ACS plans job cuts after disappointing 2nd qtr.

Posted: Friday, July 26, 2002

ANCHORAGE (AP) -- Alaska Communications Systems says it posted disappointing second quarter earnings and plans a restructuring that will include cutting up to 90 jobs.

ACS posted a $3.6 million profit in the second quarter, compared with a $2.8 million loss a year ago. Revenue rose to $92.5 million from $81.5 million in the same period last year.

But the company said its cash-flow measure was well-below what it had predicted.

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

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

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

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

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

The cost to ACS of ramping up the new system totaled $1.8 million, the company said. ACS expects to realize $1.5 million a month from this contract eventually, the company said.

To improve the bottom line next quarter, ACS plans to reduce its work force of 1,200 employees by 7 percent, Carson said. The company will shed the jobs through early retirement, attrition, targeted layoffs and the completion of temporary contracts, he said. The downsizing is expected to produce $6 million in savings.

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

''Competition from GCI has certainly had an impact. They've been steadily losing customers (to GCI) for a couple of years,'' Klugman said.

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