General Communication Inc. Annual Report 2013

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K  ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2013 or o TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THESECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 0-15279 GENERAL COMMUNICATION, INC. (Exact name of registrant as specified in its charter) State of Alaska 92-0072737 (State or other jurisdiction ofincorporation or organization) (I.R.S EmployerIdentification No.) 2550 Denali StreetSuite 1000Anchorage, Alaska 99503 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: (907) 868-5600Securities registered pursuant to Section 12(b) of the Act: NoneSecurities 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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No  Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes o No  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 Actof 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days. Yes  No o Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive DataFile required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 232.405 of this chapter) during the preceding 12months (or for such shorter period that the registrant was required to submit and post such files).Yes  No o Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is notcontained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to this Form 10-K. o Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reportingcompany. See the definitions of “large accelerated filer,” "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the ExchangeAct.Large accelerated filer oAccelerated filer xNon-accelerated filer o (Do not check if a smaller reporting company)Smaller reporting company oIndicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No The aggregate market value of the voting stock held by non-affiliates of the registrant, computed by reference to the average high and lowprices of such stock as of the close of trading as of the last business day of the registrant’s most recently completed second fiscal quarter ofJune 30, 2013 was $103,420,000. Shares of voting stock held by each officer and director and by each person who owns 5% or more of theoutstanding voting stock (as publicly reported by such persons pursuant to Section 13 and Section 16 of the Exchange Act) have beenexcluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusivedetermination for other purposes.The number of shares outstanding of the registrant’s common stock as of February 28, 2014, was: Class A common stock – 38,356,000 shares; and,Class B common stock – 3,162,000 shares.1Table of ContentsGENERAL COMMUNICATION, INC.2013 ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS Page No. Cautionary Statement Regarding Forward-Looking Statements4 Part I Item 1.Business4 Item 1A.Risk Factors17 Item 1B.Unresolved Staff Comments26 Item 2.Properties26 Item 3.Legal Proceedings27 Item 4.Mine Safety Disclosures27 Part II Item 5.Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities27 Item 6.Selected Financial Data31 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations31 Item 7A.Quantitative and Qualitative Disclosures About Market Risk46 Item 8.Consolidated Financial Statements and Supplementary Data46 Item 9.Changes In and Disagreements With Accountants on Accounting and Financial Disclosure46 Item 9A.Controls and Procedures46 Item 9B.Other Information47 Part III Item 10.Directors, Executive Officers and Corporate Governance48 Item 11.Executive Compensation53 Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters73 Item 13.Certain Relationships and Related Transactions, and Director Independence772Table of Contents Item 14.Principal Accountant Fees and Services79 Part IV Item 15.Exhibits, Consolidated Financial Statement Schedules81 SIGNATURES 1303Table of ContentsCautionary Statement Regarding Forward-Looking StatementsYou should carefully review the information contained in this Annual Report, but should particularly consider any risk factors that we set forthin this Annual Report and in other reports or documents that we file from time to time with the Securities and Exchange Commission(“SEC”). In this Annual Report, in addition to historical information, we state our future strategies, plans, objectives or goals and our beliefs offuture events and of our future operating results, financial position and cash flows. In some cases, you can identify those so-called “forward-looking statements” by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,”“project,” or “continue” or the negative of those words and other comparable words. All forward-looking statements involve known andunknown risks, uncertainties and other important factors that may cause our actual results, performance, achievements, plans andobjectives to differ materially from any future results, performance, achievements, plans and objectives expressed or implied by theseforward-looking statements. In evaluating those statements, you should specifically consider various factors, including those identified under“Risk Factors,” and elsewhere in this Annual Report. Those factors may cause our actual results to differ materially from any of our forward-looking statements. For these forward-looking statements, we claim the protection of the safe harbor for forward-looking statements providedby the Private Securities Litigation Reform Act of 1995.You should not place undue reliance on any such forward-looking statements. Further, any forward-looking statement, and the related risks,uncertainties and other factors speak only as of the date on which they were originally made and we expressly disclaim any obligation orundertaking to update or revise any forward-looking statement to reflect any change in our expectations with regard to these statements orany other change in events, conditions or circumstances on which any such statement is based. New factors emerge from time to time, andit is not possible for us to predict what factors will arise or when. In addition, we cannot assess the impact of each factor on our business orthe extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.Part IItem 1. Business GeneralIn this Annual Report, “we,” “us,” “our,” "GCI" and “the Company” refer to General Communication, Inc. and its direct and indirectsubsidiaries.GCI was incorporated in 1979 under the laws of the State of Alaska and has its principal executive offices at 2550 Denali Street, Suite 1000,Anchorage, AK 99503-2781 (telephone number 907-868-5600).GCI is primarily a holding company and together with its direct and indirect subsidiaries, is a diversified communications provider withoperations primarily in the state of Alaska.Availability of Reports and Other InformationInternet users can access information about the Company and its services at http://www.gci.com/, http://www.gci-industrialtelecom.com,http://www.unicom-alaska.com/ and http://www.alaskaunited.com/. The Company hosts broadband delivery of ConnectMD® services athttp://www.connectmd.com, and SchoolAccess® services at http://www.schoolaccess.net/. The Company hosts information about ourTERRA-Southwest (“TERRA-SW”) and TERRA-Northwest (“TERRA-NW”) projects at http://terra.gci.com/. Our television broadcast stationspost news and other information at http://www.ktva.com/ and http://www.kath.tv/.We make available on the http://www.gci.com/ website, free of charge, access to our Annual Report on Form 10-K, Quarterly Reports onForm 10-Q, Current Reports on Form 8-K, Proxy Statement on Schedule 14A and amendments to those materials filed or furnishedpursuant to Section 13(a) or 15(d) of the Securities and Exchange Act of 1934 as soon as reasonably practicable after we electronically submitsuch material to the SEC. In addition, the SEC’s website is http://www.sec.gov/. The SEC makes available on this website, free of charge,reports, proxy and information statements, and other information regarding issuers, such as us, that file electronically with the SEC.Information on our websites or the SEC’s website is not part of this document.4Table of ContentsFinancial Information about Industry SegmentsEffective January 1, 2013, we refocused our business and now have two reportable segments, Wireless and Wireline. The Wirelesssegment’s revenue is derived from wholesale wireless services. The Wireline segment’s revenue includes all of our other revenue,specifically a full range of retail wireless, data, video and voice services to residential, local, national and global businesses and non-profit andgovernmental entities. This change reflects our plan to strategically focus on our wireless network and is how our chief operating decisionmaker now measures performance and makes resource allocation decisions. Prior to 2013 we had operated our business under fivereportable segments – Consumer, Network Access, Commercial, Managed Broadband and Regulated Operations. The historical segmentdata has been reclassified to conform to the revised reportable segments.For financial information about our reportable segments, see “Part II — Item 7 — Management’s Discussion and Analysis of FinancialCondition and Results of Operations.” Also refer to note 10 included in “Part II — Item 8 — Consolidated Financial Statements andSupplementary Data.”Narrative Description of our Business GeneralWe are the largest Alaska-based communications provider as measured by revenues. We offer facilities-based wireless telephone services,data services, Internet access, video services and local and long-distance voice services, to residential and business customers across thestate under our GCI brand. Due to the unique nature of the markets we serve, including harsh winter weather and remote geographies, ourcustomers rely extensively on our systems to meet their communication and entertainment needs. We benefit from the attractivedemographic and economic characteristics of Alaska.Since our founding in 1979 as a competitive long distance provider, we have consistently expanded our product portfolio and facilities tobecome the leading integrated communication services provider in our markets. Our facilities include redundant and geographically diversedigital undersea fiber optic cable systems linking our Alaska terrestrial networks to the networks of other carriers in the lower 48 contiguousstates. In recent years, we expanded our efforts in wireless and presently operate the only statewide wireless network. For the year ended December 31, 2013, we generated consolidated revenues of $811.6 million. We ended the period with 141,500 wirelesssubscribers, 129,300 cable modem subscribers and 136,700 basic video subscribers.Development of our Business During the Past Fiscal YearThe Alaska Wireless Network. On July 22, 2013, we closed the transactions under the Asset Purchase and Contribution Agreement(“Wireless Agreement”) and other related agreements entered into on June 4, 2012 by and among Alaska Communications Systems Group,Inc. (“ACS”), GCI, ACS Wireless, Inc., a wholly owned subsidiary of ACS, GCI Wireless Holdings, LLC, a wholly owned subsidiary of GCI,and The Alaska Wireless Network, LLC ("AWN"), pursuant to which the parties agreed to contribute the respective wireless network assetsof GCI, ACS and their affiliates to AWN. AWN operates a statewide wireless communications network with the spectrum mix, scale,advanced technology and cost structure necessary to compete with Verizon Wireless and AT&T Mobility in Alaska. AWN provides wholesaleservices to GCI and ACS. GCI and ACS use the AWN network in order to continue to sell services to their respective retail customers. GCIand ACS continue to compete against each other and other wireless providers in the retail market for wireless communications.Under the terms of the Wireless Agreement, we contributed our wireless network assets and certain rights to use capacity to AWN.Additionally, ACS contributed its wireless network assets and certain rights to use capacity to AWN. As consideration for the contributedbusiness assets and liabilities, ACS received $100.0 million in cash from GCI, a one-third ownership interest in AWN and entitlements toreceive preferential cash distributions totaling $190.0 million over the first four years of AWN’s operations ("Preference Period") contingent onthe future cash flows of AWN. The preferential cash distribution is cumulative and may be paid beyond the Preference Period until the entire$190.0 million is paid. ACS's preferential cash distributions are expected to be higher than that which they would receive from their one-thirdinterest. We received a two-third ownership interest in AWN, as well as entitlements to receive all remaining cash distributions after ACS’spreferential cash distributions during the Preference Period. The distributions to each member are subject to adjustment based on thenumber of ACS and GCI wireless subscribers, with the aggregate adjustment capped at $21.8 million for each member over the5Table of ContentsPreference Period. Following the Preference Period, we and ACS will receive distributions proportional to our ownership interests.Denali Media Holdings. On November 1, 2013, we closed two transactions pursuant to which Denali Media Holdings, Corp., a whollyowned subsidiary of GCI, through its wholly owned subsidiaries, Denali Media Anchorage, Corp. and Denali Media Southeast, Corp.,agreed to purchase three Alaska broadcast television stations: CBS affiliate KTVA-TV of Anchorage and NBC affiliates KATH-TV in Juneauand KSCT-TV of Sitka, for a total of $7.6 million. Denali Media Holdings will provide a new statewide platform for news and information andwe expect to provide unique content and value for our video subscribers.You should see “Part I — Item 1. Business — Regulation” for regulatory developments.Business StrategyWe intend to continue to increase revenues using the following strategies:Offer Bundled Products. We offer innovative service bundles to meet the needs of our consumer and commercial customers. We believethat bundling our services significantly improves customer retention, increases revenue per customer and reduces customer acquisitionexpenses. Our experience indicates that our bundled customers are significantly less likely to churn, and we experience less price erosionwhen we effectively combine our offerings. Bundling improves our top line revenue growth, provides operating cost efficiencies that expandour margins and drives our overall business performance. As a measure of success to date, over 77,800 of our residential customerssubscribe to one of our service bundles that include two or more services.Maximize Sales Opportunities. We successfully sell new and enhanced services and products to our existing customer base to achieveincreased revenues and penetration of our services. Through close coordination of our customer service and sales and marketing efforts, ourcustomer service representatives suggest to our customers other services they can purchase or enhanced versions of services they alreadypurchase. Many calls into our customer service centers or visits into one of our retail stores result in sales of additional services andproducts.Deliver Industry Leading Customer Service. We have positioned ourselves as a customer service leader in the Alaska communicationsmarket. We operate our own customer service department and have empowered our customer service representatives to handle mostservice issues and questions on a single call. We prioritize our customer services to expedite handling of our most valuable customers’issues, particularly for our largest commercial customers. We believe our integrated approach to customer service, including service set-up,programming various network databases with the customer’s information, installation, and ongoing service, allows us to provide a customerexperience that fosters customer loyalty.Leverage Communications Operations. We continue to expand and evolve our integrated network for the delivery of our services. Ourbundled strategy and integrated approach to serving our customers creates efficiencies of scale and maximizes network utilization. Byoffering multiple services, we are better able to leverage our network assets and increase returns on our invested capital. We periodicallyevaluate our network assets and continually monitor technological developments that we can potentially deploy to increase network efficiencyand performance.Expand Our Product Portfolio and Footprint in Alaska. Throughout our history, we have successfully added and expect to continue to addnew products to our product portfolio. We have a demonstrated history of new product evaluation, development and deployment for ourcustomers, and we continue to assess revenue-enhancing opportunities that create value for our customers. Where feasible and whereeconomic analysis supports geographic expansion of our network coverage, we are currently pursuing or expect to pursue opportunities toincrease the scale of our facilities, enhance our ability to serve our existing customers’ needs and attract new customers.Make Strategic Acquisitions. We have a history of making and integrating acquisitions of in-state telecommunications providers and otherproviders of complementary services. Our management team will continue to actively pursue and make investments that we believe fit withour strategy and networks and that enhance earnings.6Table of ContentsDescription of our Business by Reportable Segment OverviewOur two reportable segments are Wireless and Wireline. Our Wireless segment provides wholesale wireless services to wireless carriers.Our Wireline segment offers services and products under three major customer groups as follows: Customer GroupWireline Segment Services and ProductsConsumerBusinessServicesManagedBroadband Retail wirelessXX Data: InternetXXX Data networks XX Managed services XX VideoXX Voice: Long-distanceXXX Local accessXXXThe following discussion includes information about significant services and products, sales and marketing, facilities, competition andseasonality for each of our reportable segments. For a discussion and analysis of financial condition and results of operations please see“Part II – Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations.”Wireless SegmentWireless segment revenues for 2013, 2012 and 2011 are summarized as follows (amounts in thousands): Year Ended December 31, 2013 2012 2011Total Wireless segment revenues1$197,218 124,745 119,5211 See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 10 includedin “Part II — Item 8 — Consolidated Financial Statements and Supplementary Data” for more information regarding the financialperformance of our Wireless segment.Services and ProductsOur Wireless segment offers wholesale wireless services and products to wireless carriers. We provide network transport and access to ourwireless network to wireless carriers. These services allow wireless carriers to provide full wireless services to their customers.Sales and MarketingOur Wireless segment sales and marketing efforts are primarily directed toward increasing the number of wireless carriers we serve whichthen increases the number of billable minutes and megabytes of wireless data traffic we carry over our network and the number of voice anddata circuits leased. We sell our wireless services primarily through direct contact marketing.7Table of ContentsFacilitiesWe own statewide wireless facilities that cover most of the Alaska population providing service to urban and rural communities and we willcontinue to expand these networks throughout Alaska in 2014. We own a statewide wireless network that use GSM/HSPA+, CDMA/EVDOand Long Term Evolution ("LTE"). We own Wi-Fi access points that create a Wi-Fi network branded as TurboZone in Anchorage, Fairbanks,Juneau, Kenai-Soldotna, Matanuska-Susitna Valley, and other areas of the State ("TurboZone").Major CustomerWe had no major customer in 2013, 2012 or 2011.CompetitionOur Wireless segment competes with AT&T, Verizon, and smaller companies. We compete in the wholesale wireless market by offeringcompetitive rates and by providing a comprehensive statewide network to meet the needs of carrier customers.SeasonalityWireless segment wireless services revenues derived from our carrier customers have historically been highest in the summer monthsbecause of temporary population increases attributable to tourism and increased seasonal economic activity such as construction,commercial fishing, and oil and gas activities. Our ability to implement construction projects is hampered during the winter months becauseof cold temperatures, snow and short daylight hours.Wireline SegmentWireline segment revenues for 2013, 2012 and 2011 are summarized as follows (amounts in thousands): Year Ended December 31, 2013 2012 2011Total Wireline segment revenues1$614,430 585,436 559,8601 See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and note 10 includedin “Part II — Item 8 — Consolidated Financial Statements and Supplementary Data” for more information regarding the financialperformance of our Wireline segment.Services and ProductsOur Wireline segment offers services and products to three major customer groups as follows:•Consumer - We offer a full range of retail wireless, data, video and voice services to residential customers. Our products andservices offered to consumer customers include wireless voice and data plans, high-speed cable modem service, a full range ofvideo services, and long-distance and local voice services.•Business Services - We offer a full range of retail wireless, data, video and voice services to local, national and global businesses,governmental entities and public and private educational institutions and wholesale data and voice services to common carriercustomers. Our products and services offered to business customers include data network services, wireless voice and data plans,high-speed Internet service, data center services, cloud computing, a full range of video services, and voice services. Additionally, weoffer managed services under which we design, sell, install, service, and operate customized networks.•Managed Broadband - We offer Internet, data network and managed services to rural schools and health organizations and regulatedvoice services to residential and commercial customers in rural communities primarily in Southwest Alaska.Sales and MarketingWe offer our services directly to consumer and business services customers through our call center, direct mail advertising, televisionadvertising, Internet advertising, local media advertising, and through our retail stores. Our sales efforts are primarily directed towardincreasing the number of subscribers we serve, selling bundled services,8Table of Contentsand generating incremental revenues through product and feature up-sell opportunities. We sell our managed services through direct contactmarketing.FacilitiesWe operate a modern, competitive communications network providing switched and dedicated voice and broadband services. Our fibernetwork employs digital transmission technology over our fiber optic facilities within Alaska and between Alaska and the lower 48states. Our facilities include digital undersea fiber optic cable systems linking our Alaska terrestrial networks to the networks of other carriersin the lower 48 states, a terrestrial fiber optic cable system connecting Anchorage and Fairbanks, Alaska along the Parks Highway corridorand a terrestrial fiber optic cable system that extends from Prudhoe Bay, Alaska to Valdez, Alaska via Fairbanks, Alaska.We serve many rural and remote Alaska locations solely via satellite communications. Each of our C-band and Ku-band satellitetransponders is backed up on alternate spacecraft with multiple backup transponders. We also operate a digital microwave systems to linkAnchorage with the Kenai Peninsula. Additionally, we operate a hybrid fiber optic cable and digital microwave system (“TERRA”) linkingAnchorage with the Bristol Bay and Yukon-Kuskokwim, and Northwest regions of the state. This system serves communities in thoseregions with interstate Ethernet and time-division multiplexing ("TDM") services. The network is fully digital, computer controlled, centrallymonitored and supports multiple services.Our statewide cable systems consist of cable plant having 450 to 920 MHz of channel capacity. Our video businesses are located throughoutAlaska and serve 41 communities and areas in Alaska, including the state’s five largest population centers, Anchorage, Fairbanks, theMatanuska-Susitna Valley, the Kenai Peninsula, and Juneau. Our facilities include cable plant and head-end distribution equipment. Themajority of our locations on the fiber routes are served from head-end distribution equipment in Anchorage. All of our cable systems arecompletely digital.Our dedicated Internet access and Internet protocol/MPLS data services are delivered to an Ethernet port located at the service point. Ourmanagement platform constantly monitors this port and continual communications are maintained with all of the core and distributionelements in the network. The availability and quality of service, as well as statistical information on traffic loading, are continuouslymonitored for quality assurance. The management platform has the capability to remotely access routers, servers and layer two switches,permitting changes in configuration without the need to physically be at the service point. This management platform allows us to offernetwork monitoring and management services to businesses and governmental entities.CompetitionWe operate in intensely competitive industries and compete with a growing number of companies that provide a broad range ofcommunication, entertainment and information products and services. Technological changes are further intensifying and complicating thecompetitive landscape and consumer behavior. For example, companies continue to emerge that offer services and devices that enable digitaldistribution of movies, television shows and other video programming, and wireless services and devices continue to evolve. Moreover,newer services that distribute video programming are also beginning to produce or acquire their own original content. These new alternativemethods for the distribution, sale and viewing of content have been, and will likely continue to be, developed, and will continue to furtherincrease the number of competitors we face.Retail Wireless Services and Products CompetitionWe compete with AT&T, Verizon, ACS, and other community or regional-based wireless providers, and resellers of those services inAnchorage and other markets.Regulatory policies favor robust competition in wireless markets. Wireless local number portability helps to maintain a high level ofcompetition in the industry because it allows subscribers to switch carriers without having to change their telephone numbers.The communications industry continues to experience significant technological changes, as evidenced by the increasing pace ofimprovements in the capacity and quality of digital technology, shorter cycles for new products and enhancements and changes in consumerpreferences and expectations. Accordingly, we expect competition in the wireless communications industry to continue to be dynamic andintense as a result of the development of new technologies, services and products.9Table of ContentsThe national wireless carriers with whom we compete, AT&T and Verizon, have resources that are greater than ours. These companies havesignificantly greater capital, financial, marketing, human capital, distribution and other resources than we do. Specifically, as a regionalwireless carrier we may not have immediate access to some wireless handsets that are available to these national wireless carriers. Asdiscussed in Development of Our Business During the Past Fiscal Year section of this Item 1, we have completed the creation of AWN,which should enhance our ability to compete against the national carriers on all resource fronts.We compete for customers based principally upon price, bundled services, the services and enhancements offered, network quality,customer service, statewide network coverage and capacity, TurboZone, the type of wireless handsets offered, and the availability ofdifferentiated features and services. Our ability to compete successfully will depend, in part, on our marketing efforts and our ability toanticipate and respond to various competitive factors affecting the industry.Data Services and Products CompetitionThe Internet industry is highly competitive, rapidly evolving and subject to constant technological change. Competition is based upon priceand pricing plans, service bundles, the types of services offered, the technologies used, customer service, billing services, and perceivedquality, reliability and availability. We compete with other Alaska based Internet providers and domestic, non-Alaska based providers thatprovide national service coverage. Several of the providers headquartered outside of Alaska have substantially greater financial, technical andmarketing resources than we do.With respect to our high-speed cable modem service, ACS and other Alaska telephone service providers are providing competitive high-speeddata subscriber line services over their telephone lines in direct competition with our high-speed cable modem service. Direct broadcastsatellite ("DBS") providers and local fixed wireless providers supply wireless high-speed Internet service in competition with our high-speedcable modem services. We also provide metro-Ethernet fiber optic and dedicated access Internet products primarily for our business servicescustomers.Niche providers in the industry, both local and national, compete with certain of our Internet service products, such as web hosting, listservices and e-mail.We expect to continue to provide, at reasonable prices and in competitive bundles, a greater variety of data services than are available throughother alternative delivery sources. Additionally, we believe we offer superior technical performance and speed, and responsive community-based customer service. Increased competition, however, may adversely affect our market share and results of operations from our dataservices product offerings.Presently, there are a number of competing companies in Alaska that actively sell and maintain data and voice communicationssystems. Our ability to integrate communications networks and data communications equipment has allowed us to maintain our marketposition based on customer support services rather than price competition alone. These services are blended with other transport productsinto unique customer solutions, including managed services and outsourcing.Video Services and Products CompetitionOur video systems face competition from services and devices that offer Internet video streaming and distribution of movies, televisionshows and other video programming, as well as alternative methods of receiving and distributing television signals, including DBS, digitalvideo over telephone lines, broadband IP-based services, wireless and satellite master antenna television systems. Our video systems alsoface competition from potential overbuilds of our existing cable systems. The extent to which our video systems are competitive depends, inpart, upon our ability to provide quality programming and other services at competitive prices.Online video services via the Internet are a major growing source of competition for our video services. However, as a major Internet-provider ourselves, the competition may result in additional data service subscriber revenue to the extent we grow Internet average revenueper subscriber.We believe that the greatest source of external competition for our video services comes from the DBS industry. Two major companies,DIRECTV and DISH DBS Corporation, are currently offering nationwide high-power DBS services.10Table of ContentsCompetitive forces will be counteracted by offering expanded programming through digital services. Digital delivery technology is beingutilized in all of our systems. We have retransmission agreements with various broadcasters and provide for the uplink/downlink of theirsignals into certain of our systems, and local programming for our customers. Additionally, our 2013 purchase of three television stationsprovides us the opportunity to create unique content for our subscribers.Video systems generally operate pursuant to franchises granted on a non-exclusive basis. The 1992 Cable Act gives local franchisingauthorities jurisdiction over basic video service rates and equipment in the absence of “effective competition.” The 1992 Cable Act alsoprohibits franchising authorities from unreasonably denying requests for additional franchises and permits franchising authorities to operatevideo systems. Well-financed businesses from outside the video industry (such as the public utilities that own certain of the poles on whichcable is attached) may become competitors for franchises or providers of competing services.We expect to continue to provide, at reasonable prices and in competitive bundles, a greater variety of video services than are available off-airor through other alternative delivery sources. Additionally, we believe we offer superior technical performance and responsive community-based customer service. Increased competition, however, may adversely affect our market share and results of operations from our videoservices product offerings.Voice Services and Products CompetitionOur most significant competition for local access and long-distance comes from wireless substitution and voice over Internet protocolservices. Wireless local number portability allows consumers to retain the same phone number as they change service providers allowing forinterchangeable and portable fixed-line and wireless numbers. A growing number of consumers now use wireless service as their primaryvoice phone service for local calling. We also compete against Incumbent Local Exchange Carriers ("ILECs"), long-distance resellers andcertain smaller rural local telephone companies for local access and long-distance. We have competed by offering excellent customer service,cross product discounts, and by providing desirable bundles of services.See “Regulation — Wireline Voice Services and Products” below for more information.SeasonalityOur Wireline segment services and products do not exhibit significant seasonality. Our ability to implement construction projects ishampered during the winter months because of cold temperatures, snow and short daylight hours.Sales and Marketing – Company-wideOur sales and marketing strategy hinges on our ability to leverage (i) our unique position as an integrated provider of multiplecommunications, Internet and video services, (ii) our well-recognized and respected brand names in the Alaskan marketplace and (iii) ourleading market positions in the services and products we offer. By continuing to pursue a marketing strategy that takes advantage of thesecharacteristics, we believe we can increase our customer market penetration and retention rates, increase our share of our customers’aggregate voice, video, data and wireless services expenditures and achieve continued growth in revenues and operating cash flow.Environmental RegulationsWe may undertake activities that, under certain circumstances affect the environment. Accordingly, they are subject to federal, state, and localregulations designed to preserve or protect the environment, including the Clean Water Act and the Clean Air Act. The FederalCommunications Commission ("FCC"), Bureau of Land Management, U.S. Forest Service, U.S. Fish and Wildlife Service, U.S. ArmyCorps of Engineers, and National Park Service are among the federal agencies required by the National Environmental Policy Act of 1969 toconsider the environmental impact of actions they authorize, including facility construction.The principal effect of our facilities on the environment would be in the form of construction of facilities and networks at various locations inAlaska and between Alaska, Washington, and Oregon. Our facilities have been constructed in accordance with federal, state and localbuilding codes and zoning regulations whenever and wherever applicable. Some facilities may be on wetlands that may be subject to stateand/or federal regulation. We are unaware of any material violations of federal, state or local regulations or permits.11Table of ContentsPatents, Trademarks, and LicensesWe do not hold patents, franchises (with the exception of video services as described below) or concessions for communications services orlocal access services. We hold a number of federally registered service marks used by our reportable segments. The Communications Act of1934, as amended, gives the FCC the authority to license and regulate the use of the electromagnetic spectrum for radiocommunications. We hold licenses for our satellite and microwave transmission facilities for provision of long-distance services provided byour Wireline segment.We hold various licenses for spectrum and broadcast television use. These licenses may be revoked and license renewal applications maybe denied for cause. However, we expect these licenses to be renewed in due course when, at the end of the license period, a renewalapplication will be filed.We hold licenses for earth stations that are generally licensed for fifteen years. The FCC also issues a single blanket license for a largenumber of technically identical earth stations. Our operations may require additional licenses in the future.We are certified through the Regulatory Commission of Alaska ("RCA") to provide video service by Certificates of Public Convenience andNecessity (“CPCN”). These CPCNs are nonexclusive certificates defining each authorized service area. Although CPCNs have no statedexpiration date, they may be revoked due to cause.RegulationOur businesses are subject to substantial government regulation and oversight. The following summary of regulatory issues does notpurport to describe all existing and proposed federal, state, and local laws and regulations, or judicial and regulatory proceedings that affectour businesses. Existing laws and regulations are reviewed frequently by legislative bodies, regulatory agencies, and the courts and aresubject to change. We cannot predict at this time the outcome of any present or future consideration of proposed changes to governing lawsand regulations.Wireless Services and ProductsGeneral. The FCC regulates the licensing, construction, interconnection, operation, acquisition, and transfer of wireless network systems inthe United States pursuant to the Communications Act. As wireless licensees, we are subject to regulation by the FCC, and must complywith certain build-out and other license conditions, as well as with the FCC’s specific regulations governing wireless services. The FCCdoes not currently regulate rates for services offered by commercial mobile radio service providers (the official legal description for wirelessservice providers).Commercial mobile radio service wireless systems are subject to Federal Aviation Administration and FCC regulations governing thelocation, lighting, construction, and registration of antenna structures on which our antennas and associated equipment are located and arealso subject to regulation under federal environmental laws and the FCC’s environmental regulations, including limits on radio frequencyradiation from wireless handsets and antennas on towers.Universal Service. The Universal Service Fund ("USF") pays Eligible Telecommunications Carriers ("ETCs") to support the provision offacilities-based wireless telephone service in high cost areas. A wireless carrier may seek ETC status so that it can receive support from theUSF. Under FCC regulations and RCA orders, we are an authorized ETC for purposes of providing wireless telephone service inAnchorage, Juneau, Fairbanks, and the Matanuska Telephone Association, Inc. ("MTA") study area (which includes the Matanuska-SusitnaValley) and other small areas throughout Alaska. Without ETC status, we would not qualify for USF support in these areas or other ruralareas where we propose to offer facilities-based wireless telephone services, and our net cost of providing wireless telephone services inthese areas would be materially adversely affected.On November 29, 2011, the FCC published a final rule to reform the methodology for distributing USF high cost support for voice andbroadband services, as well as to the access charge regime for terminating traffic between carriers. Support for competitive eligibletelecommunications carriers (“CETCs”) serving areas that generally include Anchorage, Fairbanks, and Juneau followed national reformsand had support per provider per service area capped as of January 1, 2012, and a five-step phase-down commenced on July 1, 2012. Inaddition to broader reforms, the FCC tailored revisions specifically for CETCs serving Remote Alaska, intended to address the unique12Table of Contentschallenges for serving these areas. Support to these locations is capped and distributed on a per-line basis until the later of July 1, 2014, orthe implementation of a successor funding mechanism. A further rulemaking to consider successor funding mechanisms is underway. Wecannot predict at this time the outcome of this proceeding or its effect on Remote high cost support available to us, but our revenue forproviding local services in these areas would be materially adversely affected by a substantial reduction of USF support. On February 6, 2012, the FCC released its Report and Order and Further Notice of Proposed Rulemaking to comprehensively reform andmodernize the USF’s Lifeline program. The Lifeline program is administered by the Universal Service Administrative Company ("USAC")and is designed to ensure that quality telecommunications services are available to low-income customers at just, reasonable, and affordablerates. The order adopted several reforms, but the only reform with a significant 2012 impact was a requirement for annual recertification ofall Lifeline subscribers enrolled as of June 1, 2012 to be completed by the end of 2012. In an order released on December 27, 2012, theFCC’s Wireline Competition Bureau granted GCI a waiver to permit early recertification of subscribers (those recertified prior to June 1,2012), subject to the condition that certain address information be verified for a subset of those subscribers by January 31, 2013.Interconnection. We have completed negotiation and the RCA has approved current direct wireless interconnection agreements with all ofthe major Alaska ILECs. These are in addition to indirect interconnection arrangements utilized elsewhere.See “Description of Our Business by Reportable Segment — Regulation — Wireline Voice Services and Products — Regulatory RegimeApplicable to IP-based Networks” for more information.Emergency 911. The FCC has imposed rules requiring carriers to provide emergency 911 services, including enhanced 911 (“E911”)services that provide to local public safety dispatch agencies the caller’s phone number and approximate location. Providers are required totransmit the geographic coordinates of the customer’s location, either by means of network-based or handset-based technologies, withinaccuracy parameters recently revised by the FCC, to be implemented over a phase-in period. Due to Alaska’s relatively low population andlow cell-site densities, we have excluded certain areas from E911 coverage where cell triangulation is not feasible, pursuant to FCC rule. Wehave also filed for a waiver, which remains pending, for remaining areas where triangulation may be technically feasible, but where the cell-site densities are insufficient to reach the FCC’s standard. Providers may not demand cost recovery as a condition of providing E911,although they are permitted to negotiate cost recovery if it is not mandated by the state or local governments.State and Local Regulation. While the Communications Act generally preempts state and local governments from regulating the entry of,and the rates charged by, wireless carriers, it also permits a state to petition the FCC to allow it to impose commercial mobile radio servicerate regulation when market conditions fail to adequately protect customers and such service is a replacement for a substantial portion of thetelephone wireline exchange service within a state. No state currently has such a petition on file, and all prior efforts have been rejected. Inaddition, the Communications Act does not expressly preempt the states from regulating the “terms and conditions” of wireless service.Several states have invoked this “terms and conditions” authority to impose or propose various consumer protection regulations on thewireless industry. State attorneys general have also become more active in enforcing state consumer protection laws against sales practicesand services of wireless carriers. States also may impose their own universal service support requirements on wireless and othercommunications carriers, similar to the contribution requirements that have been established by the FCC.States have become more active in attempting to impose new taxes and fees on wireless carriers, such as gross receipts taxes. Wheresuccessful, these taxes and fees are generally passed through to our customers and result in higher costs to our customers.At the local level, wireless facilities typically are subject to zoning and land use regulation. Neither local nor state governments maycategorically prohibit the construction of wireless facilities in any community or take actions, such as indefinite moratoria, which have theeffect of prohibiting construction. Nonetheless, securing state and local government approvals for new tower sites has been and is likely tocontinue to be difficult, lengthy and costly.13Table of ContentsInternet-based Services and ProductsGeneral. There is no one entity or organization that governs the Internet. Each facilities-based network provider that is interconnected withthe global Internet controls operational aspects of their own network. Certain functions, such as IP addressing, domain name routing, andthe definition of the TCP/IP protocol, are coordinated by an array of quasi-governmental, intergovernmental, and non-governmental bodies.The legal authority of these bodies is not precisely defined.Although the FCC does not regulate the prices charged by Internet service providers or Internet backbone providers, the vast majority of usersconnect to the Internet over facilities of existing communications carriers. Those communications carriers are subject to varying levels ofregulation at both the federal and state level. Thus, non-Internet-specific regulatory decisions exercise a significant influence over theeconomics of the Internet market.Many aspects of the coordination and regulation of Internet activities and the underlying networks over which those activities are conductedare evolving. Internet-specific and non-Internet-specific changes in the regulatory environment, including changes that affect communicationscosts or increase competition from ILECs or other communications services providers, could adversely affect the prices at which we sellInternet-based services.On November 20, 2011, the FCC issued rules governing the activities of cable operators and other Internet service providers in connectionwith the provision of Internet service. The rules generally prohibited blocking lawful content and prohibiting unreasonable discrimination,outside of reasonable network management, as well as imposing transparency requirements. On January 14, 2014, in a case challengingthese rules, the U.S. Court of Appeals for the D.C. Circuit vacated the anti-discrimination and anti-blocking rules, upheld the transparencyrules, and remanded the case to the FCC for further proceedings. The majority opinion held that the FCC possessed the general statutoryauthority to adopt these rules, but did so in a manner that contravened specific statutory prohibitions against imposing common carrierregulations on non-telecommunications services. The remand leaves open the possibility that the FCC could reclassify broadband servicesas telecommunication services subject to common carrier regulation or adopt different regulations that do not rise to the level of per secommon carrier obligations. We do not view the upheld requirements as significant federal regulation of cable system delivery of Internetservices. In addition, these rules are subject to court appeals. On February 19, 2014, the FCC Chairman announced that he would initiate aproceeding to establish new rules. Further, FCC regulation or legislative proposals under the banner of “net neutrality,” if adopted, couldinterfere with our ability to reasonably manage and invest in our broadband network, and could adversely affect the manner and price ofproviding service.Video Services and ProductsGeneral. Because video communications systems use local streets and rights-of-way, they generally are operated pursuant to franchises(which can take the form of certificates, permits or licenses) granted by a municipality or other state or local government entity. The RCA isthe franchising authority for all of Alaska. We believe that we have generally met the terms of our franchises, which do not require periodicrenewal, and have provided quality levels of service. Military franchise requirements also affect our ability to provide video services to militarybases.The RCA is also certified under federal law to regulate rates for the basic service tier on our video systems. Under state law, however, videoservice is exempt from regulation unless subscribers petition the RCA. At present, regulation of basic video rates takes place only in Juneau.The RCA does not regulate rates for cable modem service.Must Carry/Retransmission Consent. The 1992 Cable Act contains broadcast signal carriage requirements that allow local commercialtelevision broadcast stations to elect once every three years to require a cable system to carry the station, subject to certain exceptions, or tonegotiate for “retransmission consent” to carry the station.The FCC has adopted rules to require cable operators to carry the digital programming streams of broadcast television stations. The FCCrequirement that cable operators carry both the analog and digital programming streams of broadcast television stations while broadcastersare transitioning from analog to digital transmission does not apply to all-digital systems like ours. Further, the FCC has declined to requireany cable operator to carry multiple digital programming streams from a single broadcast television station, but should the FCC change thispolicy, we would be required to devote additional cable capacity to carrying broadcast television programming streams, a step that couldrequire the removal of other programming services.14Table of ContentsCable System Delivery of Internet Service. The FCC has defined high-speed Internet over cable as an “information service” not subject tolocal cable franchise fees, as video service may be, or any explicit requirements for “open access.” The Supreme Court affirmed the FCC’sposition in a decision issued in 2005.Although there is at present no significant federal regulation of cable system delivery of Internet services, proposals previously have beenadvanced at the FCC and before Congress to require cable operators to provide access to unaffiliated Internet service providers and onlineservice providers and to govern the terms under which content providers and applications are delivered by all broadband network operators. Ifsuch requirements were imposed on cable operators, it could burden the capacity of cable systems and frustrate our plans for providingexpanded Internet access services. These access obligations could adversely affect our financial position, results of operations or liquidity.Segregated Security for Set-top Devices. The FCC mandated, effective July 1, 2007, that all new set-top video navigation devices mustsegregate the security function from the navigation function. The new devices are more expensive than existing equipment, and compliancewould increase our cost of providing video services. Subject to a waiver granted by the FCC on May 4, 2007, we may continue providing low-cost integrated set-top boxes to consumers to facilitate our all-digital cable networks.AllVid Proceeding. On April 21, 2010, the FCC adopted a Notice of Inquiry to consider ways to develop a standardized interface for accessingvideo content, as an alternative to set-top boxes. Adoption of new rules or standards in this area could affect the manner in which we delivervideo products to our customers. We do not know if the FCC will propose rules for further consideration.Pole Attachments. The Communications Act requires the FCC to regulate the rates, terms and conditions imposed by public utilities forcable systems’ use of utility pole and conduit space unless state authorities can demonstrate that they adequately regulate pole attachmentrates. In the absence of state regulation, the FCC administers pole attachment rates on a formula basis. This formula governs the maximumrate certain utilities may charge for attachments to their poles and conduit by companies providing communications services, including cableoperators. The RCA, however, does not use the federal formula and instead has adopted its own formula that has been in place since 1987.This formula could be subject to further revisions upon petition to the RCA. In addition, on April 7, 2011, the FCC adopted an order torationalize different pole attachment rates among types of services. The United States Court of Appeals, D.C. Circuit, recently upheld theFCC’s rules, denying challenges from several utility companies. Though the general purpose of rule changes was to ensure poleattachment rates as low and as uniform as possible, we do not expect the rules to have an immediate impact on the terms under which weaccess poles.Copyright. Cable television systems are subject to federal copyright licensing covering carriage of television and radio broadcast signals. Inexchange for filing certain reports and contributing a percentage of their revenues to a federal copyright royalty pool that varies depending onthe size of the system, the number of distant broadcast television signals carried, and the location of the cable system, cable operators canobtain blanket permission to retransmit copyrighted material included in broadcast signals. The possible modification or elimination of thiscompulsory copyright license is the subject of continuing legislative review. We cannot predict the outcome of this legislative review, whichcould adversely affect our ability to obtain desired broadcast programming. Copyright clearances for non-broadcast programming services arearranged through private negotiations.Wireline Voice Services and ProductsGeneral. As an interexchange carrier, we are subject to regulation by the FCC and the RCA as a non-dominant provider of interstate,international, and intrastate long-distance services. As a state-certificated competitive local exchange carrier, we are subject to regulation bythe RCA and the FCC as a non-dominant provider of local communications services. Military franchise requirements also affect our ability toprovide communications services to military bases.Universal Service. The USF pays ETCs to support the provision of facilities-based wireline telephone service in high cost areas. Under FCCregulations and RCA orders, we are an authorized ETC for purposes of providing wireline local exchange service in Anchorage, Juneau,Fairbanks, and the MTA study area (which includes the Matanuska-Susitna Valley) and other small areas throughout Alaska. Without ETCstatus, we would not qualify for USF support in these areas or other rural areas where we propose to offer facilities-based wireline telephoneservices, and our net cost of providing local telephone services in these areas would be materially adversely affected. See15Table of Contents“Description of Our Business by Reportable Segment - Regulation - Wireless Services and Products - Universal Service” for information onUSF reform.Rural Exemption and Interconnection. A Rural Telephone Company is exempt from compliance with certain material interconnectionrequirements under Section 251(c) of the 1996 Telecom Act, including the obligation to negotiate Section 251(b) and (c) interconnectionrequirements in good faith, unless and until a state regulatory commission lifts such “rural exemption” or otherwise finds it not to apply. AllILECs in Alaska are Rural Telephone Companies except ACS in its Anchorage study area. We have had to participate in numerousproceedings regarding the rural exemptions of various ILECs, including ACS for its Fairbanks and Juneau operating companies, MTA andKetchikan Public Utilities, in order to achieve the necessary interconnection agreements with the remaining ILECs. In other cases theinterconnection agreements were reached by negotiation without regard to the implications of the ILEC’s rural exemption.We have completed negotiation and/or arbitration of the necessary interconnection provisions and the RCA has approved current wirelineInterconnection Agreements between GCI and all of the major ILECs. We have entered all of the major Alaskan markets with local accessservices.See “Description of Our Business by Reportable Segment — Consumer — Competition — Voice Services and Products Competition” formore information.Access Charges and Other Regulated Fees. The FCC regulates the fees that local telephone companies charge long-distance companiesfor access to their local networks. On November 29, 2011, the FCC published a final rule to restructure and reduce over time originatinginterstate access charges, along with a proposal to adopt similar reforms applicable to terminating interstate access charges. We do notanticipate that the adopted changes, for which implementation began in 2012, will have a material impact on our operations, except that thereduction of interstate access rates generally will result in a cost savings on access charges to us. However, the details of implementation ingeneral and between different classes of technology continue to be addressed, and they could affect the economics of some aspects of ourbusiness. We cannot predict at this time the impact of this implementation or future implementation of adopted reforms, but we do not expectit to have a material impact on our operations.Access to Unbundled Network Elements. The ability to obtain unbundled network elements ("UNEs") is an important element of our localaccess services business. We cannot predict the extent to which existing FCC rules governing access to and pricing for UNEs will besustained in the face of additional legal action and the impact of any further rules that are yet to be determined by the FCC. Moreover, thefuture regulatory classification of services that are transmitted over facilities may impact the extent to which we will be permitted access tosuch facilities. Changes to the applicable regulations could result in a change in our cost of serving new and existing markets.Recurring and non-recurring charges for UNE loops and other UNEs may increase based on the rates adopted in RCA proceedings toestablish new Interconnection Agreements or renew existing agreements. These increases could have an adverse effect on our financialposition, results of operations or liquidity.Local Regulation. We may be required to obtain local permits for street opening and construction permits to install and expand our networks.Local zoning authorities often regulate our use of towers for microwave and other communications sites. We also are subject to generalregulations concerning building codes and local licensing. The 1996 Telecom Act requires that fees charged to communications carriers beapplied in a competitively neutral manner, but there can be no assurance that ILECs and others with whom we will be competing will bearcosts similar to those we will bear in this regard.Regulatory Regime Applicable to IP-based Networks. On January 30, 2014, the FCC adopted an order calling for experiments toexamine how best to accelerate the technological and regulatory transitions from traditional TDM-based networks to IP-basedtechnologies. These proceedings are in early stages, and we cannot predict any resulting proceedings or their effect on us; however, achange in regulatory obligation or classification that interfered with our ability to exchange traffic with other providers, that raises the cost ofdoing so, or that adversely affects eligibility for USF support could materially affect our net cost of and revenue from providing local services.Rural Health Care Program. On December 12, 2012, the FCC created the Healthcare Connect Fund to supplement the existing RuralHealth Care Program of the USF. Healthcare providers can choose to participate under either the16Table of Contentsexisting Rural Health Care Program or the new Healthcare Connect Fund. We cannot predict at this time the impact of this change but we donot expect it to have a material impact on our operations.Schools and Libraries Program. On July 23, 2013, the FCC released a Notice of Proposed Rulemaking seeking comment regardingpotential changes to the Schools and Libraries Program ("E-Rate") to increase the availability of 21st century connectivity to support digitallearning in schools nationwide. We cannot at this time predict the outcome of this proceeding or its effect on E-Rate support available to ourschools and libraries customers, but our revenue for providing services in these areas would be materially adversely affected by a substantialreduction of E-Rate support.OtherConflict Minerals. Recently, the SEC adopted new rules pursuant to Section 1502 of the Dodd-Frank Wall Street Reform and ConsumerProtection Act setting forth new disclosure requirements concerning the use of certain minerals that are mined from the Democratic Republicof Congo and adjoining countries. These new disclosure requirements begin in May 2014. We believe these disclosure requirements willnot have a material effect on our financial position, results of operations or liquidity.Financial Information about our Foreign and Domestic Operations and Export SalesWe do not have significant foreign operations or export sales. We conduct our operations throughout the contiguous United States and Alaskaand believe that any subdivision of our operations into distinct geographic areas would not be meaningful.Company-Sponsored ResearchWe have not expended material amounts during the last three fiscal years on company-sponsored research activities.Geographic Concentration and the Alaska EconomyWe offer wireless, data and voice telecommunication services and video services to customers primarily throughout Alaska. Because of thisgeographic concentration, growth of our business and operations depends upon economic conditions in Alaska, and we believe the Alaskaeconomy continues to perform well compared to most other states at the current time. The economy of Alaska is dependent upon the naturalresource industries, and in particular oil production, as well as government spending, investment earnings and tourism. The governmentspending is comprised of state government and United States military spending. Any deterioration in these markets could have an adverseimpact on us.EmployeesWe employed 1,924 persons as of December 31, 2013, and we are not subject to any collective bargaining agreements with our employees.We believe our future success will depend upon our continued ability to attract and retain highly skilled and qualified employees. We believethat relations with our employees are satisfactory.OtherNo material portion of our business is subject to renegotiation of profits or termination of contracts at the election of the federal government.Item 1A. Risk Factors.Factors That May Affect Our Business and Future ResultsAdditional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially and adverselyaffect our business operations. Any of the following risks could materially and adversely affect our business, financial position, results ofoperations or liquidity.17Table of ContentsWe face competition that may reduce our market share and harm our financial performance.There is substantial competition in the telecommunications and entertainment industries. Through mergers and various service integrationstrategies, major providers are striving to provide integrated communications services offerings within and across geographic markets. Weface increased wireless services competition from the 2013 entrance of Verizon into the Alaska market and increasing video servicescompetition from DBS providers.We expect competition to increase as a result of the rapid development of new technologies, services and products. We cannot predict whichof many possible future technologies, products or services will be important to maintain our competitive position or what expenditures will berequired to develop and provide these technologies, products or services. Our ability to compete successfully will depend on marketing andon our ability to anticipate and respond to various competitive factors affecting the industry, including new services that may be introduced,changes in consumer preferences, economic conditions and pricing strategies by competitors. To the extent we do not keep pace withtechnological advances or fail to timely respond to changes in competitive factors in our industry and in our markets, we could lose marketshare or experience a decline in our revenue and net income. Competitive conditions create a risk of market share loss and the risk thatcustomers shift to less profitable lower margin services. Competitive pressures also create challenges for our ability to grow new businessesor introduce new services successfully and execute our business plan. We also face the risk of potential price cuts by our competitors thatcould materially adversely affect our market share and gross margins.For more information about competition by segment, see the sections titled “Competition” included in “Item 1 — Business — Description ofour Business by Reportable Segment.”If we experience low or negative rates of subscriber acquisition or high rates of turnover, our financial performance will beimpaired.We are in the business of selling communications and entertainment services to subscribers, and our economic success is based on ourability to retain current subscribers and attract new subscribers. If we are unable to retain and attract subscribers, our financial performancewill be impaired. Our rates of subscriber acquisition and turnover are affected by a number of competitive factors including the size of ourservice areas, network performance and reliability issues, our device and service offerings, subscribers’ perceptions of our services, andcustomer care quality. Managing these factors and subscribers’ expectations is essential in attracting and retaining subscribers. Although wehave implemented programs to attract new subscribers and address subscriber turnover, we cannot assure you that these programs or ourstrategies to address subscriber acquisition and turnover will be successful. A high rate of turnover or low or negative rate of new subscriberacquisition would reduce revenues and increase the total marketing expenditures required to attract the minimum number of subscribersrequired to sustain our business plan which, in turn, could have a material adverse effect on our business, financial condition and results ofoperations.We may be unable to obtain or maintain the roaming services we need from other carriers to remain competitive.AT&T Wireless and Verizon have national networks which enable them to offer automatic roaming services to their subscribers at a lowercost than we can offer. The networks we operate do not, by themselves, provide national coverage and we must pay fees to other carriers whoprovide roaming services to us. We currently rely on roaming agreements with several carriers for the majority of our roaming services. Webelieve that the rates charged to us by some of these carriers are higher than the rates they charge to certain other roaming partners.The FCC has adopted rules requiring commercial mobile radio service providers to provide automatic roaming, upon request, for voice andSMS text messaging services on just, reasonable and non-discriminatory terms. The FCC has also adopted rules generally requiringcarriers to offer data roaming services. The rules do not provide or mandate any specific mechanism for determining the reasonableness ofroaming rates for voice, SMS text messaging or data services and require that roaming complaints be resolved on a case-by-case basis,based on a non-exclusive list of factors that can be taken into account in determining the reasonableness of particular conduct or rates. If wewere unexpectedly to lose the benefit of one or more key roaming or wholesale agreements, we may be unable to obtain similar replacementagreements and as a result may be unable to continue providing nationwide voice and data roaming services for our customers or may beunable to provide such services on a cost-effective basis. Our inability to obtain new or replacement roaming services on a cost-effectivebasis may limit our ability to18Table of Contentscompete effectively for wireless customers, which may increase our turnover and decrease our revenues, which in turn could materiallyadversely affect our business, financial condition and results of operations.We may be unable to successfully manage the new operations of AWN or Denali Media.The formation, with ACS, of AWN is crucial to our strategy to remain competitive in wireless services against the national wireless carriersoffering services in Alaska. We may not be able to successfully integrate the network facilities or recognize the expected synergies whichmay cause interruptions of or loss of momentum in our business and financial performance. The diversion of management’s attention ordifficulties encountered in connection with the integration may have an adverse effect on our business, financial condition, or results ofoperations. We may also incur unforeseen expenses in connection with the integration efforts. There can be no assurance that the expensesavings and synergies that we anticipated from the transaction will be realized fully or will be realized within the expected timeframe.We may not be able to successfully manage the acquired broadcast stations or recognize the expected synergies with our video servicesbusiness which may cause interruptions of or loss of momentum in our business and financial performance. The diversion ofmanagement’s attention or difficulties encountered in connection with this acquisition may have an adverse effect on our business, financialcondition, or results of operations. We may also incur unforeseen expenses in connection with the management efforts. There can be noassurance that the synergies that we anticipate from the transaction will be realized fully or will be realized within the expected timeframe.Our business is subject to extensive governmental legislation and regulation. Applicable legislation and regulations andchanges to them could adversely affect our business, financial position, results of operations or liquidity.Wireless Services. The licensing, construction, operation, sale and interconnection arrangements of wireless communications systemsare regulated by the FCC and, depending on the jurisdiction, state and local regulatory agencies. In particular, the FCC imposes significantregulation on licensees of wireless spectrum with respect to: •How radio spectrum is used by licensees;•The nature of the services that licensees may offer and how such services may be offered; and•Resolution of issues of interference between spectrum bands.Although the Communications Act of 1934, as amended, preempts state and local regulation of market entry and the rates charged bycommercial mobile radio service providers, states may exercise authority over such things as certain billing practices and consumer-relatedissues. These regulations could increase the costs of our wireless operations. The FCC grants wireless licenses for terms of generally tenyears that are subject to renewal and revocation. FCC rules require all wireless licensees to meet certain build-out requirements andsubstantially comply with applicable FCC rules and policies and the Communications Act of 1934, as amended, in order to retain theirlicenses. Failure to comply with FCC requirements in a given license area could result in revocation of the license for that licensearea. There is no guarantee that our licenses will be renewed.The FCC has initiated a number of proceedings to evaluate its rules and policies regarding spectrum licensing and usage. Changesproposed by the FCC could adversely impact our utilization of our licensed spectrum and our operating costs.Commercial mobile radio service providers must implement E911 capabilities in accordance with FCC rules. Failure to deploy E911 serviceconsistent with FCC requirements could subject us to significant fines.The FCC, together with the Federal Aviation Administration, also regulates tower marking and lighting. In addition, tower construction isaffected by federal, state and local statutes addressing zoning, environmental protection and historic preservation. The FCC has adopted rulechanges that require local notice in any community in which it is seeking FCC Antenna Structure Registration to build a tower. Local noticeprovides members of the community with an opportunity to comment on or challenge the tower construction for environmentalreasons. This rule change could cause delay for certain tower construction projects.19Table of ContentsInternet Services. Proposals may be made before Congress and the FCC to mandate that cable operators provide “open access” over theircable systems to Internet service providers. As of the date of this report, the FCC has declined to impose such requirements. If the FCC orother authorities mandate additional access to our cable systems, we cannot predict the effect that this would have on our Internet serviceofferings.Changes in the regulatory environment relating to the Internet access market, including changes in legislation, FCC regulation, judicialaction or local regulation that affect communications costs or increase competition from the ILEC or other communications servicesproviders, could adversely affect the prices at which we sell Internet services.Video Services. The cable television industry is subject to extensive regulation at various levels, and many aspects of such regulation arecurrently the subject of judicial proceedings and administrative or legislative proposals. The law permits certified local franchising authoritiesto order refunds of rates paid in the previous 12-month period determined to be in excess of the reasonable rates. It is possible that ratereductions or refunds of previously collected fees may be required of us in the future. Currently, pursuant to Alaska law, the basic video ratesin Juneau are the only rates in Alaska subject to regulation by the local franchising authority; the basic rates in Juneau were reviewed andapproved by the RCA in July 2010.Other existing federal regulations, currently the subject of judicial, legislative, and administrative review, could change, in varying degrees,the manner in which video systems operate. Neither the outcome of these proceedings nor their impact upon the cable television industry ingeneral, or on our activities and prospects in the cable television business in particular, can be predicted at this time. There can be noassurance that future regulatory actions taken by Congress, the FCC or other federal, state or local government authorities will not have amaterial adverse effect on our business, financial position, results of operations or liquidity.Local Access Services. Our success in the local telephone market depends on our continued ability to obtain interconnection, access andrelated services from local exchange carriers on terms that are reasonable and that are based on the cost of providing these services. Ourlocal telephone services business faces the risk of unfavorable changes in regulation or legislation or the introduction of new regulations. Ourability to provide service in the local telephone market depends on our negotiation or arbitration with local exchange carriers to allowinterconnection to the carrier’s existing local telephone network, to establish dialing parity, to obtain access to rights-of-way, to resell servicesoffered by the local exchange carrier, and in some cases, to allow the purchase, at cost-based rates, of access to UNEs. In some Alaskamarkets, it also depends on our ability to gain interconnection at economic costs. Future negotiations or arbitration proceedings with respect tonew or existing markets could result in a change in our cost of serving these markets via the facilities of the ILEC or via wholesale offerings.For more information about Regulations affecting our operations, see “Item 1 — Business — Regulation.”Loss of our ETC status would disqualify us for USF support.The USF pays support to ETCs to support the provision of facilities-based wireline and wireless telephone service in high cost areas. If wewere to lose our ETC status in any of the study areas where we are currently an authorized ETC, we would be ineligible to receive USFsupport for providing service in that area. Loss of our ETC status could have an adverse effect on our business, financial position, results ofoperations or liquidity.Revenues and accounts receivable from USF support may be reduced or lost.We receive support from each of the various USF programs: high cost, low income, rural health care, and schools and libraries. This supportwas 19% of our revenue for the years ended December 31, 2013, 2012 and 2011. We had USF net receivables of $124.3 million and $70.1million at December 31, 2013 and 2012, respectively. The programs are subject to change by regulatory actions taken by the FCC orlegislative actions. Changes to any of the USF programs that we participate in could result in a material decrease in revenue and accountsreceivable, which could have an adverse effect on our business, financial position, results of operations or liquidity.See “Description of Our Business by Reportable Segment — Regulation — Wireless Services and Products — Universal Service” and“Description of Our Business by Reportable Segment — Regulation — Wireline Voice Services and Products — Universal Service” for moreinformation.20Table of ContentsProgramming expenses for our video services are increasing, which could adversely affect our business.We expect programming expenses for our video services to continue to increase in the foreseeable future. The multichannel video providerindustry has continued to experience an increase in the cost of programming, especially sports programming. In addition, as we addprogramming to our video services or if we choose to distribute existing programming to our customers through additional delivery platforms,we may incur increased programming expenses. If we are unable to raise our customers’ rates or offset such programming cost increasesthrough the sale of additional services, the increasing cost of programming could have an adverse impact on our business, financialcondition, or results of operations. Moreover, as our contracts with content providers expire, there can be no assurance that they will berenewed on acceptable terms or that they will be renewed at all, in which case we may be unable to provide such content as part of our videoservices and our business could be adversely affected.The decline in our Wireline segment voice services’ results of operations, which include long-distance and local accessservices, may accelerate.We expect our Wireline voice services’ results of operations, which include long-distance and local access services, will continue to decline. As competition from wireless carriers, such as ourselves, increases we expect our local access services and long-distance subscribers andrevenues will continue to decline and possibly accelerate. We expect to continue to strategically use certain marketing and bundlingstrategies to slow the decline but we do not expect these strategies will significantly impact or stop the decline.We may not be able to satisfy the requirements of our participation in a New Markets Tax Credit program for funding ourTERRA-NW project.In 2011 and 2012 we entered into three separate arrangements under the NMTC program with US Bancorp to help fund various phases ofour TERRA-NW project. In connection with the NMTC transactions we received proceeds which are restricted for use on TERRA-NW. TheNMTCs are subject to 100% recapture of the tax credit for a period of seven years as provided in the Internal Revenue Code. We are requiredto be in compliance with various regulations and contractual provisions that apply to the NMTC arrangements. We have agreed to indemnifyUS Bancorp for any loss or recapture of its $56.0 million in NMTCs until such time as our obligation to deliver tax benefits is relieved inDecember 2019. Non-compliance with applicable requirements could result in projected tax benefits not being realized by US Bancorp andcould have an adverse effect on our financial position, results of operations or liquidity.Failure to complete development, testing and deployment of a new technology that supports new services could affect ourability to compete in the industry. In addition, the technology we use may place us at a competitive disadvantage.We develop, test and deploy various new technologies and support systems intended to enhance our competitiveness by both supportingnew services and features and reducing the costs associated with providing those services or features. Successful development andimplementation of technology upgrades depend, in part, on the willingness of third parties to develop new applications in a timelymanner. We may not successfully complete the development and rollout of new technology and related features or services in a timelymanner, and they may not be widely accepted by our customers or may not be profitable, in which case we could not recover our investmentin the technology. Deployment of technology supporting new service offerings may also adversely affect the performance or reliability of ournetworks with respect to both the new and existing services. Any resulting customer dissatisfaction could affect our ability to retaincustomers and may have an adverse effect on our financial position, results of operations, or liquidity. In addition to introducing newtechnologies and offerings, we must phase out outdated and unprofitable technologies and services. If we are unable to do so on a cost-effective basis, we could experience reduced profits.Unfavorable general economic conditions in the United States could have a material adverse effect on our financial position,results of operations and liquidity.Unfavorable general economic conditions could negatively affect our business including our financial position, results of operations, orliquidity, as well as our ability to service debt, pay other obligations and enhance shareholder returns. While it is often difficult for us to predictthe impact of general economic conditions on our business, these conditions could adversely affect the affordability of and demand for someof our products and21Table of Contentsservices and could cause customers to shift to lower priced products and services or to delay or forgo purchases of our products andservices. One or more of these circumstances could cause our revenue to decline. Also, our customers may not be able to obtain adequateaccess to credit, which could affect their ability to make timely payments to us. If that were to occur, we could be required to increase ourallowance for doubtful accounts, and the number of days outstanding for our accounts receivable could increase.Our business is geographically concentrated in Alaska. Any deterioration in the economic conditions in Alaska could have amaterial adverse effect on our financial position, results of operations and liquidity.We offer wireless, data and voice telecommunication services and video services to customers primarily throughout Alaska. Because of thisgeographic concentration, growth of our business and operations depends upon economic conditions in Alaska. The economy of Alaska isdependent upon natural resource industries, and in particular oil production, as well as government spending, investment earnings andtourism. The government spending is comprised of state government and United States military spending. Any deterioration in thesemarkets or the occurrence of a single disruptive event, such as a shut-down of the TransAlaska Pipeline System, could have an adverseimpact on the demand for our products and services and on our results of operations and financial condition.Additionally, the customer base in Alaska is limited and we have already achieved significant market penetration with respect to our serviceofferings in Anchorage and other locations in Alaska. We may not be able to continue to increase our market share of the existing markets forour services, and no assurance can be given that the Alaskan economy will continue to grow and increase the size of the markets we serveor increase the demand for the services we offer. As a result, the best opportunities for expanding our business may arise in other geographicareas such as the lower 49 states. There can be no assurance that we will find attractive opportunities to grow our businesses outside ofAlaska or that we will have the necessary expertise to take advantage of such opportunities. The markets in Alaska for voice, data andwireless communications and video services are unique and distinct within the United States due to Alaska’s large geographical size, itssparse population located in a limited number of clusters, and its distance from the rest of the United States. The expertise we havedeveloped in operating our businesses in Alaska may not provide us with the necessary expertise to successfully enter other geographicmarkets.Natural disasters or terrorist attacks could have an adverse effect on our business.Our technical infrastructure (including our communications network infrastructure and ancillary functions supporting our network such asservice activation, billing and customer care) is vulnerable to damage or interruption from technology failures, power surges or outages,natural disasters, fires, human error, terrorism, intentional wrongdoing or similar events. In addition, earthquakes, floods, fires and otherunforeseen natural disasters or events could materially disrupt our business operations or our provision of service in one or moremarkets. Costs we incur to restore, repair or replace our network or technical infrastructure, as well as costs associated with detecting,monitoring or reducing the incidence of unauthorized use, may be substantial and increase our cost of providing service. Any failure in orinterruption of systems that we or third parties maintain to support ancillary functions, such as billing, point of sale, inventory management,customer care and financial reporting, could materially impact our ability to timely and accurately record, process and report informationimportant to our business. If any of the above events were to occur, we could experience higher churn, reduced revenues and increasedcosts, any of which could harm our reputation and have a material adverse effect on our business, financial condition or results of operations.Cyber attacks or other network disruptions could have an adverse effect on our business.Cyber attacks or other breaches of network information technology may cause equipment failures, disruption of our operations, andpotentially unauthorized access to confidential customer data. Cyber attacks, which include the use of malware, computer viruses, and othermeans for service disruption or unauthorized access to confidential customer data, have increased in frequency, scope, and potential harm inrecent years. Although we have not been subject to cyber attacks or network disruptions which, individually or in the aggregate, have beenmaterial to our operations or financial condition, the preventive actions we take to reduce the risk of such events and protect our informationtechnology and confidential customer data may be insufficient to repel a major cyber attack or network disruption in the future.Some of the most significant risks to our information technology systems, networks, and infrastructure include:22Table of Contents•Disruptions, damage, or unauthorized access beyond our control, including disruptions or damage, or unauthorized access causedby criminal or terrorist activities, theft, natural disasters, power surges, or equipment failure;•Human error;•Viruses, malware, worms, software defects, Trojan horses, unsolicited mass advertising, denial of service and other malicious orabusive attacks by third parties, including cyber attacks or other breaches of network or information technology security; and•Unauthorized access to our information technology, billing, customer care, and provisioning systems and networks and those of ourvendors and other providers.If “hackers” or cyber thieves gain improper access to our technology systems, networks, or infrastructure, they may be able to access, steal,publish, delete, misappropriate, or modify confidential customer data. Moreover, additional harm to customers could be perpetrated by thirdparties who are given access to the confidential customer data. Relatedly, a network disruption (including one resulting from a cyber attack)could cause an interruption or degradation of service as well as permit access, theft, publishing, deletion, misappropriation, or modification toor of confidential customer data. Due to the evolving techniques used in cyber attacks to disrupt or gain unauthorized access to technologynetworks, we may not be able to anticipate or prevent such disruption or unauthorized access.The costs imposed on us as a result of a cyber attack or network disruption could be significant. Among others, such costs could includeincreased expenditures on cyber security measures, lost revenues from business interruption, litigation, fines, sanctions, and damage to thepublic’s perception regarding our ability to provide a secure service. As a result, a cyber attack or network disruption could have a materialadverse effect on our business, financial condition, and operating results.Prolonged service interruptions could affect our business.We rely heavily on our network equipment, communications providers, data and software to support all of our functions. We rely on ournetworks and the networks of others for substantially all of our revenues. We are able to deliver services only to the extent that we can protectour network systems against damage from power or communication failures, computer viruses, natural disasters, unauthorized access andother disruptions. While we endeavor to provide for failures in the network by providing back-up systems and procedures, we cannotguarantee that these back-up systems and procedures will operate satisfactorily in an emergency. Should we experience a prolonged failure,it could seriously jeopardize our ability to continue operations. In particular, should a significant service interruption occur, our ongoingcustomers may choose a different provider, and our reputation may be damaged, reducing our attractiveness to new customers.If failures occur in our undersea fiber optic cable systems or our TERRA facilities and its extensions, our ability to immediatelyrestore the entirety of our service may be limited and we could incur significant costs, which could lead to a material adverseeffect on our business, financial position, results of operations or liquidity.Our communications facilities include undersea fiber optic cable systems that carry a large portion of our traffic to and from the contiguouslower 48 states one of which provides an alternative geographically diverse backup communication facility to the other. Our facilities alsoinclude TERRA and its extensions which are an unringed facility operating in a remote environment and are at times difficult to access forrepairs. If a failure of both sides of the ring of our undersea fiber optic facilities or of our unringed TERRA facility and its extensions occursand we are not able to secure alternative facilities, some of the communications services we offer to our customers could be interruptedwhich could have a material adverse effect on our business, financial position, results of operations or liquidity. Damage to an undersea fiberoptic cable system or TERRA and its extensions could result in significant unplanned expense which could have a material adverse effect onour business, financial position, results of operations or liquidity.If a failure occurs in our satellite communications systems, our ability to immediately restore the entirety of our service may belimited.Our communications facilities include satellite transponders that we use to serve many rural and remote Alaska locations. Each of our C-band and Ku-band satellite transponders is backed up using on-board transponder23Table of Contentsredundancy. In the event of a complete spacecraft failure the services are restored using capacity on other spacecraft that are held inreserve. If a failure of our satellite transponders occurs and we are not able to secure alternative facilities, some of the communicationsservices we offer to our customers could be interrupted which could have a material adverse effect on our business, financial position, resultsof operations or liquidity.We depend on a limited number of third-party vendors to supply communications equipment. If we do not obtain the necessarycommunications equipment, we will not be able to meet the needs of our customers.We depend on a limited number of third-party vendors to supply wireless, Internet, video and other telephony-related equipment. If ourproviders of this equipment are unable to timely supply the equipment necessary to meet our needs or provide them at an acceptable cost,we may not be able to satisfy demand for our services and competitors may fulfill this demand. Due to the unique characteristics of theAlaska communications markets (i.e., remote locations, rural, satellite-served, low density populations, and our leading edge services andproducts), in many situations we deploy and utilize specialized, advanced technology and equipment that may not have a large market ordemand. Our vendors may not succeed in developing sufficient market penetration to sustain continuing production and may fail. Vendorbankruptcy, or acquisition without continuing product support by the acquiring company, may require us to replace technology before itsotherwise useful end of life due to lack of on-going vendor support and product development.The suppliers and vendors on which we rely may also be subject to litigation with respect to technology on which we depend, includinglitigation involving claims of patent infringement. Such claims have been growing rapidly in the communications industry. We are unable topredict whether our business will be affected by any such litigation. We expect our dependence on key suppliers to continue as they developand introduce more advanced generations of technology.We do not have insurance to cover certain risks to which we are subject, which could lead to the occurrence of uninsuredliabilities that adversely affect our financial position, results of operations or liquidity.As is typical in the communications industry, we are self-insured for damage or loss to certain of our transmission facilities, including ourburied, undersea and above-ground fiber optic cable systems. If we become subject to substantial uninsured liabilities due to damage or lossto such facilities, our financial position, results of operations or liquidity may be adversely affected.Our significant debt and capital lease obligations could adversely affect our business and prevent us from fulfilling ourobligations under our Senior Notes, Amended Senior Credit Facility, other debt or capital leases.We have and will continue to have a significant amount of debt and capital lease obligations. On December 31, 2013, we had total debt of$1,048.0 million and total capital lease obligations of $74.6 million. Our high level of debt and capital lease obligations could have importantconsequences, including the following:•Use of a large portion of our cash flow to pay principal and interest on our Senior Notes, Amended Senior Credit Facility, other debtand capital leases, which will reduce the availability of our cash flow to fund working capital, capital expenditures and otherbusiness activities;•Increase our vulnerability to general adverse economic and industry conditions;•Limit our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate;•Restrict us from making strategic acquisitions or exploiting business opportunities;•Make it more difficult for us to satisfy our obligations with respect to the Senior Notes, Amended Senior Credit Facility, other debtand capital lease obligations;•Place us at a competitive disadvantage compared to our competitors that have less debt and capital lease obligations; and•Limit, along with the financial and other restrictive covenants in our debt, among other things, our ability to borrow additionalfunds, dispose of assets or pay cash dividends.24Table of ContentsWe will require a significant amount of cash to service our debt and to meet other obligations. Our ability to generate cashdepends on many factors beyond our control. If we are unable to meet our future capital needs it may be necessary for us tocurtail, delay or abandon our business growth plans. If we incur significant additional indebtedness to fund our plans, it couldcause a decline in our credit rating and could increase our borrowing costs or limit our ability to raise additional capital.We will continue to require a significant amount of cash to satisfy our debt service requirements and to meet other obligations. Our ability tomake payments on and to refinance our debt and to fund planned capital expenditures and acquisitions will depend on our ability to generatecash and to arrange additional financing in the future. These abilities are subject to, among other factors, our credit rating, our financialperformance, general economic conditions, prevailing market conditions, the state of competition in our market, the outcome of certainlegislative and regulatory issues and other factors that may be beyond our control. Our business may not generate sufficient cash flow fromoperations and future borrowings may not be available to us in an amount sufficient to enable us to pay our debt or to fund our other liquidityneeds. We may need to refinance all or a portion of our debt on or before maturity. We may not be able to refinance any of our debt oncommercially reasonable terms or at all.The terms of our debt impose restrictions on us that may affect our ability to successfully operate our business and our abilityto make payments on the Senior Notes.The indentures governing our Senior Notes and/or the credit agreements governing our Amended Senior Credit Facility and other loanscontain various covenants that could materially and adversely affect our ability to finance our future operations or capital needs and to engagein other business activities that may be in our best interest.All of these covenants may restrict our ability to expand or to pursue our business strategies. Our ability to comply with these covenantsmay be affected by events beyond our control, such as prevailing economic conditions and changes in regulations, and if such events occur,we cannot be sure that we will be able to comply. A breach of these covenants could result in a default under the indentures governing ourSenior Notes and/or the Amended Senior Credit Facility. If there were an event of default under the indentures for the Senior Notes and/orthe Amended Senior Credit Facility, holders of such defaulted debt could cause all amounts borrowed under these instruments to be due andpayable immediately. Additionally, if we fail to repay the debt under the Amended Senior Credit Facility when it becomes due, the lendersunder the Amended Senior Credit Facility could proceed against certain of our assets and capital stock of our subsidiaries that we havepledged to them as security. Our assets or cash flow may not be sufficient to repay borrowings under our outstanding debt instruments inthe event of a default thereunder.Any significant impairment of our indefinite-lived intangible assets would lead to a decrease in our assets and a reduction inour net operating performance.We had $504.8 million of indefinite-lived intangible assets at December 31, 2013, consisting of cable certificates of $191.6 million, goodwillof $219.0 million, wireless licenses of $91.4 million and broadcast licenses of $2.8 million. Our cable certificates represent agreements withgovernment entities to construct and operate a video business. Our wireless licenses are from the FCC and give us the right to providewireless service within a certain geographical area. Our broadcast licenses represent permission to use a portion of the radio frequencyspectrum in a given geographical area for broadcasting purposes. Goodwill represents the excess of cost over fair value of net assets acquiredin connection with business acquisitions.If we make changes in our business strategy or if market or other conditions adversely affect our operations, we may be forced to record animpairment charge, which would lead to a decrease in our assets and a reduction in our net operating performance. Our indefinite-livedintangible assets are tested annually for impairment during the fourth quarter and at any time upon the occurrence of certain events orsubstantive changes in circumstances that indicate the assets might be impaired. If the testing performed indicates that impairment hasoccurred, we are required to record an impairment charge for the difference between the carrying value of the goodwill and/or the indefinite-lived intangible assets, as appropriate, and the fair value of the goodwill and/or indefinite-lived intangible assets, in the period in which thedetermination is made. The testing of goodwill and indefinite-lived intangible assets for impairment requires us to make significantestimates about our future performance and cash flows, as well as other assumptions. These estimates can be affected by numerousfactors, including changes in economic, industry or market conditions, changes in underlying business operations, future operatingperformance, changes in competition, or changes in technologies. Any changes to key assumptions, or actual performance compared with25Table of Contentsthose assumptions, about our business and its future prospects or other assumptions could affect the fair value, resulting in an impairmentcharge.Our ability to use net operating loss carryforwards to reduce future tax payments could be negatively impacted if there is an“ownership change” as defined under Section 382 of the Internal Revenue Code.At December 31, 2013, we have tax net operating loss carryforwards of $294.5 million for U.S. federal income tax purposes and, under theInternal Revenue Code, we may carry forward these net operating losses in certain circumstances to offset any current and future taxableincome and thus reduce our federal income tax liability, subject to certain requirements and restrictions. If we experience an “ownershipchange,” as defined in Section 382 of the Internal Revenue Code and related Treasury regulations at a time when our market capitalization isbelow a certain level, our ability to use the net operating loss carryforwards could be substantially limited. This limit could impact the timingof the usage of the net operating loss carryforwards, thus accelerating cash tax payments or causing net operating loss carryforwards to expireprior to their use, which could affect the ultimate realization of that deferred tax asset.Concerns about health risks associated with wireless equipment may reduce the demand for our wireless services.Portable communications devices have been alleged to pose health risks, including cancer, due to radio frequency emissions from thesedevices. Purported class actions and other lawsuits have been filed from time to time against other wireless companies seeking not onlydamages but also remedies that could increase the cost of doing business. We cannot be sure of the outcome of any such cases or that theindustry will not be adversely affected by litigation of this nature or public perception about health risks. The actual or perceived risk of mobilecommunications devices could adversely affect us through a reduction in subscribers. Further research and studies are ongoing, with nolinkage between health risks and mobile phone use established to date by a credible public source. However, we cannot be sure thatadditional studies will not demonstrate a link between radio frequency emissions and health concerns.Additionally, new government regulations on the use of a wireless device while driving may affect us through a reduction in usagerevenue. Studies have indicated that using wireless devices while driving may impair a driver’s attention. Many state and local legislativebodies, including Alaska’s, have passed legislation to restrict the use of wireless telephones while driving vehicles. In Alaska all drivers arebanned from texting while driving. Concerns over safety and the effect of additional future legislation, if adopted and enforced in the areas weserve, could limit our ability to market and sell our wireless services. Litigation relating to accidents, deaths or serious bodily injuriesallegedly incurred as a result of wireless telephone use while driving could result in adverse publicity and further governmentalregulation. Any of these results could have a material adverse effect on our financial position, results of operations or liquidity.A significant percentage of our voting securities are owned by a small number of shareholders and these shareholders cancontrol shareholder decisions on very important matters.As of December 31, 2013, our executive officers and directors and their affiliates owned 12% of our combined outstanding Class A and ClassB common stock, representing 23% of the combined voting power of that stock. These shareholders can significantly influence, if notcontrol, our management policy and all fundamental corporate actions, including mergers, substantial acquisitions and dispositions, andelection of directors to the Board.Item 1B. Unresolved Staff Comments.Not applicable.Item 2. PropertiesOur properties do not lend themselves to description by location of principal units. The majority of our properties are located in Alaska. 26Table of ContentsWe lease our executive, corporate and administrative facilities and business offices. Our operating, executive, corporate and administrativeproperties are in good condition. We consider our properties suitable and adequate for our present needs and they are being fully utilized.Our Wireline and Wireless segments have properties that consist primarily of undersea and terrestrial fiber optic cable networks, switchingequipment, satellite transponders and earth stations, microwave radio, cable and wire facilities, cable head-end equipment, wireless towersand equipment, coaxial distribution networks, connecting lines (aerial, underground and buried cable), routers, servers, transportationequipment, computer equipment, general office equipment, land, land improvements, landing stations and other buildings. Substantially allof our properties are located on or in leased real property or facilities. Substantially all of our properties secure our Amended Senior CreditFacility. See note 6 included in “Part II — Item 8 — Consolidated Financial Statements and Supplementary Data” for more information.Item 3. Legal ProceedingsWe are involved in various lawsuits, billing disputes, legal proceedings, and regulatory matters that have arisen from time to time in thenormal course of business. Management believes there are no proceedings from asserted and unasserted claims which if determinedadversely would have a material adverse effect on our financial position, results of operations or liquidity. Item 4. Mine Safety DisclosuresNot Applicable.Part IIItem 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases ofEquity SecuritiesMarket Information for Common StockShares of GCI’s Class A common stock are traded on the Nasdaq Global Select MarketSM under the symbol GNCMA.Shares of GCI’s Class B common stock are traded through the Over-The-Counter Bulletin Board service offered by the National Associationof Securities Dealers. Each share of Class B common stock is convertible, at the option of the holder, into one share of Class A commonstock.27Table of ContentsThe following table sets forth the high and low sales price for our common stock for the periods indicated. Market price data for Class Ashares was obtained from the Nasdaq Stock Market System quotation system. Market price data for Class B shares was obtained fromreported Over-the-Counter Bulletin Board service market transactions. The prices represent prices between dealers, do not include retailmarkups, markdowns, or commissions, and do not necessarily represent actual transactions. Class A Class B High Low High Low2013 First Quarter$9.51 7.97 8.89 7.50Second Quarter$9.82 7.69 8.29 7.50Third Quarter$9.60 8.44 9.09 8.29Fourth Quarter$11.18 8.78 10.96 8.752012 First Quarter$11.36 8.72 9.90 7.75Second Quarter$8.60 6.22 9.31 6.75Third Quarter$10.26 8.62 10.00 7.25Fourth Quarter$10.27 7.52 10.00 8.00HoldersAs of December 31, 2013, there were 2,372 holders of record of our Class A common stock and 306 holders of record of our Class Bcommon stock (amounts do not include the number of shareholders whose shares are held of record by brokers, but do include thebrokerage house as one shareholder).DividendsWe have never paid cash dividends on our common stock, and we have no present intention of doing so. Payment of cash dividends in thefuture, if any, will be determined by our Board of Directors in light of our earnings, financial condition and other relevant considerations. Ourexisting debt agreements contain provisions that limit payment of dividends on common stock, other than stock dividends (see note 6included in “Part II — Item 8 — Consolidated Financial Statements and Supplementary Data” for more information).Stock Transfer Agent and RegistrarComputershare is our stock transfer agent and registrar.Performance GraphThe following graph includes a line graph comparing the yearly percentage change in our cumulative total shareholder return on our Class Acommon stock during the five-year period 2009 through 2013. This return is measured by dividing (1) the sum of (a) the cumulative amountof dividends for the measurement period (assuming dividend reinvestment, if any) and (b) the difference between our share price at the endand the beginning of the measurement period, by (2) the share price at the beginning of that measurement period. This line graph iscompared in the following graph with two other line graphs during that five-year period, i.e., a market index and a peer index.The market index is the Center for Research in Securities Price Index for the Nasdaq Stock Market for United States companies. It presentscumulative total returns for a broad based equity market assuming reinvestment of dividends and is based upon companies whose equitysecurities are traded on the Nasdaq Stock Market. The peer index is the Center for Research in Securities Price Index for NasdaqTelecommunications Stock. It presents cumulative total returns for the equity market in the telecommunications industry segmentassuming reinvestment of dividends and is based upon companies whose equity securities are traded on the Nasdaq Stock Market. The linegraphs represent annual index levels derived from compounding daily returns.In constructing each of the line graphs in the following graph, the closing price at the beginning point of the five-year measurement period hasbeen converted into a fixed investment, stated in dollars, in our Class A common stock (or28Table of Contentsin the stock represented by a given index, in the cases of the two comparison indexes), with cumulative returns for each subsequent fiscalyear measured as a change from that investment. Data for each succeeding fiscal year during the five-year measurement period are plottedwith points showing the cumulative total return as of that point. The value of a shareholder’s investment as of each point plotted on a givenline graph is the number of shares held at that point multiplied by the then prevailing share price.Our Class B common stock is traded through the Over-The-Counter Bulletin Board service on a more limited basis. Therefore, comparisonssimilar to those previously described for the Class A common stock are not directly available. However, the performance of Class B commonstock may be analogized to that of the Class A common stock in that the Class B common stock is readily convertible into Class A commonstock by request to us.Prepared by Zacks Investment Research, Inc. All indexes used with permission. All rights reserved.29Table of ContentsCOMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURNS PERFORMANCE GRAPH FOR GENERALCOMMUNICATION, INC., NASDAQ STOCK MARKET INDEX FOR UNITED STATES COMPANIES, AND NASDAQTELECOMMUNICATIONS STOCK1,2,3,4Measurement Period (Fiscal YearCovered)Company ($)Nasdaq Stock Market Index forU.S. Companies ($)Nasdaq TelecommunicationsStock ($)FYE 12/31/08100.00100.00100.00FYE 12/31/0978.86143.74149.95FYE 12/31/10156.49170.23193.61FYE 12/31/11121.01171.13204.74FYE 12/31/12118.54202.46276.61FYE 12/31/13137.82282.01401.351 The lines represent annual index levels derived from compounded daily returns that include all dividends.2 The indexes are reweighted daily, using the market capitalization on the previous trading day.3 If the annual interval, based on the fiscal year-end, is not a trading day, the preceding trading day is used.4 The index level for all series was set to $100.00 on December 31, 2008.Issuer’s Purchases of Equity Securities(a) Not applicable.(b) Not applicable.(c) The following table provides information about repurchases of shares of our Class A common stock during the quarter endedDecember 31, 2013 (amounts rounded to hundreds, except per share amounts): (a) Total Number of SharesPurchased1(b) Average Price Paid perShare(c) Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs2(d) Maximum Number (orapproximate Dollar Value)of Shares that May Yet BePurchased Under the Planor Programs3October 1, 2013 to October31, 201364,300$8.9963,000$105,713,700November 1, 2013 toNovember 30, 2013120,600$9.58—$105,761,700December 1, 2013 toDecember 31, 20137,900$11.15—$105,958,900Total192,800 1 Consists of 63,000 shares from open market purchases made under our publicly announced repurchase plan, 15 shares from privatepurchases made under our publicly announced plan and 129,800 shares from private purchases made to settle the minimum statutorytax-withholding requirements pursuant to restricted stock award vesting.2 The repurchase plan was publicly announced on November 3, 2004. Our plan does not have an expiration date, however transactionspursuant to the plan are subject to periodic approval by our Board of Directors. We expect to continue the repurchases for an indefiniteperiod dependent on leverage, liquidity, company performance, market conditions and subject to continued oversight by our Board ofDirectors.3 The total amount approved by our Board of Directors for repurchase under our publicly announced repurchase plan was $337.9 millionthrough December 31, 2013, consisting of $332.6 million through September 30, 2013, and an additional $5.3 million during the threemonths ended December 31, 2013. We have made total repurchases under the program of $232.0 million through December 31,2013. If stock repurchases are less than the total approved quarterly amount the difference may be carried forward and used torepurchase additional shares in future quarters, subject to board approval.30Table of Contents Item 6. Selected Financial DataThe following table presents selected historical information relating to financial condition and results of operations over the past five years. Years Ended December 31, 2013 2012 2011 2010 2009(Amounts in thousands except per shareamounts) Revenues$811,648 710,181 679,381 651,250 595,811Income before income taxes$42,684 21,250 12,891 17,858 6,867Net income$31,727 9,162 5,486 8,610 3,172Net income (loss) attributable to non-controlling interest$22,321 (511) (238) — —Net income attributable to GCI commonstockholders$9,406 9,673 5,724 8,610 3,172Basic net income attributable to GCI percommon share$0.23 0.23 0.13 0.16 0.06Diluted net income attributable to GCI percommon share$0.23 0.23 0.12 0.16 0.05Total assets$2,011,807 1,506,552 1,446,320 1,350,353 1,417,335Long-term debt, including current portionand net of unamortized discount$1,047,980 877,051 861,272 781,717 776,380Obligations under capital leases, includingcurrent portion$74,605 80,612 86,054 91,165 95,914Redeemable preferred stock Series B$— — — — —Series C$— — — — —Total GCI stockholders’ equity$157,144 157,178 157,339 199,099 265,255Dividends declared per common share$— — — — —The Selected Financial Data should be read in conjunction with “Part II — Item 7 — Management’s Discussion and Analysis of FinancialCondition and Results of Operations.”Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsIn the following discussion, General Communication, Inc. (“GCI”) and its direct and indirect subsidiaries are referred to as “we,” “us” and“our.”Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements,which have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Thepreparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets andliabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to theallowance for doubtful receivables, unbilled revenues, accrual of the USF high cost Remote area program support, share-basedcompensation, inventory at lower of cost or market, reserve for future customer credits, liability for incurred but not reported medicalinsurance claims, valuation allowances for deferred income tax assets, depreciable and amortizable lives of assets, the carrying value oflong-lived assets including goodwill, cable certificates, wireless licenses, and broadcast licenses, our effective tax rate, purchase priceallocations, deferred31Table of Contentslease expense, asset retirement obligations, the accrual of cost of goods sold (exclusive of depreciation and amortization expense) ("Cost ofGoods Sold"), depreciation, and accrual of contingencies and litigation. We base our estimates and judgments on historical experience andon various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for makingjudgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ fromthese estimates under different assumptions or conditions. See also our “Cautionary Statement Regarding Forward-Looking Statements.”The following discussion and analysis of financial condition and results of operations should be read in conjunction with our consolidatedfinancial statements and supplementary data as presented in Part IV of this Form 10-K.General OverviewThrough our focus on long-term results, acquisitions, and strategic capital investments, we strive to consistently grow our revenues andexpand our margins. We have historically met our cash needs for operations, regular capital expenditures and maintenance capitalexpenditures through our cash flows from operating activities. Historically, cash requirements for significant acquisitions and major capitalexpenditures have been provided largely through our financing activities.As discussed earlier in “Item 1 — Business — Geographic Concentration and the Alaska Economy,” our revenue is impacted by the strengthof the Alaska economy. The Alaska economy is affected by certain economic factors including activity in the oil and gas industry, tourism,government spending, and military personnel stationed in Alaska. Additionally, the health of the national economy can impact our revenue.Effective January 1, 2013, we refocused our business and now have two reportable segments, Wireless and Wireline. The Wirelesssegment’s revenue is derived from wholesale wireless services. The Wireline segment’s revenue includes all of our other revenue. Thischange reflects our plan to strategically focus on our wireless network and is how our chief operating decision maker now measuresperformance and makes resource allocation decisions. Prior to 2013, we had operated our business under five reportable segments –Consumer, Network Access, Commercial, Managed Broadband and Regulated Operations. The historical segment data has beenreclassified to conform to the revised reportable segments.On July 22, 2013, we closed the transactions under the Wireless Agreement and other related agreements entered into on June 4, 2012 byand among Alaska Communications Systems Group, Inc. (“ACS”), GCI, ACS Wireless, Inc., a wholly owned subsidiary of ACS, GCIWireless Holdings, LLC, a wholly owned subsidiary of GCI, and AWN, pursuant to which the parties agreed to contribute the respectivewireless network assets of GCI, ACS and their affiliates to AWN. This transaction provides a statewide network with the spectrum mix,scale, advanced technology and cost structure necessary to compete with Verizon Wireless and AT&T Mobility in Alaska. AWN provideswholesale services to GCI and ACS. GCI and ACS use the AWN network in order to continue to sell services to their respective retailcustomers. GCI and ACS continue to compete against each other and other wireless providers in the retail market.Under the terms of the Wireless Agreement, we contributed our wireless network assets and certain rights to use capacity to AWN.Additionally, ACS contributed its wireless network assets and certain rights to use capacity to AWN. As consideration for the contributedbusiness assets and liabilities, ACS received $100.0 million in cash from GCI, a one-third ownership interest in AWN and entitlements toreceive preferential cash distributions totaling $190.0 million over the Preference Period. ACS's preferential cash distributions are expected tobe higher than that which they would receive from their one-third interest. We received a two-third ownership interest in AWN, as well asentitlements to receive all remaining cash distributions after ACS’s preferential cash distributions during the Preference Period. Thedistributions to each member are subject to adjustment based on the number of ACS and GCI wireless subscribers, with the aggregateadjustment capped at $21.8 million for each member over the Preference Period. Following the Preference Period, we and ACS will receivedistributions proportional to our ownership interests. As part of closing, we borrowed $100.0 million under our Amended Senior CreditFacility to fund the purchase of wireless network assets from ACS.As an ETC, we receive support from the USF to support the provision of wireline local access and wireless service in high cost areas. OnNovember 29, 2011, the FCC published final rules to reform, among others, the methodology for distributing USF high cost support for voiceand broadband services (“High Cost Order”). The High Cost Order segregated the support methodology for Remote areas in Alaska from thesupport methodology for all urban areas,32Table of Contentsincluding Alaska Urban locations. Our future revenue recognition for both Remote and Urban high cost support is dependent upon thefunctionality and timing of an operational successor funding mechanism. At December 31, 2013, we believe an implementation of asuccessor funding mechanism prior to January 2015 is unlikely.In October 2013 and February 2014 two of our customers received notices of denial and funding changes from the Rural Health CareDivision of USAC related to certain services we provided during 2013. In 2013 one customer filed an appeal with the FCC and we expect theother customer to file an FCC appeal in 2014. We recognized $5.7 million during the year ended December 31, 2013, and because webelieve our customers are in compliance with program rules, we expect our customers will prevail in their appeals we have not reduced ourrevenue recognition during the year ended December 31, 2013.In November 2010, Verizon acquired a license for 22MHz of the 700 MHz wireless spectrum band covering Alaska. In June 2013, Verizonbegan providing service on its LTE network in Anchorage, Fairbanks, Juneau and the Matanuska-Susitna Borough. The service provided byVerizon’s LTE network is limited to data only.Results of OperationsThe following table sets forth selected financial data as a percentage of total revenues for the periods indicated (underlying data rounded to thenearest thousand): Year Ended December 31,PercentageChange1 2013vs. 2012PercentageChange1 2012vs. 2011 201320122011Statements of Operations Data: Revenues: Wireless segment24%18%18%58%4%Wireline segment76%82%82%5%5%Total revenues100%100%100%14%5%Selling, general and administrative expenses33%34%35%11%3%Depreciation and amortization expense18%18%19%13%4%Operating income14%13%13%27%(2)%Other expense, net9%10%11%4%(13)%Income before income taxes5%3%2%101%65%Net income4%1%1%246%67%Net income (loss) attributable to the non-controlling interest3%—%—%(4,468)%115%Net income attributable to GCI1%1%1%(3)%69% 1 Percentage change in underlying data We evaluate performance and allocate resources based on earnings before depreciation and amortization expense, net interest expense,income taxes, share-based compensation expense, accretion expense, income or loss attributable to non-controlling interest, and non-cashcontribution adjustment (“Adjusted EBITDA”). Management believes that this measure is useful to investors and other users of our financialinformation in evaluating operating profitability as an analytical indicator of income generated to service debt and fund capital expenditures. Inaddition, multiples of current or projected earnings before depreciation and amortization expense, net interest expense and income taxes(“EBITDA”) are used to estimate current or prospective enterprise value. See note 10 in the "Notes to Consolidated Financial Statements"included in Part IV of this annual report on Form 10-K for a reconciliation of consolidated Adjusted EBITDA, a non-GAAP financial measure,to consolidated income before income taxes.33Table of ContentsOverview of Revenues and Cost of Goods SoldTotal revenues increased 5% from $679.4 million in 2011 to $710.2 million in 2012 and increased 14% to $811.6 million in 2013. Revenueincreased in both of our segments in 2013 and 2012. See the discussion below for more information by segment.Total Cost of Goods Sold increased 9% from $227.4 million in 2011 to $247.5 million in 2012 and increased 13% to $280.5 million in2013. Cost of Goods Sold increased in both of our segments in 2013 and 2012. See the discussion below for more information by segment.Wireless Segment OverviewWireless segment revenue, Cost of Goods Sold, and Adjusted EBITDA for 2013, 2012, and 2011 are as follows (amounts in thousands): 201320122011PercentageChange 2013 vs.2012PercentageChange 2012 vs.2011Revenue$197,218124,745119,52158%4 %Cost of Goods Sold$68,08658,73742,68716%38 %Adjusted EBITDA$109,60950,80262,315116%(18)%See note 10 in the "Notes to Consolidated Financial Statements" included in Part IV of this annual report on Form 10-K for a reconciliation ofconsolidated Adjusted EBITDA, a non-GAAP financial measure, to consolidated income before income taxes.Wireless Segment RevenuesThe increase in revenue in 2013 is primarily due to the following:•A $28.9 million increase in roaming revenue in 2013 due to the July 22, 2013 close of the AWN transaction.•A $13.0 million increase in roaming revenue in 2013 due to increased data usage by one of our roaming partners’ customers,•A $18.8 million increase in non-Lifeline retail revenue in 2013 due to the July 22, 2013 close of the AWN transaction, •A $6.2 million increase in non-Lifeline retail revenue in 2013 due to an increase in non-Lifeline retail customers. The Wirelesssegment recognizes 70% of retail wireless plan fee revenue with the remaining 30% recognized in Wireline segment – Consumeror Wireline segment – Business Services depending on whether the revenue is generated by a residential or commercialsubscriber, and•A $7.9 million increase in high cost support in 2013 due to the July 22, 2013 close of the AWN transaction.The increase is partially off-set by a $6.6 million increase in the wireless handset cash incentives to ACS in 2013 for the sale of wirelesshandsets to their retail customers due to the July 22, 2013 close of the AWN transaction.Wireless Segment Cost of Goods SoldThe increase in Cost of Goods Sold is primarily due to the following:•A $6.4 million increase in 2013 primarily due to roaming costs due to the July 22, 2013 close of the AWN transaction,•A $6.7 million increase in 2012 primarily due to wireless handset equipment costs. The Wireless segment provides a handsetsubsidy to the Wireline segment - Consumer and Wireline segment - Business Services to offset the cost of handsets sold to retailwireless subscribers. Our wireless handset equipment costs have increased due to an increase in non-Lifeline wirelesssubscribers and due to a higher percentage of our handsets sold being premium smartphones which have a higher cost,•A $3.5 million increase in distribution and capacity costs in 2013 due to growth in traffic carried on the wireless network,•A $2.1 million increase in distribution and capacity costs in 2013 due to the July 22, 2013 close of the AWN transaction,34Table of Contents•A $6.3 million increase in roaming costs in 2012 due to the depletion of a large block of wireless network usage that was used forroaming provided at no charge by AT&T pursuant to an agreement signed in December 2007, and•Additional increases in network maintenance costs in 2013 due to the growth of the wireless network due to the July 22, 2013close of the AWN transaction and increased emphasis on our wireless network.The increase in 2013 is partially off-set by an $11.0 million decrease in wireless equipment costs. Through the AWN transaction close theWireless segment recorded the Cost of Goods Sold related to wireless equipment sales to retail customers based upon equipment sales andagreed-upon subsidy rates. Any amount in excess of this subsidy was recorded in the Wireline segment. Subsequent to the transaction closeand through December 31, 2013, although permitted, the Wireline segment was unable to meet the requirements in order to request awireless equipment subsidy from the Wireless segment in accordance with the AWN agreements. We expect the cost of wireless equipmentsold to the Wireline segment's retail customers to be recorded in the Wireline segment in 2014.Wireless Segment Adjusted EBITDAThe increase in Adjusted EBITDA in 2013 is primarily due to increased revenue as described above in “Wireless Segment Revenues.” Thisincrease was partially offset by increased Cost of Goods Sold as described above in "Wireless Segment Cost of Goods Sold" and an increasein selling, general and administrative expense. The decrease in Adjusted EBITDA in 2012 is primarily due to an increase in Cost of GoodsSold as described above in "Wireless Segment Cost of Goods Sold." This decrease was partially offset by increased revenue as describedabove in “Wireless Segment Revenues.”Wireline Segment OverviewOur Wireline segment offers services and products under three major customer groups as follows: Customer GroupWireline Segment Services and ProductsConsumerBusinessServicesManagedBroadband Retail wirelessXX Data: InternetXXX Data networks XX Managed services XX VideoXX Voice: Long-distanceXXX Local accessXXX•Consumer – we offer a full range of retail wireless, data, video and voice services to residential customers.•Business Services - we offer a full range of retail wireless, data, video and voice services to local, national and global businesses,governmental entities and public and private educational institutions and wholesale data and voice services to common carriercustomers.•Managed Broadband – we offer Internet, data network and managed services to rural schools and health organizations andregulated voice services to residential and commercial customers in rural communities primarily in Southwest Alaska.35Table of ContentsThe components of Wireline segment revenue are as follows (amounts in thousands): 201320122011PercentageChange 2013 vs.2012PercentageChange 2012 vs.2011Consumer Wireless$28,03126,41624,2916 %9 %Data99,74086,46671,97715 %20 %Video111,368115,306118,635(3)%(3)%Voice35,66641,16951,847(13)%(21)%Business Services Wireless2,8722,8812,918— %(1)%Data154,498143,907144,1457 %— %Video15,17112,84211,60518 %11 %Voice50,27348,26249,1924 %(2)%Managed Broadband Data95,64586,56263,24810 %37 %Voice21,16621,62522,002(2)%(2)%Total Wireline segment revenue$614,430585,436559,8605 %5 %Wireline segment Cost of Goods Sold and Adjusted EBITDA for 2013, 2012, and 2011 are as follows (amounts in thousands): 201320122011PercentageChange 2013 vs.2012PercentageChange 2012 vs.2011Wireline segment Cost of Goods Sold$212,376188,764184,71213 %2%Wireline segment Adjusted EBITDA$157,674176,007161,326(10)%9%See note 10 in the "Notes to Consolidated Financial Statements" included in Part IV of this annual report on Form 10-K for a reconciliation ofconsolidated Adjusted EBITDA, a non-GAAP financial measure, to consolidated income before income taxes.Selected key performance indicators for our Wireline segment follow: 201320122011PercentageChange 2013 vs.2012PercentageChange 2012 vs.2011Consumer Data: Cable modem subscribers1115,300115,600108,300— %7 %Video: Basic subscribers2 117,900122,300125,000(4)%(2)%Digital programming tier subscribers3 67,50072,50075,600(7)%(4)%HD/DVR converter boxes4 96,90090,40089,4007 %1 %Homes passed247,400243,600242,1002 %1 %Video ARPU5 $77.34$77.98$77.43(1)%1 %36Table of ContentsVoice: Total local access lines in service6 61,00069,70077,600(12)%(10)%Local access lines in service on GCI facilities7 56,90064,90072,000(12)%(10)%Business Services Data: Cable modem subscribers1 14,00013,30011,1005 %20 %Voice: Total local access lines in service6 48,80051,60051,400(5)%— %Local access lines in service on GCI facilities6 34,70030,80028,70013 %7 %Combined Consumer and Business Services Multiple System Operator Operating Statistics Customer relationships7122,400126,700129,400(3)%(2)%Revenue generating units8334,100343,900345,900(3)%(1)%Wireless Consumer Lifeline wireless lines in service929,30032,40042,400(10)%(24)%Consumer Non-Lifeline wireless lines in service10 93,60090,60082,2003 %10 %Business Services Non-Lifeline wireless lines inservice1018,60017,00015,3009 %11 %Total wireless lines in service141,500140,000139,9001 %— %Wireless ARPU11$49.60$46.25$44.607 %4 %1 A cable modem subscriber is defined by the purchase of cable modem service regardless of the level of service purchased. If one entitypurchases multiple cable modem service access points, each access point is counted as a subscriber. Cable modem subscribers may alsobe video basic subscribers though basic video service is not required to receive cable modem service.2 A basic subscriber is defined as one basic tier of service delivered to an address or separate subunits thereof regardless of the number ofoutlets purchased.3 A digital programming tier subscriber is defined as one digital programming tier of service delivered to an address or separate subunitsthereof regardless of the number of outlets or digital programming tiers purchased. Digital programming tier subscribers are a subset of basicsubscribers.4 A high-definition/digital video recorder ("HD/DVR") converter box is defined as one box rented by a digital programming or basic tiersubscriber. A digital programming or basic tier subscriber is not required to rent an HD/DVR converter box to receive service.5 Applicable average monthly video revenues divided by the average number of basic subscribers at the beginning and end of each month in2013, 2012, and 2011 ("Video ARPU").6 A local access line in service is defined as a revenue generating circuit or channel connecting a customer to the public switched telephonenetwork.7 The number of customers that receive at least one level of service utilizing our cable service facilities, encompassing voice, video, and dataservices, without regard to which services customers purchase.8 The sum of all primary digital video, high-speed data, and telephony customers, not counting additional outlets.9 A Lifeline wireless line in service is defined as a revenue generating wireless device that is eligible for Lifeline support. The UniversalService Fund's Lifeline program is administered by the Universal Service Administrative Company and is designed to ensure that qualitytelecommunications services are available to low-income customers at affordable rates.10 A non-Lifeline wireless line in service is defined as a revenue generating wireless device that is not eligible for Lifeline support.37Table of Contents11 Average monthly wireless revenues, excluding those from other wireless carrier customers, divided by the average of wireless subscribersat the beginning and end of each month in the period ("Wireless ARPU"). Revenue used for this calculation includes Wireline segment -Consumer - Wireless, Wireline segment - Business Services - Wireless and wholesale wireless revenues earned from GCI retailsubscribers included in the Wireless segment for 2013, 2012, and 2011.Wireline Segment RevenuesConsumerThe increase in data revenue is primarily due to a $12.2 million or 16% and $11.6 million or 18% increase in cable modem revenue for 2013and 2012, respectively, due to an increase in the average number of subscribers and our subscribers’ selection of plans that offer higherspeeds and higher usage limits. Additionally, data revenue increased $2.9 million or 57% in 2012 due to an increase in excess usagerevenue.The decrease in voice revenue in 2012 is primarily due to:•A 21% decrease in local service plan fee revenue to $15.9 million due to decreased subscribers and a February 2012 rate decrease toone of our popular plans. We expect local access lines in service to continue to decline in the future due to wireless substitution,•A 21% decrease in local service high cost support to $8.3 million due to the changes in the high cost support program as discussedabove in the General Overview section of this Item 7 and a decrease in subscribers, and•A 39% decrease in long-distance usage to $2.4 million due to the lower rates mandated by the Intrastate Access Reform Act("Intrastate Access Reform") which went into effect in July 2011, along with our introduction of a popular new plan offering unlimitedinterstate and intrastate calling which went into effect in August 2011.Business ServicesBusiness Services data revenue is comprised of monthly recurring charges for data services and charges billed on a time and materials basislargely for personnel providing on-site customer support. This latter category can vary significantly based on project activity.The increase in data revenue in 2013 is primarily due to a $10.2 million or 20% in managed services project revenue due to special projectwork. The decrease in data revenue in 2012 is primarily due to a $4.5 million or 5% decrease due to rate compression that was partially offsetby a $4.2 million or 9% increase in special project work.Managed BroadbandThe increase in data revenue in 2013 and 2012 is primarily due to:•A $12.3 million and $19.0 million increase in 2013 and 2012, respectively, in monthly contract revenue due to new ConnectMD®and SchoolAccess® customers and increased data network capacity purchased by our existing ConnectMD® and SchoolAccess®customers due to increased demand,•A $2.5 million increase in 2012 in product sales to our customers, and•Recognition of $1.6 million in 2012 in previously denied funding from the USAC for one ConnectMD® customer for the fundingyear July 2008 to June 2009. We had appealed the funding denial and received notice during the second quarter of 2012 that ourappeal was successful and the funding was reinstated.The increase in 2013 was partially offset by a $1.6 million decrease in product sales to our customers and the absence of $1.6 million inrevenue recognized in 2012 for USAC funding that was reinstated as discussed above.38Table of ContentsWireline Segment Cost of Goods SoldThe individually significant items contributing to the 2013 and 2012 increases in Wireline segment Cost of Goods Sold include:•A 10% or $5.3 million increase in 2013 video Cost of Goods Sold primarily due to programming changes,•A 28% or $10.8 million and 10% or $3.4 million increase in managed services project Cost of Goods Sold for 2013 and 2012,respectively, related to the increased special project work described above in “Wireline Segment Revenues – Business Services,"•A 104% or $11.8 million increase in 2013 wireless Cost of Goods Sold primarily due to an increase in the number of handsets soldand a decrease in subsidies received from the Wireless segment for the purchase of wireless handsets. Through the AWNtransaction close the Wireless segment recorded the Cost of Goods Sold related to wireless equipment sales to retail customersbased upon equipment sales and agreed-upon subsidy rates. Any amount in excess of this subsidy was recorded in the Wirelinesegment. Subsequent to the transaction close and through December 31, 2013, although permitted, the Wireline segment wasunable to meet the requirements in order to request a wireless equipment subsidy from the Wireless segment in accordance withthe AWN agreements. We expect the cost of wireless equipment sold to the Wireline segment's retail customers to be recorded in theWireline segment in 2014.,•A 57% or $4.1 million increase in 2012 in wireless Cost of Goods Sold primarily due to an increase in the number of wirelesshandsets sold, and•A $2.2 million increase in 2012 Cost of Goods Sold associated with the product sales revenue described above in "WirelineSegment Revenues - Managed Broadband."The increases are partially offset by the following individually significant items:•A 9% or $3.1 million and 16% or $6.8 million decrease in voice Cost of Goods Sold for 2013 and 2012, respectively, due to thecontinuing decrease in long distance and local service subscribers. The 2012 decrease is also due to Intrastate Access Reform whichwent into effect in July 2011 and eliminated the incumbent local exchange carrier's ability to bill long distance carriers for certainintrastate line chargesWireline Segment Adjusted EBITDAThe decrease in Adjusted EBITDA for 2013 is primarily due to an increase in Cost of Goods Sold as described above in "Wireline SegmentCost of Goods Sold" and selling, general and administrative expense partially offset by an increase in revenues as described above in"Wireline Segment Revenues." The increase in Adjusted EBITDA for 2012 is primarily due to an increase in revenues as described above in"Wireline Segment Revenues" partially offset by an increase in Cost of Goods Sold as described above in "Wireline Segment Cost of GoodsSold" and selling, general and administrative expense.Selling, General and Administrative ExpensesSelling, general and administrative expenses increased $27.8 million to $271.1 million for 2013 and $7.7 million to $243 million for2012. Individually significant items contributing to the increases include:•A $9.1 million and $4.2 million increase in labor costs for 2013 and 2012, respectively,•A $2.8 million increase in our company-wide success sharing bonus accrual for 2013,•A $2.3 million increase in contract labor related to non-capitalizable network projects for our ConnectMD® and SchoolAccess®customers for 2013,•A $2.5 million increase due to an increased usage of contract labor by our operating departments for 2013, and•$1.8 million and $2.9 million in transaction costs in 2013 and 2012, respectively, related to the AWN transaction.As a percentage of total revenues, selling, general and administrative expenses were 33%, 34%, and 35% of revenue for 2013, 2012, and2011, respectively.39Table of ContentsDepreciation and Amortization ExpenseDepreciation and amortization expense increased $16.8 million to $147.3 million and $4.5 million to $130.5 million in 2013 and 2012,respectively. The increases in 2013 and 2012 are primarily due to new assets placed in service in those years partially offset by assets whichbecame fully depreciated during those years. Additionally, we recorded $8.8 million of depreciation and amortization expense in 2013 for theassets acquired from ACS as part of the AWN transaction.Other Expense, NetOther expense, net of other income, increased $2.4 million to $70.2 million in 2013 and decreased $9.9 million to $67.7 million in 2012.The 2013 increase is primarily due to increased interest expense attributable to increased borrowing on our Amended Senior Credit Facility.The 2012 decrease is primarily due the absence of a $9.1 million loss on extinguishment of debt recognized in 2011.Income Tax ExpenseIncome tax expense totaled $11.0 million, $12.1 million, and $7.4 million in 2013, 2012, and 2011, respectively. Our effective income taxrate was 26%, 57%, and 57% in 2013, 2012, and 2011, respectively. Our effective income tax rate decreased in 2013 due to the inclusion ofincome attributable to the non-controlling interest in AWN in income before income tax expense.At December 31, 2013, we have income tax net operating loss carryforwards of $294.5 million that will begin expiring in 2020 if not utilized,and alternative minimum tax credit carryforwards of $1.9 million available to offset regular income taxes payable in future years.We have recorded deferred tax assets of $120.9 million associated with income tax net operating losses that were generated from 2000 to2013 and that expire from 2020 to 2033, respectively, and with charitable contributions that were converted to net operating losses in 2004through 2007, and that expire in 2024 through 2027, respectively.Tax benefits associated with recorded deferred tax assets are considered to be more likely than not realizable through future reversals ofexisting temporary differences and future taxable income exclusive of reversing temporary differences and carryforwards. The amount ofdeferred tax assets considered realizable, however, could be reduced if estimates of future taxable income during the carryforward period arereduced which would result in additional income tax expense. We estimate that our effective annual income tax rate for financial statementpurposes will be 23% to 28% in the year ending December 31, 2014.Liquidity and Capital ResourcesOur principal sources of current liquidity are cash and cash equivalents. We believe, but can provide no assurances, that we will be able tomeet our current and long-term liquidity, capital requirements and fixed charges through our cash flows from operating activities, existingcash, cash equivalents, credit facilities, and other external financing and equity sources. Should operating cash flows be insufficient tosupport additional borrowings and principal payments scheduled under our existing credit facilities, capital expenditures will likely bereduced, which would likely reduce future revenues.On April 30, 2013, GCI Holdings, Inc., a wholly owned subsidiary of GCI, entered into a Third Amended and Restated Credit and GuaranteeAgreement with Credit Agricole Corporate and Investment Bank, as administrative agent ("Amended Senior Credit Facility"). The AmendedSenior Credit Facility provides up to $240.0 million in delayed draw term loans and a $150.0 million revolving credit facility. The AmendedSenior Credit Facility replaced the Senior Credit Facility described in Note 6(c) of our December 31, 2012 annual report on Form 10-K. Theinterest rate under the Amended Senior Credit Facility is London Interbank Offered Rate (“LIBOR”) plus a margin dependent upon our TotalLeverage Ratio ranging from 2% to 3%. The Amended Senior Credit Facility will mature on April 30, 2018. The terms of the AmendedSenior Credit Facility include customary representations and warranties, customary affirmative and negative covenants and customaryevents of default. At any time after the occurrence of an event of default under the Amended Senior Credit Facility, the lenders may, amongother options, declare any amounts outstanding under the Amended Senior Credit Facility immediately due and payable and terminate anycommitment to make further loans under the Amended Senior Credit Facility. The obligations under the Amended Senior Credit Facility aresecured by a security interest on substantially all of the assets of GCI Holdings, Inc. and the subsidiary guarantors, and on the stock of GCIHoldings, Inc.40Table of ContentsAs discussed in the General Overview section of this Item 2, on July 22, 2013, we closed the AWN transaction. Under the terms of theWireless Agreement, we contributed our wireless network assets and certain rights to use capacity to AWN. Additionally, ACS contributed itswireless network assets and certain rights to use capacity to AWN. As consideration for the contributed assets and liabilities, ACS received$100.0 million in cash from GCI, a one-third ownership percentage in AWN and entitlements to receive preferential cash distributions totaling$190.0 million over the Preference Period contingent on the future cash flows of AWN. The preferential cash distribution is cumulative andmay be paid beyond the Preference Period until the entire $190.0 million is paid. We funded the purchase by borrowing $100.0 million underour Amended Senior Credit Facility on July 17, 2013. We have also agreed to provide AWN a $50.0 million working capital line of credit.We will manage AWN and receive a management fee of 4% of free cash flow as defined in the Wireless Agreement in the first two years ofoperations. The management fee will increase to 6% in the third and fourth years of the agreement and to 8% after the fourth year of theagreement. The management fee will be paid before distributions to the owners.On November 1, 2013, we closed the transactions under the asset purchase agreements, pursuant to which Denali Media Holdings, Corp.,a wholly owned subsidiary of GCI, through its wholly owned subsidiaries, Denali Media Anchorage, Corp. and Denali Media Southeast,Corp., agreed to purchase three Alaska broadcast stations for a total of $7.6 million.We have entered into several financing arrangements under the New Markets Tax Credit (“NMTC”) program which have provided a total of$32.3 million in net cash to help fund the extension of terrestrial broadband service for the first time to rural Northwestern Alaskacommunities via a high capacity hybrid fiber optic and microwave network. When completed, the project, called TERRA-NW, will connect toour TERRA-Southwest network and provide a high capacity backbone connection from the served communities to the Internet. We beganconstruction on TERRA-NW in 2012 and expect to complete all current phases of the project in 2014. We placed into service Phase 1 andPhase 2 of the TERRA-NW project on January 3, 2013 and November 5, 2013, respectively. The total net cash received under the NMTCprogram is recorded as restricted cash and included in Other Assets on our Consolidated Balance Sheets. We have used $29.3 million ofrestricted cash to fund cumulative TERRA-NW capital expenditures through December 31, 2013. We plan to fund an additional $10.0 millionto complete TERRA-NW.On February 28, 2014, the FCC announced our winning bids in the Tribal Mobility Fund I auction for a $41.4 million grant to partially fundexpansion of our 3G wireless network, or better, to locations in Alaska where we would not otherwise be able to construct within our return-on-investment requirements. We must file a long-form application with the FCC by April 4, 2014, which must be reviewed for final approval,before the award can be issued. While our short-term and long-term financing abilities are believed to be adequate as a supplement to internally generated cash flows to fundcapital expenditures and acquisitions as opportunities arise, turmoil in the global financial markets may negatively impact our ability tofurther access the capital markets in a timely manner and on attractive terms, which may have a negative impact on our ability to grow ourbusiness.We monitor the third-party depository institutions that hold our cash and cash equivalents. Our emphasis is primarily on safety of principaland secondarily on maximizing yield on those funds.Our net cash flows provided by and (used for) operating, investing and financing activities, as reflected in the Consolidated Statements ofCash Flows for 2013 and 2012, are summarized as follows (amounts in thousands): 2013 2012Operating activities$159,634 152,783Investing activities(266,351) (168,905)Financing activities127,197 11,226Net increase (decrease) in cash and cash equivalents$20,480 (4,896)41Table of ContentsOperating ActivitiesThe increase in cash flows provided by operating activities from 2012 to 2013 is due to an increase in net income that was partially offset byan increase in accounts receivable due to the timing of receipt of payments.Investing ActivitiesNet cash used in investing activities consists primarily of cash paid for capital expenditures and $100.0 million to purchase wireless networkassets from ACS as part of the close of the AWN transaction. Our most significant recurring investing activity has been capital expendituresand we expect that this will continue in the future. A significant portion of our capital expenditures is based on the level of customer growthand the technology being deployed.Our cash expenditures for property and equipment, including construction in progress, totaled $180.6 million and $146.0 million during2013 and 2012, respectively. Our capital expenditures increased in 2013 primarily due an increase in spending to expand ournetwork. Depending on available opportunities and the amount of cash flow we generate during 2014, we expect our 2014 expenditures tototal $170.0 million including core and non-core operations and excluding real estate acquisitions and an extension of satellite lease capacity.Financing ActivitiesNet cash provided by financing activities in 2013 consists primarily of proceeds from borrowing $100.0 million under the term loan portion ofour Amended Senior Credit Facility to fund the purchase of wireless network assets from ACS as part of the close of the AWN transaction andborrowings under the revolving portion of our Amended Senior Credit Facility. These proceeds were partially offset by repayments of RuralUtilities Service ("RUS") debt and repurchases of our common stock. Proceeds from borrowings fluctuate from year to year based on ourliquidity needs. We may use excess cash to make optional repayments on our debt or repurchase our common stock depending on variousfactors, such as market conditions.Available Borrowings Under Amended Senior Credit FacilityOur Amended Senior Credit Facility includes a $240.0 million term loan and a $150.0 million revolving credit facility with a $25.0 millionsublimit for letters of credit. We had $229.0 million outstanding under the term loan at December 31, 2013. Under the revolving portion ofthe Amended Senior Credit Facility we have borrowed $32.0 million and have $4.4 million of letters of credit outstanding, which leaves$124.6 million available for borrowing as of December 31, 2013. A total of $261.0 million is outstanding as of December 31, 2013.Debt CovenantsWe are subject to covenants and restrictions applicable to our $325.0 million in aggregate principal amount of 6 3/4% Senior Notes due 2021(“2021 Notes”), our $425.0 million in aggregate principal amount of 8.63% Senior Notes due 2019 ("2019 Notes), our Amended SeniorCredit Facility, and our RUS loans. We are in compliance with the covenants, and we believe that neither the covenants nor the restrictionsin our indentures or loan documents will limit our ability to operate our business.Share RepurchasesGCI’s Board of Directors has authorized a common stock buyback program for the repurchase of GCI Class A and Class B common stock inorder to reduce the outstanding shares of Class A and Class B common stock. Under this program, we are currently authorized to make upto $106.0 million of repurchases as of December 31, 2013. We are authorized to increase our repurchase limit $5.0 million per quarterindefinitely and to use stock option exercise proceeds to repurchase additional shares. If stock repurchases are less than the total approvedquarterly amount the difference may be carried forward and applied against future stock repurchases. During 2013 we repurchased 1.8million shares of GCI common stock under the stock buyback program at a cost of $15.6 million. The common stock buyback program isexpected to continue for an indefinite period dependent on leverage, liquidity, company performance, and market conditions and subject tocontinued oversight by GCI’s Board of Directors. The open market repurchases have and will continue to comply with the restrictions of SECRule 10b-18.42Table of ContentsSchedule of Certain Known Contractual ObligationsThe following table details future projected payments associated with certain known contractual obligations as of December 31, 2013(amounts in thousands): Payments Due by Period Total Less than 1 Year 1 to 3 Years 4 to 5 Years More Than 5YearsLong-term debt$1,050,425 2,836 3,101 264,287 780,201Interest on long-term debt427,701 67,359 134,591 129,337 96,414Capital lease obligations, including interest101,987 11,758 23,478 23,453 43,298Operating lease commitments204,293 37,163 58,994 42,116 66,020Purchase obligations37,604 37,604 — — —Total contractual obligations$1,822,010 156,720 220,164 459,193 985,933Long-term debt listed in the table above includes principal payments on our Amended Senior Credit Facility, 2019 and 2021 Notes and RUSdebt. Interest on the amount outstanding under our Amended Senior Credit Facility is based on variable rates. We used the current rate paidon our Amended Senior Credit Facility to estimate our future interest payments. Our 2019 Notes require semi-annual interest payments of$18.3 million through November 2019 and our 2021 Notes require semi-annual interest payments of $11.0 million through June 2021. OurRUS debt has fixed interest rates ranging from 2.4% to 4.5%. For a discussion of our 2019 and 2021 Notes, Amended Senior Credit Facilityand RUS debt see note 6 in the accompanying “Notes to Consolidated Financial Statements.”Capital lease obligations include our obligation to lease transponder capacity on Galaxy 18. For a discussion of our capital and operatingleases, see note 13 in the accompanying “Notes to Consolidated Financial Statements.” We amended our transponder capacity leaseagreement with Intelsat in October 2013 to lease additional transponder capacity on Intelsat's Galaxy 18 spacecraft. As a result, on January1, 2014 we expect to increase our existing capital lease asset and liability by $9.4 million.Purchase obligations include cancelable open purchase orders for goods and services for capital projects and normal operations totaling $37.6million which are not included in our Consolidated Balance Sheets at December 31, 2013, because the goods had not been received or theservices had not been performed at December 31, 2013.Off-Balance Sheet ArrangementsWe have not created, and are not party to, any special-purpose and off-balance sheet entities for the purpose of raising capital, incurring debtor operating parts of our business that are not consolidated into our financial statements. We do not have any arrangements or relationshipswith entities that are not consolidated into our financial statements that are reasonably likely to materially affect our liquidity or the availabilityof our capital resources.New Accounting StandardsThere were various updates recently issued which represented technical corrections to the accounting literature or application to specificindustries. None of the updates are expected to a have a material impact on our consolidated financial position, results of operations or cashflows.Critical Accounting Policies and EstimatesOur accounting and reporting policies comply with GAAP. The preparation of financial statements in conformity with GAAP requiresmanagement to make estimates and assumptions. Our financial position and results of operations can be affected by these estimates andassumptions, which are integral to understanding reported results. Critical accounting policies are those policies that management believesare the most important to the portrayal of our financial condition and results, and require management to make estimates that are difficult,subjective or complex. Most accounting policies are not considered by management to be critical accounting policies. Several factors areconsidered in determining whether or not a policy is critical in the preparation of financial statements. These factors include, among otherthings, whether the estimates are significant to the financial statements, the nature of the estimates, the ability to readily validate theestimates with other information including43Table of Contentsthird parties or available prices, and sensitivity of the estimates to changes in economic conditions and whether alternative accountingmethods may be utilized under GAAP. For all of these policies, management cautions that future events rarely develop exactly as forecast,and the best estimates routinely require adjustment. Management has discussed the development and the selection of critical accountingpolicies with our Audit Committee.Those policies and estimates considered to be critical for the year ended December 31, 2013 are described below.Revenue RecognitionThe accounting estimates related to revenues from the Remote high cost, rural health, and schools and libraries USF programs aredependent on various inputs including our estimate of the statewide support cap, our assessment of the impact of new FCC regulations,the potential outcome of FCC proceedings and the potential outcome of USAC contract reviews. Some of the inputs are subjective andbased on our judgment regarding the outcome of certain variables and are subject to upward or downward adjustment in subsequentperiods. Significant changes to our estimates could result in material changes to the revenues we have recorded and could have amaterial effect on our financial condition and results of operations.Allowance for Doubtful ReceivablesWe maintain allowances for doubtful receivables for estimated losses resulting from the inability of our customers to make requiredpayments. We also maintain an allowance for doubtful receivables based on notification that a customer may not have satisfactorilycomplied with rules necessary to obtain supplemental funding from USAC for services provided by us under our packagedcommunications offerings to rural hospitals, health clinics and school districts. We base our estimates on the aging of our accountsreceivable balances, financial health of specific customers, regional economic data, changes in our collections process, regulatoryrequirements, and our customers’ compliance with USAC rules. If the financial condition of our customers were to deteriorate or if theyare unable to emerge from reorganization proceedings, resulting in an impairment of their ability to make payments, additionalallowances may be required. If their financial condition improves, or they emerge successfully from reorganization proceedings,allowances may be reduced. Such allowance changes could have a material effect on our financial condition and results of operations.Impairment and Useful Lives of Intangible AssetsWe had $504.8 million of indefinite-lived intangible assets at December 31, 2013, consisting of cable certificates of $191.6 million,goodwill of $219.0 million, wireless licenses of $91.4 million, and broadcast licenses of $2.8 million. Our indefinite-lived intangibleassets are tested annually for impairment during the fourth quarter and at any time upon the occurrence of certain events or substantivechanges in circumstances that indicate the assets might be impaired.We are allowed to first assess qualitative factors (“Step Zero”) to determine whether it is more likely than not that goodwill is impaired,however, we chose to assess goodwill for impairment using the traditional quantitative two-step process. The first step of the quantitativegoodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carryingamount. To determine our reporting units, we evaluate the components one level below the segment level and we aggregate thecomponents if they have similar economic characteristics. As a result of this assessment, our reporting units are the same as our tworeportable segments. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment testcompares the implied fair value of the reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of thereporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to thatexcess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill that would be recognized in abusiness combination.We are allowed to perform a Step Zero analysis for our annual test over our indefinite-lived intangible assets other than goodwill.However, we chose to test for impairment using the traditional quantitative approach. The impairment test for identifiable indefinite-livedintangible assets other than goodwill consists of a comparison of the estimated fair value of the intangible asset with its carrying value. Ifthe carrying value of the intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.Our cable certificates are our largest indefinite-lived intangible asset other than goodwill and represent agreements with governmententities to construct and operate a video business. The value of our cable certificates is derived from the economic benefits we receivefrom the right to solicit new customers and to44Table of Contentsmarket new services. The amount we have recorded for cable certificates is from cable system acquisitions. The cable certificates arevalued under a direct discounted cash flow method whereby the cash flow associated with existing customers is isolated after appropriatecontributory asset charges and then projected based on an analysis of customer churn and attrition characteristics.Our wireless licenses are from the FCC and give us the right to provide wireless service within a certain geographical area. The amountwe have recorded is from acquisitions of wireless companies and auctions of wireless spectrum. We use comparable markettransactions from recent FCC auctions, as appropriate, and a hypothetical build-up method to value our wireless licenses.Our broadcast licenses are from the FCC and give us the right to broadcast television stations within a certain geographical area. Theamount we have recorded is from acquisitions of television stations. We did not perform an impairment test on our broadcast licensesduring 2013 since we acquired them in November 2013 when we acquired the television stations pursuant to the Media Agreement.Goodwill represents the excess of cost over fair value of net assets acquired in connection with a business acquisition. We use anincome approach to determine the fair value of our reporting units for purposes of our goodwill impairment test. In addition, a market-based approach is used where possible to corroborate the fair values determined by the income approach.The direct discounted cash flow, hypothetical build-up, and income approach valuation methods require us to make estimates andassumptions including projected cash flows, discount rate, customer churn, and customer behaviors and attrition. These estimates andassumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such impairmentcharge. Fair value estimates are made at a specific point in time, based on relevant information. These estimates are subjective innature and involve uncertainties and matters of significant judgment and therefore cannot be determined with precision. Changes inassumptions could significantly affect the estimates. Events and factors that may be out of our control that could affect the estimatesinclude such things as competitive forces, customer behaviors, change in revenue growth trends, cost structures and technology, andchanges in discount rates, performance compared to peers, material and ongoing negative economic trends, and specific industry ormarket sector conditions. We may also record impairments in the future if there are changes in long term market conditions, expectedfuture operating results, or laws and regulations that may prevent us from recovering the carrying value of our goodwill, cable certificates,and wireless licenses.We have allocated all of the goodwill to our reporting units and based on our annual impairment test as of October 31, 2013, the fairvalue of each reporting unit exceeded the book value by a range between 9% and 34%. The reporting unit that exceeded the book valueby 9% passed the goodwill impairment test by $78.1 million, which we believe is a large margin. We believe none of our reporting unitswere close to failing step one of the goodwill impairment test.Based on our annual impairment test as of October 31, 2013, the fair value of our cable certificates exceeded the book value by 43% and$82.9 million, which we believe is a large margin. The fair value of our wireless licenses exceeded the book value by 25% and $22.6million as of October 31, 2013, which we believe is a large margin. Valuation Allowance for Net Operating Loss Deferred Tax AssetsOur income tax policy provides for deferred income taxes to show the effect of temporary differences between the recognition of revenueand expenses for financial and income tax reporting purposes and between the tax basis of assets and liabilities and their reportedamounts in the financial statements. We have recorded deferred tax assets of $120.9 million associated with income tax net operatinglosses that were generated from 2000 to 2013, and that primarily expire from 2020 to 2033, and with charitable contributions that wereconverted to net operating losses in 2004 to 2007, and that expire in 2024 to 2027, respectively. We have recorded deferred tax assets of$1.9 million associated with alternative minimum tax credits that do not expire. Significant management judgment is required indeveloping our provision for income taxes, including the determination of deferred tax assets and liabilities and any valuation allowancesthat may be required against the deferred tax assets. We have not recorded a valuation allowance on the deferred tax assets as ofDecember 31, 2013, based on management’s belief that future reversals of existing temporary differences and estimated future taxableincome exclusive of reversing temporary differences and carryforwards will, more likely45Table of Contentsthan not, be sufficient to realize the benefit of these assets over time. In the event that actual results differ from these estimates or if ourhistorical trends change, we may be required to record a valuation allowance on deferred tax assets, which could have a material adverseeffect on our consolidated financial position or results of operations.Other significant accounting policies, not involving the same level of measurement uncertainties as those discussed above, are neverthelessimportant to an understanding of the financial statements. A complete discussion of our significant accounting policies can be found in note 1in the accompanying “Notes to Consolidated Financial Statements.”Regulatory DevelopmentsSee “Part I — Item 1 — Business — Regulation” for more information about regulatory developments affecting us.InflationWe do not believe that inflation has a significant effect on our operations.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are exposed to various types of market risk in the normal course of business, including the impact of interest rate changes. OurAmended Senior Credit Facility carries interest rate risk. Amounts borrowed under our Amended Senior Credit Facility bear interest atLIBOR plus 2.75% or less depending upon our Total Leverage Ratio (as defined in the Amended Senior Credit Facility). Should the LIBORrate change, our interest expense will increase or decrease accordingly. As of December 31, 2013, we have borrowed $261.0 million subjectto interest rate risk. On this amount, each 1% increase in the LIBOR interest rate would result in $2.6 million of additional gross interestcost on an annualized basis. All of our other material borrowings have a fixed interest rate. We do not hold derivatives.Item 8. Consolidated Financial Statements and Supplementary DataOur consolidated financial statements are filed under this Item, beginning on page 81. Our supplementary data is filed under Item 7,beginning on page 31.Item 9. Changes In and Disagreements With Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed by us in reports that wefile or submit under the Securities Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized, accumulated andcommunicated to our management, including our principal executive and financial officers, to allow timely decisions regarding requiredfinancial disclosure, and reported as specified in the SEC’s rules and forms. As of the end of the period covered by this Annual Report onForm 10-K, we carried out an evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (asdefined in Exchange Act Rule 13a - 15(e)) under the supervision and with the participation of our management, including our Chief ExecutiveOfficer and our Chief Financial Officer. Based on that evaluation and as described below under “Management’s Report on Internal ControlOver Financial Reporting," our management, including our Chief Executive Officer and our Chief Financial Officer, concluded that ourdisclosure controls and procedures were effective as of December 31, 2013.The certifications attached as Exhibits 31 and 32 to this report should be read in conjunction with the disclosures set forth herein.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is definedin Exchange Act Rule 13a-15(f). Under the supervision and with the participation of our management, including our Chief Executive Officerand our Chief Financial Officer, we conducted an evaluation of46Table of Contentsthe effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework issuedby the Committee of Sponsoring Organizations (COSO) in 1992.On July 22, 2013, we closed the transactions under the Wireless Agreement entered into on June 4, 2012, pursuant to which the partiesagreed to contribute the respective wireless network assets of GCI, ACS and their affiliates to AWN. We have excluded from our assessmentof the effectiveness of our internal control over financial reporting as of December 31, 2013, AWN's internal control over financial reportingassociated with net revenue of $13.8 million included in our consolidated financial statements as of and for the year ended December 31,2013. Based on our evaluation of the effectiveness of our internal control over financial reporting, our management concluded that as of December31, 2013, we maintained effective internal control over financial reporting.Grant Thornton LLP, our independent registered public accounting firm, has issued an audit report on our internal control over financialreporting as of December 31, 2013, which is included in Item 8 of this Form 10-K.Changes in Internal Control Over Financial ReportingDuring the quarter ended December 31, 2013, we implemented internal controls over financial reporting related to revenue recognition fromACS's retail subscribers. There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) identified in connection with the evaluation of our controls performed during the quarter ended December 31, 2013,that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with GAAP. A company's internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactionsare recorded as necessary to permit preparation of financial statements in accordance with GAAP, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonableassurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have amaterial effect on the financial statements.Internal control over financial reporting has inherent limitations. Internal control over financial reporting is a process that involves humandiligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financialreporting also can be circumvented by collusion or improper management override. Because of such limitations, there is a risk that materialmisstatements will not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherentlimitations are known features of the financial reporting process. Therefore, it is possible to design into the process safeguards to reduce,though not eliminate, this risk.We may enhance, modify, and supplement internal controls and disclosure controls and procedures based on experience.Item 9B. Other InformationNone.47Table of ContentsPart IIIItem 10. Directors, Executive Officers and Corporate GovernanceIdentificationAs of December 31, 2013, our board consisted of nine director positions, divided into three classes of directors serving staggered three-yearterms.A director on our board is elected at an annual meeting of shareholders and serves until the earlier of his or her resignation or removal, or hisor her successor is elected and qualified. Our executive officers generally are appointed at our board's meeting immediately preceding eachannual meeting of shareholders and serve at the discretion of the board.The following table sets forth certain information about our directors and executive officers as of December 31, 2013:NameAgePositionStephen M. Brett173Chairman, DirectorRonald A. Duncan161President, Chief Executive Officer and DirectorJohn M. Lowber64Senior Vice President, Chief Financial Officer, and Treasurer retired effective January 1, 2014Peter J. Pounds40Senior Vice President, Chief Financial Officer, and Secretary effective January 1, 2014G. Wilson Hughes68The Alaska Wireless Network Chief Executive OfficerWilliam C. Behnke56Senior Vice PresidentMartin E. Cary49Vice President – General Manager, Managed Broadband ServicesGregory F. Chapados56Executive Vice President and Chief Operating OfficerPaul E. Landes55Senior Vice President and General Manager, Consumer ServicesGregory W. Pearce50Vice President and General Manager, Business ServicesTina M. Pidgeon45Senior Vice President, General Counsel and Government AffairsBridget L. Baker153DirectorJerry A. Edgerton171DirectorScott M. Fisher147DirectorWilliam P. Glasgow155DirectorMark W. Kroloff156DirectorStephen R. Mooney154DirectorJames M. Schneider161Director1The present classification of our board is as follows: (1) Class I – Messrs. Edgerton and Kroloff and Ms. Baker, whose present terms expire at thetime of our 2014 annual meeting; (2) Class II – Messrs. Brett, Duncan and Mooney whose present terms expire at the time of our 2015 annualmeeting; and (3) Class III – Messrs. Fisher, Glasgow, and Schneider, whose present terms expire at the time of our 2016 annual meeting. The board, when considering whether directors have the experience, qualifications, attributes or skills, taken as a whole, to enable the boardto satisfy its oversight responsibilities effectively in light of the Company's business and structure, focused primarily on each person'sbackground and experience. We believe that the Company's directors have backgrounds that, when combined, provide us with a boardequipped to direct us through an ever challenging course in the segments of the telecommunication business in which we areinvolved. Attributes of members of our board include experience in entrepreneurial, cable service, telecommunication, technological andfinancial aspects of companies similar to, as well as much larger than, us.48Table of ContentsIn particular, our board considered important the following regarding its members. With regard to Mr. Brett, our board considered histelecommunications and cable experience, as well as his over 40 year experience as a corporate lawyer. With regard to Ms. Baker, our boardconsidered her experience with broadcast and cable networks. With regards to Messrs. Fisher and Glasgow, our board considered the broadbackgrounds of these individuals in finance and their operational experience with cable companies. With regards to Messrs. Edgerton andMooney, our board considered the extensive experience and expertise of these individuals in business development in thetelecommunications industry. Our board also considered the broad perspective brought by Mr. Kroloff's experience in operating diversebusinesses throughout Alaska as well as his experience as a lawyer. With regard to Mr. Schneider, our board considered his significantfinancial and accounting experience including his time spent as Chief Financial Officer of a large public company.Our board also considered the many years of experience with the Company represented by Mr. Duncan, our President and Chief ExecutiveOfficer. He has been with the Company since he co-founded it.Many of our directors, including Messrs. Edgerton, Glasgow, Kroloff, Mooney and Schneider, were initially proposed for nomination by (or, inthe case of Mr. Kroloff, through a request from Mr. Duncan to) holders of significant amounts of Company shares. Our board has retainedeach of these directors, even after the shareholders have exited the Company or no longer have retained a right to nominate a director, due tothe valued expertise our board feels they provide as members.Stephen M. Brett. Mr. Brett has served as Chairman of our board since June 2005 and as a director on our board since January 2001. Hehas been of counsel to Sherman & Howard, L.L.C., a law firm, since January 2001. He was Senior Executive Vice President for AT&TBroadband from March 1999 to April 2000. His present term as a director on our board expires at the time of our 2015 annual meeting.Ronald A. Duncan. Mr. Duncan is a co-founder of the Company and has served as a director on our board since 1979. Mr. Duncan hasserved as our President and Chief Executive Officer since January 1989. His present term as director on the board expires at the time of our2015 annual meeting.John M. Lowber. Mr. Lowber served as our Chief Financial Officer since January 1987, as our Secretary and Treasurer since July 1988and as one of our Senior Vice Presidents since December 1989. Mr. Lowber retired from the Company effective as of January 1, 2014.Peter J. Pounds. Mr. Pounds became our Chief Financial Officer and one of our Senior Vice Presidents effective January 1, 2014. Prior tothat he served as Vice President, Finance since 2009. Prior to that, he served as Senior Financial Analyst.G. Wilson Hughes. Mr. Hughes has served as the Chief Executive Officer of The Alaska Wireless Network, LLC since July 22, 2013. Priorto that he served as Executive Vice President – Wireless from June 4, 2012 to July 22, 2013. Prior to that, he served as Executive VicePresident and General Manager from June 1991 to June 4, 2012.William C. Behnke. Mr. Behnke has served as one of our Senior Vice Presidents since January 2001.Martin E. Cary. Mr. Cary has served as our Vice President – General Manager, Managed Broadband Services since September 2004.Gregory F. Chapados. Mr. Chapados has served as our Executive Vice President and Chief Operating Officer since June 2012. Prior tothat, he served as one of our Senior Vice Presidents from June 2006 to June 2012.Paul E. Landes. Mr. Landes has served as one of our Senior Vice Presidents and as General Manager, Consumer Services sinceDecember 2010. Prior to that, he served as our Vice President and General Manager, Consumer Services from September 2005 toDecember 2010.Gregory W. Pearce. Mr. Pearce has served as our Vice President and General Manager, Business Services since June 2010. Prior to that,he served as our Vice President and General Manager, Commercial Services beginning in September 2005.49Table of ContentsTina M. Pidgeon. Ms. Pidgeon has served as our Senior Vice President, General Counsel and Government Affairs, since September2010. Prior to that, she served as our Vice President, Federal Regulatory Affairs from January 2003 to September 2010.Bridget L. Baker. Ms. Baker has served as a director on our board since July 2013. Since January 2013, she has been a Principal of BakerMedia, Inc., an entertainment and media consulting firm that she founded. From 2006 to 2012, she was NBCUniversal's President of TVNetworks where she oversaw the North American distribution of NBCUniversal's content across the cable, satellite, andtelecommunications industry. Her present term as a director on our board expires at the time of our 2014 annual meeting.Jerry A. Edgerton. Mr. Edgerton has served as a director on our board since June 2004. Since January 2013, he has been ChiefExecutive Officer of Cumulus Solutions, Inc., a provider of visual collaboration tools. From September 2011 to December 2012, he wasPresident of Global Services for iNETWORKS Group, Inc., a comprehensive telecommunications solutions provider. From July 2009 toAugust 2011, he was President of Government Markets for Core 180, a network integrator for large governmental and commercialcustomers. From November 2007 to May 2009, he was Chief Executive Officer for Command Information, Inc., a next generation Internetservice company. From April 2007 to October 2007, Mr. Edgerton was an advisor on matters affecting the telecommunications industry aswell as the U.S. government. Prior to that and from January 2006 to April 2007, he was Group President of Verizon Federal. Prior to thatand from November 1996, he was Senior Vice President – Government Markets for MCI Communications Corporation, an affiliate of MCI,which was later acquired by Verizon Communications, Inc. His present term as a director on our board expires at the time of our 2014annual meeting.Scott M. Fisher. Mr. Fisher has served on our board since December 2005. From 1998 to the present, he has been a partner of FisherCapital Partners, Ltd., a private equity and real estate investment company located in Denver, Colorado. During that time, Fisher Capitalowned and operated Peak Cablevision, a multiple system cable television operator with approximately 120,000 subscribers. At PeakCablevision, Mr. Fisher was responsible for television programming and corporate development. From June 1990 to April 1998, he wasVice President at The Bank of New York and BNY Capital Resources Corporation, an affiliate of The Bank of New York, where he worked inthe corporate lending and commercial leasing departments. Mr. Fisher serves on the advisory boards of several private companies. Hispresent term as director on our board expires at the time of our 2016 annual meeting.William P. Glasgow. Mr. Glasgow has served as a director on our board since 1996. From 2005 to the present, Mr. Glasgow has beenChief Executive Officer of AmericanWay Education. From 1999 to December 2004, he was President/CEO of Security BroadbandCorp. From 2000 to the present Mr. Glasgow has been President of Diamond Ventures, L.L.C., a Texas limited liability company and solegeneral partner of Prime II Management, L.P., and Prime II Investments, L.P., both of which are Delaware limited partnerships. Since 1996,he has been President of Prime II Management, Inc., a Delaware corporation, which was formerly the sole general partner of Prime IIManagement, L.P. His present term as a director on our board expires at the time of our 2016 annual meeting.Mark W. Kroloff. Mr. Kroloff has served as a director on our board since February 2009. Since January 2010, he has been a principal atFirst Alaskan Capital Partners, LLC, an investment firm. From May 2005 to December 2009, he was Senior Executive Vice President andChief Operating Officer of Arctic Slope Regional Corporation ("ASRC"), an Alaska Native regional corporation formed pursuant to the AlaskaNative Claims Settlement Act. From 2001 to April 2005, Mr. Kroloff was Chief Operating Officer of Cook Inlet Region, Inc., also an AlaskaNative regional corporation. Prior to that, from 1989 to 2001 he was Vice President and General Counsel of Cook Inlet Region, Inc. He alsoserves on the board of managers for Trilogy International Partners, LLC. Mr. Kroloff's present term as a director on our board expires at thetime of our 2014 annual meeting.Stephen R. Mooney. Mr. Mooney has served as a director on our board since January 1999. He has been a Partner at ChessiecapSecurities, Inc., an investment bank specializing in technology and telecommunications services based in Maryland since 2012. From April2010 to 2012, Mr. Mooney was a Managing Director with the McClean Group, LLC, a national financial advisory services firm. FromFebruary 2008 to November 2009, Mr. Mooney was Vice President, Business Development for Affiliated Computer Services, Inc., a globalinformation technology and business process outsourcing company. From January 2006 to September 2007, he was Executive Director,Business Development of VerizonBusiness, a unit of Verizon. Prior to that, he was Vice President, Corporate Development and TreasuryServices at MCI beginning in 2002. From 1999 to 2002, he was Vice President of WorldCom Ventures Fund, Inc. His present term as adirector on our board expires at the time of our 2015 annual meeting.50Table of ContentsJames M. Schneider. Mr. Schneider has served as a director on our board since July 1994. He has been Chairman of FrontierBancshares, Inc. since February 2007. Prior to that, Mr. Schneider had been Senior Vice President and Chief Financial Officer for Dell, Inc.from March 2000 to February 2007. Prior to that, he was Senior Vice President – Finance for Dell Computer Corporation from September1998 to March 2000. He served on the board of directors of GAP, Inc. from September 2003 to October 2010. Mr. Schneider also served onthe board of directors of Lockheed Martin Corporation from December 2005 to August 2010. His present term as a director on our boardexpires at the time of our 2016 annual meeting.Section 16(a) Beneficial Ownership Reporting ComplianceDuring 2013, one of our executive officers (Mr. Chapados) inadvertently failed to file a Form 4 with the SEC that was due on February 4,2013, however the filing was made on February 12, 2013. Another executive officer (Mr. Hughes) inadvertently failed to file a Form 4 with theSEC that was due on January 18, 2013, however the filing was made on January 29, 2013. Additionally, Ms. Pidgeon, an executive officer,inadvertently failed to file Forms 4 with the SEC that were due on March 12, 2013 and April 1, 2013, however, both filings were made byMarch 18, 2013 and April 2, 2013, respectively. Ms. Pidgeon also failed to file a Form 4 with the SEC that was due on April 12, 2013,however, the filing was made on August 9, 2013. Mr. Landes, an executive officer, inadvertently failed to file a Form 4 with the SEC that wasdue on December 13, 2013, however the filing was made on March 5, 2014.Code of Business Conduct and EthicsOur current Code of Business Conduct and Ethics ("Ethics Code"), was adopted by our board in 2013. It applies to all of our officers,directors and employees. The Ethics Code takes as its basis a set of business principles adopted by our board several years ago. It alsobuilds upon the basic requirements for a code of ethics as required by federal securities law and rules adopted by the SEC.Through our Ethics Code, we reaffirm our course of business conduct and ethics as based upon key values and characteristics and throughadherence to a clear code of ethical conduct. Our Ethics Code promotes honest and ethical conduct, including ethical handling of actual orapparent conflicts of interest between personal and professional relationships of our employees. It also promotes full, fair, accurate, timelyand understandable disclosure in our reports and documents filed with, or submitted to, the SEC and other public communications made byus. Our Ethics Code further promotes compliance with applicable governmental laws, rules and regulations, internal reporting of violationsof the code to appropriate persons as identified in the code and accountability for adherence to the code.A copy of our Ethics Code is displayed on our Internet website at www.gci.com. Except for the Ethics Code, and any other documentsspecifically incorporated herein, no information contained on the Company’s website shall be incorporated by reference in this Form 10-K.No Change in Nominating ProcedureThere were no changes made during 2013 to the procedure by which our shareholders may recommend nominees to our board.Litigation and Regulatory MattersWe were, as of December 31, 2013, involved in several administrative and civil action matters primarily related to our telecommunicationsmarkets in Alaska and the remaining 49 states and other regulatory matters. These actions are discussed in more detail elsewhere in thisreport. See "Part I – Item 3 – Legal Proceedings." However, as of that date, our board was unaware of any legal proceedings in which one ormore of our directors, officers, affiliates or owners of record or beneficially of more than 5% of any class of our voting securities, or anyassociates of the previously listed persons were parties adverse to us or any of our subsidiaries. Furthermore, as of that date, our board wasunaware of any events occurring during the past 10 years materially adverse to an evaluation of the ability or integrity of any director, personnominated to become a director or executive officer of the Company.In December 2010, Mr. Schneider settled charges brought against him by the SEC for actions that allegedly took place when he was the chieffinancial officer at Dell, Inc. Mr. Schneider is no longer employed by Dell, Inc. He51Table of Contentssettled the charges and consented to the issuance of an SEC administrative order without admitting or denying the SEC's findings, withlimited exceptions. The limited exceptions are acknowledgment of the SEC's jurisdiction over Mr. Schneider and the subject matter of theSEC proceedings brought against him, and the SEC findings with respect to litigation involving that company and certain of its seniorexecutive officers including Mr. Schneider. The court in that litigation entered an order permanently enjoining Mr. Schneider, by consent,from future violations of specified provisions of federal securities law. Mr. Schneider agreed to pay, as specified in the court's order, $3 millionas a civil money penalty and $83,096 in disgorgement of ill-gotten gains, as well as $38,640 in prejudgment interest. In the settlement withthe SEC, Mr. Schneider has further consented to his suspension from appearing or practicing before the SEC as an accountant for at leastfive years, after which time he may request reinstatement by application to the SEC. As of December 31, 2013, Mr. Schneider was makingpayments in accordance with the terms of the court order.Audit Committee, Audit Committee Financial ExpertWe have a board audit committee ("Audit Committee") comprised of several members of our board, i.e., Messrs. Mooney (Chair), Fisher,and Glasgow.Our Audit Committee is governed by, and carries out its responsibilities under, an Audit Committee Charter, as adopted and amended fromtime to time by our board ("Audit Committee Charter"). The charter sets forth the purpose of the Audit Committee and its membershipprerequisites and operating principles. It also requires our Audit Committee to select our independent, registered, public accounting firm toprovide for us accounting and audit services ("External Accountant") and sets forth other primary responsibilities. A copy of our AuditCommittee Charter is available to our shareholders on our Internet website: www.gci.com.The Nasdaq corporate governance listing standards require that at least one member of our Audit Committee must have past employmentexperience in finance or accounting, requisite professional certification in accounting, or comparable experience or background which resultsin the individual's "financial sophistication." This financial sophistication may derive from the person being or having been a chief executiveofficer, chief financial officer or other senior officer with financial oversight responsibilities.Our board believes that Messrs. Fisher, Glasgow and Mooney, are audit committee financial experts ("Audit Committee Financial Experts")and also meet the Nasdaq requirements for financial sophistication. Our board further believes that Messrs. Fisher, Glasgow and Mooneyare each an independent director as the term is defined in the Nasdaq Stock Market corporate listing standards (to which the Company issubject), i.e., an individual other than one of our executive officers or employees or any other individual having a relationship which in theopinion of our board would interfere in carrying out the responsibilities of a director ("Independent Director") and are independent as definedby Rule 10A-3(b)(1) under the Exchange Act.Under the SEC's rules, an Audit Committee Financial Expert is defined as a person who has all of the following attributes:•Understanding of GAAP and financial statements.•Ability to assess the general application of GAAP in connection with accounting for estimates, accruals and reserves.•Experience in preparing, auditing, analyzing or evaluating financial statements that present a breadth and level ofcomplexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonablybe expected to be raised by our financial statements, or experience actively supervising one or more persons engaged insuch activities.•Understanding of internal control over financial reporting.•Understanding of audit committee functions.52Table of ContentsThe Audit Committee Charter specifies how one may determine whether a person has acquired the attributes of an Audit CommitteeFinancial Expert. They are one or more of the following:•Education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditoror experience in one or more positions that involved the performance of similar functions.•Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant,auditor or person performing similar functions.•Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation,auditing or evaluation of financial statements.•Other relevant experience.Our Audit Committee acts on behalf of our board and generally carries out specific duties including the following, all of which are described indetail in our Audit Committee Charter:•Principal Accountant Selection, Qualification – Is directly responsible for appointment, compensation, retention,oversight, qualifications and independence of our External Accountant.•Financial Statements – Assists in our board's oversight of integrity of the Company financial statements.•Financial Reports, Internal Control – Is directly responsible for oversight of the audit by our External Accountant of ourfinancial reports and reports on internal control.•Annual Reports – Prepares reports required to be included in our annual proxy statement.•Complaints – Receives and responds to certain complaints relating to internal accounting controls, and auditing matters,confidential, anonymous submissions by our employees regarding questionable accounting or auditing matters, andcertain alleged illegal acts or behavior-related conduct in violation of our Ethics Code. See "Part III – Item 10 – Code ofBusiness Conduct and Ethics."•Principal Accountant Disagreements – Resolves disagreements, if any, between our External Accountant and usregarding financial reporting.•Non-Audit Services – Reviews and pre-approves any non-audit services (audit-related, tax and other non-audit relatedservices) offered to us by our External Accountant ("Non-Audit Services").•Attorney Reports – Addresses certain attorney reports, if any, relating to violation of securities law or fiduciary duty byone of our officers, directors, employees or agents.•Related Party Transactions – Reviews certain related party transactions as described elsewhere in this report. See"Part III – Item 13 – Certain Transactions."•Other – Carries out other assignments as designated by our board.Item 11. Executive CompensationCompensation Discussion and AnalysisOverview –Compensation of our executive officers and directors during 2013 was subject to processes and procedures carried out through ourCompensation Committee ("Compensation Program"). This compensation discussion and analysis ("Compensation Discussion andAnalysis") addresses the material elements of our Compensation Program as applied to our Chief Executive Officer, our Chief FinancialOfficer, and to each of our three other most highly compensated executive officers other than the Chief Executive Officer and Chief FinancialOfficer who were serving53Table of Contentsas executive officers as of December 31, 2013. All five of these officers are identified in the Summary Compensation Table ("NamedExecutive Officers"). See "Part III – Item 11 – Executive Compensation: Summary Compensation Table."Both the Compensation Committee and the Company believe that the compensation paid to the Named Executive Officers under ourCompensation Program is fair, reasonable, competitive and consistent with our Compensation Principles. See "Part III – Item 11 –Compensation Discussion and Analysis: Principles of the Compensation Program."Our Compensation Committee is composed of Messrs. Brett, Edgerton (Chair), Mooney, and Schneider. All of the members of thecommittee are considered by our board to be Independent Directors.Our board adopted a charter for the Compensation Committee during 2013. The charter of the Compensation Committee guides decisionsregarding our Compensation Program, the aspects of which are described elsewhere in this report. See "Part III – Item 11 – CompensationDiscussion and Analysis: Process."Our Charter of the Compensation Committee sets forth the scope of authority of our Compensation Committee and requires the committeeto carry out the following:•Review, on an annual basis, plans and targets for executive officer and board member compensation, if any –◦Review is specifically to address expected performance and compensation of, and the criteria on which compensation isbased for, the Chief Executive Officer and such other of our executive officers as our board may designate for this purpose.•Monitor the effect of ongoing events on, and the effectiveness of, existing compensation policies, goals, and plans –◦Events specifically include but are not limited to the status of the premise that all pay systems correlate with ourcompensation goals and policies.◦Report from time to time, its findings to our board.•Administer our Amended and Restated 1986 Stock Option Plan ("Stock Option Plan") and approve grants of options and awardspursuant to the plan.•Strive to make our compensation plans fair and structured so as to maximize shareholder value.In carrying out its duties, our Compensation Committee may accept for review and inclusion in its annual review with our board,recommendations from our Chief Executive Officer as to expected performance and compensation of, and the criteria on whichcompensation is based for, executive officers. See "Part III – Item 11 – Compensation Discussion and Analysis: Process."Principles of the Compensation Program –Our Compensation Program is based upon the following principles ("Compensation Principles"):•Compensation is related to performance and must cause alignment of interests of executive officers with the long term interests ofour shareholders.•Compensation targets must take into consideration competitive market conditions and provide incentives for superior performanceby the Company.•Actual compensation must take into consideration the Company's and the executive officer's performance over the prior year and thelong term, and the Company's resources.•Compensation is based upon both qualitative and quantitative factors.•Compensation must enable the Company to attract and retain management necessary to cause the Company to succeed.54Table of ContentsProcess –Overview. Our Compensation Committee reviews and approves the base salary, incentive and other compensation of our Chief ExecutiveOfficer and senior executive officers, including the Named Executive Officers. The analyses and recommendations of the Chief ExecutiveOfficer on these matters may be considered by our Compensation Committee in its deliberations and approvals.Other elements of executive compensation and benefits as described in this section are also reviewed by our Compensation Committee on aregular basis.Implementation. Discussions on executive compensation and benefits made by the Compensation Committee have been guided by ourCompensation Principles. The elements of compensation as described later in this section are believed by the Compensation Committee tobe integral and necessary parts of the Compensation Program.Our Compensation Committee has concluded that each individual segment of each element of executive compensation continues generallyto be consistent with one or more of our Compensation Principles. Our Compensation Committee has further concluded the amount ofcompensation provided by the segment is reasonable, primarily based upon a comparison of the compensation amounts and segments weprovide when compared to those offered by other similar companies in our industry and in our market.Our process for determining executive compensation and benefits does not involve a precise and identifiable formula or link between eachelement and our Compensation Principles. However, it takes into consideration market practice and information provided by ourmanagement. Furthermore, it is based upon the relationship of compensation as shall be paid and financial performance of the Company. Itis also the result of discussion among our Compensation Committee members and management. Ultimately it is based upon the judgmentof our Compensation Committee.Each year our Compensation Committee reviews elements of compensation for each of our senior executive officers including, for 2013, theNamed Executive Officers.In 2010, base salary and incentive stock targets were compared to survey data and amounts offered by a group of similar companies. TheCompany's relative financial performance was reviewed in order to determine what a reasonable amount of compensation might be inrelation to its peer group. The compensation peer group is principally made up of the following:•Companies in industries similar to our Company.•Companies with which our Company competes for executive talent.•Our Company's direct business competitors.•Companies that compete with our Company for investment dollars.The compensation peer group list used in determining the reasonableness of our Compensation Program consisted of 16 companies asfollows:Alaska Communications Systems Group, Inc.Knology, Inc.C Beyond, Inc.Mediacom Communications Corp.Cincinnati Bell, Inc.Premiere Global Services, Inc.Consolidated Communications Holdings, Inc.RCN CorpCrown Media Holdings, Inc.SureWest CommunicationsEquinix, Inc.Time Warner Telecom, Inc.Grande CommunicationsWave BroadbandIowa Telecommunications Services, Inc.XO Holdings, Inc.55Table of ContentsIndividual levels of base compensation were generally targeted to be set within a range of between the 50th and 75th percentile, based uponthe executive's individual performance in the prior year relative to his or her peers, the executive's future potential, and the scope of theexecutive's responsibilities and experience. Input from the individual executives in terms of their expectation and requirements wereconsidered as well.We believe this method of setting compensation enables the Company to attract and retain individuals who are necessary to lead andmanage the Company while enabling the Company to differentiate between executives and performance levels and responsibility. Thecomparison to other companies also allowed the Compensation Committee to determine the reasonableness of the balance between long-term incentive and annual compensation.The Compensation Committee determined that, in general, base compensation levels for the Company's senior officers were reasonableand within the 50th and 75th percentile when compared to officers of companies in our peer group having comparable financial performancewhen it completed its review in 2010.Based on its review in 2010, the Compensation Committee established a four year compensation plan that ended in 2013. During 2013, theCompensation Committee analyzed such things as the economy and the business environment in which the Company operates todetermine if any modifications were needed to the four year compensation plan established during 2010. Based on its review, theCompensation Committee concluded that that the salaries and incentive compensation established in 2010 were still appropriate for thesenior executive officers with a few exceptions. See “Part III – Item 11 – Compensation Discussion and Analysis: Performance Rewarded.”The Compensation Committee believes the framework established in 2010 continues to provide an effective framework upon which theCompensation Program is based. The Compensation Committee has modified the Compensation Program at its discretion to continue itseffectiveness for motivating the senior executive officers and aligning their interests with the long term interests of our shareholders andbelieves it is appropriate for the next three years.Elements of Compensation –Overview. For 2013, the elements of compensation in our Compensation Program were as follows:•Base Salary.•Incentive Compensation Bonus Plan ("Incentive Compensation Plan").•Stock Option Plan.•Perquisites.•Retirement and Welfare Benefits.As of December 31, 2013, there were no compensatory plans or arrangements providing for payments to any of the Named ExecutiveOfficers in conjunction with any termination of employment or other working relationship of such an officer with us (including withoutlimitation, resignation, severance, retirement or constructive termination of employment of the officer). Furthermore, as of that date, therewere no such plans or arrangements providing for payments to any of the Named Executive Officers in conjunction with a change of controlof us or a change in such an officer's responsibilities to us. However, in the event of a change in control, all options and restricted stock of ourNamed Executive Officers will vest. See "Part III – Item 11 – Executive Compensation: Potential Payments upon Termination or Change-in-Control."The Company has no requirements with respect to security ownership by its officers or directors, and it has no policies regarding hedging theeconomic risk of ownership of Company equity. Executive officers are invited to provide their input with respect to their compensation to theCompensation Committee primarily through our Chief Executive Officer.A Named Executive Officer participating in the Compensation Program could, under terms of the corresponding Incentive CompensationPlan agreement with us and pursuant to our Deferred Compensation Plan, elect to defer a significant portion of that compensation. In thisinstance, the Named Executive Officer becomes our unsecured creditor. See "Part III – Item 11 – Nonqualified Deferred Compensation."56Table of ContentsBase Salary. Effective January 1, 2013, based upon the process previously described in this section, the base salaries reported in theSummary Compensation Table (see "Part III – Item 11 – Executive Compensation: Summary Compensation Table") were approved by theCompensation Committee.Mr. Duncan's base salary reflects cash compensation of $840,000 per year until adjusted by our Compensation Committee. Mr. Duncan'sduties remained unchanged during 2013. Mr. Duncan’s base salary was increased to $925,000 effective January 1, 2014. See “Part III –Item 11 – Executive Compensation: Performance Rewarded.”Mr. Hughes' base salary reflects cash compensation of $362,500 per year and $125,000 credited to his Deferred Compensation Arrangementaccount with us. Mr. Hughes was our Executive Vice President – Wireless before we closed the Alaska Wireless Network, LLC (“AWN”)transaction on July 22, 2013 at which time Mr. Hughes became President and Chief Executive Officer of AWN.Mr. Lowber's base salary reflects cash compensation of $260,000 and $135,000 credited to his Deferred Compensation Arrangement accountwith us. His duties remained unchanged during 2013. Mr. Lowber retired from the Company effective January 1, 2014.Mr. Chapados' base salary reflects cash compensation of $350,000. His duties remained unchanged during 2013. Mr. Chapados basesalary was increased to $450,000 effective January 1, 2014. See “Part III – Item 11 – Executive Compensation: Performance Rewarded.”Mr. Pearce's base salary reflects cash compensation of $160,000. His duties remained unchanged during 2013.Incentive Compensation Plan. Overview – A portion of the Company's compensation to each Named Executive Officer relates to, and iscontingent upon, the officer's performance and our financial performance and resources.Messrs. Duncan, Hughes, Lowber and Chapados – Overview. In October 2010, our board approved changes to our IncentiveCompensation Plan for four of our Named Executive Officers (Messrs. Duncan, Hughes, Lowber and Chapados, collectively "Four NamedExecutive Officers"). The changes resulted from ongoing discussions during 2009 and 2010 that formed a plan that was in place for thoseFour Named Executive Officers through 2013. This Incentive Compensation Plan does not apply to the fifth Named Executive Officer, Mr.Pearce.In the context of the Four Named Executive Officers, the Compensation Committee first determined the targeted annual incentivecompensation for each of them. After setting these targets, the Compensation Committee then split that amount between short-term andlong-term incentive compensation. Both short-term and long-term incentive compensation is paid out in the form of 50% cash and 50%restricted stock grants that vest 100% at the end of three years, unless otherwise determined by the Compensation Committee based on theindividual circumstances of each of the Four Named Executive Officer. Therefore, even the short-term incentive compensation is designed toencourage the focus of these executives on long-term performance. Annual cash bonuses are intended to reward short-term performanceand to make our senior executive compensation packages competitive with comparable executive positions in other companies.Short-Term Incentive Compensation. The following table provides a summary of the 2013 short-term incentive compensation targets forthe Named Executive Officers:Name Adjusted EBITDAless Capex Goal($) Capex Spending($) Discretionary($) Total 2013 Short-Term IncentiveCompensationPlan Target($)Ronald A. Duncan 300,000 100,000 810,000 1,210,000G. Wilson Hughes 200,000 50,000 216,667 466,667John M. Lowber 100,000 50,000 200,000 350,000Gregory F. Chapados 150,000 50,000 300,000 500,00057Table of ContentsThe following is a description of what each of these short-term incentive compensation targets are and how they are measured.Adjusted EBITDA less Capex. The Adjusted EBITDA less Capex Goal is intended to focus Messrs. Duncan, Lowber and Chapados onincreasing the earnings before depreciation and amortization expense, net interest expense, income taxes, share-based compensationexpense, accretion expense, income or loss from equity investments, net income or loss attributable to non-controlling interest resultingfrom New Markets Tax Credit transactions and non-cash contribution adjustment (“Adjusted EBITDA”) less Capex of the Company and inthe case of Mr. Hughes on increasing the Adjusted EBITDA less Capex of AWN. The goal is achieved by the Company recording AdjustedEBITDA less Capex that is greater than the targeted Adjusted EBITDA less Capex.The targets for this metric were $89.9 million in 2013 for Messrs. Duncan, Lowber, and Chapados and $37.6 million for Mr. Hughes whowould earn their Target Incentive Compensation for this goal if the metric was exceeded. In the case of Messrs. Duncan, Lowber, andChapados, the incentive compensation earned is increased or decreased from the Target Incentive Compensation by 5% for each $1 millionthat the actual Adjusted EBITDA less Capex is above or below the Adjusted EBITDA less Capex metric. In the case of Mr. Hughes, hisincentive compensation earned is increased or decreased from the Target Incentive Compensation by 10% for each $1 million that the actualAdjusted EBITDA less Capex is above or below the Adjusted EBITDA less Capex metric.Capex Spending. The Capex Spending target is based on core adjusted cash capex spending ("Capex Spending")not exceeding the goal setforth by our board. For Messrs. Duncan, Lowber, and Chapados the goal was $150 million in 2013. In 2013 the targeted incentive for CapexSpending will be paid out at 100% if the total Capex Spending for the year is $150 million or less. If Capex Spending exceeds $152 million,the payout would reduce in a linear fashion to zero at $156 million. For 2013, the Capex Spending was $135.6 million.In the case of Mr. Hughes, the Capex Spending goal for AWN was $35.5 million. In 2013 the targeted incentive for Capex Spending will bepaid out at 100% if the total Capex Spending for the year is $35.5 million or less. If Capex Spending exceeds $37.5 million, the payout wouldreduce in a linear fashion to zero at $39.5 million. For 2013, the Capex Spending was $30.0 million.Discretionary. The board will take various factors into account when deciding on the payout of the discretionary portion of the plan applyingto the Named Executive Officers. These factors include, but are not limited to, leadership, crisis management, succession planning,strategic planning, risk management, special projects, financial reporting, and compliance with our debt covenants.The following table summarizes the 2013 short-term incentive compensation achieved by Messrs. Duncan, Hughes, Lowber, andChapados, each of whom participated in this plan. The 2013 short-term incentive compensation was paid 50% in cash and 50% issued inthe form of restricted stock grants; the majority of the cash portion was paid in 2013 with the remainder paid in 2014:58Table of ContentsGoalsRonald A.Duncan G. WilsonHughes John M. Lowber Gregory F.Chapados Adjusted EBITDA less Capex Goal – Target Incentive Compensation$300,000 $200,000 $100,000 $150,000 Adjusted EBITDA less Capex Goal Achievement1244.3%345.2%244.3%244.3%2013 Adjusted EBITDA less Capex Incentive Compensation Earned$732,900 $690,400 $244,300 $366,450 Capex Spending$100,000 $50,000 $50,000 $50,000 Capex Spending Achievement100%100%100%100%2013 Capex Spending Incentive Compensation Earned$100,000 $50,000 $50,000 $50,000 Discretionary$810,000 $216,667 $200,000 $300,000 Discretionary Achievement296.7%92.3%98.8%89.6%2013 Discretionary Incentive Compensation Earned$783,000 $200,000 $197,500 $268,750 2013 Short-Term Incentive Compensation Earned$1,615,900$940,400 $491,800 $685,200 _____________1The Adjusted EBITDA less Capex metric for 2013 was $89,852,000 for the Company. Messrs. Duncan, Lowber and Chapados wouldearn their Target Incentive Compensation for this goal if the Company had Adjusted EBITDA less Capex equal to the metric. The TargetIncentive Compensation is increased or decreased by 5% for each $1 million that the actual Adjusted EBITDA less Capex is above orbelow the metric. For 2013, the actual Adjusted EBITDA less Capex was $118,717,000 resulting in actual Adjusted EBITDA less Capexthat was $28,865,000 above the metric, therefore, the Target Incentive Compensation was increased by 144.3%.The Adjusted EBITDA less Capex metric for 2013 was $37,649,000 million for AWN. Mr. Hughes would earn his Target IncentiveCompensation for this goal if AWN had Adjusted EBITDA less Capex equal to the metric. The Target Incentive Compensation isincreased or decreased by 10% for each $1 million that the actual Adjusted EBITDA less Capex is above or below the metric. For 2013,the actual Adjusted EBITDA less Capex for AWN was $62,172,000 resulting in actual Free Cash Flow that was $24,523,000 above themetric, therefore, the Target Incentive Compensation was increased by 245.2%.2 Our Compensation Committee considered the following factors regarding the Discretionary Achievement of the Named ExecutiveOfficers. With regard to Mr. Duncan, the Compensation Committee took into account his leadership during 2013, performance indeveloping a strategic plan for key components of our business, diversification and succession planning. With regard to Mr. Hughes, theCompensation Committee took into account his leadership of the AWN integration, succession planning and the operations of ourwireless strategy. With regard to Mr. Lowber, the Compensation Committee considered his leadership in regards to risk management,management development and financial reporting. With regard to Mr. Chapados, the Compensation Committee considered, amongother thing, his leadership, his operating of the Wireline segment, his strategic and financial planning, and risk management._____________Long-Term Incentive Compensation. $290 million Adjusted EBITDA Plan. The goal of this portion of the Incentive Compensation Planfor the Four Named Executive Officers is to drive long-term Adjusted EBITDA growth. To achieve the target level of payments under the plan,it would be necessary to have $225 million in Adjusted EBITDA in 2011 and $250 million in Adjusted EBITDA in 2013. Effective January 1,2014, we no longer have a long-term incentive compensation component of our plan since we believe the incentive compensation plan has along-term component in that incentive compensation is paid 50% in cash and 50% in restricted stock grants that vest 100% at the end of threeyears. 59Table of ContentsGoalsRonald A.Duncan G. WilsonHughes John M. Lowber Gregory F.Chapados Target Long-Term Incentive Compensation$700,000 $500,000 $400,000 $400,000 Long-Term Incentive Compensation Goal Achievement1100.0%100.0%100.0%100.0%Long-Term Incentive Compensation Earned$700,000 $500,000 $400,000 $400,000 _____________1 The Adjusted EBITDA metric for 2013 adjusted for USF reform in 2011, changes to Capex and the AWN acquisition was $271.6 million.For 2013, the Company achieved Adjusted EBITDA adjusted for other acquisitions and diversification efforts of $272.2 million resultingin achievement of the target._____________Incentive Compensation Targets. Based on discussions with our CEO, management and the practices of other companies, ourCompensation Committee approved the following incentive compensation targets for our Four Named Executive Officers (excluding Mr.Lowber who retired effective January 1, 2014) which is expected to be in place through 2016:Name Adjusted EBITDAless Capex Goal($) Capex Spending($) Discretionary($) Total 2014IncentiveCompensationPlan Target($)Ronald A. Duncan 310,000 150,000 1,015,000 1,475,000G. Wilson Hughes 100,000 45,000 321,667 466,667Gregory F. Chapados 180,000 90,000 630,000 900,000See “Part III – Item 11 – Executive Compensation: Performance Rewarded” for additional discussion on the calculation of Mr. Duncan's Total2014 Incentive Compensation Plan Target.The Compensation Committee may change the incentive compensation amounts between the goals at its discretion.Mr. Pearce - Mr. Pearce's incentive compensation was paid in accordance with the targeted incentive compensation based on a percentage ofthe growth of Business Services revenue less its cost of goods sold and its direct expenses compared to the prior year. The CompensationCommittee believed that such a payment was appropriate given the strong performance of the Company's Business Services department.The incentive plan for Mr. Pearce for 2014 will be the same as his 2013 incentive plan.Stock Option Plan. Options and awards, if granted to the Named Executive Officers, were granted pursuant to terms of our Stock OptionPlan. In particular, the exercise price for options in each instance was the closing price for our Class A common stock on the Nasdaq GlobalSelect Market on the day of the grant of the option. Options or awards, if granted, were granted contemporaneously with the approval of theCompensation Committee, typically early in the year in question or late in the previous year as described above. See "Part III – Item 11 –Compensation Discussion and Analysis: Elements of Compensation – Incentive Compensation Plan."With limited exceptions (one involving Mr. Duncan, a Named Executive Officer), since mid-2009 we have used restricted stock in place ofoptions. That is, on February 8, 2010, we granted an option for 150,000 shares of Class A common stock to Mr. Duncan. That option vestedon February 8, 2012.We adopted our stock option plan in 1986. It has been subsequently amended from time to time and presently is our Stock Option Plan, i.e.,our Amended and Restated 1986 Stock Option Plan. Under our Stock Option Plan, we are authorized to grant awards and options topurchase shares of Class A common stock to selected officers, directors and other employees of, and consultants or advisors to, theCompany and its subsidiaries. The options60Table of Contentsare more specifically referred to as nonstatutory stock options or incentive stock options within Section 422 of the Internal Revenue Code of1986, as amended ("Internal Revenue Code"). In addition, under the Stock Option Plan restricted stock awards may be granted as furtherdescribed below. The selection of grantees for options and awards under the plan is made by our Compensation Committee.The number of shares of Class A common stock allocated to the Stock Option Plan is 15.7 million shares. The number of shares for whichoptions or awards may be granted is subject to adjustment upon the occurrence of stock dividends, stock splits, mergers, consolidations andcertain other changes in corporate structure or capitalization. As of December 31, 2013, there were 0.6 million shares subject to outstandingoptions under the Stock Option Plan, 1.2 million shares granted subject to vesting, 3.4 million share grants had vested, 8.6 million shareshad been issued upon the exercise of options under the plan, 1.3 million shares repurchased by the plan and 3.2 million shares remainedavailable for additional grants under the plan.Restricted stock awards granted under the Stock Option Plan may be subject to vesting conditions based upon service or performance criteriaas the Compensation Committee may specify. These specifications may include attainment of one or more performance targets. Sharesacquired pursuant to such an award may not be transferred by the participant until vested. Unless otherwise provided by the CompensationCommittee, a participant will forfeit any shares of restricted stock where the restrictions have not lapsed prior to the participant's terminationof service with us. Participants holding restricted stock will have the right to vote the shares and to receive dividends paid, if any. However,those dividends or other distributions paid in shares will be subject to the same restrictions as the original award.Our Compensation Committee selects each grantee and the time of grant of an option or award and determines the terms of each grant,including the number of shares covered by each grant and the exercise price. In selecting a participant, as well as in determining these otherterms and conditions of each grant, our Compensation Committee takes into consideration such factors as it deems, in its sole discretion,relevant in connection with accomplishing the purpose of the plan.Under our Stock Option Plan, our authority to modify or amend the plan is subject to prior approval of our shareholders only in cases ofincreasing the number of shares of our stock allocated to, and available and reserved for, issuance under the plan, changing the class ofpersons eligible to receive incentive stock options or where shareholder approval is required under applicable law, regulation or rule. Onesuch law requiring shareholder approval before the Company may rely on it is Section 162(m) of the Internal Revenue Code.Subject to these limitations, the Company may terminate or amend the Stock Option Plan at any time. However, no termination oramendment may affect any outstanding option or award unless expressly provided by the Compensation Committee. In any event, notermination or amendment of the plan may adversely affect an outstanding option or award without the consent of the participant unlessnecessary to comply with applicable law, regulation or rule.With limited exception, no maximum or minimum exists with regard to the amount, either in dollars or in numbers, of options that may beexercised in any year, either by a single optionee or by all optionees under our Stock Option Plan. At the 2002 annual meeting, ourshareholders approved an amendment to the plan placing a limitation on accumulated grants of options of not more than 500,000 shares ofClass A common stock per optionee per year.With these exceptions, there are no fixed limitations on the number or amount of securities being offered, other than the practical limitationsimposed by the number of employees eligible to participate in the plan and the total number of shares of stock authorized and available forgranting under the plan. Shares covered by options which have terminated or expired for any reason prior to their exercise are available forgrant of new options pursuant to the plan.61Table of ContentsPerquisites. The Company provides certain perquisites to its Named Executive Officers. The Compensation Committee believes theseperquisites are reasonable and appropriate and consistent with our awareness of perquisites offered by similar publicly tradedcompanies. The perquisites assist in attracting and retaining the Named Executive Officers and, in the case of certain perquisites, promotehealth, safety and efficiency of our Named Executive Officers. These perquisites are as follows:•Use of Company Leased Aircraft – The Company permits employees, including the Named Executive Officers, to useCompany aircraft for personal travel for themselves and their guests. Such travel generally is limited to a space available basis onflights that are otherwise business-related. Where a Named Executive Officer, or a guest of that officer, flies on a space availablebasis, the additional variable cost to the Company (such as fuel, catering, and landing fees) is de minimus. As a result, no amountis reflected in the Summary Compensation Table for that flight. Where the additional variable cost to the Company occurs on such aflight for solely personal purposes of that Named Executive Officer or guest, that cost is included in the Summary CompensationTable entry for that officer. Because it is rare for a flight to be purely personal in nature, fixed costs (such as hangar expenses, crewsalaries and monthly leases) are not included in the Summary Compensation Table. In any case, in the event such a cost is non-deductible by the Company under the Internal Revenue Code, the value of that lost deduction is included in the SummaryCompensation Table entry for that Named Executive Officer. When employees, including the Named Executive Officers, useCompany aircraft for such travel they are attributed with taxable income in accordance with regulations pursuant to the InternalRevenue Code. The Company does not "gross up" or reimburse an employee for taxes he or she owes on such attributedincome. The variable cost of the aircraft for personal travel, if any, is included in the respective entries in the SummaryCompensation Table. See "Part III – Item 11 – Executive Compensation: Summary Compensation Table."•Enhanced Long Term Disability Benefit – The Company provides the Named Executive Officers and other senior executiveofficers of the Company with an enhanced long term disability benefit. This benefit provides a supplemental replacement incomebenefit of 60% of average monthly compensation capped at $10,000 per month. The normal replacement income benefit applying toother of our employees is capped at $5,000 per month.•Enhanced Short Term Disability Benefit – The Company provides the Named Executive Officers and other senior executiveofficers of the Company with an enhanced short term disability benefit. This benefit provides a supplemental replacement incomebenefit of 66 2/3% of average monthly compensation, capped at $2,300 per week. The normal replacement income benefit applyingto other of our employees is capped at $1,150 per week.•Miscellaneous – Aside from benefits offered to its employees generally, the Company provided miscellaneous other benefits to itsNamed Executive Officers including the following (see "Part III – Item 11 – Executive Compensation: Summary CompensationTable – Components of 'All Other Compensation'"):◦Success Sharing – An incentive program offered to all of our employees that shares 15% of the excess earnings beforeinterest, taxes, depreciation, amortization and share based compensation expense over the highest previous year ("SuccessSharing").◦Board Fees – Provided to Mr. Duncan as one of our directors. The Compensation Committee believes that it is appropriate toprovide such board fees to Mr. Duncan given the additional oversight responsibilities and the accompanying liabilityincumbent upon members of our board. In determining the appropriate amount of overall compensation payable to Mr.Duncan in his capacity as Chief Executive Officer, the Compensation Committee does take into account any such boardfees that are payable to Mr. Duncan. This monitoring of Mr. Duncan's overall compensation package for services renderedas Chief Executive Officer and as a director is done to ensure that Mr. Duncan is not being doubly compensated for thesame services rendered to the Company.Retirement and Welfare Benefits – GCI 401(k) Plan. In January 1987, we adopted an Employee Stock Purchase Plan (“GCI 401(k)Plan”) qualified under Section 401 of the Internal Revenue Code of 1986. The GCI 401(k) Plan provides for acquisition of GCI’s Class Acommon stock at market value as well as various mutual funds. We may match a percentage of the employees' contributions up to certainlimits, decided by GCI’s Board of Directors each year. Named Executive Officers may, along with our employees generally, participate in ourGCI 401(k) Plan in which we may provide matching contributions in accordance with the terms of the plan.62Table of ContentsAs of December 31, 2013, there remained 5,028,217 shares of Class A and 463,989 shares of Class B common stock allocated to our GCI401(k) Plan and available for issuance by us or otherwise acquisition by the plan for the benefit of participants in the plan.– Deferred Compensation Plan and Arrangements. The Company provides to certain of our employees, including our executive officersand Named Executive Officers, opportunities to defer certain compensation under our nonqualified, unfunded, deferred compensation plan("Deferred Compensation Plan"). In addition, we offer to our executive officers and to certain of our Named Executive Officers nonqualified,deferred compensation arrangements more specifically fashioned to the needs of the officer and us ("Deferred CompensationArrangements"). During 2013, none of our officers participated in the Deferred Compensation Plan. However, during 2013, two of ourofficers, both Named Executive Officers, participated in Deferred Compensation Arrangements specifically fashioned to their respectiveneeds. These Deferred Compensation Arrangements enable these individuals to defer compensation in excess of limits that apply toqualified plans, like our GCI 401(k) Plan, and to pursue other income tax goals which they set for themselves.Based upon its review of the Deferred Compensation Arrangements, our Compensation Committee concluded that the benefits providedunder them are in each case both reasonable and an important tool in retaining the executive officers involved with those arrangements.– Welfare Benefits. With the exception of the enhanced long term and short term disability benefits described previously, the Companyprovided to the Named Executive Officers the same health and welfare benefits provided generally to all other employees of the Company atthe same general premium rates as charged to those employees. The cost of the health and welfare programs is subsidized by the Companyfor all eligible employees including the Named Executive Officers.Performance Rewarded –Our Compensation Program is, in large part, designed to reward individual performance. What constitutes performance varies from officer toofficer, depending upon the nature of the officer's responsibilities. Consistent with the Compensation Program, the Company identified keybusiness metrics and established defined targets related to those metrics for each Named Executive Officer. In the case of each NamedExecutive Officer, the targets were regularly reviewed by management, from time to time, and provided an immediate and clear picture ofperformance and enabled management to respond quickly to both potential problems as well as potential opportunities. The CompensationProgram also was used to establish and track corresponding applicable targets for individual management employees.In 2013, the Compensation Program was used in the development of each Named Executive Officer's individual performance goals andestablished incentive compensation targets. The Compensation Committee evaluated the performance of each of the executive officers andthe financial performance of the Company and awarded incentive compensation as described above. See "Part III – Item 11 – CompensationDiscussion and Analysis: Elements of Compensation – Incentive Compensation Plan."In 2013, our Compensation Committee determined to increase the cash component of Mr. Chapados’ base salary from $350,000 to$450,000 effective January 1, 2014. The increase to the cash component of Mr. Chapados’ base salary was to compensate him for theadditional responsibilities resulting from the increased growth of the Company. In 2013, our Compensation Committee increased the cash component of Mr. Duncan's base salary from $840,000 to $925,000 effectiveJanuary 1, 2014. In addition, the Compensation Committee increased Mr. Duncan's annual Incentive Compensation target (exclusive of theformer long-term incentive component) from $1,210,000 to $1,475,000 effective January 1, 2014. The increases to Mr. Duncan's base salaryand Incentive Compensation are to compensate him for the additional responsibilities resulting from the growth of the Company. Theamounts disclosed under Part III – Item 11 – Short-Term Incentive Compensation – 2014 Incentive Compensation Targets reflect theincrease to Mr. Duncan’s 2014 incentive compensation target.In 2013, our Compensation Committee modified the calculation of Mr. Duncan's Incentive Compensation target. Mr. Duncan's incentivecompensation target will be calculated by multiplying the sum of his base salary, director cash63Table of Contentscompensation, estimated value of stock grant for service as a director, and incentive compensation ("Total Compensation") by the percentageincrease in Adjusted EBITDA from Adjusted EBITDA in 2013 and adding that to his target incentive compensation.Timing of Equity Awards –Overview. Timing of equity awards under our Director Compensation Plan and equity awards under our Compensation Program varieswith the plan or portion of that program. However, the Company does not, and has not in the past, timed its release of material nonpublicinformation for purposes of affecting the value of equity compensation. Timing issues and our grant policy are described further below.Director Compensation Plan. As a part of the Director Compensation Plan, we grant awards of our common stock to board members,including those persons who may also be serving as one or more of our executive officers. Mr. Duncan, a board member and NamedExecutive Officer, has been granted such awards in the past. These awards are made annually in June of each year in accordance with theterms of the Director Compensation Plan. The awards are made through our Stock Option Plan. See "Part III – Item 11 – CompensationDiscussion and Analysis: Elements of Compensation – Stock Option Plan."Incentive Compensation Plan. As a part of our Compensation Program, from time to time, we grant stock options and awards in ourClass A common stock to our executive officers, including the Named Executive Officers. In particular, stock options and awards are grantedin conjunction with the agreements that we enter into with Named Executive Officers pursuant to our Incentive Compensation Plan. Thegrants of such options and awards are typically made early in the year at the time our board finalizes the prior year incentive compensationplan payouts for each of the Named Executive Officers. All such options and awards are granted through the Stock Option Plan. See "Part III– Item 11 – Compensation Discussion and Analysis: Elements of Compensation – Incentive Compensation Plan" and "– Elements ofCompensation – Stock Option Plan."Stock Option Plan. As a part of our Compensation Program, from time to time, we grant stock options or awards in our Class A commonstock to our executive officers, including the Named Executive Officers, and to certain of our advisors. In the case of an executive officer,these options or awards may be granted regardless of whether there is in place an agreement entered into with the officer under our IncentiveCompensation Plan. In the case of a new hire and where we choose to grant options or awards, the grant may be done at the time ofhire. Under the Stock Option Plan, the Compensation Committee may set the exercise price for our Class A common stock at not less thanits fair market value. That value is presently determined on Nasdaq. In all cases, regardless of the identity of the grantee, the timing,amount and other terms of the grant of options or awards under our Stock Option Plan are determined in the sole discretion of ourCompensation Committee. See "Part III – Item 11 – Compensation Discussion and Analysis: Elements of Compensation – Stock OptionPlan."In the event an executive level employee is hired or promoted during a year, that employee may be eligible to receive an award under theplans previously described in this section. Grants of awards in this context may be made at the recommendation of management and onlywith action of the Compensation Committee.Grant Policy. Under our grant policy, all approved grants are granted effective the date they were approved by the committee and are pricedat the market value at the close of trading on that date. The terms of the award are then communicated immediately to the recipient.Tax and Accounting Treatment of Executive Compensation –In determining the amount and form of compensation granted to executive officers, including the Named Executive Officers, the Companytakes into consideration both tax treatment and accounting treatment of the compensation. Tax and accounting treatment for various forms ofcompensation is subject to changes in, and changing interpretations of, applicable laws, regulations, rulings and other factors not within theCompany's control. As a result, tax and accounting treatment is only one of several factors that the Company takes into account in designingthe previously described elements of compensation.64Table of ContentsCompensation Policies and Practices in Relation to Our Risk Management –At the direction of our board, Company management has reviewed our compensation policies, plans and practices to determine whether theycreate incentives or encourage behavior that is reasonably likely to have a materially adverse effect on the Company. This effort included areview of our various employee compensation plans and practices as described elsewhere in this report. See "Part III – Item 11 –Compensation Discussion and Analysis: Process."The purpose of the review was to evaluate risks and the internal controls we have implemented to manage those risks. The controls includemultiple performance metrics, corporate-wide financial measures, statutory clawbacks on equity awards, and board and board committeeoversight and approvals.In completing this review, our board and management believe risks created by our compensation policies, plans and practices that createincentives likely to have a material adverse effect on us are remote.Shareholder Advisory Votes on Executive CompensationThe agenda for the 2014 annual meeting will include an opportunity for our shareholders to provide an advisory vote on executivecompensation of our Named Executive Officers. The vote on executive compensation will be advisory only and is not binding on theCompany or its board.Our board views decisions as to compensation of Company named executive officers, including but not limited to those for 2013, as itsresponsibility. Our board takes this responsibility seriously and has gone to considerable effort to establish and implement a process fordetermining executive compensation as described elsewhere in this report. See "Part III – Item 11 – Compensation Discussion andAnalysis."Our board carefully considers all proposals from our shareholders. However, in light of its responsibilities to the Company, our board may ormay not follow the advice of those shareholder votes.Our board contemplates next placing before our shareholders a proposal dealing with the frequency of shareholder advisory votes onexecutive compensation of our named executive officers during our 2017 annual shareholder meeting.Executive CompensationSummary Compensation Table –As of December 31, 2013, the Company did not have employment agreements with any of the Named Executive Officers. The followingtable summarizes total compensation paid or earned by each Named Executive Officer for fiscal years 2013, 2012 and 2011. The processfollowed by the Compensation Committee in establishing total compensation for each Named Executive Officer as set forth in the table isdescribed elsewhere in this report. See "Part III – Item 11 – Compensation Discussion and Analysis."65Table of ContentsSummary Compensation TableName andPrincipal PositionYearSalary1($)Bonus($)NonequityIncentivePlanCompen-sation($)StockAwards2($)OptionAwards2($)Change inPension ValueandNonqualifiedDeferredCompensationEarnings3($)All OtherCompensation($)4Total($)Ronald A. Duncan5President and ChiefExecutive Officer2013830,000—1,158,158523,3716——75,0002,586,5292012600,000—566,20931,100——67,0001,264,3092011600,000—1,751,9191,220,3647——61,5003,633,783G. Wilson HughesExecutive VicePresident ---Wireless2013487,500—754,465285,0849—29619,5001,546,8452012487,500—229,2231,486,3429—2,27225,8752,231,2122011487,50025,0008400,108412,0957—4,22416,5001,345,427John M. LowberSenior Vice President,Chief Financial Officerand Treasurer2013395,000—445,353123,3836—14,84317,500996,0792012395,000—145,723372,29910—8,92424,875946,8212011395,000—325,432287,0977—3,05818,5001,029,087Gregory F. ChapadosExecutive VicePresident andChief OperatingOfficer2013347,917—542,654143,2866——21,5001,055,3572012300,000—169,223998,20811——19,0001,486,4312011300,000—328,846265,7707——23,087917,703Gregory Pearce12Vice President General Manager,Business Services2013160,000—520,024427,7376——20,3851,128,146________________________1 For 2011, 2012 and 2013, salary includes deferred compensation of $125,000 and $135,000 for Messrs. Hughes and Lowber,respectively.2 This column reflects the grant date fair values of awards of Class A common stock, restricted stock awards or stock options granted in thefiscal year indicated which were computed in accordance with Financial Accounting Standards Board ("FASB") Accounting StandardsCodification Topic 718, Compensation – Stock Options ("ASC Topic 718"). Assumptions used in the calculation of these amounts areset forth in Footnote 9 of "Part II – Item 8 – Consolidated Financial Statements and Supplementary Data."3 The amount shown represents the above-market earnings on nonqualified deferred compensation plan balances. Above market-earningsis defined as earnings in excess of 120% of the long-term monthly applicable federal rate (AFR).4 See, "Components of 'All Other Compensation'" table displayed below for more detail.5 In 2011, Mr. Duncan received $105,534 in compensation for service on our board including $45,000 in director fees and stock awardvalued at $60,534. In 2012, Mr. Duncan received $81,100 in compensation for service on our board in the form of $50,000 in directorfees and a stock award valued at $31,100. In 2013, Mr. Duncan received $106,450 in compensation for service on our board in the formof $57,500 in director fees and a stock award valued at $43,950.6 The Stock Awards granted during 2013 were for the Named Executive Officer's performance during 2012.7 The Stock Awards granted during 2011 were for the Named Executive Officer’s performance during 2010.8 The Bonus Compensation represents compensation paid pursuant to the Incentive Compensation Plan in excess of the target paymentunder the plan.9 In 2012, Mr. Hughes received a stock award with a grant date fair value of $486,338 for his performance during 2011 and a stock awardwith a grant date fair value of $1,000,004 to incentivize Mr. Hughes to stay to lead the integration of AWN. In 2013, Mr. Hughes received astock award with a grant date fair value of $194,084 for his perfomance during 2012 and a stock award with a grant date fair value of$91,000 granted upon the successful close of AWN.66Table of Contents10 The Stock Awards granted during 2012 were for the Named Executive Officer’s performance during 2011.11 Mr. Chapados received a stock award with a grant date fair value of $376,208 for his performance during 2011 and a stock award with agrant date fair value of $622,000 upon his promotion to Chief Operating Officer.12 Compensation for Mr. Pearce is only provided for 2013 as he was not a Named Executive Officer in 2012 or 2011.______________________The amounts reported under the "All Other Compensation" column are comprised of the following:Components of "All Other Compensation"Name and Principal PositionYearStockPurchasePlan1($)BoardFees($)SuccessSharing2($)Use ofCompanyLeasedAircraft3($)Miscellaneous($)Total($)Ronald A. Duncan201317,50057,500---------75,000201217,00050,000---------67,000201116,50045,000---------61,500G. Wilson Hughes201317,500---------2,000419,500201217,000------7,8751,000425,875201116,500------------16,500John M. Lowber201317,500------------17,500201217,000------7,875---24,875201116,500---------2,000418,500Gregory F. Chapados201317,500---------4,000421,500201217,000---------2,000419,000201116,500---------6,587523,087Gregory Pearce201317,500---------2,885620,385________________________1 Amounts are contributions by us matching each employee's contribution. Matching contributions by us under our GCI 401(k) Plan areavailable to each of our full time employees with over one year of service. During 2013, the match was based upon the lesser of $17,500($17,000 for 2012 and $16,500 for 2011) or 10% of the employee's salary and the total of the employee's pre-tax and post-taxcontributions to the plan. See "Part III – Item 11 – Compensation Discussion and Analysis: Elements of Compensation – Retirementand Welfare Benefits – GCI 401(k) Plan."2 See "Part III – Item 11 – Compensation Discussion and Analysis: Elements of Compensation – Perquisites."3 The value of use of Company leased aircraft is shown at the variable cost to the Company.4 Compensation for attending certain management meetings.5 Includes $4,587 for a guest to accompany Mr. Chapados on a business trip and $2,000 for attending certain management meetings.6 Compensation for a guest to accompany Mr. Pearce on a business trip._____________________67Table of ContentsGrants of Plan-Based Awards Table –The following table displays specific information on grants of options, awards and non-equity incentive plan awards under our CompensationProgram and, in addition, in the case of Mr. Duncan, our Director Compensation Plan, made to Named Executive Officers during 2013.Grants of Plan-Based Awards Estimated Future Payouts UnderNon-Equity Incentive Plan Awards Estimated Future Payouts UnderEquity Incentive Plan Awards All Other StockAwards:Number ofSharesof Stockor Units (#)All OtherOptionAwards:Number ofSecuritiesUnderlyingOptions (#)Exerciseor BasePrice ofOptionAwards($/Sh)Grant DateFair Value ofStock andOptionAwards1($)NameGrant DateThreshold($)Target($)Maximum($) Threshold(#)Target(#)Maximum(#)Ronald A. Duncan02/12/13--------- ---------59,0422------479,421 06/01/13--------- ---------5,0003------43,950G. Wilson Hughes02/12/13--------- ---------23,9022------194,084 07/22/13--------- ---------10,0004------91,000John M. Lowber02/12/13--------- ---------15,1952------123,383Gregory F. Chapados02/12/13--------- ---------17,6462------143,286Gregory Pearce02/12/13--------- ---------52,6772------427,737______________________1 Computed in accordance with FASB ASC Topic 718.2 Represents the 50% portion of the 2012 incentive compensation paid in the form of restricted stock grants under our IncentiveCompensation Plan that were not granted until 2013. Restricted stock awards are included in the "Stock Awards" column of theSummary Compensation Table above.3 Mr. Duncan's stock award was granted pursuant to the terms of our Director Compensation Plan. See "Part III – Item 11 – DirectorCompensation."4 Mr. Hughes received a restricted stock award of 10,000 shares upon the successful closing of the AWN transaction. The award will vestone year from the closing date of the AWN transaction.____________________Outstanding Equity Awards at Fiscal Year-End Table –The following table displays specific information on unexercised options, stock that has not vested and equity incentive plan awards for eachof the Named Executive Officers and outstanding as of December 31, 2013. Vesting of these options and awards varies for the NamedExecutive Officers as described in the footnotes to the table.68Table of ContentsOutstanding Equity Awards at Fiscal Year-End Option Awards1 Stock AwardsNameNumber ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unexercisable OptionExercisePrice ($) OptionExpirationDate Number ofShares orUnits of StockThat HaveNot Vested (#) Market Valueof Shares orUnits of Stockthat Have NotVested ($) Equity IncentivePlan Awards:Number ofUnearnedShares, Units orOther RightsThat Have NotVested (#) Equity IncentivePlan Awards:Market or PayoutValue ofUnearnedShares, Units orOther RightsThat Have NotVested ($)Ronald A. Duncan250,000 --- 8.40 6/24/2014 --- --- --- ---150,000 --- 5.32 2/8/2020 --- --- --- ------ --- --- --- 59,0422 658,3182 --- ---G. Wilson Hughes--- --- --- --- 10,0003 111,5003 --- --- --- --- --- --- 43,4234 484,1664 --- --- --- --- --- --- 117,9255 1,314,8645 --- --- --- --- --- --- 23,9022 266,5072 --- ---John M. Lowber--- --- --- --- 33,2414 370,6374 --- --- --- --- --- --- 15,1956 169,4246 Gregory F. Chapados100,000 --- 7.95 1/9/2018 --- --- --- --- --- --- --- --- 10,0007 111,5007 --- --- --- --- --- --- 33,5904 374,5294 --- --- --- --- --- --- 50,0008 557,5008 --- --- --- --- --- --- 17,6462 196,7532 --- --- --- --- --- --- 100,0009 1,115,0009 --- ---Gregory Pearce--- --- --- --- 35,11710 391,55510 --- ---_____________________1 Stock option awards generally vest over five years and expire ten years from grant date, except as noted in the footnotes below.2 Restricted stock vests on November 30, 2015.3 Restricted stock vests on July 22, 2014.4 Restricted stock vests on November 30, 2014.5 Restricted stock vests 58,962 shares on December 31, 2014 and 58,963 shares on December 31, 2015.6 Restricted stock vests on January 1, 2015.7 Restricted stock vests 5,000 shares on October 7 of 2014 and 2015.8 Restricted stock vests on October 7, 2015.9 Restricted stock vests on June 3, 2016.10 Restricted stock vests 17,559 shares on November 30, 2014 and 17,558 shares on November 30, 2015._____________________69Table of ContentsOption Exercises and Stock Vested Table –The following table displays specific information on each exercise of stock options, stock appreciation rights, and similar instruments, andeach vesting of stock, including restricted stock, restricted stock units and similar instruments on an aggregate basis, for each of the NamedExecutive Officers during 2013:Option Exercises and Stock Vested Option Awards Stock AwardsNameNumber ofSharesAcquired onExercise (#)Value Realizedon Exercise($) Number ofSharesAcquired onVesting (#)Value Realizedon Vesting($)Ronald A. Duncan------ 5,000143,950 ------ 93,159892,463G. Wilson Hughes------ 33,100317,098John M. Lowber------ 14,098115,463 ------ 25,000278,750 ------ 23,060220,915Gregory F. Chapados30,00081,619 ------ ------ 18,797153,947 ------ 5,00044,950 ------ 21,347204,504Gregory W. Pearce------ 7,07867,807------ 7,40870,969------ 17,560168,225___________________1 This stock award relates to Mr. Duncan's service as one of our directors._________________Potential Payments upon Termination or Change-in-Control –As of December 31, 2013, there were no compensatory plans or arrangements providing for payments to any of the Named ExecutiveOfficers in conjunction with any termination of employment or other working relationship of such an officer with us (including withoutlimitation, resignation, severance, retirement or constructive termination of employment of the officer). Furthermore, as of December 31,2013, there were no such plans or arrangements providing for payments to any of the Named Executive Officers in conjunction with achange of control of us or a change in such an officer's responsibilities to us. However, all outstanding options and awards for each of ourNamed Executive Officers would vest upon his or her disability, retirement or death, or a change-in-control of the Company.Nonqualified Deferred CompensationDeferred Compensation Plan –We established our Deferred Compensation Plan in 1995 to provide a means by which certain of our employees may elect to defer receipt ofdesignated percentages or amounts of their compensation and to provide a means for certain other deferrals of compensation. Employeeseligible to participate in our Deferred Compensation Plan are determined by our board. We may, at our discretion, contribute matchingdeferrals in amounts as we select.Participants immediately vest in all elective deferrals and all income and gain attributable to that participation. Matching contributions and allincome and gain attributable to them vest on a case-by-case basis as determined by us. Participants may elect to be paid in either a singlelump-sum payment or annual installments over a period not to exceed ten years. Vested balances are payable upon termination ofemployment, unforeseen70Table of Contentsemergencies, death or total disability of the participant or change of control of us or our insolvency. Participants become our generalunsecured creditors with respect to deferred compensation benefits of our Deferred Compensation Plan.None of our Named Executive Officers participated in our Deferred Compensation Plan during 2013.Deferred Compensation Arrangements –We have, from time to time, entered into Deferred Compensation Arrangements with certain of our executive officers, including two of theNamed Executive Officers. These arrangements are negotiated with individual officers on a case-by-case basis. The status of our DeferredCompensation Arrangements with our Named Executive Officers during 2013 is summarized for each of our Named Executive Officers inthe following table, and further descriptions of them are provided following the table.Nonqualified Deferred CompensationName ExecutiveContributionsin Last FY($) RegistrantContributionin Last FY($) AggregateEarnings (Loss)in Last FY($) AggregateWithdrawals/Distributions($) AggregateBalanceat Last FY($)Ronald A. Duncan --- --- --- --- ---G. Wilson Hughes1 125,000 --- 252,929 620,799 2,861,211John M. Lowber2 135,000 --- 99,035 200,000 1,231,072Gregory F. Chapados --- --- --- --- ---Gregory W. Pearce --- --- --- --- ---_____________________1 Includes earnings of $296 for Mr. Hughes that is reported in the Summary Compensation Table.2 Includes earnings of $14,843 for Mr. Lowber that is reported in the Summary Compensation Table.___________________Mr. Hughes' Deferred Compensation Arrangement with us consists of three components. The first component consisted of deferredcompensation invested in 90,480 shares of Company Class A common stock. The second component is $1,212,359 accrued at year end ofwhich $125,000 in salary were deferred and $110,214 of interest were accrued during 2013. This arrangement with us earns interest at therate of 10% per year based upon the balance at the beginning of the year plus new salary deferrals during the year. The third component is$640,000 accrued at year end of which $30,000 were accrued for 2013 interest. This arrangement earns interest at 7.5% per year basedupon the original $400,000 that was given to Mr. Hughes in consideration for his continued employment at the Company from January 1,2006 through December 31, 2009.Mr. Hughes' Deferred Compensation Arrangement provides that at his discretion or at termination of employment, he is entitled to receivethe full amount owed in a lump sum, in monthly installments paid over a ten-year period, or in installments negotiated with the Company inaccordance with statutory requirements.Mr. Lowber's Deferred Compensation Arrangement with us consists of deferred salary which earns interest on the amounts deferred at 9%per year. As of December 31, 2013 and under this plan, there were accrued $729,309, of which $119,851 had accrued ($65,000 in principalplus $54,851 in interest) and $122,254 had been paid out during 2013. Additionally, effective January 1, 2007, the Company agreed to enterinto a retention agreement with Mr. Lowber. In exchange for his commitment to remain in the employ of the Company through the end of2010, the Company agreed to establish a deferred compensation account in the amount of $350,000 that vested on December 31, 2010. Theaccount is to accrue interest at the rate of 7.25% per annum, compounding annually. The balance in that account was $501,763 as ofDecember 31, 2013, of which $114,185 had accrued ($70,000 in principal plus $44,185 in interest) and $77,747 had been paid out during2013.71Table of ContentsMessrs. Duncan, Chapados and Pearce did not participate in a Deferred Compensation Arrangement with us during 2013.Other than the Deferred Compensation Arrangements described above, no Named Executive Officer was, as of December 31, 2013, entitledto defer any additional consideration. Any additional Deferred Compensation Arrangements would have to be separately negotiated with, andagreed to by, the Compensation Committee.Compensation Committee Interlocks and Insider ParticipationOur Compensation Committee is composed of four members of our board as identified elsewhere in this report. All of these membersserved on the committee during all of 2013. See "Part III – Item 11 – Compensation Discussion and Analysis: Overview." Therelationships of them to us are described elsewhere in this report. See "Part III – Item 10 – Identification," "Part III – Item 12 – PrincipalShareholders" and "Part III – Item 13 – Certain Transactions."Compensation Committee ReportThe Compensation Committee has reviewed and discussed with management the Compensation Discussion and Analysis. Based uponthat review and discussion, the Compensation Committee recommended to our board that the Compensation Discussion and Analysis beincluded in our 2013 annual report.Compensation CommitteeJerry A. Edgerton, ChairStephen M. BrettStephen R. MooneyJames M. SchneiderDirector CompensationThe following table sets forth certain information concerning the cash and non-cash compensation earned by our directors ("DirectorCompensation Plan"), each for services as a director during the year ended December 31, 2013:2013 Director Compensation1 Name FeesEarnedorPaid inCash($) StockAwards2($) OptionAwards($) Non-EquityIncentive PlanCompensation($) Change inPensionValue and NonqualifiedDeferredCompensationEarnings($) All OtherCompensation($) Total($)Stephen M. Brett 57,500 43,950 --- --- --- --- 101,450Bridget L. Baker3 32,500 — --- --- --- --- 32,500Jerry A. Edgerton 57,500 57,135 --- --- --- --- 114,635Scott M. Fisher 57,500 43,950 --- --- --- --- 101,450William P. Glasgow 57,500 43,950 --- --- --- --- 101,450Mark W. Kroloff 57,500 43,950 --- --- --- --- 101,450Stephen R. Mooney 70,000 57,135 --- --- --- --- 127,135James M. Schneider 57,500 43,950 --- --- --- --- 101,450_______________________1 Compensation to Mr. Duncan as a director is described elsewhere in this report. See "Part III – Item 11 – Executive Compensation" and"Compensation Discussion and Analysis."2 Each director, except Ms. Baker, received a grant of awards of 5,000 shares of Company Class A common stock on June 1, 2013 (thegrant date), with the exception of our Audit Committee chair and Compensation Committee chair, Mr. Mooney and Mr. Edgerton,respectively , who received 6,500 shares. The value of the72Table of Contentsshares on the date of grant was $8.79 per share, i.e., the closing price of the stock on Nasdaq on that date and as calculated inaccordance with FASB ASC Topic 718.3 Ms. Baker accepted the appointment to serve on the Company's Board effective July 29, 2013._____________________Our initial Director Compensation Plan was adopted in 2004 by our board to acknowledge and compensate, from time to time, directors onthe board for ongoing dedicated service. During 2013 the plan provided for $50,000 per year (paid quarterly) for all Directors through June 30,2013. Effective July 1, 2013, the Director Compensation Plan provided for $65,000 per year for all Directors with the exception of Mr.Mooney, Audit Committee chair, who will receive an additional $25,000 per year (paid quarterly).During 2013, the stock compensation portion of our Director Compensation Plan consisted of a grant of 5,000 shares to a director for a year ofservice, or a portion of a year of service. Grants are made and vest annually under the plan on June 1 of each year. For 2013, grants ofawards were made under our Director Compensation Plan as of June 1, 2013. As of December 31, 2013, our board anticipated that grants ofawards of 7,500 shares of Class A common stock to each director would be made under the plan as of June 1, 2014. Because the sharesvest upon award, they are subject to taxation based upon the then fair market value of the vested shares.Except for our Director Compensation Plan, during 2013 the directors on our board received no other direct compensation for serving on theboard and its committees. However, they were reimbursed for travel and out-of-pocket expenses incurred in connection with attendance atmeetings of our board and its committees.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related StockholderMattersSecurities Authorized for Issuance under Equity Compensation PlansThe following table sets forth, as of the end of 2013, information on equity compensation plans approved by our shareholders and separatelysuch plans not approved by our shareholders. The information is focused on outstanding options, warrants and rights; the only such plan isour Stock Option Plan as approved by our shareholders.Equity Compensation Plan InformationPlan categoryNumber of securitiesto be issued upon exercise ofoutstanding options, warrants andrightsWeighted-averageexercise price ofoutstanding options,warrants and rights($)Number of securitiesremaining available for futureissuance under equitycompensation plans (excludingsecurities reflected in the secondcolumn)Equity compensation plansapproved by security holders619,9007.743,163,780Total:619,9007.743,163,780Ownership of CompanyPrincipal Shareholders –The following table sets forth, as of December 31, 2013 (unless otherwise noted), certain information regarding the beneficial ownership ofour Class A common stock and Class B common stock by each of the following:•Each person known by us to own beneficially 5% or more of the outstanding shares of Class A common stock or Class Bcommon stock.•Each of our directors.73Table of Contents•Each of the Named Executive Officers.•All of our executive officers and directors as a group.All information with respect to beneficial ownership has been furnished to us by the respective shareholders.Name ofBeneficial Owner1Title ofClass2Amount andNature ofBeneficialOwnership(#)% of Class% of Total SharesOutstanding (Class A & B)2% CombinedVotingPower(Class A & B)2Stephen M. BrettClass A67,7503***Class B------ Ronald A. DuncanClass A1,621,6163,44.35.611.9Class B661,809420.9 Bridget L. BakerClass A5,000*** Class B------ Jerry A. EdgertonClass A45,7503***Class B------ Scott M. FisherClass A56,3343,5*1.37.5Class B511,716516.2 William P. GlasgowClass A92,6943,6***Class B------ Mark W. KroloffClass A36,1003***Class B------ Stephen R. MooneyClass A56,4003***Class B------ James M. SchneiderClass A38,1503***Class B------ G. Wilson HughesClass A828,08672.22.11.2Class B2,6957* John M. LowberClass A362,0228***Class B6,2038* Gregory F. ChapadosClass A459,34491.21.1*Class B---* Gregory W. PearceClass A83,74410***Class B------ Black Rock, Inc.40 East 52nd StreetNew York, New York 10022Class A3,824,00810.39.55.6Class B --- Dimensional Fund Advisors LPPalisades West, Building One6300 Bee Cave RoadAustin, Texas 78746Class A2,040,133115.55.03.0Class B------ GCI 401(k) Plan2550 Denali St., Ste. 1000Anchorage, Alaska 99503Class A4,117,45311.010.36.7Class B49,4181.6 Gary Magnessc/o Raymond L. Sutton, Jr.303 East 17th Ave., Ste 1100Denver, Colorado 80203-1264Class A1,347,9613.64.48.3Class B433,92413.7 74Table of ContentsPrivate ManagementGroup, Inc.15635 Alton Parkway,Suite 400Irvine, California 92606Class A2,754,5107.46.84.0Class B------ John W. Stanton andTheresa E. Gillespie155 108th Avenue., N.E.,Suite 450Bellevue, Washington 98004Class A2,342,6276.39.324.3Class B1,436,46945.4 The Vanguard Group, Inc.100 Vanguard BlvdMalvern, Pennsylvania 19355Class A1,869,932125.04.62.7Class B------ All Directors and ExecutiveOfficers As a Group(17 Persons)Class A4,188,3071311.213.123.1Class B1,182,4231337.4 ______________________*Represents beneficial ownership of less than 1% of the corresponding class or series of stock.1 Beneficial ownership is determined in accordance with Rule 13d-3 of the Exchange Act. Shares of our stock that a person has the right toacquire within 60 days of December 31, 2013 are deemed to be beneficially owned by such person and are included in the computationof the ownership and voting percentages only of such person. Each person has sole voting and investment power with respect to theshares indicated, except as otherwise stated in the footnotes to the table. Addresses are provided only for persons other thanmanagement who own beneficially more than 5% of the outstanding shares of Class A or B common stock. The Class A shares do notinclude the number of Class B shares owned although the Class B shares are convertible on a share-per-share basis into Class Ashares.2 "Title of Class" includes our Class A common stock and Class B common stock. "Amount and Nature of Beneficial Ownership" and "%of Class" are given for each class of stock. "% of Total Shares Outstanding" and "% Combined Voting Power" are given for thecombination of outstanding Class A common stock and Class B common stock, and the voting power for Class B common stock (10votes per share) is factored into the calculation of that combined voting power.3 Includes 5,000 shares of our Class A common stock granted to each of those persons pursuant to the Director Compensation Plan forservices performed during 2013 except for our Audit Committee Chairman and Compensation Committee Chairman, Mr. Mooney andMr. Edgerton, respectively, who each were granted 6,500 shares of our Class A common stock.4 Includes 165,572 shares of Class A common stock and 6,165 shares of Class B common stock allocated to Mr. Duncan under the GCI401(k) Plan as of December 31, 2013. Includes 400,000 shares of Class A common stock subject to stock options granted under theStock Option Plan to Mr. Duncan which he has the right to acquire within 60 days of December 31, 2013 by exercise of the stockoptions. Does not include 55,560 shares of Class A common stock or 8,242 shares of Class B common stock held by the AmandaMiller Trust, with respect to which Mr. Duncan has no voting or investment power. Ms. Miller is Mr. Duncan's daughter, and Mr. Duncandisclaims beneficial ownership of the shares. Does not include 7,500 shares owned by the Neoma Lowndes Trust which Ms. Miller is a50% beneficiary, with respect to which Mr. Duncan has no voting or investment power and Mr. Duncan disclaims beneficial ownership ofthe shares. Does not include 63,186 shares of Class A common stock or 27,020 shares of Class B common stock held by DaniBowman, Mr. Duncan's wife, of which Mr. Duncan disclaims beneficial ownership. Does not include 10,000 shares of Class A commonstock held by Missy, LLC which is 25% owned by Mr. Duncan, 25% owned by Dani Bowman and 50% owned by a trust of which Mr.Duncan’s daughter is the 50% beneficiary, of which securities Mr. Duncan disclaims beneficial ownership (Mr. Duncan claims beneficialownership of an additional 5,000 shares of Class A Common Stock held by Missy, LLC. which are included within the shares for whichMr. Duncan has a pecuniary interest). Includes 925,283 shares of Class A common stock and 655,644 shares of Class B commonstock pledged as security.5 Includes 13,484 shares of Class A and 511,716 shares of Class B common stock owned by Fisher Capital Partners, Ltd. of which Mr.Fisher is a partner.75Table of Contents6 Does not include 158 shares owned by a daughter of Mr. Glasgow. Mr. Glasgow disclaims any beneficial ownership of the shares heldby his daughter.7 Includes 15,230 shares of Class A common stock allocated to Mr. Hughes under the GCI 401(k) Plan, as of December 31,2013. Includes 305,890 shares of Class A common stock pledged as security. Excludes 90,480 shares held by the Company pursuantto Mr. Hughes' Deferred Compensation Agreement.8 Includes 27,834 shares of Class A common stock and 5,933 shares of Class B common stock allocated to Mr. Lowber under the GCI401(k) Plan, as of December 31, 2013.9 Includes 24,578 shares of Class A common stock allocated to Mr. Chapados under the GCI 401(k) Plan, as of December 31,2013. Includes 100,000 shares of Class A common stock subject to stock options granted under the Stock Option Plan to Mr. Chapadoswhich he has the right to acquire within 60 days of December 31, 2013 by exercise of those options. Includes 110,344 shares of Class Acommon stock pledged as security.10 Includes 4,292 shares of Class A common stock allocated to Mr. Pearce under the GCI 401(k) Plan, as of December 31, 2013.11 As disclosed in Schedule 13G filed with the SEC on February 2, 2013, Dimensional Fund Advisors LP has sole voting power for1,941,121 shares of Class A common stock and sole dispositive power for 2,040,133 shares of Class A common stock.12 As disclosed in Schedule 13G filed with the SEC on February 11, 2014, The Vanguard Group, Inc. has sole voting power of 51,300shares of Class A common stock, shared dispositive power for 1,819,132 shares of Class A common stock and sole dispositive powerfor 50,800 shares of Class A common stock.13 Includes 500,000 shares of Class A common stock which such persons have the right to acquire within 60 days of December 31, 2013through the exercise of vested stock options. Includes 294,075 shares of Class A common stock and 12,098 shares of Class B commonstock allocated to such persons under the GCI 401(k) Plan.______________________Changes in Control –Pledged Assets and Securities. Our obligations under our credit facilities are secured by substantially all of our assets. Should there be adefault by us under such agreements, our lenders could gain control of our assets. We have been at all times during 2013 in compliancewith all material terms of these credit facilities.Senior Notes. In 2009, GCI, Inc., our wholly-owned subsidiary, sold $425.0 million in aggregate principal amount of senior debt securitiesdue in 2019.The senior notes are subject to the terms of an indenture entered into by GCI, Inc. Upon the occurrence of a change of control, as defined inthe Indenture, GCI, Inc. is required to offer to purchase those senior notes at a price equal to 101% of their principal amount, plus accruedand unpaid interest. The indenture provides that those senior notes are redeemable at the option of GCI, Inc. at specified redemption pricescommencing in 2014. The terms of the senior notes contain limitations on the ability of GCI, Inc. and its restricted subsidiaries to incuradditional indebtedness, limitations on investments, payment of dividends and other restricted payments and limitations on liens, assetsales, mergers, transactions with affiliates and operation of unrestricted subsidiaries. The indenture also limits the ability of GCI, Inc. and itsrestricted subsidiaries to enter into, or allow to exist, specified restrictions on the ability of GCI, Inc. to receive distributions from restrictedsubsidiaries.For purposes of the indenture and the senior notes, the restricted subsidiaries consist of all of our direct or indirect subsidiaries, with theexception of certain unrestricted subsidiaries. Under the terms of the indenture, an unrestricted subsidiary is a subsidiary of GCI, Inc. sodesignated from time to time in accordance with procedures as set forth in the indenture. As of December 31, 2013, these unrestrictedsubsidiaries consisted of GCI Community Development, LLC and Unicom, Inc.In May 2011, GCI, Inc. issued an additional $325 million of senior notes at 6.75% interest due in June 2021. The new senior notes havesubstantially similar terms as the 2009 senior notes. They were used to pay off previously issued Senior Notes.76Table of ContentsWe and GCI, Inc. have since the issuance of the senior notes and up through December 31, 2013, been in compliance with all materialterms of the Indentures including making timely payments on the obligations of GCI, Inc.Item 13. Certain Relationships and Related Transactions, and Director IndependenceCertain TransactionsTransactions with Related Persons –Stanton Shareholdings, Registration Rights Agreement. As of December 31, 2013, John W. Stanton and Theresa E. Gillespie,husband and wife (collectively, "Stantons"), continued to be significant shareholders of our Class B common stock. As of that date, neitherthe Stantons nor the Stantons' affiliates were our directors, officers, nominees for election as directors, or members of the immediate familyof such directors, officers, or nominees.We are a party to a registration rights agreement ("Stanton Registration Rights Agreement") with the Stantons regarding all unregisteredshares the Stantons hold in our Class B common stock and any shares of our Class A common stock resulting from conversion of thatClass B common stock to Class A common stock. The basic terms of the Stanton Registration Rights Agreement are as follows. If wepropose to register any of our securities under the Securities Act of 1933, as amended ("Securities Act") for our own account or for the accountof one or more of our shareholders, we must notify the Stantons of that intent. In addition, we must allow the Stantons an opportunity toinclude the holder's shares ("Stanton Registerable Shares") in that registration.Under the Stanton Registration Rights Agreement, the Stantons also have the right, under certain circumstances, to require us to register allor any portion of the Stanton Registerable Shares under the Securities Act. The agreement is subject to certain limitations and restrictions,including our right to limit the number of Stanton Registerable Shares included in the registration. Generally, we are required to pay allregistration expenses in connection with each registration of Stanton Registerable Shares pursuant to this agreement.The Stanton Registration Rights Agreement specifically states we are not required to effect any registration on behalf of the Stantonsregarding Stanton Registerable Shares if the request for registration covers an aggregate number of Stanton Registerable Shares having amarket value of less than $1.5 million. The agreement further states we are not required to effect such a registration for the Stantons wherewe have at that point previously filed two registration statements with the SEC, or where the registration would require us to undergo aninterim audit or prepare and file with the SEC sooner than otherwise required financial statements relating to the proposedtransaction. Finally, the agreement states we are not required to effect such a registration when in the opinion of our legal counsel aregistration is not required in order to permit resale under Rule 144 as adopted by the SEC pursuant to the Exchange Act.The Stanton Registration Rights Agreement provides that the first demand for registration by the Stantons must be for no less than 15% ofthe total number of Stanton Registerable Shares. However, the Stantons may take the opportunity to require us to include the StantonRegisterable Shares as incidental to a registered offering proposed by us.Duncan Leases. In 1991, we entered into a long-term capital lease agreement with a partnership in which Mr. Duncan held a 50%ownership interest. Mr. Duncan later sold that interest to an individual who later became his spouse. However, Mr. Duncan remains aguarantor on the note which was used to finance the acquisition of the property subject to the lease. The leased asset was capitalized in 1991at the owner's cost of $900,000 and the related obligation was recorded in the accompanying financial statements. The lease agreement wasamended in 2008, and we have increased our existing capital lease asset and liability by $1.3 million to record the extension of the capitallease. The amended lease terminates on September 30, 2026. The property consists of a building presently occupied by us. As ofDecember 31, 2013, the payments on the lease were $23,932 per month. They continue at that rate through September 2014. In October2014, the payments on the lease will increase to $24,732 per month.In January 2001 we entered into an aircraft operating lease agreement with a company owned by GCI’s President and CEO. The lease wasamended several times, most recently on May 9, 2011. The amended lease agreement77Table of Contentsadded the lease of a second aircraft. The lease term of the original aircraft could be terminated at any time upon 90 days written notice. Thisnotice was provided and as of January 1, 2013, the original aircraft lease, and its monthly rate of $45,000, ended. The lease term of thesecond aircraft may be terminated at any time upon 12 months’ written notice. The monthly lease rate of the second aircraft is $132,000. In2001, we paid a deposit of $1.5 million in connection with the lease. The deposit will be repaid to us no later than six months after theagreement terminates.Review Procedure for Transactions with Related Persons –The following describes our policies and procedures for the review, approval or ratification of transactions in which we are to be a participantand where the amount involved in each instance exceeds $120,000 and in which any related person had or is to have a direct or indirectmaterial interest ("Related Transactions"). Here, we use the term "related person" to mean any person who is one of our directors, anominee for director, an immediate family member of one of our directors or executive officers, any person who is a holder of five percent ormore of a class of our common stock, or any immediate family member of such a holder.A related person who is one of our officers, directors or employees ("Employee") is subject to our Ethics Code. The Ethics Code requires theEmployee to act in the best interest of the Company and to avoid situations which may conflict with this obligation. The code specificallyprovides that a conflict of interest occurs when an Employee's private interest interferes in any way with our interest. In the event anEmployee suspects such a conflict, or even an appearance of conflict, he or she is urged by the Ethics Code to report the matter to anappropriate authority. The Ethics Code, Nominating and Corporate Governance Committee Charter and the Audit Committee Charter definethat authority as being our Chief Financial Officer, the Nominating and Corporate Governance Committee, the Audit Committee (in thecontext of suspected illegal or unethical behavior-related violations pertaining to accounting, or internal controls on accounting or auditmatters), or the Employee's supervisor within the Company, as the case may be.The Ethics Code further provides that an Employee is prohibited from taking a personal interest in a business opportunity discovered throughuse of corporate position, information or property that properly belongs to us. The Ethics Code also provides that an Employee must notcompete with, and in particular, must not use corporate position, information, or property for personal gain or to compete with, us.The Ethics Code provides that any waiver of its provisions for our executive officers and directors may be made only by our board and mustbe promptly disclosed to our shareholders. This disclosure must include an identification of the person who received the waiver, the date ofthe grant of the waiver by our board, and a brief description of the circumstances and reasons under which it was given.The Ethics Code is silent as to the treatment of immediate family members of our Employees, holders of five percent or more of a class ofour stock, or the immediate family members of them. We consider such Related Transactions with such persons on a case-by-case basis, ifat all, by analogy to existing procedures as above described pertaining to our Employees.During 2013, there were no new Transactions with Related Persons. The leases described previously were entered into prior to theestablishment of the Ethics Code.Director IndependenceThe term Independent Director as used by us is an individual, other than one of our executive officers or employees, and other than anyother individual having a relationship which in the opinion of our board would interfere with the exercise of independent judgment in carryingout the responsibilities of a director. See "Part III – Item 10 – Audit Committee, Audit Committee Financial Expert."Mr. Brett, our Chairman of the Board, while in that capacity an officer under our Bylaws and responsible for the conduct of our boardmeetings and shareholder meetings when present, is considered by our board to have no greater influence on our affairs or authority to acton behalf of us than any of the non-executive directors on our board.78Table of ContentsOur board believes each of its members satisfies the definition of an Independent Director, with the exception of Mr. Duncan who is an officerand employee of the Company. That is, in the case of all other board members, our board believes each of them is an individual having arelationship which does not interfere with the exercise of independent judgment in carrying out the member's director responsibilities to us.Item 14. Principal Accountant Fees and ServicesOverviewOn February 26, 2014, our Audit Committee approved the appointment of Grant Thornton as the Company’s External Accountant for2014. Also on that date, our board ratified that appointment by the Audit Committee.Pre-Approval Policies and ProceduresWe have established as policy, through the adoption of the Audit Committee Charter that, before our External Accountant is engaged by us torender audit services, the engagement must be approved by the Audit Committee.Our Audit Committee Charter provides that our Audit Committee is directly responsible for appointment, compensation, retention, oversight,qualifications and independence of our External Accountant. Also under our Audit Committee Charter, all audit services provided by ourExternal Accountant must be pre-approved by the Audit Committee.Our pre-approval policies and procedures with respect to Non-Audit Services include as a part of the Audit Committee Charter that the AuditCommittee may choose any of the following options for approving such services:•Full Audit Committee – The full Audit Committee can consider each Non-Audit Service.•Designee – The Audit Committee can designate one of its members to approve a Non-Audit Service, with that member reportingapprovals to the full committee.•Pre-Approval of Categories – The Audit Committee can pre-approve categories of Non-Audit Services. Should this option bechosen, the categories must be specific enough to ensure both of the following –◦The Audit Committee knows exactly what it is approving and can determine the effect of such approval on auditorindependence.◦Management will not find it necessary to decide whether a specific service falls within a category of pre-approved Non-AuditService.The Audit Committee's pre-approval of Non-Audit Services may be waived under specific provisions of the Audit Committee Charter. Theprerequisites for waiver are as follows: (1) the aggregate amount of all Non-Audit Services constitutes not more than 5% of the total amount ofrevenue paid by us to our External Accountant during the fiscal year in which those services are provided; (2) the service is originally thoughtto be a part of an audit by our External Accountant; (3) the service turns out to be a Non-Audit Service; and (4) the service is promptly broughtto the attention of the Audit Committee and approved prior to completion of the audit by the committee or by one or more members of thecommittee who are members of our board to whom authority to grant such approvals has been delegated by the committee.During 2013, there were no waivers of our Audit Committee pre-approval policy.79Table of ContentsFees and ServicesThe aggregate fees billed to us by our External Accountant in each of these categories for each of 2013 and 2012 are set forth as follows:External Accountant Auditor FeesType of Fees 2013 2012Audit Fees1 $2,291,961 $1,660,909Audit-Related Fees2 29,400 29,846Tax Fees3 147,761 54,964All Other Fees4 --- ---Total $2,469,122 $1,745,719____________________________ 1Consists of fees for our annual financial statement audit, quarterly financial statement reviews, reviews of other filings by us with theSEC, audit of our internal control over financial reporting and for services that are normally provided by an auditor in connection withstatutory and regulatory filings or engagements.2 Consists of fees for audit of the GCI 401(k) Plan and review of the related annual report on Form 11-K filed with the SEC.3 Consists of fees for review of our state and federal income tax returns and consultation on various tax advice and tax planning matters.4 Consists of fees for any services not included in the first three types of fees identified in the table.___________________All of the services described above were approved in conformity with the Audit Committee's pre-approval policy.80Table of ContentsPart IVItem 15. Exhibits, Consolidated Financial Statement Schedules(1) Consolidated Financial StatementsPage No. Included in Part II of this Report: Reports of Independent Registered Public Accounting Firm82 Consolidated Balance Sheets, December 31, 2013 and 201284 Consolidated Income Statements, years ended December 31, 2013, 2012 and 201186 Consolidated Statements of Stockholders’ Equity, years ended December 31, 2013, 2012 and 201187 Consolidated Statements of Cash Flows, years ended December 31, 2013, 2012 and 201188 Notes to Consolidated Financial Statements89 (2) Consolidated Financial Statement Schedules Schedules are omitted, as they are not required or are not applicable, or the required information is shown in theapplicable financial statements or notes thereto. (3) Exhibits12381Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and ShareholdersGeneral Communication, Inc.We have audited the accompanying consolidated balance sheets of General Communication, Inc. (an Alaska corporation) and subsidiaries(collectively, the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income, stockholders’ equity,and cash flows for each of the three years in the period ended December 31, 2013. These financial statements are the responsibility of theCompany’s management. Our responsibility is to express an opinion on these financial statements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financialstatements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well asevaluating 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 GeneralCommunication, Inc. and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for each ofthe three years in the period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States ofAmerica.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’sinternal control over financial reporting as of December 31, 2013, based on criteria established in the 1992 Internal Control-IntegratedFramework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report datedMarch 26, 2014 expressed an unqualified opinion thereon./s/ GRANT THORNTON LLPSeattle, WashingtonMarch 26, 201482Table of ContentsReport of Independent Registered Public Accounting FirmBoard of Directors and ShareholdersGeneral Communication, Inc.We have audited the internal control over financial reporting of General Communication, Inc. (an Alaska corporation) and subsidiaries(collectively, the “Company”) as of December 31, 2013, based on criteria established in the 1992 Internal Control-Integrated Frameworkissued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The Company’s management isresponsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control overfinancial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting (“Management’sReport”). Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. Our auditof, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reportingassociated with total net revenue of $13.6 million of Alaska Wireless Networks (“AWN”), a consolidated subsidiary of the Company, for theyear ended December 31, 2013. As indicated in Management’s Report, on July 22, 2013, the Company closed the transactions under theWireless Agreement entered into on June 4, 2012, pursuant to which the parties agreed to contribute the respective wireless network assetsof the Company, Alaska Communications Systems (“ACS”) and their affiliates to AWN. Management’s assertion on the effectiveness of theCompany’s internal control excluded internal control over financial reporting associated with AWN net revenue totaling $13.6 million.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financialreporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting,assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based onthe assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our auditprovides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability offinancial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accountingprinciples. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) providereasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generallyaccepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations ofmanagement and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, orthat the degree of compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013,based on criteria established in the 1992 Internal Control-Integrated Framework issued by COSO.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidatedfinancial statements of the Company as of and for the year ended December 31, 2013, and our report dated March 26, 2014 expressed anunqualified opinion on those financial statements./s/ GRANT THORNTON LLPSeattle, WashingtonMarch 26, 201483Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Amounts in thousands)December 31,ASSETS2013 2012Current assets: Cash and cash equivalents$44,971 24,491 Receivables (including $28,000 from a related party at December 31, 2013)228,372 150,436Less allowance for doubtful receivables2,346 3,215Net receivables226,026 147,221 Deferred income taxes39,753 12,897Inventories10,347 12,098Prepaid expenses7,725 8,441Other current assets230 1,678Total current assets329,052 206,826 Property and equipment in service, net of depreciation969,578 838,247Construction in progress87,476 94,418Net property and equipment1,057,054 932,665Goodwill219,041 77,294Cable certificates191,635 191,635Wireless licenses91,400 25,967Other intangible assets, net of amortization71,435 16,560Deferred loan and senior notes costs, net of amortization of $6,545 and $4,554 at December 31, 2013and 2012, respectively12,129 11,189Other assets40,061 44,386Total other assets625,701 367,031Total assets$2,011,807 1,506,522 See accompanying notes to consolidated financial statements. Continued84Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Continued)(Amounts in thousands) December 31,LIABILITIES AND STOCKHOLDERS’ EQUITY 2013 2012Current liabilities: Current maturities of obligations under long-term debt and capital leases $9,301 7,923Accounts payable (including $11,200 to a related party at December 31, 2013) 65,095 52,384Accrued payroll and payroll related obligations 29,855 19,440Deferred revenue 27,586 25,218Accrued liabilities 14,359 15,242Accrued interest 7,088 6,786Subscriber deposits 1,326 1,366Total current liabilities 154,610 128,359 Long-term debt, net 1,045,144 875,123Obligations under capital leases, excluding current maturities 66,261 72,725Obligation under capital lease due to related party, excluding current maturity 1,880 1,892Deferred income taxes 161,476 123,661Long-term deferred revenue 88,259 89,815Other liabilities 36,823 25,511Total liabilities 1,554,453 1,317,086 Commitments and contingencies Stockholders’ equity: Common stock (no par): Class A. Authorized 100,000 shares; issued 37,299 and 38,534 shares at December 31, 2013and 2012, respectively; outstanding 37,209 and 38,357 shares at December 31, 2013 and2012, respectively 11,467 22,703Class B. Authorized 10,000 shares; issued and outstanding 3,165 and 3,169 shares atDecember 31, 2013 and 2012, respectively; convertible on a share-per-share basis into ClassA common stock 2,673 2,676Less cost of 90 and 177 Class A common shares held in treasury at December 31, 2013 and2012, respectively (866) (1,617)Paid-in capital 26,880 25,832Retained earnings 116,990 107,584Total General Communication, Inc. stockholders' equity 157,144 157,178Non-controlling interests 300,210 32,258Total stockholders’ equity 457,354 189,436Total liabilities and stockholders’ equity $2,011,807 1,506,522 See accompanying notes to consolidated financial statements.85Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESCONSOLIDATED INCOME STATEMENTSYEARS ENDED DECEMBER 31, 2013, 2012, AND 2011(Amounts in thousands, except per share amounts)2013 2012 2011Revenues: Non-related party$782,971 710,181 679,381Related party28,677 — —Total revenues811,648 710,181 679,381 Cost of goods sold (exclusive of depreciation and amortization shown separatelybelow): Non-related party275,701 247,501 227,399Related party4,761 — —Total cost of goods sold280,462 247,501 227,399 Selling, general and administrative expenses271,065 243,248 235,521Depreciation and amortization expense147,259 130,452 125,937Operating income112,862 88,980 90,524 Other income (expense): Interest expense (including amortization of deferred loan fees)(69,725) (67,747) (68,258)Loss on extinguishment of debt(103) — (9,111)Other(350) 17 (264)Other expense, net(70,178) (67,730) (77,633)Income before income tax expense42,684 21,250 12,891Income tax expense(10,957) (12,088) (7,405) Net income31,727 9,162 5,486Net income (loss) attributable to non-controlling interests22,321 (511) (238)Net income attributable to General Communication, Inc.$9,406 9,673 5,724Basic net income attributable to General Communication, Inc. commonstockholders per Class A common share$0.23 0.23 0.13Basic net income attributable to General Communication, Inc. commonstockholders per Class B common share$0.23 0.23 0.13Diluted net income attributable to General Communication, Inc. commonstockholders per Class A common share$0.23 0.23 0.12Diluted net income attributable to General Communication, Inc. commonstockholders per Class B common share$0.23 0.23 0.12 See accompanying notes to consolidated financial statements. 86Table of Contents GENERAL COMMUNICATION, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITYYEARS ENDED DECEMBER 31, 2013, 2012 AND 2011(Amounts in thousands)Class ACommonStock Class BCommonStock Class Aand BSharesHeld inTreasury Paid-inCapital RetainedEarnings Non-controllingInterests TotalStockholders’EquityBalances at January 1, 2011$69,396 2,677 (2,249) 37,075 92,200 — 199,099Net income (loss)— — — — 5,724 (238) 5,486Common stock repurchasesand retirements(55,685) — 24 — — — (55,661)Shares issued under stock option plan947 — — — — — 947Issuance of restricted stock awards11,523 — — (11,523) — — —Share-based compensation expense— — — 7,243 — — 7,243Investment by non-controlling interest— — — — — 16,546 16,546Other(2) 2 — — (13) — (13)Balances at December 31, 201126,179 2,679 (2,225) 32,795 97,911 16,308 173,647Net income (loss)— — — — 9,673 (511) 9,162Common stock repurchasesand retirements(17,701) — 90 — — — (17,611)Shares issued under stock option plan2,118 — — — — — 2,118Issuance of restricted stock awards12,104 — — (12,104) — — —Share-based compensation expense— — — 5,072 — — 5,072Issuance of treasury shares related todeferred compensation payment— — 511 69 — — 580Investment by non-controlling interest— — — — — 16,461 16,461Other3 (3) 7 — — — 7Balances at December 31, 201222,703 2,676 (1,617) 25,832 107,584 32,258 189,436Net income— — — — 9,406 22,321 31,727Common stock repurchasesand retirements(17,338) — 130 — — — (17,208)Shares issued under stock option plan622 — — — — — 622Issuance of restricted stock awards5,477 — — (5,477) — — —Share-based compensation expense— — — 6,525 — — 6,525Issuance of treasury shares related todeferred compensation payment— — 621 — — — 621Investment by non-controlling interests— — — — — 267,642 267,642Distribution to non-controlling interests— — — — — (22,011) (22,011)Other3 (3) — — — — —Balances at December 31, 2013$11,467 2,673 (866) 26,880 116,990 300,210 457,354 See accompanying notes to consolidated financial statements.87Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSYEARS ENDED DECEMBER 31, 2013, 2012 AND 2011(Amounts in thousands)2013 2012 2011Cash flows from operating activities: Net income$31,727 9,162 5,486Adjustments to reconcile net income to net cash provided by operatingactivities: Depreciation and amortization expense147,259 130,452 125,937Deferred income tax expense10,957 12,088 7,405Share-based compensation expense6,638 5,040 6,620Loss on extinguishment of debt103 — 9,111Other noncash income and expense items5,128 6,651 8,555Change in operating assets and liabilities(42,178) (10,610) (28,680)Net cash provided by operating activities159,634 152,783 134,434Cash flows from investing activities: Purchases of property and equipment(180,554) (146,038) (177,090)Purchase of businesses, net of cash received(107,600) (1,874) (352)Restricted cash23,997 (25,244) (16,621)Purchases of other assets and intangible assets(6,027) (6,152) (5,423)Grant proceeds2,405 10,403 35,060Other1,428 — 233Net cash used in investing activities(266,351) (168,905) (164,193)Cash flows from financing activities: Borrowing on Senior Credit Facility261,000 70,000 142,000Repayment of debt and capital lease obligations(98,152) (64,540) (429,626)Distribution to non-controlling interest(17,845) — —Purchase of treasury stock to be retired(17,208) (17,611) (55,661)Payment of debt issuance costs(2,990) — (3,603)Borrowing of other long-term debt1,770 4,729 35,201Proceeds from stock option exercises622 2,118 947Investment by non-controlling interests— 16,461 16,546Issuance of Senior Notes— — 325,000Payment of Senior Notes call premiums— — (4,728)Other— 69 —Net cash provided by financing activities127,197 11,226 26,076Net increase (decrease) in cash and cash equivalents20,480 (4,896) (3,683)Cash and cash equivalents at beginning of period24,491 29,387 33,070Cash and cash equivalents at end of period$44,971 24,491 29,387 See accompanying notes to consolidated financial statements. 88Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements(1) Business and Summary of Significant Accounting PrinciplesIn the following discussion, General Communication, Inc. (“GCI”) and its direct and indirect subsidiaries are referred to as “we,” “us” and“our.”(a)BusinessGCI, an Alaska corporation, was incorporated in 1979. We offer the following services primarily in Alaska:•Postpaid and prepaid wireless telephone services and sale of wireless telephone handsets and accessories,•Video services,•Internet access services,•Wholesale wireless, including postpaid and prepaid wireless plans for resale by other carriers and roaming for certainwireless carriers,•Origination and termination of wireline traffic for certain common carriers,•Local and long-distance telephone service,•Data network services,•Broadband services, including our SchoolAccess® offering to rural school districts, our ConnectMD® offering to rural hospitalsand health clinics, and managed video conferencing,•Managed services to certain commercial customers,•Sales and service of dedicated communications systems and related equipment, and•Lease, service arrangements and maintenance of capacity on our fiber optic cable systems used in the transmission ofservices within Alaska and between Alaska and the remaining United States and foreign countries.(b)Basis of Presentation and Principles of ConsolidationOur consolidated financial statements include the consolidated accounts of GCI and its wholly owned subsidiaries, The AlaskaWireless Network, LLC ("AWN") of which we own a two-third interest and four variable interest entities (“VIEs”) for which we are theprimary beneficiary after providing certain loans and guarantees and have been prepared in accordance with accounting principlesgenerally accepted in the United States of America ("GAAP"). These VIEs are Terra GCI Investment Fund, LLC (“TIF”), Terra GCI 2Investment Fund, LLC (“TIF 2”), Terra GCI 2-USB Investment Fund, LLC (“TIF 2-USB”) and Terra GCI 3 Investment Fund, LLC(“TIF 3”). TIF became a VIE on August 30, 2011. TIF 2 and TIF 2-USB became VIEs on October 3, 2012. TIF 3 became a VIE onDecember 11, 2012. We also include in our consolidated financial statements non-controlling interests in consolidated subsidiariesfor which our ownership is less than 100 percent. All significant intercompany transactions between non-regulated affiliates of ourcompany are eliminated. Intercompany transactions generated between regulated and non-regulated affiliates of our company arenot eliminated in consolidation.(c)Non-controlling InterestsNon-controlling interests represent the equity ownership interests in consolidated subsidiaries not owned by us. Non-controllinginterests are adjusted for contributions, distributions, and earnings (loss) attributable to the non-controlling interest partners of theconsolidated entities. Income and loss is allocated to the non-controlling interests based on the respective partnership agreements.89Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (d)AcquisitionsAWNOn July 22, 2013, we closed the transactions under the Asset Purchase and Contribution Agreement (“Wireless Agreement”) andother related agreements entered into on June 4, 2012 by and among Alaska Communications Systems Group, Inc. (“ACS”), GCI,ACS Wireless, Inc., a wholly owned subsidiary of ACS, GCI Wireless Holdings, LLC, a wholly owned subsidiary of GCI, andAWN, pursuant to which the parties agreed to contribute the respective wireless network assets of GCI, ACS and their affiliates toAWN. AWN provides wholesale services to GCI and ACS. GCI and ACS use the AWN network in order to continue to sell servicesto their respective retail customers. GCI and ACS continue to compete against each other and other wireless providers in the retailwireless market.Under the terms of the Wireless Agreement, we contributed our wireless network assets and certain rights to use capacity to AWN.Additionally, ACS contributed its wireless network assets and certain rights to use capacity to AWN. As consideration for thecontributed business assets and liabilities, ACS received $100.0 million in cash from GCI, a one-third ownership interest in AWNand entitlements to receive preferential cash distributions totaling $190.0 million over the first four years of AWN’s operations("Preference Period") contingent on the future cash flows of AWN. The preferential cash distribution is cumulative and may be paidbeyond the Preference Period until the entire $190.0 million is paid. We believe ACS's preferential cash distributions are expected tobe higher than that which they would receive from their one-third interest. We received a two-third ownership interest in AWN, aswell as entitlements to receive all remaining cash distributions after ACS’s preferential cash distributions during the PreferencePeriod. The distributions to each member are subject to adjustment based on the number of ACS and GCI wireless subscribers,with the aggregate adjustment capped at $21.8 million for each member over the Preference Period. Following the PreferencePeriod, we and ACS will receive distributions proportional to our ownership interests.We accounted for the acquisition of AWN using the acquisition method of accounting for business combinations with GCI treated asthe acquiring entity. Accordingly, the assets and liabilities contributed by ACS were recorded at estimated fair values as of July 23,2013, using the acquisition method of accounting in accordance with Accounting Standards Codification ("ASC") 805, BusinessCombinations. We used a combination of the discounted cash flows and market method to value the wireless licenses. We used thecost approach to value the acquired fixed assets and rights to use capacity assets. We used a discounted cash flow method todetermine the fair value of the non-controlling interest. The assets and liabilities contributed to AWN by GCI were measured at theircarrying amount immediately prior to the contribution as GCI is maintaining control over the assets and liabilities.90Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements We have not completed our analysis of the valuation, therefore, the amounts recorded and classifications used for the assetsacquired and liabilities assumed are provisional and subject to change. We will finalize the amounts recognized as we obtain theinformation necessary to complete our analysis. The following table summarizes the preliminary purchase price and the estimatedfair value of ACS’s assets acquired and liabilities assumed, effective July 23, 2013 (amounts in thousands):Purchase price: Cash consideration paid $100,000Fair value of the one-third ownership interest of AWN 267,642Total purchase price $367,642 Assets acquired and liabilities assumed: Acquired assets Current assets $16,952Property and equipment, including construction in progress 82,473Goodwill 140,081Wireless licenses 65,433Rights to use capacity 52,636Other assets 16,078Fair value of liabilities assumed (6,011)Total fair value of assets acquired and liabilities assumed $367,642Goodwill in the amount of $140.1 million was recorded as a result of the acquisition and assigned to our Wireless segment.Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and represents the estimatedfuture economic benefits arising from other assets acquired that could not be individually identified and separately recognized. Thegoodwill is primarily the result of synergies expected from the combination. Other assets is primarily comprised of future capacityreceivable.The acquisition resulted in additional revenues of $50.6 million for the year ended December 31, 2013. It is impracticable for us todetermine the amount of earnings of the acquired business included in our Consolidated Income Statement for the year endedDecember 31, 2013, due to the significant transfer of personnel, fixed assets and other expenses into and between newly createdand historical cost centers that has occurred subsequent to the acquisition.Unaudited pro forma financial information does not purport to be indicative of the actual results that would have occurred if theacquisition had actually been completed on January 1, 2012, nor is it necessarily indicative of the future revenue of the combinedcompany. The following unaudited pro forma financial information is presented as if the acquisition occurred on January 1, 2012(amounts in thousands): (unaudited) Years Ended December 31, 2013 2013 2012Pro forma consolidated revenue$897,270 848,676Supplemental pro forma earnings have not been provided as it would be impracticable due to the nature of GCI's and ACS'srespective wireless operations prior to the business combination. GCI and ACS were unable to disaggregate the components ofexpenses related to their wireless operations contributed to AWN91Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements and thus the amounts would require estimates so significant that the resulting information would not be meaningful.Transaction costs of $1.8 million and $2.9 million were recorded in selling, general and administrative expense in the years endedDecember 31, 2013 and 2012, respectively.Denali Media HoldingsEffective November 1, 2013 we closed the transactions under the asset purchase agreements, pursuant to which Denali MediaHoldings, Corp., a wholly owned subsidiary of GCI, through its wholly owned subsidiaries, Denali Media Anchorage, Corp. andDenali Media Southeast, Corp., agreed to purchase three Alaska broadcast stations: CBS affiliate KTVA-TV of Anchorage and NBCaffiliates KATH-TV in Juneau and KSCT-TV of Sitka, for a total of $7.6 million (“Media Agreements”). We accounted for theacquisitions using the acquisition method of accounting for business combinations with GCI treated as the acquiring entity. Weconsider these business combinations to be immaterial to our consolidated financial statements.(e)Recently Issued Accounting PronouncementsThere were various updates recently issued which represented technical corrections to the accounting literature or application tospecific industries. None of the updates are expected to a have a material impact on our consolidated financial position, results ofoperations or cash flows.(f)Recently Adopted Accounting PronouncementsAccounting Standards Update (“ASU”) 2012-2, “Intangibles – Goodwill and Other (Topic 350): Testing Indefinite-Lived IntangibleAssets for Impairment” allows an entity to assess qualitative factors (such as changes in management, key personnel, strategy, keytechnology or customers) to determine if it is more likely than not that an indefinite-lived intangible asset is impaired and thuswhether it is necessary to perform the quantitative impairment test in accordance with GAAP. The adoption of ASU 2012-2 onJanuary 1, 2013 did not have a material impact on our income statements, financial position or cash flows.ASU 2012-4, “Technical Corrections and Improvements” includes amendments that cover a wide range of topics in the ASC. Theseamendments include technical corrections and improvements to the ASC and conforming amendments related to fair valuemeasurements. The adoption of ASU 2012-4 on January 1, 2013 did not have a material impact on our income statements,financial position or cash flows.(g)Regulatory AccountingWe account for our regulated operations in accordance with the accounting principles for regulated enterprises. This accountingrecognizes the economic effects of rate regulation by recording cost and a return on investment as such amounts are recoveredthrough rates authorized by regulatory authorities. Accordingly, plant and equipment is depreciated over lives approved by regulatorsand certain costs and obligations are deferred based upon approvals received from regulators to permit recovery of such amounts infuture years. Our cost studies and depreciation rates for our regulated operations are subject to periodic audits that could result in achange to recorded revenues.(h)Earnings per Common ShareWe compute net income per share of Class A and Class B common stock using the “two class” method. Therefore, basic netincome per share is computed by dividing net income applicable to common stockholders by the weighted average number ofcommon shares outstanding during the period. Diluted net income per share is computed by dividing net income by the weightedaverage number of common and dilutive common equivalent shares outstanding during the period. The computation of the dilutivenet income per share of Class A common stock assumes the conversion of Class B common stock to Class A common stock, whilethe dilutive net income per share of Class B common stock does not assume the conversion of those shares. Additionally, inapplying the “two-class” method, undistributed earnings are allocated to both common shares and participating securities. Ourrestricted stock grants are entitled to dividends and meet the criteria of a participating security.Undistributed earnings for each year are allocated based on the contractual participation rights of Class A and Class B commonshares as if the earnings for the year had been distributed. In accordance with our Articles of Incorporation, if and when dividends aredeclared on our common stock in accordance with92Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Alaska corporate law, equivalent dividends shall be paid with respect to the shares of Class A and Class B common stock. Bothclasses of common stock have identical dividend rights and would therefore share equally in our net assets in the event ofliquidation. As such, we have allocated undistributed earnings on a proportionate basis.Earnings per common share (“EPS”) and common shares used to calculate basic and diluted EPS consist of the following (amountsin thousands, except per share amounts): Year EndedDecember 31, 2013 Class A Class BBasic net income per share: Numerator: Allocation of undistributed earnings$8,678 728 Denominator: Weighted average common shares outstanding37,732 3,166Basic net income attributable to GCI common stockholders per common share$0.23 0.23 Diluted net income per share: Numerator: Allocation of undistributed earnings for basic computation$8,678 728Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares728 —Effect of share based compensation that may be settled in cash or shares— (3)Net income adjusted for allocation of undistributed earnings$9,406 725 Denominator: Number of shares used in basic computation37,732 3,166Conversion of Class B to Class A common shares outstanding3,166 —Unexercised stock options142 —Number of shares used in per share computation41,040 3,166Diluted net income attributable to GCI common stockholders per common share$0.23 0.2393Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Years Ended December 31, 2012 2011 Class A Class B Class A Class BBasic net income per share: Numerator: Allocation of undistributed earnings$8,938 735 $5,323 401 Denominator: Weighted average common shares outstanding38,560 3,170 42,175 3,175Basic net income attributable to GCI commonstockholders per common share$0.23 0.23 $0.13 0.13 Diluted net income per share: Numerator: Allocation of undistributed earnings for basic computation$8,938 735 $5,323 401Reallocation of undistributed earnings as a result ofconversion of Class B to Class A shares735 — 401 —Reallocation of undistributed earnings as a result ofconversion of dilutive securities— (8) — (30)Effect of share based compensation that may be settled incash or shares(13) — (367) —Net income adjusted for allocation of undistributedearnings and effect of share based compensation thatmay be settled in cash or shares$9,660 727 $5,357 371 Denominator: Number of shares used in basic computation38,560 3,170 42,175 3,175Conversion of Class B to Class A common sharesoutstanding3,170 — 3,175 —Unexercised stock options158 — 322 —Effect of share based compensation that may be settled incash or shares231 — 217 —Number of shares used in per share computation42,119 3,170 45,889 3,175Diluted net income attributable to GCI commonstockholders per common share$0.23 0.23 $0.12 0.12Weighted average shares associated with outstanding share awards for the years ended December 31, 2013, 2012 and 2011 whichhave been excluded from the computations of diluted EPS, because the effect of including these share awards would have been anti-dilutive, consist of the following (shares, in thousands): Years Ended December 31, 2013 2012 2011Shares associated with anti-dilutive unexercised stock options86 88 38Share-based compensation that may be settled in cash or shares, the effect ofwhich is anti-dilutive90 — —94Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Shares associated with contingent awards for the years ended December 31, 2013, 2012 and 2011, which have been excluded fromthe computations of diluted EPS because the contingencies of these awards have not been met at December 31, 2013, 2012 and2011, consist of the following (shares in thousands): Years Ended December 31, 2013 2012 2011Shares associated with contingent awards— 58 34(i)Common StockFollowing are the changes in issued common stock for the years ended December 31, 2013, 2012 and 2011 (shares, in thousands): Class A Class BBalances at January 1, 201144,213 3,178Class B shares converted to Class A7 (7)Shares issued upon stock option exercises163 —Share awards issued460 —Shares retired(5,244) —Shares acquired to settle minimum statutory tax withholding requirements(287) —Other(16) —Balances at December 31, 201139,296 3,171Class B shares converted to Class A2 (2)Shares issued upon stock option exercises320 —Share awards issued731 —Shares retired(1,469) —Shares acquired to settle minimum statutory tax withholding requirements(337) —Other(9) —Balances at December 31, 201238,534 3,169Class B shares converted to Class A4 (4)Shares issued upon stock option exercises87 —Share awards issued680 —Shares retired(1,859) —Shares acquired to settle minimum statutory tax withholding requirements(147) —Balances at December 31, 201337,299 3,165GCI’s Board of Directors has authorized a common stock buyback program for the repurchase of GCI’s Class A and Class Bcommon stock in order to reduce the outstanding shares of Class A and Class B common stock. Under the common stock buybackplan approved by GCI’s Board of Directors in 2010 we were authorized to repurchase up to $200.0 million worth of GCI commonstock, to increase our repurchase limit $5.0 million per quarter indefinitely and to use stock option exercise proceeds to repurchaseadditional shares. If stock repurchases are less than the total approved quarterly amount the difference may be carried forward andused to repurchase additional shares in future quarters. The cost of the repurchased common stock reduced Common Stock on ourConsolidated Balance Sheets.During the years ended December 31, 2013, 2012 and 2011 we repurchased 1.8 million, 1.5 million and 5.2 million shares,respectively, of our Class A common stock under the stock buyback program at a cost of $15.6 million, $14.0 million and $52.6million, respectively. Under this program we are currently authorized to make up to $106.0 million of repurchases as of December31, 2013. The repurchased stock was constructively retired as of December 31, 2013, 2012 and 2011.95Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements We expect to continue the repurchases for an indefinite period dependent on leverage, liquidity, company performance, and marketconditions and subject to continued oversight by GCI’s Board of Directors.(j)Redeemable Preferred StockWe have 1,000,000 shares of preferred stock authorized with no shares issued and outstanding at years ended December 31, 2013,2012 and 2011.(k)Treasury StockWe account for treasury stock purchased for general corporate purposes under the cost method and include treasury stock as acomponent of Stockholders’ Equity. Treasury stock purchased with intent to retire (whether or not the retirement is actuallyaccomplished) is charged to Class A or Class B Common Stock.(l)Cash EquivalentsCash equivalents consist of certificates of deposit which have an original maturity of three months or less at the date acquired andare readily convertible into cash.(m)Accounts Receivable and Allowance for Doubtful ReceivablesTrade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful receivables is ourbest estimate of the amount of probable credit losses in our existing accounts receivable. We base our estimates on the aging of ouraccounts receivable balances, financial health of specific customers, regional economic data, changes in our collectionsprocess, regulatory requirements and our customers’ compliance with Universal Service Administrative Company rules. We reviewour allowance for doubtful receivables methodology at least annually.Depending upon the type of account receivable our allowance is calculated using a pooled basis with an allowance for all accountsgreater than 120 days past due or a specific identification method. When a specific identification method is used, potentiallyuncollectible accounts due to bankruptcy or other issues are reviewed individually for collectability. Account balances are charged offagainst the allowance when we feel it is probable the receivable will not be recovered. We do not have any off-balance-sheet creditexposure related to our customers.(n)InventoriesWireless handset inventories are stated at the lower of cost or market (net realizable value). Cost is determined using the averagecost method. Handset costs in excess of the revenues generated from handset sales, or handset subsidies, are expensed at the timeof sale. We do not recognize the expected handset subsidies prior to the time of sale because the promotional discount decision ismade at the point of sale and/or because we expect to recover the handset subsidies through service revenue.Inventories of other merchandise for resale and parts are stated at the lower of cost or market. Cost is determined using the averagecost method.(o)Property and EquipmentProperty and equipment is stated at cost. Construction costs of facilities are capitalized. Equipment financed under capital leases isrecorded at the lower of fair market value or the present value of future minimum lease payments at inception of the lease.Construction in progress represents transmission equipment and support equipment and systems not placed in service onDecember 31, 2013, that management intends to place in service during 2014.96Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Depreciation is computed using the straight-line method based upon the shorter of the estimated useful lives of the assets or thelease term, if applicable, in the following ranges:Asset CategoryAsset LivesTelephony transmission equipment and distribution facilities5-20 yearsFiber optic cable systems15-25 yearsCable transmission equipment and distribution facilities5-30 yearsSupport equipment and systems3-20 yearsTransportation equipment5-13 yearsProperty and equipment under capital leases12-20 yearsBuildings25 yearsCustomer premise equipment2-20 yearsStudio equipment10-15 yearsAmortization of property and equipment under capital leases is included in Depreciation and Amortization Expense on theConsolidated Income Statements.Repairs and maintenance are charged to expense as incurred. Expenditures for major renewals and betterments are capitalized.Accumulated depreciation is removed and gains or losses are recognized at the time of sales or other dispositions of property andequipment.(p)Intangible Assets and GoodwillGoodwill, cable certificates (certificates of convenience and public necessity), wireless licenses and broadcast licenses are notamortized. Cable certificates represent certain perpetual operating rights to provide cable services. Wireless licenses represent theright to utilize certain radio frequency spectrum to provide wireless communications services. Broadcast licenses represent the rightto broadcast television stations in certain areas. Goodwill represents the excess of cost over fair value of net assets acquired inconnection with a business acquisition.All other amortizable intangible assets are being amortized over 2 to 20 year periods using the straight-line method.(q)Impairment of Intangibles, Goodwill, and Long-lived AssetsCable certificates, wireless licenses and broadcast licenses are treated as indefinite-lived intangible assets and are tested annually forimpairment or more frequently if events and circumstances indicate that the asset might be impaired. We are allowed to assessqualitative factors (“Step Zero”) in our annual test over our indefinite-lived intangible assets other than goodwill. The impairment testfor identifiable indefinite-lived intangible assets other than goodwill consists of a comparison of the estimated fair value of theintangible asset with its carrying value. If the carrying value of the intangible asset exceeds its fair value, an impairment loss isrecognized in an amount equal to that excess. After an impairment loss is recognized, the adjusted carrying amount of the assetbecomes its new accounting basis. Impairment testing of our cable certificate and wireless license assets as of October 31, 2013and 2012, used a direct discounted cash flow method. This approach requires us to make estimates and assumptions includingprojected cash flows and discount rates. These estimates and assumptions could have a significant impact on whether animpairment charge is recognized and also the magnitude of any such impairment charge. We did not perform an impairment test onour broadcast license assets during 2013 since we acquired them in November 2013 when we acquired the television stationspursuant to the Media Agreement.Our goodwill is tested annually for impairment, and is tested for impairment more frequently if events and circumstances indicatethat the assets might be impaired. In our annual test of goodwill we are allowed to use Step Zero to determine whether it is morelikely than not that goodwill is impaired. We chose not to apply Step Zero and chose to test for goodwill impairment using thetraditional quantitative two-step process. The first step of the quantitative goodwill impairment test is used to identify potentialimpairment by comparing the fair value of a reporting unit with its carrying amount. To determine our reporting units, we97Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements evaluate the components one level below the segment level and we aggregate the components if they have similar economiccharacteristics. As a result of this assessment, our reporting units are the same as our two reportable segments. If the carryingamount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test compares the implied fair value ofthe reporting unit's goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit's goodwill exceedsthe implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value ofgoodwill is determined in the same manner as the amount of goodwill that would be recognized in a business combination. We usean income approach to determine the fair value of our reporting units for purposes of our goodwill impairment test. In addition, amarket-based approach is used where possible to corroborate the fair values determined by the income approach. The incomeapproach requires us to make estimates and assumptions including projected cash flows and discount rates. These estimates andassumptions could have a significant impact on whether an impairment charge is recognized and also the magnitude of any suchimpairment charge.We completed our annual review and no impairment charge was recorded for the years ended December 31, 2013, 2012 or 2011.Long-lived assets, such as property, plant, and equipment, and purchased intangibles subject to amortization are reviewed forimpairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not berecoverable. Recoverability of an asset group to be held and used is measured by a comparison of the carrying amount of an assetgroup to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an assetgroup exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which thecarrying amount of the asset group exceeds the fair value of the asset group.(r)Amortization and Write-off of Loan FeesDebt issuance costs are deferred and amortized using the effective interest method. If a refinancing or amendment of a debtinstrument is a substantial modification, all or a portion of the applicable debt issuance costs are written off. If a debt instrument isrepaid prior to the maturity date we will write-off a proportional amount of debt issuance costs.(s)Other AssetsOther Assets primarily include future capacity receivable, broadcast licenses, restricted cash, long-term deposits, prepayments, andnon-trade accounts receivable.Under the terms of the Wireless Agreement, we acquired from ACS the rights to use additional network capacity which we may drawdown in the future. The applicable portion of the future capacity receivable asset will be reclassified to the rights to use capacity assetwhen the capacity is placed in service and amortized using the straight-line method over the remaining 20 year period.(t)Asset Retirement ObligationsWe record the fair value of a liability for an asset retirement obligation in the period in which it is incurred in Other Liabilities on theConsolidated Balance Sheets. When the liability is initially recorded, we capitalize a cost by increasing the carrying amount of therelated long-lived asset. In periods subsequent to initial measurement, changes in the liability for an asset retirement obligationresulting from revisions to either the timing or the amount of the original estimate of undiscounted cash flows are recognized. Overtime, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the relatedasset. Upon settlement of the liability, we either settle the obligation for its recorded amount or incur a gain or loss upon settlement.98Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements The majority of our asset retirement obligations are the estimated cost to remove telephony transmission equipment and supportequipment from leased property. Following is a reconciliation of the beginning and ending aggregate carrying amounts of our liabilityfor asset retirement obligations (amounts in thousands):Balance at December 31, 2011$15,223Liability incurred660Accretion expense508Liability settled(111)Balance at December 31, 201216,280Liability incurred5,292Additions upon the close of AWN5,218Accretion expense77Liability settled(65)Balance at December 31, 2013$26,802During the years ended December 31, 2013 and 2012, we recorded additional capitalized costs of $10.5 million and $0.7 million,respectively, in Property and Equipment in Service, Net of Depreciation.Certain of our network facilities are on property that requires us to have a permit and the permit contains provisions requiring us toremove our network facilities in the event the permit is not renewed. We expect to continually renew our permits and thereforecannot estimate any liabilities associated with such agreements. A remote possibility exists that we would not be able tosuccessfully renew a permit, which could result in us incurring significant expense in complying with restoration or removalprovisions.(u)Revenue RecognitionAll revenues are recognized when the earnings process is complete. Revenue recognition is as follows:•Revenues generated from long-distance service usage and plan fees, Internet service excess usage, and managed servicesare recognized when the services are provided,•We recognize unbilled revenues when the service is provided based upon minutes of use processed, and/or establishedrates, net of credits and adjustments,•Video service package fees, local access and Internet service plan fees, and data network revenues are billed in advance,recorded as Deferred Revenue on the balance sheet, and are recognized as the associated service is provided,•Certain of our wireless services offerings have been determined to be revenue arrangements with multiple deliverables.Revenues are recognized as each element is earned based on objective evidence regarding the relative fair value of eachelement and when there are no undelivered elements that are essential to the functionality of the delivered elements.Revenues generated from wireless service usage and plan fees are recognized when the services are provided. Revenuesgenerated from the sale of wireless handsets and accessories are recognized when title to the handset and accessoriespasses to the customer. As the non-refundable, up-front activation fee charged to the customer does not meet the criteria as aseparate unit of accounting, we allocate the additional arrangement consideration received from the activation fee to thehandset (the delivered item) to the extent that the aggregate handset and activation fee proceeds do not exceed the fair value ofthe handset. Any activation fees not allocated to the handset would be deferred upon activation and recognized as servicerevenue on a straight-line basis over the expected customer relationship period,•The majority of our equipment sale transactions involve the sale of communications equipment with no other servicesinvolved. Such equipment is subject to standard manufacturer warranties and we do not manufacture any of the equipmentwe sell. In such instances, the customer takes title to the equipment generally upon delivery. We recognize revenue for suchtransactions when title passes to the customer and the revenue is earned and realizable. On certain occasions we enter intoagreements to sell and satisfactorily install or integrate telecommunications equipment for a fixed99Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements fee. Customers may have refund rights if the installed equipment does not meet certain performance criteria. We deferrevenue recognition until we have received customer acceptance per the contract or agreement, and all other requiredrevenue recognition elements have been achieved. Revenues from contracts with multiple element arrangements, such asthose including installation and integration services, are recognized as each element is earned based on objective evidenceregarding the relative fair value of each element and when there are no undelivered elements that are essential to thefunctionality of the delivered elements,•Technical services revenues are derived primarily from maintenance contracts on equipment and are recognized on aprorated basis over the term of the contracts,•We account for fiber capacity Indefeasible Right to Use ("IRU") agreements as an operating lease or service arrangement andwe defer the revenue and recognize it ratably over the life of the IRU or as service is rendered,•Access revenue is recognized when earned. We participate in access revenue pools with other telephone companies. Suchpools are funded by toll revenue and/or access charges regulated by the Regulatory Commission of Alaska ("RCA") withinthe intrastate jurisdiction and the Federal Communications Commission (“FCC”) within the interstate jurisdiction. Much ofthe interstate access revenue is initially recorded based on estimates. These estimates are derived from interim financialinformation, available separation studies and the most recent information available about achieved rates of return. Theseestimates are subject to adjustment in future accounting periods as additional information becomes available. To the extentthat a dispute arises over revenue settlements, our policy is to defer revenue recognition until the dispute is resolved,•We receive grant revenue for the purpose of building communication infrastructure in rural areas. We defer the revenue andrecognize it over the life of the asset that was constructed using grant funds.•We pay cash incentives to ACS when wireless handsets are sold to their retail wireless customers and this incentive isrecorded as an offset to revenue, and•Other revenues are recognized when the service is provided.In October 2013 and February 2014 two of our customers received notices of denial and funding changes from the Rural HealthCare Division of USAC related to certain services we provided during 2013. In 2013 one customer filed an appeal with the FCC andwe expect the other customer to file an FCC appeal in 2014. We recognized $5.7 million during the year ended December 31, 2013,and because we believe our customers are in compliance with program rules, we expect our customers will prevail in their appealswe have not reduced our revenue recognition during the year ended December 31, 2013.As an Eligible Telecommunications Carrier ("ETC"), we receive support from the Universal Service Fund ("USF") to support theprovision of wireline local access and wireless service in high cost areas. In November 2011, the FCC published a final rule toreform the methodology for distributing USF high cost support for voice and broadband services, as well as to the access chargeregime for terminating traffic between carriers (“High Cost Order”). The High Cost Order segregated the support methodology forRemote areas in Alaska from the support methodology for other urban areas, including Alaska Urban locations. The High CostOrder was a significant program change that required a reassessment of our high cost support revenue recognition.Prior to the High Cost Order program changes, we accrued Remote and Urban estimated program revenue quarterly based oncurrent line counts, the most current rates paid to us, our assessment of the impact of current FCC regulations, and ourassessment of the potential outcome of FCC proceedings. Our estimated accrued revenue was subject to our judgment regardingthe outcome of many variables and was subject to upward or downward adjustments in subsequent periods.Remote High Cost SupportThe High Cost Order mandated that as of January 1, 2012, the annual available Remote high cost support is based upon the 2011support disbursed to Competitive Eligible Telecommunications Carriers (“CETCs”) (“Statewide Support Cap”) providing supportedservices in Remote Alaska, except AT&T. On January 1, 2012, the per-line rates paid in the Remote areas were frozen by the USFand cannot exceed $250 per line per month on a study area basis. Line count growth that causes support to exceed the StatewideSupport100Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Cap triggers a pro rata support payment reduction to all subject Alaska CETCs until the support is reduced to the Statewide SupportCap amount.In the Third Order on Reconsideration issued in May 2012 the FCC determined that Remote support will continue to be based online counts until the later of June 30, 2014, or the last full month prior to the implementation of a successor funding mechanism. If asuccessor funding mechanism is operational on July 1, 2014, a 20% annual phase down will commence decreasing support 20%each annual period until no support is paid starting July 1, 2018. If a successor funding mechanism is not operational on July 1,2014, the phase down will not begin and the subject CETCs will continue to receive per-line based support (subject to the StatewideSupport Cap) until a successor funding mechanism is operational. A subject CETC may not receive both phase down support andsupport from a successor funding mechanism; one program or the other must be selected. At December 31, 2013, we believeimplementation of a successor funding mechanism prior to January 2015 is unlikely.As a result of the High Cost Order program changes for the areas designated Remote by the FCC, beginning in the fourth quarter of2011 we accrue estimated program revenue based on current line counts and the frozen per-line rates, reduced as needed by ourestimate of the impact of the Statewide Support Cap. When determining the estimated program revenue accrual, we also considerour assessment of the impact of current FCC regulations and of the potential outcome of FCC proceedings. Our estimated accruedrevenue is subject to our judgment regarding the outcome of many variables and is subject to upward or downward adjustment insubsequent periods.Urban High Cost SupportThe High Cost Order mandated that as of January 1, 2012, Urban high cost support payments are frozen at the monthly average ofthe subject CETC’s 2011 annual support. Urban high cost support is no longer dependent upon line counts. A 20% annual phasedown commenced July 1, 2012, decreasing support 20% each annual period until no support is paid starting July 1, 2016. If asuccessor funding mechanism is not operational on July 1, 2014, the phase down will stop at 60% and the subject CETCs willcontinue to receive annual support payments at the 60% level until a successor funding mechanism is operational. At December 31,2013, we believe implementation of a successor funding mechanism prior to January 2015 is unlikely.As a result of the High Cost Order program changes for the areas designated as Urban by the FCC, we apply the proportionalperformance revenue recognition method to account for the impact of the declining payments while our level of service provided andassociated costs remain constant. Included in the calculation are the scheduled Urban high cost support payments from October2011 through January 2017 net of our Urban accounts receivable balance at September 30, 2011. An equal amount of this result isrecognized as Urban support revenue each period.For both Remote and Urban high cost support revenue, our ability to collect our accrued USF support is contingent upon continuationof the USF program and upon our eligibility to participate in that program, which are subject to change by future regulatory, legislativeor judicial actions. We adjust revenue and the account receivable in the period the FCC makes a program change or we assess thelikelihood that such a change has increased or decreased revenue. We do not recognize revenue related to a particular service areauntil our ETC status has been approved by the RCA.We recorded high cost support revenue under the USF program of $55.6 million, $42.8 million and $48.8 million for the yearsended December 31, 2013, 2012 and 2011, respectively. At December 31, 2013, we have $45.9 million and $0.5 million in Remoteand Urban high cost accounts receivable, respectively.(v)Advertising ExpenseWe expense advertising costs in the period during which the first advertisement appears. Advertising expenses were $5.2 million,$4.9 million and $4.2 million for the years ended December 31, 2013, 2012 and 2011, respectively.101Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (w)LeasesScheduled operating lease rent increases are amortized over the expected lease term on a straight-line basis. Rent holidays arerecognized on a straight-line basis over the operating lease term (including any rent holiday period).Leasehold improvements are amortized over the shorter of their economic lives or the lease term. We may amortize a leaseholdimprovement over a term that includes assumption of a lease renewal if the renewal is reasonably assured. Leaseholdimprovements acquired in a business combination are amortized over the shorter of the useful life of the assets or a term thatincludes required lease periods and renewals that are deemed to be reasonably assured at the date of acquisition. Leaseholdimprovements that are placed in service significantly after and are not contemplated at or near the beginning of the lease term areamortized over the shorter of the useful life of the assets or a term that includes required lease periods and renewals that are deemedto be reasonably assured at the date the leasehold improvements are purchased. Leasehold improvements made by us and fundedby landlord incentives or allowances under an operating lease are recorded as deferred rent and amortized as reductions to leaseexpense over the lease term.(x)Interest ExpenseMaterial interest costs incurred during the construction period of non-software capital projects are capitalized. Interest costs incurredduring the development period of a software capital project are capitalized. Interest is capitalized in the period commencing with thefirst expenditure for a qualifying capital project and ending when the capital project is substantially complete and ready for its intendeduse. We capitalized interest costs of $4.6 million, $2.8 million and $3.7 million during the years ended December 31, 2013, 2012and 2011, respectively.(y)Income TaxesIncome taxes are accounted for using the asset and liability method. Deferred tax assets and liabilities are recognized for their futuretax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities andtheir respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxableearnings in the years in which those temporary differences are expected to be recovered or settled. A valuation allowance isrecognized if it is more likely than not that some portion or the entire deferred tax asset will not be realized.(z)Comprehensive IncomeTotal comprehensive income was equal to net income during the years ended December 31, 2013, 2012 and 2011.(aa)Share-based Payment ArrangementsCompensation expense is recognized in the financial statements for share-based awards based on the grant date fair value of thoseawards. Share-based compensation expense includes an estimate for pre-vesting forfeitures and is recognized over the requisiteservice periods of the awards on a straight-line basis, which is generally commensurate with the vesting term.We are required to report the benefits associated with tax deductions in excess of recognized compensation cost as a financing cashflow rather than as an operating cash flow.(ab)Use of EstimatesThe preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect thereported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements andthe reported amounts of revenues and expenses during the reporting period. Significant items subject to estimates and assumptionsinclude the allowance for doubtful receivables, unbilled revenues, accrual of the USF high cost Remote area program support, share-based compensation, inventory at lower of cost or market, reserve for future customer credits, liability for incurred but not reportedmedical insurance claims, valuation allowances for deferred income tax assets, depreciable and amortizable lives of assets, thecarrying value of long-lived assets including goodwill, cable certificates, wireless and broadcast licenses, our effective tax rate,purchase price allocations, deferred lease expense, asset retirement obligations, the accrual of Cost of Goods Sold, depreciation andthe accrual of contingencies and litigation. Actual results could differ from those estimates.102Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements The accounting estimates related to revenues from the USF high cost Remote area program are dependent on various inputsincluding our estimate of the Statewide Support Cap, our assessment of the impact of new FCC regulations, and the potentialoutcome of FCC proceedings. These inputs are subjective and based on our judgment regarding the outcome of certain variablesand are subject to upward or downward adjustment in subsequent periods.(ac)Concentrations of Credit RiskFinancial instruments that potentially subject us to concentrations of credit risk are primarily cash and cash equivalents and accountsreceivable. Excess cash is invested in high quality short-term liquid money instruments. At December 31, 2013 and 2012,substantially all of our cash and cash equivalents were invested in short-term liquid money instruments and the balances were inexcess of Federal Deposit Insurance Corporation insured limits.We do not have any major customers for the year ended December 31, 2013, see Note 10, “Industry Segment Data” of this Form 10-K. Our customers are located primarily throughout Alaska. Because of this geographic concentration, our growth and operationsdepend upon economic conditions in Alaska.(ad)Software Capitalization PolicyInternally used software, whether purchased or developed, is capitalized and amortized using the straight-line method over anestimated useful life of five years. We capitalize certain costs associated with internally developed software such as payroll costs ofemployees devoting time to the projects and external direct costs for materials and services. Costs associated with internallydeveloped software to be used internally are expensed until the point the project has reached the development stage. Subsequentadditions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to performa task it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred.The capitalization of software requires judgment in determining when a project has reached the development stage.(ae)GuaranteesCertain of our customers have guaranteed levels of service. If an interruption in service occurs we do not recognize revenue for anyportion of the monthly service fee that will be refunded to the customer or not billed to the customer due to these service levelagreements.Additionally, we have provided certain guarantees to U.S. Bancorp Community Development Corporation (“US Bancorp”), our taxcredit investor in our four VIEs. We have guaranteed the delivery of $56.0 million of New Markets Tax Credits (“NMTC”) to USBancorp, as well as certain loan and management fee payments between our subsidiaries and the VIEs, for which we are theprimary beneficiary. In the event that the tax credits are not delivered or certain payments not made, we are obligated to provideprompt and complete payment of these obligations. Please refer to Note 12, Variable Interest Entities, of this Form 10-K, for moreinformation about our NMTC transactions.(af)Classification of Taxes Collected from CustomersWe report sales, use, excise, and value added taxes assessed by a governmental authority that is directly imposed on a revenue-producing transaction between us and a customer on a net basis in our Consolidated Income Statements. The following are certainsurcharges reported on a gross basis in our Consolidated Income Statements (amounts in thousands): Years Ended December 31, 2013 2012 2011Surcharges reported gross$4,644 5,401 5,408(ag)ReclassificationsReclassifications have been made to the prior year's consolidated financial states to conform to classifications used in the currentyear.103Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (2)Consolidated Statements of Cash Flows Supplemental DisclosuresChanges in operating assets and liabilities consist of (amounts in thousands):Year ended December 31,2013 2012 2011Increase in accounts receivable, net$(68,360) (9,386) (16,900)(Increase) decrease in prepaid expenses672 (350) (1,949)(Increase) decrease in inventories1,751 (4,576) (1,718)Decrease in other current assets1,448 1,953 309(Increase) decrease in other assets(1,459) 1,236 907Increase (decrease) in accounts payable15,334 3,085 (1,373)Increase in deferred revenues2,368 3,215 4,707Increase (decrease) in accrued payroll and payroll related obligations10,263 (2,750) (102)Increase (decrease) in accrued liabilities(883) 3,043 (1,733)Increase (decrease) in accrued interest302 106 (6,776)Increase (decrease) in subscriber deposits(40) 116 (21)Decrease in long-term deferred revenue(3,554) (5,001) (2,413)Decrease in components of other long-term liabilities(20) (1,301) (1,618)Total change in operating assets and liabilities$(42,178) (10,610) (28,680)The following items are for the years ended December 31, 2013, 2012 and 2011 (amounts in thousands):Net cash paid or received:2013 2012 2011Interest paid, net of amounts capitalized$71,749 69,083 73,492The following items are non-cash investing and financing activities for the years ended December 31, 2013, 2012 and 2011 (amounts inthousands): 2013 2012 2011Non-cash additions for purchases of property and equipment$17,230 9,010 7,233Asset retirement obligation additions to property and equipment$5,292 660 613Deferred compensation distribution denominated in shares$621 511 —Net assets acquired with equity in AWN (see Note 1(d))$267,642 — —(3)Receivables and Allowance for Doubtful ReceivablesReceivables consist of the following at December 31, 2013 and 2012 (amounts in thousands): 2013 2012Trade$225,689 148,902Employee1,037 703Other1,646 831Total receivables$228,372 150,436As described in Note 1(u), Revenue Recognition, we receive support from each of the various USF programs: high cost, low income,rural health care, and schools and libraries. This support was 19% of our revenue for the years ended December 31, 2013, 2012 and2011. We had USF net receivables of $124.3 million and $70.1104Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements million at December 31, 2013 and 2012, respectively. The increase is primarily due to ACS’s contribution of $14.2 million in USFreceivables upon the close of the Wireless Agreement on July 22, 2013 and the receipt of $18.5 million in Rural Health payments fromUSF in January 2014. The comparable 2012 Rural Health payment was received in 2012.Changes in the allowance for doubtful receivables during the years ended December 31, 2013, 2012 and 2011 are summarized below(amounts in thousands): Additions Deductions DescriptionBalance atbeginning of year Charged to costsand expenses Charged to otheraccounts Write-offs net ofrecoveries Balance at end ofyearDecember 31, 2013$3,215 2,370 (446) 2,793 2,346December 31, 2012$5,796 3,649 (2,261) 3,969 3,215December 31, 2011$9,189 4,294 (29) 7,658 5,796In 2012 we received notice that a 2010 appeal of a decision impacting our Rural Health Care Division support was successful andreceived payment of $1.6 million. The original reserve was recorded by reducing revenue therefore we recognized revenue and reducedour allowance upon winning the appeal and this amount is included in Additions - Charged to other accounts, during the year endedDecember 31, 2012.(4)Net Property and Equipment in ServiceNet property and equipment in service consists of the following at December 31, 2013 and 2012 (amounts in thousands): 2013 2012Land and buildings$69,984 60,928Telephony transmission equipment and distribution facilities1,085,963 897,620Cable transmission equipment and distribution facilities177,410 155,122Studio equipment12,680 —Support equipment and systems245,301 217,637Transportation equipment13,619 9,184Customer premise equipment149,372 142,176Fiber optic cable systems299,525 291,220 2,053,854 1,773,887Less accumulated depreciation1,042,724 901,398Less accumulated amortization41,552 34,242Net property and equipment in service$969,578 838,247 Property and equipment under capital leases$104,251 104,251(5)Intangible Assets and GoodwillAs of October 31, 2013, cable certificates, wireless licenses and goodwill were tested for impairment and the fair values were greaterthan the carrying amounts, therefore these intangible assets were determined not to be impaired at December 31, 2013. The remaininguseful lives of our cable certificates, wireless licenses, and goodwill were evaluated as of October 31, 2013, and events andcircumstances continue to support an indefinite useful life. There are no indicators of impairment of our intangible assets subject toamortization as of December 31, 2013.105Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements During the year ended December 31, 2013, we acquired $2.8 million in broadcast licenses from our acquisitions pursuant to the MediaAgreements.Other Intangible Assets subject to amortization include the following at December 31, 2013 and 2012 (amounts in thousands): 2013 2012Rights to use$55,407 —Software license fees41,804 35,416Customer relationships3,036 3,036Right-of-way783 783 101,030 39,235Less accumulated amortization29,595 22,675Net other intangible assets$71,435 16,560Under the terms of the Wireless Agreement, we acquired from ACS rights to use capacity on its network and the associated maintenanceon this network capacity for 20 years.Changes in Goodwill and Other Intangible Assets are as follows (amounts in thousands): GoodwillOther IntangibleAssetsBalance at December 31, 2011$74,88315,835Contingent consideration to former shareholders of United Utilities, Inc.2,411—Asset additions—5,952Less amortization expense—5,227Balance at December 31, 201277,29416,560Goodwill addition from AWN acquisition140,080—Goodwill addition from Denali Media acquisitions1,667—Asset additions—61,919Less amortization expense—7,044Balance at December 31, 2013$219,04171,435Amortization expense for amortizable intangible assets for the years ended December 31, 2013, 2012 and 2011 follow (amounts inthousands): Years Ended December 31, 2013 2012 2011Amortization expense$7,044 5,227 6,039Amortized intangible assets are definite-life assets, and as such, we record amortization expense based on a method that mostappropriately reflects our expected cash flows from these assets. Intangible assets that have finite useful lives are amortized over theiruseful lives using the straight-line method, a weighted-average of 15.8 years.106Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Amortization expense for amortizable intangible assets for each of the five succeeding fiscal years is estimated to be (amounts inthousands):Years Ending December 31, 2014$8,19620156,67020165,00620173,88020183,054(6)Long-Term DebtLong-term debt consists of the following at December 31, 2013 and 2012 (amounts in thousands): 2013 20122021 Notes (a)$325,000 325,0002019 Notes (b)425,000 425,000Senior Credit Facility (c)261,000 90,000Rural Utilities Service ("RUS") debt (d)39,425 38,997CoBank Mortgage note payable— 797Debt1,050,425 879,794Less unamortized discount paid on the 2019 Notes2,445 2,743Less current portion of long-term debt2,836 1,928Long-term debt, net$1,045,144 875,123(a)We pay interest of 6.75% on notes that are due in 2021 ("2021 Notes"). The 2021 Notes are senior unsecured obligations whichrank equally in right of payment with our existing and future senior unsecured debt, including our 2019 Notes, and senior in right ofpayment to all future subordinated indebtedness.The 2021 Notes are not redeemable prior to June 1, 2016. At any time on or after June 1, 2016, the 2021 Notes are redeemable atour option, in whole or in part, on not less than thirty nor more than sixty days’ notice, at the following redemption prices (expressedas percentages of principal amount), plus accrued and unpaid interest (if any) to the date of redemption:If redeemed during the twelve month period commencing June 1 of the year indicated:Redemption Price2016103.375%2017102.250%2018101.125%2019 and thereafter100.000%The 2021 Notes mature on June 1, 2021. Semi-annual interest payments are payable on June 1 and December 1.The 2021 Notes were issued pursuant to an Indenture, dated as of May 20, 2011, between us and Union Bank, N.A., as trustee.We are not required to make mandatory sinking fund payments with respect to the 2021 Notes.107Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Upon the occurrence of a change of control, each holder of the 2021 Notes will have the right to require us to purchase all or any part(equal to $1,000 or an integral multiple thereof, except that no 2021 Note will be purchased in part if the remaining portion thereofwould not be at least $2,000) of such holder’s 2021 Notes at a purchase price equal to 101% of the principal amount of such 2021Notes, plus accrued and unpaid interest on such 2021 Notes, if any. If we or certain of our subsidiaries engage in asset sales, wemust generally either invest the net cash proceeds from such sales in our business within a period of time, prepay debt under anyoutstanding credit facility, or make an offer to purchase a principal amount of the 2021 Notes equal to the excess net cash proceeds,with the purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any.The terms of the Indenture include customary affirmative and negative covenants and customary events of default. At any time afterthe occurrence and during the continuation of an event of default under the Indenture, the trustee or holders of not less than 25% inaggregate principal amount of the 2021 Notes may, among other options, declare the 2021 Notes immediately due and payable.We paid closing costs totaling $3.6 million in connection with the offering, which were recorded as deferred loan costs and are beingamortized over the term of the 2021 Notes. During the year ended December 31, 2011, we recorded a $9.1 million Loss onExtinguishment of Debt on our Consolidated Income Statement. Included in the loss was $2.9 million in unamortized deferred loancosts, $1.5 million for the unamortized portion of the original issue discount and $4.7 million in call premium payments to redeemour 2014 Notes.We were in compliance with all 2021 Notes loan covenants at December 31, 2013.(b)We pay interest of 8.63% on notes that are due in 2019 (“2019 Notes”). The 2019 Notes are senior unsecured obligations whichrank equally in right of payment with the existing and future senior unsecured debt, including our 2021 Notes described previously,and senior in right of payment to all future subordinated indebtedness. The 2019 Notes are carried on our Consolidated BalanceSheets net of the unamortized portion of the discount, which is being amortized to Interest Expense over the term of the 2019 Notesusing the effective interest method and an effective interest rate of 9.09%.The 2019 Notes are redeemable at our option, in whole or in part, on not less than thirty days nor more than sixty days notice, at thefollowing redemption prices (expressed as percentages of principle amount), plus accrued and unpaid interest (if any) to the date ofredemption:If redeemed during the twelve month period commencing November 15 of the year indicated:Redemption Price2014104.313%2015102.875%2016101.438%2017 and thereafter100.000%The 2019 Notes mature on November 15, 2019. Semi-annual interest payments are payable on May 15 and November 15 of eachyear.The 2019 Notes were issued pursuant to an Indenture, dated as of November 3, 2009, between us and Union Bank, N.A., astrustee.We are not required to make mandatory sinking fund payments with respect to the 2019 Notes.Upon the occurrence of a change of control, each holder of the 2019 Notes will have the right to require us to purchase all or any part(equal to $1,000 or an integral multiple thereof, except that no 2019 Note will be purchased in part if the remaining portion thereofwould not be at least $2,000) of such holder’s 2019 Notes at a purchase price equal to 101% of the principal amount of such 2019Notes, plus accrued and unpaid interest on such 2019 Notes, if any. If we or certain of our subsidiaries engage in asset sales, wemust108Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements generally either invest the net cash proceeds from such sales in our business within a period of time, prepay debt under anyoutstanding credit facility, or make an offer to purchase a principal amount of the 2019 Notes equal to the excess net cash proceeds,with the purchase price equal to 100% of their principal amount, plus accrued and unpaid interest, if any.The terms of the Indenture include customary affirmative and negative covenants and customary events of default. At any time afterthe occurrence and during the continuation of an event of default under the Indenture, the trustee or holders of not less than 25% inaggregate principal amount of the 2019 Notes may, among other options, declare the 2019 Notes immediately due and payable. We paid closing costs totaling $9.4 million in connection with the offering, which were recorded as deferred loan costs and are beingamortized over the term of the 2019 Notes.We were in compliance with all 2019 Notes loan covenants at December 31, 2013.(c)On April 30, 2013, GCI Holdings, Inc., a wholly owned subsidiary of GCI, entered into a Third Amended and Restated Credit andGuarantee Agreement with Credit Agricole Corporate and Investment Bank, as administrative agent ("Amended Senior CreditFacility"). The Amended Senior Credit Facility provides up to $240.0 million in delayed draw term loans and a $150.0 millionrevolving credit facility. The Amended Senior Credit Facility replaced our then existing Senior Credit Facility. The interest rate on our Amended Senior Credit Facility is London Interbank Offered Rate (“LIBOR”) plus the following ApplicableMargin set forth opposite each applicable Total Leverage Ratio below. Total Leverage Ratio (as defined)Applicable Margin>=5.53.00%>=5.0 but <5.52.75%>=4.5 but <5.02.50%>=4.0 but <4.52.25%<4.02.00%Borrowings under the Amended Senior Credit Facility are subject to certain financial covenants and restrictions onindebtedness. Our Amended Senior Credit Facility Total Leverage Ratio (as defined) may not exceed 6.5 to one through June 30,2014 and shall not exceed 5.95 to one any time thereafter; the Senior Leverage Ratio (as defined) may not exceed 3.00 to one; andour Interest Coverage Ratio (as defined) must not be less than 2.50 to one at any time.The terms of the Amended Senior Credit Facility include customary representations and warranties, customary affirmative andnegative covenants and customary events of default. At any time after the occurrence of an event of default under the AmendedSenior Credit Facility, the lenders may, among other options, declare any amounts outstanding under the Amended Senior CreditFacility immediately due and payable and terminate any commitment to make further loans under the Amended Senior CreditFacility. The obligations under the Amended Senior Credit Facility are secured by a security interest on substantially all of the assetsof GCI Holdings, Inc. and the subsidiary guarantors, as defined in the Amended Senior Credit Facility, and on the stock of GCIHoldings, Inc.The Amended Senior Credit Facility was a partial substantial modification of our existing Senior Credit Facility resulting in a $0.1million write-off of previously deferred loan fees on our Consolidated Income Statement for the year ended December 31, 2013. Netdeferred loan fees of $0.7 million associated with the portion of our previous Senior Credit Facility that was determined not to havebeen substantially modified are being amortized over the life of the Amended Senior Credit Facility.109Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements In connection with the Amended Senior Credit Facility, we paid loan fees and other expenses of $0.4 million that were expensedimmediately on our Consolidated Income Statement for the year ended December 31, 2013 and $3.0 million that were deferred andare being amortized over the life of the Amended Senior Credit Facility.We have borrowed $229.0 million under the delayed draw term loan, $32.0 million under the revolving portion and have $4.4million of letters of credit outstanding under the Amended Senior Credit Facility at December 31, 2013, which leaves $124.6 millionavailable for borrowing as of December 31, 2013.(d)UUI, our wholly owned subsidiary, has entered into various loans with the RUS. The long-term debt is due in monthly installmentsof principal based on a fixed rate amortization schedule. The interest rates on the various loans to which this debt relates range from2.4% to 4.5%. Substantially all of the assets of UUI are pledged as collateral for the amounts due to RUS.Maturities of long-term debt as of December 31, 2013 are as follows (amounts in thousands):Years ending December 31, 2014$2,83620151,52820161,57320171,6202018262,6682019 and thereafter780,200 1,050,425Less unamortized discount paid on 2019 Notes2,445Less current portion of long-term debt2,836 $1,045,144(7)Income TaxesTotal income tax expense of $11.0 million, $12.1 million and $7.4 million for the years ended December 31, 2013, 2012 and 2011,respectively, was allocated to income in each year. Income tax expense consists of the following (amounts in thousands): Years Ended December 31, 2013 2012 2011Deferred tax expense: Federal taxes$9,267 10,318 6,264State taxes1,690 1,770 1,141 $10,957 12,088 7,405110Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Total income tax expense differed from the “expected” income tax expense determined by applying the statutory federal income tax rate of35% as follows (amounts in thousands): Years Ended December 31, 2013 2012 2011“Expected” statutory tax expense$14,939 7,437 4,500Impact of non-controlling interest attributable to non-tax paying entity(7,977) — —State income taxes, net of federal expense1,690 1,770 1,141Income tax effect of nondeductible entertainment expenses1,045 777 737Income tax effect of nondeductible lobbying expenses369 298 327Income tax effect of nondeductible officer compensation824 1,718 758Other, net67 88 (58) $10,957 12,088 7,405The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities at December 31, 2013 and2012 are summarized below (amounts in thousands): 2013 2012Current deferred tax assets, net of current deferred tax liability: Net operating loss carryforwards$30,344 3,952Compensated absences, accrued for financial reporting purposes2,956 2,605Workers compensation and self-insurance health reserves, principally due to accrual for financialreporting purposes1,688 1,357Accounts receivable, principally due to allowance for doubtful receivables1,154 1,319Deferred compensation expense for tax purposes in excess of amounts recognized for financialreporting purposes104 32Deferred revenue for financial reporting purposes2,673 2,734Other834 898Total current deferred tax assets$39,753 12,897Long-term deferred tax assets: Net operating loss carryforwards$90,589 116,034Deferred revenue for financial reporting purposes35,506 36,316Alternative minimum tax credits1,895 1,895Deferred compensation expense for tax purposes in excess of amounts recognized for financialreporting purposes2,556 2,543Asset retirement obligations in excess of amounts recognized for tax purposes4,930 6,680Share-based compensation expense for financial reporting purposes in excess of amounts recognizedfor tax purposes1,860 1,675Other4,335 3,353Total long-term deferred tax assets141,671 168,496Long-term deferred tax liabilities: Plant and equipment, principally due to differences in depreciation212,719 233,530Intangible assets49,761 58,627Flow-through entity deferred tax items40,667 —Total long-term deferred tax liabilities303,147 292,157Net long-term deferred tax liabilities$161,476 123,661111Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements At December 31, 2013, we have tax net operating loss carryforwards of $294.5 million that will begin expiring in 2020 if not utilized, andalternative minimum tax credit carryforwards of $1.9 million available to offset regular income taxes payable in future years. Ourutilization of remaining acquired net operating loss carryforwards is subject to annual limitations pursuant to Internal Revenue Codesection 382 which could reduce or defer the utilization of these losses.Our tax net operating loss carryforwards are summarized below by year of expiration (amounts in thousands):Years ending December 31,Federal State2020$39,969 38,954202129,614 28,987202214,081 13,78820233,968 3,9032024722 —2025737 —2026150 —20271,010 —202839,879 39,715202948,370 47,5582031110,933 109,37620335,031 4,927Total tax net operating loss carryforwards$294,464 287,208Tax benefits associated with recorded deferred tax assets are considered to be more likely than not realizable through taxable incomeearned in carryback years, future reversals of existing taxable temporary differences, and future taxable income exclusive of reversingtemporary differences and carryforwards. The amount of deferred tax assets considered realizable, however, could be reduced if estimatesof future taxable income during the carryforward period are reduced.We file federal income tax returns in the U.S. and in various state jurisdictions. We are not subject to U.S. or state tax examinations bytax authorities for years 2009 and earlier except that certain U.S. federal income tax returns for years after 1998 are not closed byrelevant statutes of limitations due to unused net operating losses reported on those income tax returns.We recognize accrued interest on unrecognized tax benefits in interest expense and penalties in selling, general and administrativeexpenses. We did not have any unrecognized tax benefits as of December 31, 2013, 2012 and 2011, and accordingly, we did notrecognize any interest expense. Additionally, we recorded no penalties during the years ended December 31, 2013, 2012 and 2011.We did not record any excess tax benefit generated from stock options exercised during the years ended December 31, 2013, 2012 and2011, since we are in a net operating loss carryforward position and the income tax deduction will not yet reduce income taxespayable. The cumulative excess tax benefits generated for stock options exercised that have not been recognized is $3.4 million atDecember 31, 2013.(8)Financial InstrumentsFair Value of Financial InstrumentsThe fair value of a financial instrument is the amount at which the instrument could be exchanged in a current transaction betweenwilling parties. At December 31, 2013 and 2012, the fair values of cash and cash equivalents, net receivables, inventories, accountspayable, accrued payroll and payroll related obligations, accrued interest, accrued liabilities, and subscriber deposits approximate theircarrying value due to the short-112Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements term nature of these financial instruments. The carrying amounts and approximate fair values of our financial instruments at December31, 2013 and 2012 follow (amounts in thousands): December 31,2013 December 31,2012 Carrying Amount Fair Value Carrying Amount Fair ValueCurrent and long-term debt$1,047,980 1,058,431 877,051 899,414The following methods and assumptions were used to estimate fair values:Current and long-term debt: The fair values of the 2021 Notes and the 2019 Notes are based upon quoted market prices for the same orsimilar issues (Level 2). The fair value of our RUS debt is based on the current rates offered to us for the same remaining maturities(Level 3). The fair value of our Amended Senior Credit Facility is estimated to approximate the carrying value because this instrument issubject to variable interest rates (Level 2).Fair Value MeasurementsAssets measured at fair value on a recurring basis as of December 31, 2013 and 2012 are as follows (amounts in thousands): Fair Value Measurement at Reporting Date UsingDecember 31, 2013 AssetsQuoted Prices in ActiveMarkets for IdenticalAssets (Level 1) Significant OtherObservable Inputs(Level 2) SignificantUnobservable Inputs(Level 3)Deferred compensation plan assets (mutual funds)$2,183 — —Total assets at fair value$2,183 — — December 31, 2012 Assets Deferred compensation plan assets (mutual funds)$1,758 — —Total assets at fair value$1,758 — —The valuation of our mutual funds is determined using quoted market prices in active markets utilizing market observable inputs.(9)Stockholders’ EquityCommon StockGCI’s Class A and Class B common stock are identical in all respects, except that each share of Class A common stock has one vote pershare and each share of Class B common stock has ten votes per share. Each share of Class B common stock outstanding isconvertible, at the option of the holder, into one share of Class A common stock.During the years ended December 31, 2013, 2012 and 2011, we repurchased 1.8 million, 1.5 million and 5.2 million shares,respectively, of our Class A common stock at a cost of $15.6 million, $14.0 million and $52.6 million, respectively, pursuant to the ClassA and Class B common stock repurchase program authorized by GCI’s Board of Directors. During the years ended December 31, 2013,2012 and 2011, we retired 2.0 million, 1.8 million and 5.2 million shares, respectively, of our Class A common stock.Shared-Based CompensationOur Amended and Restated 1986 Stock Option Plan ("Stock Option Plan"), provides for the grant of options and restricted stock awards(collectively "award") for a maximum of 15.7 million shares of GCI Class A common113Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements stock, subject to adjustment upon the occurrence of stock dividends, stock splits, mergers, consolidations or certain other changes incorporate structure or capitalization. If an award expires or terminates, the shares subject to the award will be available for further grantsof awards under the Stock Option Plan. The Compensation Committee of GCI’s Board of Directors administers the Stock Option Plan.Substantially all restricted stock awards granted vest over periods of up to three years. Substantially all options vest in equal installmentsover a period of five years and expire ten years from the date of grant. The requisite service period of our awards is generally the same asthe vesting period. Options granted pursuant to the Stock Option Plan are only exercisable if at the time of exercise the option holder isour employee, non-employee director, or a consultant or advisor working on our behalf. New shares are issued when stock optionagreements are exercised or restricted stock awards are granted. We have 3.2 million shares available for grant under the Stock OptionPlan at December 31, 2013.The fair value of restricted stock awards is determined based on the number of shares granted and the quoted price of our commonstock. We estimate pre-vesting option forfeitures at the time of grant and periodically revise those estimates in subsequent periods ifactual forfeitures differ from those estimates. We record share-based compensation expense only for those awards expected to vest usingan estimated forfeiture rate based on our historical pre-vesting forfeiture data. We review our forfeiture estimates annually and adjust ourshare-based compensation expense in the period our estimate changes.A summary of option activity under the Stock Option Plan as of December 31, 2013 and changes during the year then ended ispresented below: Shares (inthousands) Weighted AverageExercise Price Weighted Average RemainingContractual Term Aggregate IntrinsicValue (inthousands)Outstanding at January 1, 2013719 $7.65 Exercised(87) $7.16 Expired(12) $6.61 Outstanding at December 31, 2013620 $7.74 2.8 years $2,153Exercisable at December 31, 2013601 $7.78 2.7 years $2,060There were no options granted during the years ended December 31, 2013, 2012 and 2011. The total fair value of options vesting duringthe years ended December 31, 2013, 2012 and 2011, was $78,000, $560,000 and $379,000, respectively. The total intrinsic values,determined as of the date of exercise, of options exercised in the years ended December 31, 2013, 2012 and 2011, were $0.2 million,$1.3 million and $0.3 million, respectively. We received $0.6 million, $2.1 million and $0.9 million in cash from stock option exercisesin the years ended December 31, 2013, 2012 and 2011, respectively.A summary of nonvested restricted stock award activity under the Stock Option Plan for the year ended December 31, 2013, follows(share amounts in thousands): Shares WeightedAverageGrant DateFair ValueNonvested at January 1, 20131,127 $9.59Granted680 $8.30Vested(582) $10.05Forfeited(16) $8.60Nonvested at December 31, 20131,209 $8.60114Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements The weighted average grant date fair value of awards granted during the years ended December 31, 2013, 2012 and 2011, were $8.30,$9.23 and $12.08, respectively. We have recorded share-based compensation expense of $6.6 million, $5.0 million and $6.6 million forthe years ended December 31, 2013, 2012 and 2011, respectively. Share-based compensation expense is classified as Selling, Generaland Administrative Expense in our Consolidated Income Statements. Unrecognized share-based compensation expense was $6.2million relating to 1.2 million restricted stock awards and $27,000 relating to 19,000 unvested stock options as of December 31,2013. We expect to recognize share-based compensation expense over a weighted average period of 0.6 years for stock options and 2years for restricted stock awards.GCI 401(k) PlanIn 1986, we adopted an Employee Stock Purchase Plan (“GCI 401(k) Plan”) qualified under Section 401 of the Internal Revenue Code of1986. The GCI 401(k) Plan provides for acquisition of GCI’s Class A common stock at market value as well as various mutual funds.We may match a percentage of the employees' contributions up to certain limits, decided by GCI’s Board of Directors each year. Ourmatching contributions allocated to participant accounts totaled $8.2 million, $7.5 million and $7.1 million for the years ended December31, 2013, 2012 and 2011, respectively. We used cash to fund all of our employer-matching contributions during the years endedDecember 31, 2013, 2012 and 2011.(10)Industry Segments DataEffective January 1, 2013, we refocused our business and now have two reportable segments, Wireless and Wireline. The Wirelesssegment’s revenue is derived from wholesale wireless services. The Wireline segment’s revenue includes all of our other revenue,specifically a full range of retail wireless, data, video and voice services to residential, local, national and global businesses,governmental entities and public and private educational institutions; wholesale data and voice services to common carrier customers;Internet, data network and managed services to rural schools and health organizations and regulated voice services to residential andcommercial customers in rural communities primarily in Southwest Alaska. This change reflects our plan to strategically focus on ourwireless network and is how our chief operating decision maker now measures performance and makes resource allocationdecisions. Prior to 2013 we had operated our business under five reportable segments – Consumer, Network Access, Commercial,Managed Broadband and Regulated Operations. The historical segment data has been reclassified to conform to the revised reportablesegments.Wireless plan fee and usage revenues from external customers are allocated between our Wireless and Wireline segments. TheWireless segment recorded subsidies to the Wireline segment related to wireless equipment sales based upon equipment sales andagreed-upon subsidy rates through the AWN transaction close on July 23, 2013. Subsequent to the transaction close and throughDecember 31, 2013, although permitted, the Wireline segment was unable to meet the requirements in order to request a wirelessequipment subsidy from the Wireless segment in accordance with the AWN agreements. These subsidies, which eliminate inconsolidation, increase the Wireline segment earnings before depreciation and amortization expense, net interest expense, incometaxes, share-based compensation expense, accretion expense, income or loss attributable to non-controlling interest and non-cashcontribution adjustment (“Adjusted EBITDA”) and reduce the Wireless segment Adjusted EBITDA. The wireless equipment subsidywas $13.0 million for the period January 1, 2013 to July 22, 2013 and $23.2 million and $16.5 million for the years ended December31, 2012 and 2011, respectively. Selling, general and administrative expenses are charged to the Wireless segment based upon a sharedservices agreement. The remaining selling, general and administrative expenses are charged to the Wireline segment. Intercompanytransactions have been pushed down to the segment level.We evaluate performance and allocate resources based on Adjusted EBITDA. Management believes that this measure is useful toinvestors and other users of our financial information in evaluating operating profitability as an analytical indicator of income generated toservice debt and fund capital expenditures. In addition, multiples of current or projected earnings before depreciation and amortization,net interest expense, and income taxes (“EBITDA”) are used to estimate current or prospective enterprise value. The accounting policiesof the reportable segments are the same as those described in Note 1, “Business and Summary of Significant Accounting Policies” ofthis Form 10-K. We have no intersegment sales.115Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements We earn all revenues through sales of services and products within the United States. All of our long-lived assets are located within theUnited States of America, except approximately 82% of our undersea fiber optic cable systems which transit international waters and allof our satellite transponders.Summarized financial information for our reportable segments for the years ended December 31, 2013, 2012 and 2011 follows(amounts in thousands): Wireless Wireline Total ReportableSegments2013 Revenues Wholesale$197,218 — 197,218Consumer— 274,805 274,805Business Services— 222,814 222,814Managed Broadband— 116,811 116,811Total197,218 614,430 811,648 Cost of Goods Sold68,086 212,376 280,462Contribution129,132 402,054 531,186Less SG&A20,030 251,035 271,065Plus share-based compensation expense— 6,638 6,638Plus (less) accretion expense507 (430) 77Other expense— 447 447Adjusted EBITDA$109,609 157,674 267,283 Capital expenditures$28,156 152,398 180,554Goodwill$155,445 63,596 219,041Total assets$624,740 1,387,067 2,011,807116Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements Wireless Wireline Total ReportableSegments2012 Revenues Wholesale$124,745 — 124,745Consumer— 269,357 269,357Business Services— 207,892 207,892Managed Broadband— 108,187 108,187Total124,745 585,436 710,181 Cost of Good Sold58,737 188,764 247,501Contribution66,008 396,672 462,680Less SG&A15,475 227,773 243,248Plus share-based compensation expense— 5,040 5,040Plus non-cash contribution expense— 960 960Plus accretion expense269 239 508Other expense— 869 869Adjusted EBITDA$50,802 176,007 226,809 2011 Revenues Wholesale$119,521 — 119,521Consumer— 266,750 266,750Business Services— 207,860 207,860Managed Broadband— 85,250 85,250Total119,521 559,860 679,381 Cost of Good Sold42,687 184,712 227,399Contribution76,834 375,148 451,982Less SG&A14,868 220,653 235,521Plus share-based compensation expense— 6,620 6,620Plus accretion expense349 270 619Other expense— (59) (59)Adjusted EBITDA$62,315 161,326 223,641Capital expenditures and total assets by segment for 2012 and 2011 are not reported as it is impracticable to allocate our historical balancesheets.117Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements A reconciliation of reportable segment Adjusted EBITDA to consolidated income before income taxes follows (amounts in thousands):Years Ended December 31,2013 2012 2011Reportable segment Adjusted EBITDA$267,283 226,809 223,641Less depreciation and amortization expense(147,259) (130,452) (125,937)Less share-based compensation expense(6,638) (5,040) (6,620)Less non-cash contribution expense— (960) —Less accretion expense(77) (508) (619)Other(447) (869) 59Consolidated operating income112,862 88,980 90,524Less other expense, net(70,178) (67,730) (77,633)Consolidated income before income tax expense$42,684 21,250 12,891We did not have any major customers for the years ended December 31, 2013, 2012 and 2011.(11)Related Party TransactionsWe entered into a long-term capital lease agreement in 1991 with the wife of GCI’s President and CEO for property occupied by us. Theleased asset was capitalized in 1991 at the owner’s cost of $900,000 and the related obligation was recorded. The lease agreement wasamended in April 2008 and our existing capital lease asset and liability increased by $1.3 million to record the extension of this capitallease. The amended lease terminates on September 30, 2026.In January 2001 we entered into an aircraft operating lease agreement with a company owned by GCI’s President and CEO. The leasewas amended several times, most recently in May 2011. The amended lease agreement added the lease of a second aircraft. The leaseterm of the original aircraft could be terminated by us at any time upon 90 days written notice. This notice was provided and as ofJanuary 1, 2013, the original aircraft lease, and its monthly rate of $45,000, ended. The lease term of the second aircraft may beterminated at any time by us upon 12 months’ written notice. The monthly lease rate of the second aircraft is $132,000. In 2001, wepaid a deposit of $1.5 million in connection with the lease. The deposit will be repaid to us no later than six months after the agreementterminates.Upon closing of the AWN acquisition on July 22, 2013, ACS became a related party for financial statement reporting purposes. ACSprovides us with local service lines and network capacity in locations where we do not have our own facilities. We provide wholesaleservices to ACS who uses our network to sell services to its respective retail customers and we receive ACS' high cost support from USFfor its wireless customers. We have paid ACS $25.1 million and received $23.9 million in payments from ACS since the acquisitiondate. At December 31, 2013 we have $28.0 million in receivables from ACS and $11.2 million in payables to ACS. We also have longterm capacity exchange agreements with ACS for which no money is exchanged.(12)Variable Interest EntitiesWe have entered into several arrangements under the NMTC program with US Bancorp to help fund a $59.3 million project to extendterrestrial broadband service for the first time to rural Northwestern Alaska communities via a high capacity hybrid fiber optic andmicrowave network. When completed, the project, called TERRA-Northwest (“TERRA-NW”), will connect to the TERRA-Southwest(“TERRA-SW”) network and provide a high capacity backbone connection from the served communities to the Internet. The NMTCprogram was provided for in the Community Renewal Tax Relief Act of 2000 (the “Act”) to induce capital investment in qualified lowerincome communities. The Act permits taxpayers to claim credits against their federal income taxes for up to 39% of qualifiedinvestments in the equity of community development entities (“CDEs”). CDEs are privately managed investment institutions that arecertified to make qualified low-income community investments.On August 30, 2011, we entered into the first arrangement (“NMTC #1”). In connection with the NMTC #1 transaction we loaned $58.3million to TIF, a special purpose entity created to effect the financing arrangement,118Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements at 1% interest due August 30, 2041. Simultaneously, US Bancorp invested $22.4 million in TIF. TIF then contributed US Bancorp’scontribution and the loan proceeds to certain CDEs. The CDEs, in turn, loaned the $76.8 million in funds less payment of placementfees, at interest rates varying from 1% to 3.96%, to Unicom, as partial financing for TERRA-NW.On October 3, 2012, we entered into the second arrangement (“NMTC #2”). In connection with the NMTC #2 transaction we loaned$37.7 million to TIF 2 and TIF 2-USB, special purpose entities created to effect the financing arrangement, at 1% interest due October 2,2042. Simultaneously, US Bancorp invested $17.5 million in TIF 2 and TIF 2-USB. TIF 2 and TIF 2-USB then contributed USBancorp’s contributions and the loan proceeds to certain CDEs. The CDEs, in turn, loaned the$55.2 million in funds less payment ofplacement fees, at interest rates varying from 0.7099% to 0.7693%, to Unicom, as partial financing for TERRA-NW.On December 11, 2012, we entered into the third arrangement (“NMTC #3”). In connection with the NMTC #3 transaction we loaned$8.2 million to TIF 3, a special purpose entity created to effect the financing arrangement, at 1% interest due December 10,2042. Simultaneously, US Bancorp invested $3.8 million in TIF 3. TIF 3 then contributed US Bancorp’s contributions and the loanproceeds to a CDE. The CDE, in turn, loaned the $12.0 million in funds less payment of placement fees, at an interest rate of 1.35%, toUnicom, as partial financing for TERRA-NW.US Bancorp is the sole investor in TIF, TIF 2, TIF 2-USB and TIF 3, and as such, is entitled to substantially all of the benefits derivedfrom the NMTCs. All of the loan proceeds to Unicom, net of syndication and arrangement fees, are restricted for use on TERRA-NW. Restricted cash of $6.9 million and $30.9 million was held by Unicom at December 31, 2013 and 2012, respectively, and isincluded in our Consolidated Balance Sheets. We began construction on TERRA-NW in 2012 and expect to complete all current phasesof the project in 2014. We began offering service on Phase 1 of this new facility on January 3, 2013.These transactions include put/call provisions whereby we may be obligated or entitled to repurchase US Bancorp’s interests in TIF, TIF2, TIF 2-USB and/or TIF 3. We believe that US Bancorp will exercise the put options in August 2018, October 2019 and December 2019,at the end of the compliance periods for NMTC #1, NMTC #2 and NMTC #3, respectively. The NMTCs are subject to 100% recapture fora period of seven years as provided in the Internal Revenue Code. We are required to be in compliance with various regulations andcontractual provisions that apply to the NMTC arrangements. Non-compliance with applicable requirements could result in projected taxbenefits not being realized by US Bancorp. We have agreed to indemnify US Bancorp for any loss or recapture of NMTCs until suchtime as our obligation to deliver tax benefits is relieved. There have been no credit recaptures as of December 31, 2013. The valueattributed to the put/calls is nominal.We have determined that TIF, TIF 2, TIF 2-USB and TIF 3 are VIEs. The consolidated financial statements of TIF, TIF 2, TIF 2-USB andTIF 3 include the CDEs discussed above. The ongoing activities of the VIEs – collecting and remitting interest and fees and NMTCcompliance – were all considered in the initial design and are not expected to significantly affect economic performance throughout the lifeof the VIEs. Management considered the contractual arrangements that obligate us to deliver tax benefits and provide various otherguarantees to US Bancorp; US Bancorp’s lack of a material interest in the underlying economics of the project; and the fact that we areobligated to absorb losses of the VIEs. We concluded that we are the primary beneficiary of each and consolidated the VIEs in accordancewith the accounting standard for consolidation.US Bancorp’s contributions, net of syndication fees and other direct costs incurred in structuring the NMTC arrangements, are includedin Non-controlling Interests on the Consolidated Balance Sheets. Incremental costs to maintain the structure during the complianceperiod are recognized as incurred to selling, general and administrative expense.The assets and liabilities of our consolidated VIEs were $140.9 million and $104.2 million, respectively, as of December 31, 2013 and2012.The assets of the VIEs serve as the sole source of repayment for the debt issued by these entities. US Bank does not have recourse to usor our other assets, with the exception of customary representations and indemnities we have provided. We are not required and do notcurrently intend to provide additional financial119Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements support to these VIEs. While these subsidiaries are included in our consolidated financial statements, these subsidiaries are separatelegal entities and their assets are legally owned by them and not available to our creditors.(13)Commitments and ContingenciesOperating Leases as LesseeWe lease business offices, have entered into site lease agreements and use satellite transponder and fiber capacity and certainequipment pursuant to operating lease arrangements. Many of our leases are for multiple years and contain renewal options. Rentalcosts under such arrangements amounted to $46.5 million, $37.4 million and $36.3 million for the years ended December 31, 2013,2012 and 2011, respectively.Capital Leases as LesseeWe entered into a long-term capital lease agreement in 1991 with the wife of GCI’s President and CEO for property occupied by us asfurther described in Note 11, Related Party Transactions.We have a capital lease agreement for transponder capacity on Intelsat, Ltd.’s (“Intelsat”) Galaxy 18 spacecraft. The Intelsat Galaxy 18 C-band and Ku-Band transponders are being leased over an expected term of 14 years. At lease inception the present value of the leasepayments, excluding telemetry, tracking and command services and back-up protection, was $98.6 million. We amended ourtransponder capacity lease agreement with Intelsat in October 2013 to lease additional transponder capacity on Intelsat's Galaxy 18spacecraft. As a result, on January 1, 2014 we expect to increase our existing capital lease asset and liability by $9.4 million.A summary of future minimum lease payments follows (amounts in thousands):Years ending December 31:Operating Capital2014$37,163 11,758201531,358 11,734201627,636 11,745201722,120 11,723201819,996 11,7302019 and thereafter66,020 43,297Total minimum lease payments$204,293 101,987Less amount representing interest 27,381Less current maturity of obligations under capital leases 6,465Long-term obligations under capital leases, excluding current maturity $68,141The leases generally provide that we pay the taxes, insurance and maintenance expenses related to the leased assets. Several of ourleases include renewal options, escalation clauses and immaterial amounts of contingent rent expense. We expect that in the normalcourse of business leases that expire will be renewed or replaced by leases on other properties.Guaranteed Service LevelsCertain customers have guaranteed levels of service with varying terms. In the event we are unable to provide the minimum servicelevels we may incur penalties or issue credits to customers.Self-InsuranceThrough December 31, 2013, we were self-insured for losses and liabilities related primarily to health and welfare claims up to $500,000per incident per year above which third party insurance applied. A reserve of $3.1 million and $2.7 million was recorded at December 31,2013 and 2012, respectively, to cover estimated reported losses, estimated unreported losses based on past experience modified forcurrent trends, and120Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements estimated expenses for settling claims. We are self-insured for all losses and liabilities related to workers’ compensation claims inAlaska and have a workers compensation excess insurance policy to make claims for any losses in excess of $500,000 per incident. Areserve of $3.7 million and $2.4 million was recorded at December 31, 2013 and 2012, respectively, to cover estimated reported lossesand estimated expenses for open and active claims. Actual losses will vary from the recorded reserves. While we use what we believeare pertinent information and factors in determining the amount of reserves, future additions to the reserves may be necessary due tochanges in the information and factors used.We are self-insured for damage or loss to certain of our transmission facilities, including our buried, undersea, and above-groundtransmission lines. If we become subject to substantial uninsured liabilities due to damage or loss to such facilities, our financialposition, results of operations or liquidity may be adversely affected.Litigation, Disputes, and Regulatory MattersWe are involved in various lawsuits, billing disputes, legal proceedings, and regulatory matters that have arisen from time to time in thenormal course of business. Management believes there are no proceedings from asserted and unasserted claims which if determinedadversely would have a material adverse effect on our financial position, results of operations or liquidity.Universal ServiceAs an ETC, we receive support from the USF to support the provision of wireline local access and wireless services in high costareas. On November 29, 2011, the FCC published the High Cost Order which segregated the support methodology for Remote areas inAlaska from the support methodology for all urban areas, including Alaska Urban locations. CETCs serving Urban areas that generallyinclude Anchorage, Fairbanks, and Juneau will follow national reforms, had support per provider per service area capped as of January1, 2012, and a five-step phase-down commenced on July 1, 2012. In addition to broader reforms, the FCC tailored revisions specificallyfor CETCs serving Remote Alaska, intended to address the unique challenges for serving these areas. Support to these locations iscapped and is being distributed on a per-line basis until the later of June 30, 2014, or the last full month prior to the implementation of asuccessor funding mechanism. A further rulemaking to consider successor funding mechanisms is underway. We cannot predict at thistime the outcome of this proceeding or its effect on high cost support available to us, but our future revenue recognition for both Remoteand Urban high cost support is dependent upon the functionality and timing of an operational successor funding mechanism. AtDecember 31, 2013, we believe an implementation of an operational successor funding mechanism prior to January 2015 is unlikely.Our revenue for providing local and wireless services in these areas would be materially adversely affected by a substantial reduction ofUSF support.Cable Service Rate ReregulationFederal law permits regulation of basic cable programming services rates. However, Alaska law provides that cable television service isexempt from regulation by the RCA unless 25% of a system’s subscribers request such regulation by filing a petition with the RCA. AtDecember 31, 2013, only the Juneau system is subject to RCA regulation of its basic service rates. No petition requesting regulation hasbeen filed for any other system. The Juneau system serves 7% of our total basic service subscribers at December 31, 2013.TERRA-NorthwestAs a requirement of NMTC #1, NMTC #2 and NMTC #3, we have guaranteed completion of TERRA-NW by December 31, 2014. Weplan to fund an additional $10.0 million to complete TERRA-NW. We began construction in 2012 and expect to complete all phases of theproject in 2014. We began offering service on Phase 1 of this new facility on January 3, 2013.AWN Member Distribution AdjustmentAs part of the AWN transaction, distributions to each member are subject to adjustment based on the number of ACS and GCI wirelesssubscribers, with the aggregate adjustment capped at $21.8 million for each member over the Preference Period. See Note 1(d),"Acquisition" of this Form 10-K for further discussion of the AWN transaction.121Table of ContentsGENERAL COMMUNICATION, INC. AND SUBSIDIARIESNotes to Consolidated Financial Statements (14)Selected Quarterly Financial Data (Unaudited)The following is a summary of unaudited quarterly results of operations for the years ended December 31, 2013 and 2012 (amounts inthousands, except per share amounts): FirstQuarterSecondQuarterThirdQuarterFourthQuarter2013 Total revenues$186,216189,661217,943217,828Operating income$23,06025,69538,68425,423Net income (loss) attributable to GCI$3,2444,1808,905(6,923)Basic net income (loss) attributable to GCI per common share$0.080.100.22(0.17)Diluted net income (loss) attributable to GCI per common share$0.080.100.22(0.17) 2012 Total revenues$171,907176,104178,494183,676Operating income$19,68524,63325,39219,270Net income attributable to GCI$1,4293,9823,700562Basic net income attributable to GCI per common share$0.030.100.090.01Diluted net income attributable to GCI per common share1$0.030.090.090.01 1Due to rounding, the sum of quarterly diluted net income (loss) attributable to GCI per common share amounts does not agree to totalyear diluted net income attributable to GCI per common share.(15)Subsequent EventsOn February 18, 2014, we invested $15.0 million for a 39% interest in Texas Energy Network LLC, a next generation carrier-classcommunication services firm that specializes in serving the energy exploration and production, oilfield service and midstream industries.We are evaluating the accounting treatment for this transaction.On February 28, 2014, the FCC announced our winning bids in the Tribal Mobility Fund I auction for a $41.4 million grant to partiallyfund expansion of our 3G wireless network, or better, to locations in Alaska where we would not otherwise be able to construct within ourreturn-on-investment requirements. We must file a long-form application with the FCC by April 4, 2014, which must be reviewed forfinal approval, before the award can be issued. 122Table of ContentsItem 15(b). ExhibitsListed below are the exhibits that are filed as a part of this Report (according to the number assigned to them in Item 601 of Regulation S-K):Exhibit No.Description Where Located2.1Amendment, dated as of October 1, 2012, to Asset Purchase and ContributionAgreement, dated as of June 4, 2012, among Alaska Communications SystemsGroup, Inc., General Communication, Inc., ACS Wireless, Inc., GCI WirelessHoldings, LLC and The Alaska Wireless Network, LLC Incorporated by reference to TheCompany's Report on Form 8-K for theperiod October 1, 2012 filed October 2,2012.3.1Restated Articles of Incorporation of the Company dated August 20, 2007 Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2007 filedMarch 7, 2008.3.2Amended and Restated Bylaws of the Company dated August 20, 2007 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2007.4.1Certified copy of the General Communication, Inc. Amendment No. 1, dated asof June 25, 2007, to the Amended and Restated 1986 Stock Option Plan Incorporated by reference to TheCompany’s Report on Form S-8 for theperiod July 27, 2007.10.3Westin Building Lease Incorporated by reference to TheCompany’s Registration Statement onForm 10 (File No. 0-15279), mailed to theSecurities and Exchange Commission onDecember 30, 198610.6Order approving Application for a Certificate of Public Convenience and Necessityto operate as a Telecommunications (Intrastate Interexchange Carrier) PublicUtility within Alaska Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 199110.2The GCI Special Non-Qualified Deferred Compensation Plan Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 1995.10.21Transponder Purchase Agreement for Galaxy X between HughesCommunications Galaxy, Inc. and GCI Communication Corp. Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 1995.10.25Licenses: Incorporated by reference to TheCompany’s Registration Statement onForm 10 (File No. 0-15279), mailed to theSecurities and Exchange Commission onDecember 30, 198610.25.1214 Authorization 10.25.2International Resale Authorization 10.25.3Digital Electronic Message Service Authorization 10.25.11Certificate of Convenience and Public Necessity – Telecommunications Service(Local Exchange) dated July 7, 2000 Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2005 filedMarch 16, 2006.10.26ATU Interconnection Agreement between GCI Communication Corp. andMunicipality of Anchorage, executed January 15, 1997 Incorporated by reference to TheCompany’s Form S-3 RegistrationStatement (File No. 333-28001) dated May29, 1997.123Table of ContentsExhibit No.Description Where Located10.36Order Approving Arbitrated Interconnection Agreement as Resolved and Modifiedby Order U-96-89(5) dated January 14, 1997 Incorporated by reference to TheCompany’s Form S-3 RegistrationStatement (File No. 333-28001) dated May29, 1997.10.47Radio Station Authorization (Personal Communications Service License), IssueDate June 23, 1995 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.52Lease Agreement dated September 30, 1991 between RDB Company andGeneral Communication, Inc. Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 199110.54Order Approving Transfer Upon Closing, Subject to Conditions, and RequiringFilings dated September 23, 1996 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.55Order Granting Extension of Time and Clarifying Order dated October 21, 1996 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.58Employment and Deferred Compensation Agreement between GeneralCommunication, Inc. and John M. Lowber dated July 1992 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.60Transponder Lease Agreement between General Communication Incorporatedand Hughes Communications Satellite Services, Inc., executed August 8, 1989 Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 1993.10.61Addendum to Galaxy X Transponder Purchase Agreement between GCICommunication Corp. and Hughes Communications Galaxy, Inc. dated August24, 1995 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.62Order Approving Application, Subject to Conditions; Requiring Filing; andApproving Proposed Tariff on an Inception Basis, dated February 4, 1997 Incorporated by reference to TheCompany’s Amendment No. 1 to Form S-3/A Registration Statement (File No. 333-28001) dated July 8, 1997.10.102First Amendment to Lease Agreement dated as of September 2002 betweenRDB Company and GCI Communication Corp. as successor in interest toGeneral Communication, Inc. Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2002.10.105Aircraft lease agreement between GCI Communication Corp., and Alaskacorporation and 560 Company, Inc., an Alaska corporation, dated as of January22, 2001 Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2002.10.106First amendment to aircraft lease agreement between GCI CommunicationCorp., and Alaska corporation and 560 Company, Inc., an Alaska corporation,dated as of February 8, 2002 Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2002.10.108Bonus Agreement between General Communication, Inc. and Wilson Hughes Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2003.124Table of ContentsExhibit No.Description Where Located10.131Amended and Restated 1986 Stock Option Plan of General Communication,Inc. as of June 7, 2005 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2005.10.134Full-time Transponder Capacity Agreement with PanAmSat Corporation datedMarch 31, 2006 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended March 31, 2006.10.140General Communication, Inc. Director Compensation Plan dated June 29, 2006 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended March 31, 2007.10.145CDMA Build-out Agreement dated as of October 30, 2007 between AlaskaDigiTel, LLC. and WirelessCo L.P. (Nonmaterial schedules and exhibits to theReorganization Agreement have been omitted pursuant to Item 601b.2 ofRegulation S-K. We agree to furnish supplementally to the Commission uponrequest a copy of any omitted schedule or exhibit.) # Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2007 filedMarch 7, 2008.10.146Long-term de Facto Transfer Spectrum Leasing agreement between AlaskaDigiTel, LLC. and SprintCom, Inc. # Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2007 filedMarch 7, 2008.10.148Stock Purchase Agreement dated as of October 12, 2007 among GCICommunication Corp., United Companies, Inc., Sea Lion Corporation andTogiak Natives LTD. (Nonmaterial schedules and exhibits to the ReorganizationAgreement have been omitted pursuant to Item 601b.2 of Regulation S-K. Weagree to furnish supplementally to the Commission upon request a copy of anyomitted schedule or exhibit.) Incorporated by reference to TheCompany’s Annual Report on Form 10-Kfor the year ended December 31, 2007 filedMarch 7, 2008.10.150Second Amendment to Lease Agreement dated as of April 8, 2008 between RDBCompany and GCI Communication Corp. as successor in interest to GeneralCommunication, Inc. Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended March 31, 2008.10.158Fifth Amendment to the Amended and Restated Credit Agreement dated as ofOctober 17, 2008 by and among Holdings, Inc. the other parties thereto andCalyon New York Branch, as administrative agent, and the other Lenders partythereto Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2008.10.161First Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated February 15, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.162Second Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated April 9, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.163Third Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated June 4, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.164Fourth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated June 4, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.165Fifth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated September 30, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.125Table of ContentsExhibit No.Description Where Located10.166Sixth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated October 31, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.167Seventh Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated November 6, 2008 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.168Eighth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication Corp. dated June 8, 2009 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30,2009.10.170Second Amended and Restated Credit Agreement dated as of January 29, 2010by and among GCI Holdings, Inc., the other parties thereto and Calyon New YorkBranch, as administrative agent, and the other Lenders party thereto Incorporated by reference to TheCompany's Report on Form 8-K for theperiod January 29, 2010 filed February 3,2010.10.173Audit Committee Charter (as revised by the Board of Directors of GeneralCommunication, Inc. effective January 1, 2010) Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2010 filedAugust 5, 2010.10.174Nominating and Corporate Governance Committee Charter (as revised by theBoard of Directors of General Communication, Inc. effective as of January 1,2010) Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2010 filedAugust 5, 2010.10.175Ninth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated June 29, 2010 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2010 filedAugust 5, 2010.10.177Description of Incentive Compensation Guidelines for Named Executive Officers(49) Incorporated by reference to TheCompany's Report on Form 8-K for theperiod October 7, 2010 filed October 15,2010.10.178Amended and restated aircraft lease agreement between GCI CommunicationCorp., and Alaska corporation and 560 Company, Inc., an Alaska corporation,dated as of February 25, 2005 Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.179First amendment to the amended and restated aircraft lease agreement betweenGCI Communication Corp., and Alaska corporation and 560 Company, Inc., anAlaska corporation, dated as of December 27, 2010 Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.180Tenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated September 24, 2010 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.181Eleventh Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated September 23, 2010 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.182Twelfth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated November 5, 2010 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.126Table of ContentsExhibit No.Description Where Located10.185Amendment No. 2 to the Amended and Restated 1986 Stock Option Plan ofGeneral Communication, Inc. Incorporated by reference to theCompany's Form SC TO-I dated August 6,200910.186Amendment No. 3 to the Amended and Restated 1986 Stock Option Plan ofGeneral Communication, Inc. Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.188Broadband Initiatives Program Loan/Grant and Security Agreement betweenUnited Utilities, Inc. and the United States of America dated as of June 1, 2010 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2010,filed March 15, 2011.10.189Add-on Term Loan Supplement No. 1 Incorporated by reference to TheCompany's Report on Form 8-K for theperiod June 10, 2011 filed June 14, 2011.10.190Second Amended and Restated Aircraft Lease Agreement between GCICommunication Corp., an Alaska corporation and 560 Company, Inc., an Alaskacorporation, dated May 9, 2011 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2011 filedAugust 9, 2011.10.191Add-on Term Loan Supplement No. 2 Incorporated by reference to TheCompany's Report on Form 8-K for theperiod July 22, 2011 filed July 26, 2011.10.192Credit Agreement dated August 30, 2011 by and between Unicom, Inc. asborrower and Northern Development Fund VIII, LLC as Lender and Travois NewMarkets Project CDE X, LLC as Lender and Waveland Sub CDE XVI, LLC asLender and Alaska Growth Capital Bidco, Inc. as Disbursing Agent Incorporated by reference to TheCompany's Report on Form 8-K for theperiod August 30, 2011 filed September 6,2011.10.193Asset Purchase and Contribution Agreement Dated as of June 4, 2012 By andAmong Alaska Communications Systems Group, Inc., ACS Wireless, Inc.,General Communication, Inc., GCI Wireless Holdings, LLC and The AlaskaWireless Network, LLC # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2012 filedAugust 6, 2012.10.194Add-on Term Loan Supplement No. 3 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended June 30, 2012 filedAugust 6, 2012.10.195Credit Agreement dated October 3, 2012 by and between Unicom, Inc. asborrower and USBCDE Sub-CDE 74, LLC as Lender and Cherokee Nation Sub-CDE II, LLC as Lender and LBCDE Sub2, LLC as Lender and Waveland SubCDE XXII, LLC as Lender Incorporated by reference to TheCompany's Report on Form 8-K for theperiod October 3, 2012 filed October 9,2012.10.196Thirteenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated March 14, 2011 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2012,filed March 8, 2013.10.197Fourteenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated June 7, 2011 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2012,filed March 8, 2013.127Table of ContentsExhibit No.Description Where Located10.198Fifteenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated December 29, 2011 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2012,filed March 8, 2013.10.199Sixteenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated December 21, 2012 # Incorporated by reference to TheCompany's Annual Report on Form 10-Kfor the year ended December 31, 2012,filed March 8, 2013.10.200Third Amended and Restated Credit Agreement dated as of April 30, 2013 by andamong GCI Holdings, Inc., GCI, Inc., the Subsidiary Guarantors party thereto,the Lenders party thereto, Union Bank, as Syndication Agent, Suntrust Bank, asDocumentation Agent and Credit Agricole Corporate and Investment Bank, asAdministrative Agent Incorporated by reference to TheCompany's Report on Form 8-K for theperiod April 30, 2013 filed May 6, 2013.10.201Seventeenth Amendment to the Full-Time Transponder Capacity Agreement(Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated June 4, 2013 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30, 2013filed November 8, 2013.10.202Eighteenth Amendment to the Full-Time Transponder Capacity Agreement (Pre-Launch) between Intelsat Corporation, formerly known as PanAmSatCorporation and GCI Communication, Corp. dated October 17, 2013 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30, 2013filed November 8, 2013.10.203First Amended and Restated Operating Agreement of The Alaska WirelessNetwork, LLC dated July 22, 2013 # Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30, 2013filed November 8, 2013.10.204First Amendment to Contract for Alaska Access Services between GeneralCommunication, Inc. and MCI Telecommunications Corporation dated March 1,1996 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30, 2013filed November 8, 2013.10.205Broadband Initiatives Program Loan/Grant and Security Agreement betweenUnited Utilities, Inc. and The United States of America dated June 1, 2010 Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended September 30, 2013filed November 8, 2013.14Code Of Business Conduct and Ethics (originally reported as exhibit 10.118) Incorporated by reference to TheCompany’s Quarterly Report on Form 10-Q for the period ended March 31, 200421.1Subsidiaries of the Registrant * 23.1Consent of Grant Thornton LLP (Independent Public Accountant for Company) * 31Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 * 32Certifications Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002 * 128Table of ContentsExhibit No.Description Where Located101The following materials from General Communication, Inc.'s Annual Report onForm 10-K for the year ended December 31, 2013, formatted in XBRL(eXtensible Business Reporting Language): (i) Consolidated Balance Sheets asof December 31, 2013 and 2012; (ii) Consolidated Income Statements for theyears ended December 31, 2013, 2012 and 2011; (iii) Consolidated Statementsof Stockholders' Equity for the years ended December 31, 2013, 2012 and 2011;(iv) Consolidated Statements of Cash Flows for the years ended December 31,2013, 2012 and 2011; and (v) Notes to Consolidated Financial Statements * #CONFIDENTIAL PORTION has been omitted pursuant to a request for confidential treatment by us to, and the material hasbeen separately filed with, the SEC. Each omitted Confidential Portion is marked by three asterisks.*Filed herewith. 129Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this reportto 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 26, 2014 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons onbehalf of the registrant and in the capacities and on the date indicated.Signature Title Date /s/ Stephen M. Brett Chairman of Board and Director March 26, 2014Stephen M. Brett /s/ Ronald A. Duncan President and Director(Principal Executive Officer) March 26, 2014Ronald A. Duncan /s/ Bridget L. Baker Director March 26, 2014Bridget L. Baker /s/ Jerry A. Edgerton Director March 26, 2014Jerry A. Edgerton /s/ Scott M. Fisher Director March 26, 2014Scott M. Fisher Director William P. Glasgow /s/ Mark W. Kroloff Director March 26, 2014Mark W. Kroloff /s/ Stephen R. Mooney Director March 26, 2014Stephen R. Mooney Director James M. Schneider /s/ Peter J. Pounds Senior Vice President, Chief FinancialOfficer, and Secretary(Principal Financial Officer) March 26, 2014Peter J. Pounds /s/ Lynda L. Tarbath Vice President, Chief AccountingOfficer (Principal Accounting Officer) March 26, 2014Lynda L. Tarbath 130Exhibit 21.1SUBSIDIARIES OF THE REGISTRANTEntityJurisdiction ofOrganizationName Under Which Subsidiary Does BusinessAlaska United Fiber System PartnershipAlaskaAlaska United Fiber System Partnership, AlaskaUnited Fiber System, Alaska United GCI Communication Corp.AlaskaGCI, GCC, GCICC, GCI Communication Corp. GCI, Inc.AlaskaGCI, GCI, Inc. GCI Cable, Inc.AlaskaGCI Cable, GCI Cable, Inc. GCI Holdings, Inc.AlaskaGCI Holdings, Inc. Potter View Development Co., Inc.AlaskaPotter View Development Co., Inc. GCI Fiber Communication, Co., Inc. AlaskaGCI Fiber Communication, Co., Inc.,GFCC, Kanas Cycle30, Inc. AlaskaCycle30, Inc., Cycle30GCI Wireless Holdings, LLC AlaskaGCI Wireless Holdings, LLCThe Alaska Wireless Network, LLC DelawareThe Alaska Wireless Network, AWNDenali Media Holdings, Corp. AlaskaDenali Media Holdings, Corp.Denali Media Anchorage, Corp. AlaskaDenali Media Anchorage, Corp.Denali Media Juneau, Corp.AlaskaDenali Media Juneau, Corp.Denali Media Southeast, Corp. AlaskaDenali Media Southeast, Corp.GCI Community Development, LLC AlaskaGCI Community Development, LLCUnicom, Inc. AlaskaUnicom, Inc., UnicomUnited-KUC, Inc. AlaskaUnited-KUC, Inc., United-KUC, KUCUnited Utilities, Inc. AlaskaUnited Utilities, Inc. United Utilities, UUIUnited2, LLCAlaskaUnited2, LLC, United2Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe have issued our reports dated March 26, 2014, with respect to the consolidated financial statements and internal control over financialreporting included in the Annual Report of General Communication, Inc. on Form 10-K for the year ended December 31, 2013. We herebyconsent to the incorporation by reference of said reports in the Registration Statements of General Communication, Inc. on Forms S-8 (FileNos. 33-60728, 333-8760, 333-66877, 333-45054, 333-106453, 333-152857, 33-60222, 333-8758, 333‑8762, 333-87639, 333-59796,333-99003, 333-117783, 333-144916, 333-165878, and 333-188434)./s/ GRANT THORNTON LLPSeattle, WashingtonMarch 26, 2014Exhibit 31.1SECTION 302 CERTIFICATIONI, Ronald A. Duncan, certify that:1.I have reviewed this annual report on Form 10-K of General Communication, Inc. for the period ended December 31, 2013;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.March 26, 2014/s/ Ronald A. Duncan Ronald A. DuncanPresident and DirectorExhibit 31.2SECTION 302 CERTIFICATIONI, Peter J. Pounds, certify that:1.I have reviewed this annual report on Form 10-K of General Communication, Inc. for the period ended December 31, 2013;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary tomake the statements made, in light of the circumstances under which such statements were made, not misleading with respect to theperiod covered by this report;3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all materialrespects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (asdefined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and have:a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known tous by others within those entities, particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant'smost recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant's internal control over financial reporting; and5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalentfunctions):a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant'sinternal control over financial reporting.March 26, 2014/s/ Peter J. Pounds Peter J. Pounds Senior Vice President, Chief Financial Officer, and SecretaryExhibit 32.1CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002In connection with the Annual Report of General Communication, Inc. (the "Company") on Form 10-K for the period ended December 31,2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Ronald A. Duncan, Chief Executive Officerof the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations ofthe Company.Date: March 26, 2014/s/ Ronald A. Duncan Ronald A. DuncanChief Executive OfficerGeneral Communication, Inc.Exhibit 32.2CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THESARBANES-OXLEY ACT OF 2002In connection with the Annual Report of General Communication, Inc. (the "Company") on Form 10-K for the period ended December 31,2013 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Peter J. Pounds, Chief Financial Officer ofthe Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2)The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations ofthe Company.Date: March 26, 2014/s/ Peter J. Pounds Peter J. PoundsChief Financial OfficerGeneral Communication, Inc.

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