GNCMA Gci Liberty, Inc. (delisted)

GCI REPORTS SECOND QUARTER 2017 FINANCIAL RESULTS

Net Loss of $9 million

Consolidated Revenue of $224 million

Pro Forma EBITDA of $75 million

August 2, 2017, Anchorage, Alaska - General Communication, Inc. ("GCI") (NASDAQ: GNCMA) announces its results for the second quarter of 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. The following summarizes our progress on closing related requirements:

Financing: We have received consents from our bondholders waiving their change of control put right, and we have amended our Senior Credit Facility to allow for the transaction.

Hart-Scott-Rodino Review: On June 7, 2017, the Federal Trade Commission and Department of Justice announced early termination of the waiting period under the premerger notification rules.

Regulatory Approvals: We have made the required filings with each of the Federal Communications Commission ("FCC") and the Regulatory Commission of Alaska seeking approval of the transaction.

Shareholder vote: We have submitted our S-4 to the SEC this week for review.

The transaction is expected to be completed during the fourth quarter of 2017, subject to the satisfaction of customary closing conditions, including the regulatory and shareholder approvals.

Universal Services - Rural Health Care (RHC) Program Update

The RHC program provides funding for rural health care facilities to gain access to critical broadband connectivity at urban rates.  For the fiscal year ending June 30, 2017, the requests for funding from the program exceeded the program cap of $400 million for the first time.  The FCC then reduced by 7.5 percent the amount of the subsidy to users who did not file in the first application window.  This reduction left some of our customers with significant and unexpected amounts due.

With the significantly higher cost of service in Alaska, the FCC recognized that this would be a real burden on rural health care providers in Alaska.  On June 30, 2017 the FCC issued an order which would allow telecom providers to "forgive" the additional 7.5 percent payment which would have otherwise been payable, by retroactively resetting the rates for service.  Under these specific circumstances, GCI is currently expecting to forgive these amounts for the fiscal year ending June 30, 2017. The impact of this decision is a one-time reduction of revenues and EBITDA of approximately $5 million in the second quarter. We are working with our rural health care provider partners and the FCC on alternative funding solutions for future years.

Operating and Financial Highlights

Our second quarter revenues were $224 million, a decline of $4 million sequentially and $9 million from the second quarter of 2016 driven by weakness in consumer wireless and video in addition to the RHC revenue reduction.  Pro Forma EBITDA, which is Adjusted EBITDA plus $9 million of one-time Liberty transaction costs in the quarter, was $75 million. This is up $2 million from the previous quarter and $3 million year-over-year. Pro Forma EBITDA is up due to general operational efficiencies including savings achieved in procurement initiatives and our circuit costs.

As we mentioned in our first quarter call, we are focusing on operating efficiencies and cost savings as we expect muted revenue growth in the context of the Alaska recession.  This quarter we had Pro Forma EBITDA margins of 33.4 percent compared to 30.6 percent in the second quarter of 2016 and 32.0 percent in the first quarter of 2017.

Consumer

Consumer revenues of $106 million in the second quarter were down $6 million or 5.5 percent year-over-year and down $1 million or 0.8 percent sequentially. Wireless revenues were down $4 million year-over-year with the declines coming equally from handset sales and ARPU declines.    Additionally, our video subscribers were down 7.1 percent year-over-year.  The recession in Alaska is a significant contributing factor in our subscriber headwinds.

Business

GCI Business revenues of $118 million in the second quarter are down $3 million or 2.7 percent year-over-year and $3 million or 2.4 percent sequentially.  The decline is primarily due to the $5 million RHC adjustment mentioned earlier.  GCI Business revenues increased $2 million or 1.8 percent year-over-year and $3 million or 2.1 percent sequentially after removing the impact of the RHC adjustment. Sales of data products led to the revenue increase in business, which was partially offset by a decline in voice.

SG&A

SG&A expenses were $96 million during the quarter. Excluding the one-time Liberty transaction costs of $9 million, expenses were down $1 million or 0.8 percent year-over-year and down $2 million or 2.3 percent sequentially.

Capital Expenditures

Capital expenditures for the quarter totaled $43 million.

Leverage

After adding back the roaming adjustment and Liberty transaction costs, our net debt to trailing 12 months Adjusted EBITDA was 4.7x as of June 30, 2017.

2017 Guidance

We are narrowing our Pro Forma EBITDA guidance to be between $300 million and $315 million in 2017, excluding costs related to the Liberty transaction.

Capital expenditures are expected to be approximately $165 million in 2017.

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

The company will hold a conference call to discuss the financial results on Thursday, August 3, at 2:00 p.m. (Eastern). To access the call, call the conference operator between 1:45-2:00 p.m. (Eastern) at 844-850-0551 (International callers should dial +1-412-902-4197) and identify your call as "GCI". 

In addition to dial-up access, GCI will make available net conferencing. To access the call via net conference, log on to ir.gci.com and follow the instructions.

After appropriate filings have been made with the SEC, a rebroadcast of the briefing will be available by logging onto our investor relations site at www.gci.com.

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

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Gci Liberty, Inc. (delisted) (NASDAQ:GNCMA)
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