1.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Alaska Communications Systems Group, Inc. (“we”, “our”, “us”, the “Company” and “Alaska Communications”), a Delaware corporation, through its operating subsidiaries, provides broadband telecommunication and managed information technology (“IT”) services to customers in the State of Alaska and beyond using its telecommunications network.

The accompanying unaudited condensed consolidated financial statements represent the consolidated financial position, comprehensive income, stockholders’ equity and cash flows of Alaska Communications Systems Group, Inc. and the following wholly-owned subsidiaries:

•	Alaska Communications Systems Holdings, Inc. ("ACS Holdings")	•	Crest Communications Corporation
•	ACS of Alaska, LLC (“ACSAK”)	•	WCI Cable, Inc.
•	ACS of the Northland, LLC (“ACSN”)	•	WCIC Hillsboro, LLC
•	ACS of Fairbanks, LLC (“ACSF”)	•	Alaska Northstar Communications, LLC
•	ACS of Anchorage, LLC (“ACSA”)	•	WCI LightPoint, LLC
•	ACS Wireless, Inc. ("ACSW")	•	WorldNet Communications, Inc.
•	ACS Long Distance, LLC	•	Alaska Fiber Star, LLC
•	Alaska Communications Internet, LLC (“ACSI”)	•	TekMate, LLC
•	ACS Messaging, Inc.
•	ACS Cable Systems, LLC (“ACSC”)

In addition to the wholly-owned subsidiaries, the Company has a

fifty

percent controlling interest in ACS-Quintillion JV, LLC (“AQ-JV”), a joint venture formed by its wholly-owned subsidiary ACSC and Quintillion Holdings, LLC (“QHL”) in connection with the North Slope fiber optic network. See Note

“

Joint Venture

” for additional information.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements and notes included in this Quarterly Report on Form

-Q have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form

-K for the year ended

December 31, 2018.

Certain information and note disclosures normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC. The Company believes the disclosures made are adequate to make the information presented

not

misleading.

See Note

“

Leases

” for a summary of the Company’s lease accounting policies and related disclosures.

The Company consolidates the financial results of the AQ-JV based on its determination that, for accounting purposes, it holds a controlling financial interest in the joint venture and is the primary beneficiary of this variable interest entity. The Company has accounted for and reported QHL’s

fifty

percent ownership interest in the joint venture as a noncontrolling interest.

In the opinion of management, the unaudited condensed consolidated financial statements contain all normal, recurring adjustments necessary to present fairly the consolidated financial position, comprehensive income, stockholders’ equity and cash flows for all periods presented. Comprehensive income for the

three

and

six

-month periods ended

June 30, 2019,

not

necessarily indicative of comprehensive income which might be expected for the entire year or any other interim periods. The balance sheet at

December 31, 2018

has been derived from the audited financial statements as of that date but does

not

include all information and notes required by GAAP for complete financial statements. Certain reclassifications have been made to the prior year financial statements to conform to the current year presentation.

Employee Termination Benefits

In the

second

quarter of

2019,

the Company recorded a charge of

$1,595

associated with cash-based termination benefits paid or to be paid to is former Chief Executive Officer who separated from the Company effective

June 30, 2019.

These benefits consist of special termination benefits as defined in Accounting Standards Codification (“ASC”)

712,

“

Compensation – Nonretirement Postemployment Benefits

” and include the continuation of salary and certain benefits through

December 31, 2019,

and the payment of annual cash incentive and long-term cash awards, subject to certain conditions. Payments totaling

$1,267

were made in the

third

quarter of

2019

and the balance will be paid in the

fourth

quarter of

2019

and in

2020

and

2021.

The effect of the former Chief Executive Officer’s separation on the relevant equity awards were accounted for in accordance with ASC

718,

“

Compensation – Stock Compensation

.” See Note

“

Stock

Incentive Plans

.”

Share Repurchase Prog

In the

second

quarter of

2017,

the Company’s Board of Directors authorized a share repurchase program pursuant to which the Company

may

repurchase up to

$10,000

of its common stock effective

March 13, 2017

through

December 31, 2019.

Under the program, repurchases

may

be conducted through open market purchases or through privately-negotiated transactions in accordance with all applicable securities laws and regulations, including through Rule

10b5

trading plans. The timing and amount of repurchases will be determined based on the Company’s evaluation of its financial position including liquidity, the trading price of its stock, debt covenant restrictions, general business and market conditions and other factors. The Company intends to use cash on hand to fund share repurchases subject to, among other things, federal and state securities, corporate and other laws and regulations, and the Company’s financing arrangements. Share repurchases are accounted for as treasury stock.

As of

June 30, 2019,

the Company had repurchased

118,825

shares under the program at a weighted average price of

$1.72

per share with an aggregate value of

$205.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and the accompanying notes, including estimates of operating revenues, probable losses and expenses. Actual results could differ materially from those estimates.

Recently Adopted Accounting Pronouncements

Effective

January 1, 2019,

the Company adopted ASC

842,

“

Leases

” (“ASC

842”

) on a modified retrospective basis. Accordingly, information presented for periods prior to

2019

have

not

been recast. Adoption of ASC

842

resulted in the establishment of right-of-use (“ROU”) assets and associated liabilities totaling

$82,020

representing the Company’s right to use the underlying assets and the present value of the future lease payments over the terms of the Company’s operating leases. The Company elected the package of practical expedients, which among other things, does

not

require reassessment of lease classification. Adoption of ASC

842

did

not

have a material effect on the Company’s finance leases and its consolidated statements of Comprehensive Income and Cash Flows. See Note

“

Leases

” for a summary of the Company’s lease accounting policies and other disclosures required under ASC

842.

Effective

January 1, 2019,

the Company adopted Accounting Standards Update (“ASU”)

No.

2017

12,

“

Derivatives and Hedging (Topic

815

)

Targeted Improvements to Accounting for Hedging Activities

” (ASU

2017

12”

) on a prospective basis. The new guidance eliminates the requirement to separately measure and report hedge ineffectiveness and, for qualifying hedges, requires the entire change in the fair value of the hedging instrument to be presented in the same income statement line as the hedged item. The Company’s hedges, consisting of a pay-fixed, receive-floating interest rate swaps, are fully effective. Therefore, adoption of ASU

2017

did

not

have any impact on the Company’s financial statements. See Note

“Fair Value Measurements and Derivative Financial Instruments” for the disclosures required by ASU

2017

12.

Effective

January 1, 2019,

the Company adopted ASU

No.

2018

16,

“

Derivatives and Hedging (Topic

815

), Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes

” (“ASU

2018

16”

). Permitting use of the OIS rate based on SOFR as a U.S. benchmark interest rate for hedge accounting purposes will facilitate the London Interbank Offered Rate (“LIBOR”) to SOFR transition and provide sufficient lead time for entities to prepare for changes to interest rate risk hedging strategies. ASU

2018

was required to be adopted concurrently with ASU

2017

12.

Adoption of ASU

2018

did

not

affect the Company’s financial statements and related disclosures.

Accounting Pronouncements

Issued

Not

Yet Adopted

June 2016,

the Financial Accounting Standards Board (“FASB”) issued ASU

No.

2016

13,

“Financial Instruments – Credit

Losses (Topic

326

)

Meas

urement of Credit Losses on Financial Instruments”

(“ASU

2016

13”

). The amendments in ASU

2016

13,

and subsequent amendments, introduce a forward-looking approach, based on expected losses, to estimate credit losses on certain types of financial instruments, including trade receivables. ASU

2016

is effective for fiscal years beginning after

December 15, 2019.

The Company is evaluating the effect ASU

2016

will have on its financial statements and related disclosures.

August 2018,

the FASB issued ASU

No.

2018

13,

“

Fair Value Measurement (Topic

820

), Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement

” (“ASU

2018

13”

). The amendments in ASU

2018

are intended to improve the effectiveness of fair value measurement disclosures in the notes to the financial statements. The new guidance eliminates the requirement to disclose (i) the amount and reasons for transfers between Level

and Level

of the fair value hierarch; (ii) the policy for timing of transfers between levels; and (iii) the valuation processes for Level

fair value measurements. The new guidance also requires the disclosure of (i) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level

fair value measurements held at the end of the reporting period; and (ii) the range and weighted average of significant unobservable inputs used to develop Level

fair value measurements. ASU

2018

is effective for fiscal years beginning after

December 15, 2019

and early adoption is permitted. The Company is evaluating ASU

2018

and, based on its existing assets and liabilities measured at fair value, does

not

currently believe that adoption will have a material effect on its financial statements and related disclosures.

August 2018,

the FASB issued ASU

No.

2018

14,

“

Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic

715

), Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans

” (“ASU

2018

14”

). The amendments in ASU

2018

are intended to improve the effectiveness of disclosures in the notes to the financial statements about employer-sponsored defined benefit plans. The new guidance eliminates, among other items, the requirement to disclose the amounts in accumulated other comprehensive income expected to be recognized as components of net periodic benefit cost over the next fiscal year. Expanded disclosures required under ASU

2018

include an explanation of the reasons for significant gains and losses related to changes in the benefit obligation for the period. ASU

2018

is effective for fiscal years beginning after

December 15, 2020

and early adoption is permitted. The Company is evaluating the effect ASU

2018

will have on its disclosures.

August 2018,

the FASB issued ASU

No.

2018

15,

“

Intangibles – Goodwill and Other – Internal-Use Software (Subtopic

350

), Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract

” (“ASU

2018

15”

). The amendments in ASU

2018

align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with those incurred to develop or obtain internal-use software, including hosting arrangements that include an internal-use software license. ASU

2018

is effective for fiscal years beginning after

December 15, 2019

and early adoption is permitted. The Company is evaluating the effect ASU

2018

will have on its financial statements and related disclosures.