 and 1110
Denali Towers Lease, Suite 400
Hughes Transponder Lease Agreement
Duncan and Hughes Deferred Bonus Agreements
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1989.
Service Agreement dated January 1, 1990 between General
Communication, Inc. and US Sprint Communications Company
Limited Partnership of Delaware
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1990.
Order approving Application for a Certificate of Public
Convenience and Necessity to operate as a
Telecommunications (Intrastate Interexchange Carrier)
Public Utility within Alaska.
Incorporated herein by reference to the Company's Annual
Report on Form 10-K dated December 31, 1991.
1986 Stock Option Plan, as amended
Loan agreement between National Bank of Alaska and GCI
Leasing Co., Inc. dated December 31, 1992.
Pledge and Security Agreement between National Bank of
Alaska and GCI Communication Services, Inc. dated
December 31, 1992.
Lease Agreement between MCI Telecommunications Corporation
and GCI Leasing Co., Inc. dated December 31, 1992.
Sublease Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated
December 31, 1992.
Financial Assistance Agreement between MCI
Telecommunications Corporation and GCI Leasing Co., Inc.
dated December 31, 1992.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
Letter of intent between MCI Telecommunications Corporation
and General Communication, Inc. dated December 31, 1992.
Incorporated herein by reference to the Company's Current
Report on Form 8-K dated January 13, 1993.
MCI Carrier Agreement between MCI Telecommunications
Corporation and General Communication, Inc. dated January
1, 1993.
Contract for Alaska Access Services Agreement between MCI
Telecommunications Corporation and General Communication,
Inc. dated January 1, 1993.
All of the above incorporated herein by reference to the
Company's Current Report on Form 8-K dated June 4, 1993.
Promissory Note Agreement between General Communication,
Inc. and Ronald A. Duncan, dated August 13, 1993.
Deferred Compensation Agreement between General
Communication, Inc. and Ronald A. Duncan, dated August
13, 1993.
Pledge Agreement between General Communication, Inc. and
Ronald A. Duncan, dated August 13, 1993.
48
Amended and Restated Credit Agreement between General
Communication, Inc. and Nationsbank of Texas, N.A., dated
April 30, 1993.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1993.
Revised Qualified Employee Stock Purchase Plan of General
Communication, Inc.
Summary Plan Description pertaining to the Revised Qualified
Employee Stock Purchase Plan of General Communication,
Inc.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.
Company's press release on the letters of intent, dated
March 15, 1996
Amendments to Contract for Alaska Access, effective April 1,
1996
Amendments to MCI Carrier Agreement:
Sixth Amendment, effective April 1, 1996 (there was no
fifth amendment as of the date of this report)
Fourth Amendment, dated September 24, 1995
Third Amendment, dated October 1, 1994
MCI Carrier Addendum MCI 800 DAL Service (First
Amendment), dated April 20, 1994
All of the above incorporated herein by reference to the
Company's Current Report on Form 8-K dated March 14,
1996, filed March 28, 1996.
10.1 - The GCI Special Non-Qualified Deferred Compensation Plan
10.2 - Second Amendment to the Amended and Restated Credit
Agreement between General Communication, Inc. and
Nationsbank of Texas, N.A., dated October 31, 1995.
10.3 - Equipment Purchase Agreement between GCI Communication
Corporation and Scientific-Atlanta, Inc.
Licenses:
214 Authorization
International Resale Authorization
Digital Electronic Message Service Authorization
Fairbanks Earth Station License
Fairbanks (Esro) Construction Permit for P-T-P Microwave Service
Fairbanks (Polaris) Construction Permit for P-T-P Microwave
Service
Anchorage Earth Station Construction Permit
License for Eagle River P-T-P Microwave Service
License for Juneau Earth Station
Issaquah Earth Station Construction Permit
All the above incorporated herein by reference to the Company's
Registration Statement on Form 10 (File No. 0-15279), mailed to
the Securities and Exchange Commission on December 30, 1986.
49
21 - Subsidiary of Registrant:
GCI Communication Corp.
State of Incorporation: Alaska
Subsidiary of Registrant:
GCI Communication Services, Inc.
State of Incorporation: Alaska
Subsidiary of Subsidiary of Registrant:
GCI Leasing Co., Inc.
State of Incorporation: Alaska
27 - Financial Data Schedule
28 - Additional Exhibits:
The Articles of Incorporation of GCI Communication Corp.
The By-laws of GCI Communication Corp.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the period ended
December 31, 1990
The By-laws of GCI Communication Services, Inc.
The Articles of Incorporation of GCI Communication Services,
Inc.
The By-laws of GCI Leasing Co., Inc.
The Articles of Incorporation of GCI Leasing Co., Inc.
All of the above incorporated herein by reference to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.
(c) Reports on Form 8-K
None filed during the quarter ended December 31, 1995.
50
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors and Stockholders
General Communication, Inc.:
Under date of March 15, 1996, we reported on the consolidated balance sheets of
General Communication, Inc. and Subsidiaries ("Company") as of December 31, 1995
and 1994 and the related consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the three-year period ended
December 31, 1995, which are included in the Company's 1995 Annual Report on
Form 10-K. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related consolidated financial
statement schedule in the consolidated financial statements, which is listed in
the index in Item 14(a)(2) of the Company's 1995 Annual Report on Form 10-K.
This consolidated financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
consolidated financial statement schedule based on our audits.
In our opinion this consolidated financial statement schedule, when considered
in relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects the information set forth therein.
/s/KPMG PEAT MARWICK LLP
Anchorage, Alaska
March 15, 1996
51
Schedule VIII
-------------
GENERAL COMMUNICATION, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended December 31, 1995, 1994 and 1993
Additions Deductions
-------------------- -----------
Balance at Charged Write-offs Balance
beginning to profit net of at end
Description of year and loss Other recoveries of year
- ---------------------------------------- ---------- --------- ----- ---------- -------
(Amounts in thousands)
Year ended December 31, 1995:
Allowance for doubtful
receivables $ 409 1,459 --- 1,573 295
===== ===== === ===== ===
Year ended December 31, 1994:
Allowance for doubtful
receivables $ 721 829 --- 1,141 409
===== ===== === ===== ===
Year ended December 31, 1993:
Allowance for doubtful
receivables $ 675 1,207 --- 1,161 721
===== ===== === ===== ===
52
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
GENERAL COMMUNICATION, INC.
By: /s/ Ronald A. Duncan
Ronald A. Duncan, President
(Chief Executive Officer)
Date: March 15, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Signature Title Date
---------------------- ------------------------- --------------
/s/ Carter F. Page Chairman of Board March 15, 1996
Carter F. Page and Director
/s/ Robert M. Walp Vice Chairman of Board and March 15, 1996
Robert M. Walp Director
/s/ Ronald A. Duncan President and Director, March 15, 1996
Ronald A. Duncan (Chief Executive Officer)
/s/ Donne F. Fisher Director March 15, 1996
Donne F. Fisher
/s/ John W. Gerdelman Director March 15, 1996
John W. Gerdelman
/s/ Larry E. Romrell Director March 15, 1996
Larry E. Romrell
/s/ James M. Schneider Director March 15, 1996
James M. Schneider
/s/ John M. Lowber Senior Vice President, March 15, 1996
John M. Lowber Chief Financial Officer,
Secretary and Treasurer
/s/ Alfred J. Walker Vice President and Chief March 15, 1996
Alfred J. Walker Accounting Officer
53