UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2005
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-15279
A. Full title of the plan and the address of the plan, if different from that of
the issuer named below:
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and the address of
its principal executive office:
GENERAL COMMUNICATION, INC.
2550 Denali Street, Suite 1000
Anchorage, Alaska 99503
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
FORM 11-K
FOR THE YEAR ENDED DECEMBER 31, 2005
TABLE OF CONTENTS
Page No.
--------
Report of Independent Registered Public Accounting Firm dated June 2, 2006...............................3
Statements of Net Assets Available for Benefits at December 31, 2005 and 2004............................4
Statements of Changes in Net Assets Available for Benefits for the Years Ended
December 31, 2005 and 2004............................................................................5
Notes to Financial Statements............................................................................6
Schedule H, Line 4i - Schedule of Assets (Held at End of Year) .........................................14
Signature...............................................................................................15
Schedules not listed above are omitted because of the absence of conditions
under which they are required under the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974.
Exhibit
Exhibit No. 23.1 - Consent of KPMG LLP (Independent Registered Public Accounting Firm) (filed herewith)
2
Report of Independent Registered Public Accounting Firm
The Plan Trustees
General Communication, Inc. Qualified
Employee Stock Purchase Plan
We have audited the accompanying statements of nets assets available for
benefits for General Communication, Inc. Qualified Employee Stock Purchase Plan
as of December 31, 2005 and 2004, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards
as established by the Auditing Standards Board (United States) and in accordance
with the auditing standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of General
Communication, Inc. Qualified Employee Stock Purchase Plan as of December 31,
2005 and 2004, and the changes in its net assets available for benefits for the
years ended December 31, 2005 and 2004, in conformity with U.S. generally
accepted accounting principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule H, line 4i -
schedule of assets (held at end of year) is presented for purposes of additional
analysis and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. The supplemental schedule is the responsibility of the
Plan's management. The supplemental schedule has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/signed/ KPMG LLP
Anchorage, Alaska
June 2, 2006
3
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Statements of Net Assets Available for Benefits
December 31, 2005 and 2004
(Amounts in thousands) 2005 2004
------------ ------------
Assets
Cash and cash equivalents $ 406 1
------------ ------------
Investments, at fair value:
Participant directed:
Common stocks 52,153 57,609
Mutual funds 30,117 22,230
Common/collective trust 7,592 5,587
------------ ------------
89,862 85,426
Participant loans 1,667 1,357
Pending settlements 217 470
------------ ------------
Total investments, at fair value 91,746 87,253
------------ ------------
Receivables:
Employee contributions 510 213
Employer contributions 432 188
Investment income 14 11
------------ ------------
956 412
------------ ------------
Liabilities
Excess contributions refundable:
Employee (316) (339)
Employer (170) (237)
------------ ------------
(486) (576)
------------ ------------
Net assets available for benefits $ 92,622 87,090
============ ============
See accompanying notes to financial statements.
4
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 2005 and 2004
(Amounts in thousands) 2005 2004
------------ ------------
Contributions:
Employee $ 6,831 6,540
Employer 5,642 5,053
------------ ------------
12,473 11,593
------------ ------------
Investment income:
Net appreciation (depreciation) in fair value of investments (3,752) 14,337
Dividend income 1,733 769
Interest income 111 78
------------ ------------
(1,908) 15,184
------------ ------------
Increase in net assets available for benefits 10,565 26,777
Employee withdrawals 5,033 3,987
------------ ------------
Net increase in net assets available for benefits 5,532 22,791
Net assets available for benefits at beginning of period 87,090 64,300
------------ ------------
Net assets available for benefits at end of period $ 92,622 87,090
============ ============
See accompanying notes to financial statements.
5
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(1) Description of Plan
The following description of the General Communication, Inc. Qualified
Employee Stock Purchase Plan ("Plan") provides general information
only. Participants should refer to the Plan document for a more
complete description of the Plan's provisions.
General
The Plan is a defined contribution plan covering employees of
General Communication, Inc. ("GCI") and affiliated companies
(collectively, the "Company") who have completed one year of
service, as defined in the Plan document. GCI and the Company are
parties-in-interest.
Contributions
The Plan provides for a qualified cash or deferred arrangement as
defined in Section 401(k) of the Internal Revenue Code of 1986
("Code"). A participant may elect the following methods to make
employee contributions:
(1) Salary Reduction Contributions which will not be included in
the participant's current earnings for federal income tax
purposes but rather are taxable upon distribution, or
(2) Non-qualified Voluntary Contributions ("after-tax
contributions") which will be included in the participant's
current earnings for federal income tax purposes and are not
taxable upon distribution.
Eligible employees of the Company may elect to reduce their
compensation in any amount up to 50% of such compensation subject to
a maximum of $14,000 and $13,000 in 2005 and 2004, respectively;
they may contribute up to 10% of their compensation with after-tax
dollars; or they may elect a combination of salary reduction and
after-tax contributions.
The combination of salary reduction, after-tax, forfeited and
matching contributions cannot exceed the lesser of 100% of any
employee's compensation (determined after salary reduction), or
$42,000 and $41,000 for 2005 and 2004, respectively. Compensation
considered for all Plan purposes is subject to a compensation
ceiling of $210,000 and $205,000 in 2005 and 2004, respectively.
Eligible employees were allowed to make catch-up contributions of no
more than $4,000 and $3,000 in 2005 and 2004, respectively. These
catch-up contributions are not eligible to receive employer-matching
contributions.
The Plan allows 100% matching, as determined each year by the
Company's Board of Directors, of employee contributions in GCI Class
A and Class B common stock regardless of how the contribution is
invested. No more than 10% of any one employee's compensation will
be matched in any pay period.
Matching amounts contributed to the Plan by the Company are not
taxed to the employee until distribution upon retirement, hardship,
disability, death or termination of employment. Plan earnings are
taxable to the employee either upon distribution or, in the case of
GCI common stock distributions, upon eventual disposition of the
stock.
6 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Company matching contributions made to the Plan are initially
invested in GCI Class A or Class B common stock. After each matching
contribution is deposited to a participant's account in GCI Class A
and Class B common stock the contribution may be transferred to
another available Plan investment at any time.
Participant Accounts
Each participant account is credited with the participant's
contributions, employer matching contributions and allocations of
Plan earnings. Plan earnings are allocated on a daily basis, based
upon the number of shares held by each participant account.
Vesting
A participant's interest in his or her Salary Reduction
Contributions and Non-qualified Voluntary Contributions is always
fully vested and is not subject to forfeiture.
The participant's interest in the Company matched portion of their
account ("Matching Account") is vested based upon years of service
with the Company (as defined in the Plan document), in accordance
with the following schedule:
Years of Service Vested Percentage
-------------------------- ---------------------
Less than 1 0%
1 or more but less than 2 20%
2 or more but less than 3 30%
3 or more but less than 4 45%
4 or more but less than 5 60%
5 or more but less than 6 80%
6 or more 100%
Any portion of a participant's account which is forfeitable shall be
forfeited on the earlier of the date a terminated participant
receives a distribution or the date on which the participant
experiences five consecutive one-year breaks in service (as defined
in the Plan document).
A participant's interest in their Matching Account fully vests
without regard to the number of years of service when the
participant, while still employed: (i) attains Normal Retirement Age
(as defined in the Plan document) and retires under the terms of the
Plan; (ii) dies; or (iii) becomes totally and permanently disabled.
A participant's interest in their Matching Account fully vests upon
the termination or partial termination of the Plan or upon complete
discontinuance of Company contributions.
If a participant terminates participation for any reason other than
attainment of Normal Retirement Age and retirement, death or
disability while any portion of his or her account in the Plan is
forfeitable, and receives a distribution of his or her vested
account balance attributable to Company matching contributions not
later than the close of the fifth Plan year following the Plan year
in which participation terminated, then upon becoming an eligible
employee, the participating employee will have the right to repay
the distribution to the Plan in accordance with Plan provisions. The
shares of that participating employee's account previously forfeited
will be restored.
7 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
Forfeitures
If a participating employee terminates participation for any reason
other than attainment of Normal Retirement Age and retirement, death
or disability, that portion of his or her account attributable to
Company matching contributions which has not vested will be
forfeited. All forfeited amounts are used to reduce future Company
matching contributions. During 2005 and 2004, employer contributions
were reduced by $160,000 and $132,000, respectively, from forfeited
nonvested accounts. At December 31, 2005, $138,000 had been
forfeited but had not yet been used to reduce the Company's matching
contribution.
Participant Loans
Participants may borrow from their accounts a minimum of $1,000 up
to a maximum equal to the lesser of $50,000 or 50% of the portion of
their account balance comprised of participant contributions and
earnings upon such contributions. Loan transactions are treated as a
transfer to (from) the appropriate investment fund (from) to the
participant's loan. Loan terms range from one to five years. Loans
are secured by the vested balance in the participant's account and
earn interest at a fixed rate calculated at the loan date. The fixed
rate is calculated using the prime rate reported in the Wall Street
Journal at the loan date plus two percent. Principal and interest
are paid ratably through semi-monthly payroll deductions.
(2) Summary of Significant Accounting Policies
The Plan financial statements are based on the accrual method of
accounting in accordance with generally accepted accounting principles.
Plan investments are stated at fair value.
In preparing the financial statements, the Plan administrator is
required to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements and
additions and deductions to (from) net assets for the period. Actual
results could differ from those estimates and assumptions.
At December 31, 2005 the fair values of GCI Class A common stock,
Comcast Corporation Class A common stock, and AT&T Corporation common
stock are based on the average of the bid and ask prices during the day
as listed on the National Association of Securities Dealers Automated
Quotation (NASDAQ) National Market System. At December 31, 2005 the
fair value of GCI Class B common stock is based on the average of the
bid and ask prices listed on the Over-the-Counter market Bulletin Board
system. GCI Class B common stock is convertible share-for-share into
GCI Class A common stock. Mutual fund investments are carried at fair
value, as determined by individual fund management, based upon quoted
market prices.
8 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
The Common/Collective Trust invests primarily in money market
instruments and guaranteed investment contracts. The Plan's ownership
in the Common/Collective Trust is carried at fair value based on the
investment's net asset value per unit. Money market instruments are
valued at amortized cost. The investment contracts in the
Common/Collective Trust with benefit responsive features are carried at
cost plus accrued interest. Synthetic investment contracts are stated
at the contract book value which approximates amortized cost.
Net appreciation and net depreciation in the current value of
investments includes realized gains and losses on investments sold or
disposed of during the year and unrealized gains and losses on
investments held at year end. Investment income is recorded when
earned.
Pending Settlements represent the value of sold or purchased securities
during the three-business day settlement period.
Purchases and sales of securities are recorded on a trade-date basis.
(3) Administration of Plan Assets
Merrill Lynch is the Plan's recordkeeper and asset trustee.
Administrative expenses related to the Plan of $18,000 and $17,000 for
the years ended December 31, 2005 and 2004, respectively, are paid
directly by the Company to the recordkeeper and asset trustee. The
asset trustee charges trade fees for all transactions in common stock
investments. Trade fees for mutual fund investments, if any, are
described in each fund's prospectus. Company employees provide
administrative support to the Plan but no employee receives
compensation from the Plan.
(4) Amendment or Termination
The Company's Board of Directors has reserved the right to amend or
terminate the Plan. No amendment may reduce the accrued benefits of any
participant or give the Company any interest in the trust assets of the
Plan. In the event of termination of the Plan, a participant with
respect to the Plan becomes fully vested in his or her Matching
Account.
(5) Investments
Investment choices offered to Plan participants at December 31, 2005
were as follows:
Common Stock:
o GCI Class A and Class B
o AT&T Inc.
o Comcast Corporation
Mutual Funds:
o AIM International Growth Fund
o AIM Mid Cap Core Equity Fund
o Alger Large Cap Growth Institutional Fund
o Allianz RCM Technology Fund
o American Intermediate Bond Fund of America
9 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
o BlackRock Aurora Portfolio
o Dreyfus Founders Discovery Fund
o Eaton Vance Utilities Fund
o Federated Fund for U.S. Government Securities
o Lord Abbett Bond-Debenture Fund
o Merrill Lynch Basic Value Fund
o Merrill Lynch Bond Fund
o Merrill Lynch S&P 500(R)Index Fund
o MFS Total Return Fund
o Oakmark Select Fund
o Oppenheimer Quest Balanced Fund
o Phoenix Real Estate Securities Fund
o Van Kampen Aggressive Growth Fund
Common/Collective Trust:
o Merrill Lynch Retirement Preservation Trust
Common stock investment prices per share at December 31, 2005 and 2004
follow:
2005 2004
---------- ----------
GCI Class A $ 10.33 11.04
GCI Class B 10.57 11.50
AT&T Corporation --- 19.06
AT&T Inc. 24.49 ---
Comcast Corporation 25.92 33.28
Beginning April 1, 2004, all investments in GCI stock are able to be
reinvested in other Plan investment choices.
Investments which represent 5% or more of the Plan's net assets at
December 31, 2005 and 2004 follow (amounts in thousands):
2005 2004
---------- ----------
GCI Class A and Class B common stock $ 51,904 57,350
Merrill Lynch Retirement Preservation Trust 7,592 5,587
---------- ----------
$ 59,496 62,937
========== ==========
10 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
The Plan's investments (including gains and losses on investments
bought and sold, as well as held during the year) have appreciated
(depreciated) in value during the years ended December 31, 2005 and
2004 as follows (amounts in thousands):
2005 2004
---------- ----------
Common stock $ (4,006) 13,068
Mutual funds 254 1,269
---------- ----------
$ (3,752) 14,337
========== ==========
Net appreciation (depreciation) in fair value by participant directed
investments during the years ended December 31, 2005 and 2004 is as
follows (amounts in thousands):
2005 2004
---------- -----------
Participant directed:
Common stock $ (4,006) 9,874
Mutual funds 254 1,269
---------- -----------
Total participant directed (3,752) 11,143
Non-participant directed common stock --- 3,194
---------- -----------
$ (3,752) 14,337
========== ===========
(6) Discontinued Common Stock Investments
The following common stock investment choices were discontinued during
the year ended December 31, 2004:
o WorldCom - this common stock was cancelled and rendered null and void
by WorldCom on April 20, 2004.
o MCI Group - WorldCom, Inc. - this common stock was cancelled and
rendered null and void by WorldCom on April 20, 2004.
o AT&T Wireless Corporation - on October 26, 2004 Cingular Wireless LLC
merged with AT&T Wireless Services, Inc. All AT&T Wireless
Corporation stock held by participants in the Plan was converted to
cash and invested in the Merrill Lynch Retirement Preservation Trust.
(7) Changes in Net Assets of Non-participant Directed Investments
Company matching contributions made to the Plan are initially invested
in GCI Class A and Class B common stock and prior to April 1, 2004,
were non-participant directed investments. Beginning April 1, 2004, the
Plan has only participant directed investments. After each matching
contribution is deposited to a participant's account the contribution
may be transferred to another available Plan investment at any time.
11 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
The following rollforward summarizes the significant components of the
changes in net assets of non-participant directed investments during
the year ended December 31, 2004 (amounts in thousands):
Non-participant directed investments at December 31, 2003 $ 8,946
Contributions 6,489
Net depreciation 3,194
Interest income 29
Employee withdrawals (821)
Net transfers to participant directed investments (17,837)
------------
Non-participant directed investments at December 31, 2004 $ ---
============
(8) Income Taxes
The Plan is qualified under Section 401(a) of the Code pursuant to
favorable tax determination letters dated December 9, 1987, March 8,
1988, March 13, 1996, February 23, 2001, and June 25, 2002 obtained
from the Internal Revenue Service. Although the most recent tax
determination letter received by the Plan Sponsor does not yet reflect
recent changes made to the Plan, the Plan Administrator believes the
Plan is currently designed and is operated in compliance with the
applicable requirements of the Code. The trust established pursuant to
the Plan is, therefore, exempt from taxation under Section 501(a) of
the Code.
(9) Reconciliation of Financial Statements to Form 5500
The following is a reconciliation of net assets available for plan
benefits per the financial statements to the Form 5500 (amounts in
thousands):
2005 2004
---------- ----------
Net assets available for plan benefits per the financial statements $ 92,622 87,090
Less: Accrued participant withdrawals (473) ---
---------- ----------
Net assets available for Plan benefits per Form 5500 $ 92,149 87,090
========== ==========
The following is a reconciliation of benefits paid to participants per
the financial statements to the Form 5500 (amounts in thousands):
2005 2004
---------- ----------
Benefits paid to participants per the financial statements $ 5,033 3,987
Add: Accrued participant withdrawals 473 ---
---------- ----------
Benefits paid to participants per Form 5500 $ 5,506 3,987
========== ==========
12 (Continued)
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Notes to Financial Statements
(10) Risks and Uncertainties
The Plan invests in various investment securities. Investment
securities are exposed to various risks such as interest rate, market,
and credit risks. Due to the level of risk associated with certain
investment securities, it is at least reasonably possible that changes
in the values of investment securities will occur in the near term and
that such changes could materially affect the participants' account
balances and the amounts reported in the statements of net assets
available for benefits.
13
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Schedule H, Line 4i - Schedule of Assets (Held at End of Year)
December 31, 2005
(Amounts in thousands, except share amounts)
(e) Current
(a) (b) Identity of Issue (c) Description of Investment (d) Cost Value
- ----- --------------------------------------- ----------------------------------- -------------- ---------------
Common stock:
-------------
* GCI 4,925,784 shares of Class A common
stock and 96,574 shares of Class
B common stock ** $ 51,904
AT&T Inc. 3,914 shares of common stock ** 96
Comcast Corporation 5,912 shares of common stock ** 153
---------------
52,153
---------------
Mutual fund investments:
------------------------
AIM International Growth Fund 135,929 shares ** 3,192
AIM Mid Cap Core Equity Fund 24,195 shares ** 691
Alger Large Cap Growth Institutional
Fund 35,204 shares ** 463
Allianz RCM Technology Fund 5,213 shares ** 203
American Intermediate Bond Fund of
America 15,067 shares ** 203
BlackRock Aurora Portolio 114,998 shares ** 3,932
Dreyfus Founders Discovery Fund 47,643 shares ** 1,364
Eaton Vance Utilities Fund 185,839 shares ** 2,133
Federated Fund for U.S. Government
Securities 49,175 shares ** 377
Lord Abbett Bond-Debenture Fund 67,987 shares ** 538
* Merrill Lynch Basic Value Fund 53,869 shares ** 1,666
* Merrill Lynch Bond Fund 260,189 shares ** 3,010
* Merrill Lynch S&P 500(R)Index Fund 272,353 shares ** 4,164
MFS Total Return Fund 47,821 shares ** 735
Oakmark Select Fund 61,941 shares ** 2,029
Oppenheimer Quest Balanced Fund 128,645 shares ** 2,298
Phoenix Real Estate Securities Fund 79,316 shares ** 2,200
Van Kampen Aggressive Growth Fund 58,408 shares ** 919
---------------
30,117
Common/collective trust:
------------------------
* Merrill Lynch Retirement Preservation
Trust 7,591,989 ** 7,592
* Participant loans Interest bearing at 6.00% to 10.75%
** 1,667
Pending settlements 217,310 units ** 217
---------------
$ 91,746
===============
* Party-in-interest
** Not required for participant directed investments
See accompanying report of independent registered public accounting
firm.
14
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees of the Plan have duly caused this annual report to be signed on its
behalf by the undersigned thereunto duly authorized.
GENERAL COMMUNICATION, INC.
QUALIFIED EMPLOYEE STOCK PURCHASE PLAN
Signature Title Date
- -------------------------------------- -------------------------------------------- -------------------
/s/ Alfred J. Walker Plan Administrator June 28, 2006
- --------------------------------------
Alfred J. Walker
15