Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - GRIZZLY MERGER SUB 1, LLC | form8k02272018exhibit99-2.htm |
| 8-K - 8-K - GRIZZLY MERGER SUB 1, LLC | gciform8k02272018.htm |
Exhibit 99.1
GCI REPORTS FOURTH QUARTER 2017 FINANCIAL RESULTS
Net Income of $48 million for the quarter and Net Loss of $25 million for the year
Consolidated Revenue of $236 million for the quarter and $919 million for the year
Pro Forma EBITDA of $76 million for the quarter and $305 million for the year
February 27, 2018, Anchorage, Alaska - GCI Liberty, Inc. (“GCI”) (NASDAQ: GNCMA) formerly known as General Communication, Inc. announces its results for the fourth quarter and year-end 2017.
Liberty Interactive Transaction Update:
As previously announced, GCI and Liberty Interactive Corporation signed an agreement to combine GCI with certain assets of the Liberty Ventures Group. We expect to close the transaction on March 9, 2018.
Operating and Financial Highlights
Our fourth quarter revenues were $236 million, an increase of $4 million sequentially and $3 million from the fourth quarter of 2016. Pro Forma EBITDA, which is Adjusted EBITDA plus $1 million of one-time transaction costs in the quarter, was $76 million. This is down $4 million from the previous quarter and up $8 million year-over-year.
This quarter we had Pro Forma EBITDA margins of 32 percent compared to 29 percent in the fourth quarter of 2016 and 35 percent in the third quarter of 2017.
Consumer
Consumer revenues of $113 million in the fourth quarter were up $3 million or 3 percent sequentially and $2 million or 2 percent year-over-year. Data and wireless revenues were up $2 million each year-over-year. During the quarter we experienced subscriber declines of 500 cable modems, 2,600 video subscribers and 4,100 wireless subscribers. The recession in Alaska is a significant contributing factor in our subscriber headwinds. The wireless subscriber losses were exacerbated by seasonal prepaid disconnects.
Business
GCI Business revenues of $122 million in the fourth quarter were up $1 million or 1 percent on both a sequential and year over year basis.
SG&A
SG&A expenses were $90 million during the quarter. Excluding the one-time transaction costs of $1 million, expenses were level sequentially and down $4 million or 4 percent year-over-year.
Leverage
After adding back the roaming adjustment and transaction costs, our net debt to Adjusted EBITDA was 4.65x for 2017.
2017 Guidance
With Pro Forma EBITDA of $305 million we achieved our guidance of $300 to $315 million excluding costs related to the Liberty transaction.
Capital expenditures of $167 million hit guidance of approximately $165 million in 2017.
2018 Guidance
Capital expenditures are expected to be approximately $170 million in 2018.
Use of Non-GAAP Measure
Pro-Forma and Adjusted EBITDA are presented herein and are non-GAAP measures. See our attached financials for a reconciliation of these non-GAAP measures to the nearest GAAP measure.
Pro-Forma EBITDA guidance is a forward-looking non-GAAP financial measure presented herein. Reconciliation to the most directly comparable GAAP financial measure is not provided because we are unable to provide such reconciliation without unreasonable effort. The inability to provide a reconciliation is due to the uncertainty and inherent difficulty regarding the occurrence, the financial impact and the periods with respect to recognition of future GAAP financial measures. We also believe that such a reconciliation would imply an inappropriate degree of precision. For the same reasons, we are unable to address the probable significance of the unavailable information.
Conference Call
Due to the pending transactions between GCI and Liberty Interactive Corporation, GCI will not hold a conference call to review these results.
Forward-Looking Statement Disclosure
The foregoing contains forward-looking statements regarding GCI’s expected results that are based on management’s expectations as well as on a number of assumptions concerning future events. Actual results might differ materially from those projected in the forward-looking statements due to uncertainties and other factors, many of which are
outside GCI’s control. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained in GCI’s cautionary statement sections of Forms 10-K and 10-Q filed with the Securities and Exchange Commission.
About GCI
GCI is the largest communications provider in Alaska, providing data, wireless, video, voice and managed services to consumer and business customers throughout Alaska and nationwide. Headquartered in Alaska, GCI has delivered services for nearly 40 years to some of the most remote communities and in some of the most challenging conditions in North America. Learn more about GCI at www.gci.com.
Contact:
Media / Investors: Heather Handyside, 907.868.6838, hhandyside@gci.com
# # #
GCI LIBERTY, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
(Amounts in thousands) | December 31, | |||||
ASSETS | 2017 | 2016 | ||||
Current assets: | ||||||
Cash and cash equivalents | $ | 15,622 | 19,297 | |||
Receivables | 188,580 | 184,296 | ||||
Less allowance for doubtful receivables | 3,992 | 4,407 | ||||
Net receivables | 184,588 | 179,889 | ||||
Prepaid expenses | 21,206 | 18,599 | ||||
Inventories | 12,996 | 11,945 | ||||
Other current assets | 71 | 167 | ||||
Total current assets | 234,483 | 229,897 | ||||
Property and equipment | 2,754,667 | 2,614,875 | ||||
Less accumulated depreciation | 1,599,956 | 1,452,957 | ||||
Net property and equipment | 1,154,711 | 1,161,918 | ||||
Goodwill | 242,264 | 239,263 | ||||
Cable certificates | 191,635 | 191,635 | ||||
Wireless licenses | 93,753 | 92,347 | ||||
Other intangible assets, net of amortization | 75,697 | 74,444 | ||||
Other assets | 100,957 | 76,435 | ||||
Total other assets | 704,306 | 674,124 | ||||
Total assets | $ | 2,093,500 | 2,065,939 | |||
GCI LIBERTY, INC. AND SUBSIDIARIES | ||||||
CONSOLIDATED BALANCE SHEETS | ||||||
(Unaudited) | ||||||
(Continued) | ||||||
(Amounts in thousands) | December 31, | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | 2017 | 2016 | ||||
Current liabilities: | ||||||
Current maturities of obligations under long-term debt, capital leases, and tower obligations | $ | 13,972 | 13,229 | |||
Accounts payable | 54,073 | 72,937 | ||||
Deferred revenue | 38,047 | 37,618 | ||||
Accrued payroll and payroll related obligations | 32,044 | 30,305 | ||||
Accrued liabilities | 14,147 | 14,729 | ||||
Accrued interest (including $5,132 to a related party at December 31, 2017 and 2016) | 13,975 | 13,926 | ||||
Subscriber deposits | 1,271 | 917 | ||||
Total current liabilities | 167,529 | 183,661 | ||||
Long-term debt, net (including $58,731 and $56,640 due to a related party at December 31, 2017 and 2016, respectively) | 1,379,059 | 1,333,446 | ||||
Obligations under capital leases, excluding current maturities (including $1,702 and $1,769 due to a related party at December 31, 2017 and 2016, respectively) | 40,288 | 50,316 | ||||
Long-term deferred revenue | 138,022 | 135,877 | ||||
Tower obligations | 93,606 | 87,653 | ||||
Deferred income taxes | 90,571 | 137,982 | ||||
Derivative stock appreciation rights with related party | 78,330 | 29,700 | ||||
Other liabilities | 60,093 | 54,056 | ||||
Total liabilities | 2,047,498 | 2,012,691 | ||||
Commitments and contingencies | ||||||
Stockholders’ equity: | ||||||
Common stock (no par): | ||||||
Class A-1. Authorized 100,000 shares; issued 32,924 and 32,668 shares at December 31, 2017 and 2016, respectively; outstanding 32,898 and 32,642 shares at December 31, 2017 and 2016, respectively | — | — | ||||
Class B-1. Authorized 10,000 shares; issued and outstanding 3,052 and 3,153 shares at December 31, 2017 and 2016, respectively; convertible on a share-per-share basis into Class A-1 common stock | 2,578 | 2,663 | ||||
Less cost of 26 Class A-1 common shares held in treasury at December 31, 2017 and 2016 | (249 | ) | (249 | ) | ||
Paid-in capital | 19,133 | 3,237 | ||||
Retained earnings (deficit) | (12,296 | ) | 17,068 | |||
Total GCI Liberty, Inc. stockholders' equity | 9,166 | 22,719 | ||||
Non-controlling interests | 36,836 | 30,529 | ||||
Total stockholders’ equity | 46,002 | 53,248 | ||||
Total liabilities and stockholders’ equity | $ | 2,093,500 | 2,065,939 | |||
GCI LIBERTY, INC. AND SUBSIDIARIES | |||||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||||
YEARS ENDED DECEMBER 31, 2017, 2016, AND 2015 | |||||||||
(Unaudited) | |||||||||
(Amounts in thousands, except per share amounts) | 2017 | 2016 | 2015 | ||||||
Revenues: | |||||||||
Non-related party | $ | 919,204 | 933,812 | 973,251 | |||||
Related party | — | — | 5,283 | ||||||
Total revenues | 919,204 | 933,812 | 978,534 | ||||||
Cost of goods sold (exclusive of depreciation and amortization shown separately below): | |||||||||
Non-related party | 280,200 | 302,578 | 321,457 | ||||||
Related party | — | — | 881 | ||||||
Total cost of goods sold | 280,200 | 302,578 | 322,338 | ||||||
Selling, general and administrative expenses | |||||||||
Non-related party | 370,639 | 358,356 | 337,839 | ||||||
Related party | — | — | 540 | ||||||
Total selling, general and administrative expenses | 370,639 | 358,356 | 338,379 | ||||||
Depreciation and amortization expense | 197,115 | 193,775 | 181,767 | ||||||
Software impairment charge | — | — | 29,839 | ||||||
Operating income | 71,250 | 79,103 | 106,211 | ||||||
Other income (expense): | |||||||||
Interest expense (including amortization of deferred loan fees) | (83,341 | ) | (78,628 | ) | (78,786 | ) | |||
Related party interest expense | (7,716 | ) | (7,455 | ) | (6,602 | ) | |||
Derivative instrument unrealized income (loss) with related party | (48,630 | ) | 3,120 | (11,160 | ) | ||||
Loss on extinguishment of debt | (649 | ) | (640 | ) | (27,700 | ) | |||
Impairment of equity method investment | — | — | (12,593 | ) | |||||
Other | 2,938 | 5,569 | 2,917 | ||||||
Other expense, net | (137,398 | ) | (78,034 | ) | (133,924 | ) | |||
Income (loss) before income taxes | (66,148 | ) | 1,069 | (27,713 | ) | ||||
Income tax (expense) benefit | 41,426 | (5,205 | ) | 1,847 | |||||
Net loss | (24,722 | ) | (4,136 | ) | (25,866 | ) | |||
Net income (loss) attributable to non-controlling interests | (476 | ) | (469 | ) | 159 | ||||
Net loss attributable to GCI Liberty, Inc. | $ | (24,246 | ) | (3,667 | ) | (26,025 | ) | ||
Basic net loss attributable to GCI Liberty, Inc. common stockholders per Class A-1 common share | $ | (0.70 | ) | (0.10 | ) | (0.69 | ) | ||
Basic net loss attributable to GCI Liberty, Inc. common stockholders per Class B-1 common share | $ | (0.70 | ) | (0.10 | ) | (0.69 | ) | ||
Diluted net loss attributable to GCI Liberty, Inc. common stockholders per Class A-1 common share | $ | (0.70 | ) | (0.15 | ) | (0.69 | ) | ||
Diluted net loss attributable to GCI Liberty, Inc. common stockholders per Class B-1 common share | $ | (0.70 | ) | (0.15 | ) | (0.69 | ) | ||
Common shares used to calculate Class A basic EPS | 31,344 | 32,526 | 34,764 | ||||||
Common shares used to calculate Class A diluted EPS | 34,427 | 36,318 | 37,921 | ||||||
GCI LIBERTY, INC. AND SUBSIDIARIES | |||||||||
SUPPLEMENTAL SCHEDULES | |||||||||
(Unaudited) | |||||||||
(Amounts in thousands) | |||||||||
Fourth Quarter 2017 | Fourth Quarter 2016 | Third Quarter 2017 | |||||||
Revenues | |||||||||
Wireless | $ | 70,738 | 68,650 | 69,452 | |||||
Data | 117,169 | 111,388 | 113,845 | ||||||
Video | 29,501 | 31,583 | 29,355 | ||||||
Voice | 18,121 | 20,672 | 18,562 | ||||||
Total | 235,529 | 232,293 | 231,214 | ||||||
Cost of goods sold | 75,101 | 74,652 | 67,496 | ||||||
Contribution | 160,428 | 157,641 | 163,718 | ||||||
Less SG&A | (90,161 | ) | (93,714 | ) | (90,691 | ) | |||
Plus share-based compensation expense | 3,712 | 3,223 | 4,858 | ||||||
Plus imputed interest on financed devices | 621 | 672 | 608 | ||||||
Plus accretion | 420 | (11 | ) | 425 | |||||
Other | 256 | (98 | ) | 227 | |||||
Adjusted EBITDA | 75,276 | 67,713 | 79,145 | ||||||
Transaction costs | 686 | — | 1,620 | ||||||
Pro Forma EBITDA | $ | 75,962 | 67,713 | 80,765 | |||||
GCI LIBERTY, INC. AND SUBSIDIARIES | ||||||
SUPPLEMENTAL SCHEDULES | ||||||
(Unaudited) | ||||||
(Amounts in thousands) | ||||||
Twelve Months Ended December 31, | ||||||
2017 | 2016 | |||||
Revenues | ||||||
Wireless | $ | 272,347 | 283,156 | |||
Data | 454,237 | 436,398 | ||||
Video | 117,648 | 127,407 | ||||
Voice | 74,972 | 86,851 | ||||
Total | 919,204 | 933,812 | ||||
Cost of goods sold | 280,200 | 302,578 | ||||
Contribution | 639,004 | 631,234 | ||||
Less SG&A | (370,639 | ) | (358,356 | ) | ||
Plus share-based compensation expense | 17,453 | 11,043 | ||||
Plus imputed interest on financed devices | 2,540 | 2,557 | ||||
Plus accretion | 1,772 | 1,229 | ||||
Other | (833 | ) | 337 | |||
Adjusted EBITDA | 289,297 | 288,044 | ||||
Transaction costs | 15,457 | — | ||||
Pro Forma EBITDA | $ | 304,754 | 288,044 | |||
GCI Liberty, Inc. | ||||||||||||||||
Non-GAAP Financial Reconciliation Schedule | ||||||||||||||||
(Unaudited) | ||||||||||||||||
(Amounts in Thousands) | Three Months Ended | Twelve Months Ended | ||||||||||||||
December 31, | December 31, | September 30, | December 31, | December 31, | ||||||||||||
2017 | 2016 | 2017 | 2017 | 2016 | ||||||||||||
Net income (loss) | $ | 48,373 | (16,243 | ) | (8,849 | ) | (24,722 | ) | (4,136 | ) | ||||||
Income tax expense (benefit) | (44,183 | ) | (2,391 | ) | (2,864 | ) | (41,426 | ) | 5,205 | |||||||
Income (loss) before income taxes | 4,190 | (18,634 | ) | (11,713 | ) | (66,148 | ) | 1,069 | ||||||||
Other (income) expense: | ||||||||||||||||
Interest expense (including amortization of deferred loan fees) | 20,964 | 20,429 | 21,595 | 83,341 | 78,628 | |||||||||||
Related party interest expense | 1,971 | 1,897 | 1,953 | 7,716 | 7,455 | |||||||||||
Derivative instrument unrealized income (loss) with related party | (5,340 | ) | 12,720 | 12,270 | 48,630 | (3,120 | ) | |||||||||
Loss on extinguishment of debt | — | 640 | — | 649 | 640 | |||||||||||
Other | (1,086 | ) | (3,867 | ) | 69 | (2,938 | ) | (5,569 | ) | |||||||
Other expense, net | 16,509 | 31,819 | 35,887 | 137,398 | 78,034 | |||||||||||
Operating income | 20,699 | 13,185 | 24,174 | 71,250 | 79,103 | |||||||||||
Plus depreciation and amortization expense | 49,568 | 50,742 | 48,853 | 197,115 | 193,775 | |||||||||||
Plus share-based compensation expense | 3,712 | 3,223 | 4,858 | 17,453 | 11,043 | |||||||||||
Plus imputed interest on financed devices | 621 | 672 | 608 | 2,540 | 2,557 | |||||||||||
Plus (less) accretion expense | 420 | (11 | ) | 425 | 1,772 | 1,229 | ||||||||||
Other | 256 | (98 | ) | 227 | (833 | ) | 337 | |||||||||
Adjusted EBITDA (Note 1) | 75,276 | 67,713 | 79,145 | 289,297 | 288,044 | |||||||||||
Transaction costs | 686 | — | 1,620 | 15,457 | — | |||||||||||
Pro Forma EBITDA (Note 2) | $ | 75,962 | 67,713 | 80,765 | 304,754 | 288,044 | ||||||||||
Note: | ||||
(1) Earnings plus imputed interest on financed devices before:
•Net interest expense,
•Income taxes,
•Depreciation and amortization expense,
•Loss on extinguishment of debt,
•Derivative instrument unrealized income (loss),
•Share-based compensation expense,
•Accretion expense,
•Loss attributable to non-controlling interest resulting from NMTC transactions,
•Gains and impairment losses on equity and cost method investments,
•Other non-cash adjustments.
(2) Adjusted EBITDA plus transaction costs.
Adjusted and Pro Forma EBITDA are not presented as an alternative measure of net income, operating income or cash flow from operations, as determined in accordance with accounting principles generally accepted in the United States of America. GCI's management uses Adjusted EBITDA and Pro Forma EBITDA to evaluate the operating performance of its business, and as a measure of performance for incentive compensation purposes. GCI believes Adjusted EBITDA and Pro Forma EBITDA are useful to investors and other users of our financial information in understanding and evaluating operating performance as an analytical indicator of income generated to service debt and fund capital expenditures. In addition, multiples of current or projected Adjusted EBITDA and Pro Forma EBITDA are used to estimate current or prospective enterprise value. Adjusted EBITDA and Pro Forma EBITDA do not give effect to cash used for debt service requirements, and thus do not reflect funds available for investment or other discretionary uses. Adjusted EBITDA and Pro Forma EBITDA as presented herein may not be comparable to similarly titled measures reported by other companies.
GCI LIBERTY, INC. AND SUBSIDIARIES | ||||||||||||||
SUPPLEMENTAL REVENUE SCHEDULES | ||||||||||||||
(Unaudited) | ||||||||||||||
(Amounts in thousands) | ||||||||||||||
Fourth Quarter 2017 | Fourth Quarter 2016 | |||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||
Revenues | ||||||||||||||
Wireless | $ | 45,294 | 25,444 | 70,738 | 43,352 | 25,298 | 68,650 | |||||||
Data | 37,260 | 79,909 | 117,169 | 35,163 | 76,225 | 111,388 | ||||||||
Video | 24,742 | 4,759 | 29,501 | 26,011 | 5,572 | 31,583 | ||||||||
Voice | 5,873 | 12,248 | 18,121 | 6,377 | 14,295 | 20,672 | ||||||||
Total | $ | 113,169 | 122,360 | 235,529 | 110,903 | 121,390 | 232,293 | |||||||
(Amounts in thousands) | ||||||||||||||
Fourth Quarter 2017 | Third Quarter 2017 | |||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||
Revenues | ||||||||||||||
Wireless | $ | 45,294 | 25,444 | 70,738 | 42,224 | 27,228 | 69,452 | |||||||
Data | 37,260 | 79,909 | 117,169 | 36,991 | 76,854 | 113,845 | ||||||||
Video | 24,742 | 4,759 | 29,501 | 24,991 | 4,364 | 29,355 | ||||||||
Voice | 5,873 | 12,248 | 18,121 | 5,939 | 12,623 | 18,562 | ||||||||
Total | $ | 113,169 | 122,360 | 235,529 | 110,145 | 121,069 | 231,214 | |||||||
(Amounts in thousands) | ||||||||||||||
Twelve Months Ended December 31, 2017 | Twelve Months Ended December 31, 2016 | |||||||||||||
Consumer | Business | Total | Consumer | Business | Total | |||||||||
Revenues | ||||||||||||||
Wireless | $ | 167,733 | 104,614 | 272,347 | 177,801 | 105,355 | 283,156 | |||||||
Data | 145,757 | 308,480 | 454,237 | 140,196 | 296,202 | 436,398 | ||||||||
Video | 99,609 | 18,039 | 117,648 | 107,305 | 20,102 | 127,407 | ||||||||
Voice | 23,783 | 51,189 | 74,972 | 26,734 | 60,117 | 86,851 | ||||||||
Total | $ | 436,882 | 482,322 | 919,204 | 452,036 | 481,776 | 933,812 | |||||||
December 31, 2017 | December 31, 2017 | |||||||||||||||
as compared to | as compared to | |||||||||||||||
December 31, | December 31, | September 30, | December 31, | September 30, | December 31, | September 30, | ||||||||||
2017 | 2016 | 2017 | 2016 | 2017 | 2016 | 2017 | ||||||||||
Consumer | ||||||||||||||||
Data: | ||||||||||||||||
Cable modem subscribers1 | 124,900 | 129,500 | 125,400 | (4,600 | ) | (500 | ) | (3.6 | )% | (0.4 | )% | |||||
Video: | ||||||||||||||||
Basic subscribers2 | 97,200 | 107,600 | 99,800 | (10,400 | ) | (2,600 | ) | (9.7 | )% | (2.6 | )% | |||||
Homes passed | 252,500 | 250,800 | 251,600 | 1,700 | 900 | 0.7 | % | 0.4 | % | |||||||
Voice: | ||||||||||||||||
Total local access lines in service3 | 48,900 | 53,400 | 50,200 | (4,500 | ) | (1,300 | ) | (8.4 | )% | (2.6 | )% | |||||
Business | ||||||||||||||||
Data: | ||||||||||||||||
Cable modem subscribers1 | 9,900 | 10,100 | 10,000 | (200 | ) | (100 | ) | (2.0 | )% | (1.0 | )% | |||||
Voice: | ||||||||||||||||
Total local access lines in service3 | 38,500 | 41,100 | 39,600 | (2,600 | ) | (1,100 | ) | (6.3 | )% | (2.8 | )% | |||||
Consumer and Business Combined | ||||||||||||||||
Wireless | ||||||||||||||||
Consumer wireless lines in service4 | 196,800 | 198,600 | 200,900 | (1,800 | ) | (4,100 | ) | (0.9 | )% | (2.0 | )% | |||||
Business wireless lines in service4 | 22,600 | 23,900 | 22,800 | (1,300 | ) | (200 | ) | (5.4 | )% | (0.9 | )% | |||||
Total wireless lines in service | 219,400 | 222,500 | 223,700 | (3,100 | ) | (4,300 | ) | -1.4 | % | -1.9 | % | |||||
1 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entity purchases multiple cable modem service access points, each access point is counted as a subscriber. On January 1, 2017, we transferred 3,100 small business cable modem subscribers from Business to Consumer. We adjusted the previously reported subscriber numbers as of December 31, 2016 for the number of subscribers that were transferred on January 1, 2017 and for database cleanup in preparation for our new billing system. | ||||||||||||||||
2 A basic subscriber is defined as one basic tier of service delivered to an address or separate subunits thereof regardless of the number of outlets purchased. On January 1, 2017, we transferred 500 small business basic subscribers from Business to Consumer. We adjusted the previously reported subscriber numbers as of December 31, 2016 for the number of subscribers that were transferred on January 1, 2017 and for database cleanup in preparation for our new billing system. | ||||||||||||||||
3 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephone network. On January 1, 2017, we transferred 4,800 small business local access lines from Business to Consumer. We adjusted the previously reported subscriber numbers as of December 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | ||||||||||||||||
4 A wireless line in service is defined as a revenue generating wireless device. On January 1, 2017, we transferred 3,700 small business wireless lines from Business to Consumer. We adjusted the previously reported subscriber numbers as of December 31, 2016 for the number of subscribers that were transferred on January 1, 2017. | ||||||||||||||||