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, 2007

 

OR

 

o 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

 

 

GENERAL COMMUNICATION, INC.

2550 Denali Street, Suite 1000

Anchorage, Alaska 99503

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

 

FORM 11-K

 

FOR THE YEAR ENDED DECEMBER 31, 2007

 

TABLE OF CONTENTS

 

 

 

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Report of Independent Registered Public Accounting Firm

 

 

The Plan Trustees

General Communication, Inc. Qualified

 

We have audited the accompanying statements of nets assets available for benefits of the General Communication, Inc. Qualified Employee Stock Purchase Plan as of December 31, 2007 and 2006, 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 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. An audit also includes 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, 2007 and 2006, and the changes in its net assets available for benefits for the years then ended 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 24, 2008

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Statements of Net Assets Available for Benefits

December 31, 2007 and 2006

 

 

 

See accompanying notes to financial statements.

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Statements of Changes in Net Assets Available for Benefits

Years Ended December 31, 2007 and 2006

 

 

 

 

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

 

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:

 

 

 

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 $15,500 and $15,000 in 2007 and 2006, 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 $45,000 and $44,000 for 2007 and 2006, respectively. Compensation considered for all Plan purposes is subject to a compensation ceiling of $225,000 and $220,000 in 2007 and 2006, respectively. Eligible employees were allowed to make catch-up contributions of no more than $5,000 in 2007 and 2006. These catch-up contributions are not eligible to receive employer-matching contributions.

 

The Plan allows up to 100% matching, as determined each year by the Company’s Board of Directors, of employee contributions regardless of how the contribution is invested. No more than 10% of any one employee’s compensation will be matched in any pay period.

 

Company matching contributions made to the Plan may be invested in any Plan investment at any time. Company matching contributions are initially deposited as directed by the participant.

 

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 certain qualifying GCI common stock distributions, upon eventual disposition of the stock.

 

Participant Accounts

Each participant account is credited with the participant's contributions, employer matching contributions and allocations of Plan earnings and losses. Plan earnings and losses are allocated on a daily basis, based upon the number of shares held by each participant account. Participants may change their investment allocation on a daily basis.

 

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.

 

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

 

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:

 

 

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 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.

 

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 2007 and 2006, employer contributions were reduced by $160,000 and $371,000, respectively, from forfeited nonvested accounts. At December 31, 2007 and 2006, $194,000 and $152,000, respectively, 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.

 

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

 

The Plan financial statements are based on the accrual method of accounting in accordance with generally accepted accounting principles. 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, 2007 and 2006, 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 closing price as listed on the National Association of Securities Dealers Automated Quotation (NASDAQ) National Market System. At December 31, 2007 and 2006 the fair value of GCI Class B common stock is based on the closing price 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 at December 31, 2007 and 2006.

 

The Union Bank of California Stable Value Fund is a stable value fund that is a commingled pool of the Pooled Investment Trust Funds of Union Bank of California, N.A. The fund primarily invests in stable value instruments and certain other fixed income or money market obligations or in a variety of collective investment vehicles which invests in such obligations. The contract value of the stable value fund represents contributions made under the contracts, plus earnings, less withdrawals and administrative expenses. The average yield to maturity and crediting interest rate for the fund was approximately 4.748% and 4.805%, respectively, at December 31, 2007.

 

As described in Financial Accounting Standards Board Staff Position, FSP AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts held by Certain Investment Companies Subject to AICPA Investment Company Guide and Defined Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined-contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined-contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the plan. As required by the FSP, the Statement of Net Assets Available for Benefits presents the fair value of the investment contracts as well as the adjustment of the fully benefit-responsive investment contracts from fair value to contract value. The statement of Changes in Net Assets Available for Benefits is prepared on a contract value basis.

 

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.

 

Reclassifications have been made to the 2006 financial statements to make them comparable with the 2007 presentation.

 

Union Bank of California is the Plan’s recordkeeper and asset trustee. Administrative expenses related to the Plan of $10,000 and $25,000 for the years ended December 31, 2007 and 2006, 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.

 

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

 

 

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.

 

The following investment choices were offered to Plan participants during the period ended December 31, 2007:

 

Common Stock:

 

Mutual Funds:

 

Common/Collective Trust:

 

Participants have the option of having self-directed benefit accounts where they may choose to buy any common stock or mutual fund.

 

Common stock investment prices per share at December 31, 2007 and 2006 follow:

 

 

Investments which represent 5% or more of the Plan’s net assets at December 31, 2007 and 2006 follow (amounts in thousands):

 

 

 

 

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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, 2007 and 2006 as follows (amounts in thousands):

 

 

The estimated fair values of the financial instruments included in the accompanying financial statements at December 31 follow:

 

 

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate:

 

Cash: The carrying amount approximates fair value because of the short-term maturity of these instruments.

 

Common stock: The carrying amount approximates fair value because these investments are carried at market values, based upon quoted prices.

 

Mutual funds: The carrying amount approximates fair value because these investments are carried at market values, based upon quoted prices.

 

Common/collective trust: These investments are carried at contract value. The fair value was determined by considering such factors as the benefit responsiveness of the contracts, the ability of the parties to the contracts to perform in accordance with the terms of the contracts and the likelihood of default by the issuer of an investment security. Individual assets of the synthetic investment contracts are generally valued at representative quoted market prices. Short term securities, if any, are stated at amortized cost, which approximates market value. Debt securities are valued on the basis of valuations furnished by a pricing service, which determines valuations using methods based on market transactions for comparable securities and various relationships between securities which are generally recognized by institutional traders. Securities for which market quotes are not readily available, or have quotes which management believes are not appropriate, are valued at fair value as determined in good faith by the Trustee of the common/collective trust. The fair value of the wrap contracts are determined using a discounting methodology which incorporates the difference between current market level rates for contract level wrap fees and the wrap fee being charged. The difference is calculated as a dollar value and discounted by the prevailing interpolated yield curve as of year end.

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

Notes to Financial Statements

 

 

Participant loans: The carrying amount approximates fair value due to the shorter term of the participant loans.

 

The Plan is qualified under Section 401(a) of the Code pursuant to a favorable tax determination letter dated 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 following is a reconciliation of net assets available for plan benefits per the financial statements to the Form 5500 (amounts in thousands):

 

 

The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 (amounts in thousands):

 

 

The following is a reconciliation of investment income per the financial statements to the Form 5500 (amounts in thousands):

 

 

 

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.

 

 

 

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GENERAL COMMUNICATION, INC.

QUALIFIED EMPLOYEE STOCK PURCHASE PLAN

 

Schedule H, Line 4i - Schedule of Assets (Held at End of Year)

 

December 31, 2007

 

 

 

 

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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

 

 

 

 

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