Alltel (NYSE: AT) achieved solid results in the second quarter,
driven by wireless growth and profitability. Fully diluted earnings
per share under Generally Accepted Accounting Principles (GAAP) was
$1.27, including gains from the sale of Fidelity National Financial
Inc. stock owned by Alltel and the exchange of partnership
interests in connection with the acquisition of wireless properties
from Cingular. The gains were offset partially by debt prepayment
costs associated with the early retirement of a $450 million bond.
Fully diluted earnings per share from current businesses was 90
cents, a 6 percent increase compared with a year ago. Among the
highlights for the second quarter: -- Total revenues were $2.3
billion, an 11 percent increase from a year ago. Net income under
GAAP was $402 million, a 53 percent increase. Net income from
current businesses was $284 million, an 8 percent increase from a
year ago. -- Wireless revenue was $1.5 billion, a 16 percent
increase from a year ago. Segment income was $307 million, a 17
percent increase. -- Average revenue per wireless customer was
$50.55, a 6 percent increase year-over-year and the highest ARPU in
5 years, driven by improvements in data revenue and quality
customer growth. Post-pay churn was 1.58 percent, which was flat
year-over-year. -- Wireline revenue was $595 million, down 2
percent from the previous year. Segment income was $215 million, an
8 percent decline. The company added 36,000 broadband customers,
bringing its total broadband customer base to 319,000. Average
revenue per wireline customer was $66.83, a 1 percent increase. --
Equity free cash flow from current businesses was $260 million. Net
cash provided from operations was $465 million. "Alltel's wireless
business delivered another strong performance, demonstrated by our
industry-leading ARPU growth," said Scott Ford, Alltel president
and CEO. "We are very pleased with the way our business has
performed over the first half of the year and excited about the
prospects for continued growth with the completion of the Western
Wireless merger." Alltel is a customer-focused communications
company with more than 15 million customers in 36 states and nearly
$10 billion in annual revenues. Alltel claims the protection of the
safe-harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995. Forward-looking
statements are subject to uncertainties that could cause actual
future events and results to differ materially from those expressed
in the forward-looking statements. These forward-looking statements
are based on estimates, projections, beliefs, and assumptions and
are not guarantees of future events and results. Actual future
events and results may differ materially from those expressed in
these forward-looking statements as a result of a number of
important factors. Representative examples of these factors include
(without limitation) adverse changes in economic conditions in the
markets served by Alltel; the extent, timing, and overall effects
of competition in the communications business; material changes in
the communications industry generally that could adversely affect
vendor relationships with equipment and network suppliers and
customer relationships with wholesale customers; changes in
communications technology; the risks associated with pending
acquisitions and dispositions and the integration of acquired
businesses, including the integration of Western Wireless and the
disposition of the Irish assets; the uncertainties related to any
discussions or negotiations regarding the sale of any of the
international assets, including the Austrian business; adverse
changes in the terms and conditions of the wireless roaming
agreements of Alltel; the uncertainties related to Alltel's
strategic investments; the effects of litigation; and the effects
of federal and state legislation, rules, and regulations governing
the communications industry. In addition to these factors, actual
future performance, outcomes, and results may differ materially
because of more general factors including (without limitation)
general industry and market conditions and growth rates, economic
conditions, and governmental and public policy changes. Alltel,
NYSE: AT www.alltel.com -0- *T ALLTEL CORPORATION CONSOLIDATED
HIGHLIGHTS BUSINESS SEGMENTS AND OTHER CONSOLIDATED FINANCIAL
INFORMATION (In thousands, except per share amounts) THREE MONTHS
ENDED ------------------ Increase June 30, June 30, (Decrease) 2005
2004 Amount % ---- ---- ------ - UNDER GAAP: Revenues and sales:
Wireless $1,455,312 $1,253,082 $202,230 16 Wireline 595,071 609,632
(14,561) (2) Communications support services 261,230 229,179 32,051
14 Total business segments 2,311,613 2,091,893 219,720 11 Less
intercompany eliminations 51,507 49,829 1,678 3 Total revenues and
sales $2,260,106 $2,042,064 $218,042 11 Segment income: Wireless $
306,925 $ 261,615 $ 45,310 17 Wireline 215,296 234,357 (19,061) (8)
Communications support services 11,572 20,896 (9,324) (45) Total
segment income 533,793 516,868 16,925 3 Less: corporate expenses
(A) 11,553 9,058 2,495 28 restructuring and other charges - - - -
Total operating income $ 522,240 $ 507,810 $ 14,430 3 Operating
margin (B): Wireless 21.1% 20.9% .2% 1 Wireline 36.2% 38.4% (2.2%)
(6) Communications support services 4.4% 9.1% (4.7%) (52)
Consolidated 23.1% 24.9% (1.8%) (7) Net income $ 402,061 $ 262,528
$139,533 53 Earnings per share: Basic $1.28 $.85 $.43 51 Diluted
$1.27 $.85 $.42 49 Weighted average common shares: Basic 314,475
308,188 6,287 2 Diluted 315,837 309,082 6,755 2 Annual dividend
rate per common share $1.52 $1.48 $.04 3 FROM CURRENT BUSINESSES
(NON-GAAP) (C): Operating income $ 522,240 $ 507,810 $ 14,430 3
Operating margin (B) 23.1% 24.9% (1.8%) (7) Net income $ 284,022 $
262,528 $ 21,494 8 Earnings per share: Basic $.90 $.85 $.05 6
Diluted $.90 $.85 $.05 6 (A) Corporate expenses for the six months
ended June 30, 2005 primarily includes $19.8 million related to the
effects of a change in accounting for operating leases with
scheduled rent increases. (B) Operating margin is calculated by
dividing segment income by the corresponding amount of segment
revenues and sales. (C) Current businesses excludes the effects of
a special cash dividend received on the Company's investment in
Fidelity National Financial, Inc. common stock, gain on the
exchange or disposal of assets, debt prepayment costs, a change in
accounting for operating leases and restructuring and other
charges. ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF INCOME UNDER
GAAP-Page 2 (In thousands, except per share amounts) THREE MONTHS
ENDED ------------------ June 30, June 30, 2005 2004 ---- ----
Revenues and sales: Service revenues $1,989,264 $1,825,894 Product
sales 270,842 216,170 Total revenues and sales 2,260,106 2,042,064
Costs and expenses: Cost of services 660,945 584,189 Cost of
products sold 308,065 256,055 Selling, general, administrative and
other 420,536 372,859 Depreciation and amortization 348,320 321,151
Restructuring and other charges - - Total costs and expenses
1,737,866 1,534,254 Operating income 522,240 507,810 Equity
earnings in unconsolidated partnerships 15,214 15,926 Minority
interest in consolidated partnerships (18,918) (21,651) Other
income, net 7,976 2,875 Interest expense (76,343) (86,543) Gain on
exchange or disposal of assets and other 188,273 - Income before
income taxes 638,442 418,417 Income taxes 236,381 155,889 Net
income 402,061 262,528 Preferred dividends 24 26 Net income
applicable to common shares $ 402,037 $ 262,502 Earnings per share:
Basic $1.28 $.85 Diluted $1.27 $.85 ALLTEL CORPORATION CONSOLIDATED
HIGHLIGHTS BUSINESS SEGMENTS AND OTHER CONSOLIDATED FINANCIAL
INFORMATION (In thousands, except per share amounts) SIX MONTHS
ENDED ---------------- Increase June 30, June 30, (Decrease) 2005
2004 Amount % ---- ---- ------ - UNDER GAAP: Revenues and sales:
Wireless $2,807,321 $2,437,568 $369,753 15 Wireline 1,188,703
1,209,098 (20,395) (2) Communications support services 485,935
448,229 37,706 8 Total business segments 4,481,959 4,094,895
387,064 9 Less intercompany eliminations 95,870 91,659 4,211 5
Total revenues and sales $4,386,089 $4,003,236 $382,853 10 Segment
income: Wireless $ 578,480 $ 472,538 $105,942 22 Wireline 429,797
462,543 (32,746) (7) Communications support services 23,474 37,343
(13,869) (37) Total segment income 1,031,751 972,424 59,327 6 Less:
corporate expenses (A) 40,243 18,031 22,212 123 restructuring and
other charges - 51,765 (51,765) (100) Total operating income $
991,508 $ 902,628 $ 88,880 10 Operating margin (B): Wireless 20.6%
19.4% 1.2% 6 Wireline 36.2% 38.3% (2.1%) (5) Communications support
services 4.8% 8.3% (3.5%) (42) Consolidated 22.6% 22.5% .1% - Net
income $ 715,065 $ 452,371 $262,694 58 Earnings per share: Basic
$2.32 $1.46 $.86 59 Diluted $2.31 $1.46 $.85 58 Weighted average
common shares: Basic 308,317 309,750 (1,433) - Diluted 309,653
310,683 (1,030) - FROM CURRENT BUSINESSES (NON-GAAP) (C): Operating
income $1,011,299 $ 954,393 $ 56,906 6 Operating margin (B) 23.1%
23.8% (.7%) (3) Net income $ 539,306 $ 484,027 $ 55,279 11 Earnings
per share: Basic $1.75 $1.56 $.19 12 Diluted $1.74 $1.56 $.18 12
(A) Corporate expenses for the six months ended June 30, 2005
primarily includes $19.8 million related to the effects of a change
in accounting for operating leases with scheduled rent increases.
(B) Operating margin is calculated by dividing segment income by
the corresponding amount of segment revenues and sales. (C) Current
businesses excludes the effects of a special cash dividend received
on the Company's investment in Fidelity National Financial, Inc.
common stock, gain on the exchange or disposal of assets, debt
prepayment costs, a change in accounting for operating leases and
restructuring and other charges. ALLTEL CORPORATION CONSOLIDATED
STATEMENTS OF INCOME UNDER GAAP-Page 2 (In thousands, except per
share amounts) SIX MONTHS ENDED ---------------- June 30, June 30,
2005 2004 ---- ---- Revenues and sales: Service revenues $3,887,526
$3,591,472 Product sales 498,563 411,764 Total revenues and sales
4,386,089 4,003,236 Costs and expenses: Cost of services 1,287,205
1,144,960 Cost of products sold 589,838 513,338 Selling, general,
administrative and other 828,001 748,052 Depreciation and
amortization 689,537 642,493 Restructuring and other charges -
51,765 Total costs and expenses 3,394,581 3,100,608 Operating
income 991,508 902,628 Equity earnings in unconsolidated
partnerships 25,957 29,178 Minority interest in consolidated
partnerships (37,265) (37,222) Other income, net 128,711 7,488
Interest expense (163,032) (178,279) Gain on exchange or disposal
of assets and other 188,273 - Income before income taxes 1,134,152
723,793 Income taxes 419,087 271,422 Net income 715,065 452,371
Preferred dividends 48 53 Net income applicable to common shares $
715,017 $ 452,318 Earnings per share: Basic $2.32 $1.46 Diluted
$2.31 $1.46 ALLTEL CORPORATION RECONCILIATION OF RESULTS OF
OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT
BUSINESSES (NON-GAAP)-Page 3 for the three months ended June 30,
2005 (In thousands, except per share amounts) Items Results of
Results Excluded from Operations of Operations Current from Current
Under GAAP Businesses Businesses ---------- ---------- ----------
Revenues and sales: Service revenues $1,989,264 $ - $1,989,264
Product sales 270,842 - 270,842 Total revenues and sales 2,260,106
- 2,260,106 Costs and expenses: Cost of services 660,945 - 660,945
Cost of products sold 308,065 - 308,065 Selling, general,
administrative and other 420,536 - 420,536 Depreciation and
amortization 348,320 - 348,320 Restructuring and other charges - -
- Total costs and expenses 1,737,866 - 1,737,866 Operating income
522,240 - 522,240 Equity earnings in unconsolidated partnerships
15,214 - 15,214 Minority interest in consolidated partnerships
(18,918) - (18,918) Other income, net 7,976 - 7,976 Interest
expense (76,343) - (76,343) Gain on exchange or disposal of assets
and other 188,273 (188,273) (A) - Income before income taxes
638,442 (188,273) 450,169 Income taxes 236,381 (70,234) (E) 166,147
Net income 402,061 (118,039) 284,022 Preferred dividends 24 - 24
Net income applicable to common shares $ 402,037 $(118,039) $
283,998 Earnings per share: Basic $1.28 $(.38) $.90 Diluted $1.27
$(.37) $.90 See notes on page 7 for a description of the line items
marked (A) - (E). ALLTEL CORPORATION RECONCILIATION OF RESULTS OF
OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT
BUSINESSES (NON-GAAP)-Page 3 for the three months ended June 30,
2005 (In thousands, except per share amounts) Segment Information
Corporate ------------------------------------ Operations
Communications and Support Intercompany Wireless Wireline Services
Eliminations -------- -------- -------- ------------ Revenues and
sales: Service revenues $1,371,089 $584,016 $ 77,772 $(43,613)
Product sales 84,223 11,055 183,458 (7,894) Total revenues and
sales 1,455,312 595,071 261,230 (51,507) Costs and expenses: Cost
of services 453,806 182,667 62,776 (38,304) Cost of products sold
150,278 9,001 161,399 (12,613) Selling, general, administrative and
other 331,743 62,662 16,982 9,149 Depreciation and amortization
212,560 125,445 8,501 1,814 Restructuring and other charges - - - -
Total costs and expenses 1,148,387 379,775 249,658 (39,954)
Operating income $ 306,925 $215,296 $ 11,572 $(11,553) ALLTEL
CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 4 for
the three months ended June 30, 2004 (In thousands, except per
share amounts) Items Results of Results Excluded from Operations of
Operations Current from Current Under GAAP Businesses Businesses
---------- ---------- ---------- Revenues and sales: Service
revenues $1,825,894 $ - $1,825,894 Product sales 216,170 - 216,170
Total revenues and sales 2,042,064 - 2,042,064 Costs and expenses:
Cost of services 584,189 - 584,189 Cost of products sold 256,055 -
256,055 Selling, general, administrative and other 372,859 -
372,859 Depreciation and amortization 321,151 - 321,151
Restructuring and other charges - - - Total costs and expenses
1,534,254 - 1,534,254 Operating income 507,810 - 507,810 Equity
earnings in unconsolidated partnerships 15,926 - 15,926 Minority
interest in consolidated partnerships (21,651) - (21,651) Other
income, net 2,875 - 2,875 Interest expense (86,543) - (86,543) Gain
on exchange or disposal of assets and other - - - Income before
income taxes 418,417 - 418,417 Income taxes 155,889 - 155,889 Net
income 262,528 - 262,528 Preferred dividends 26 - 26 Net income
applicable to common shares $ 262,502 $ - $ 262,502 Earnings per
share: Basic $.85 $ - $.85 Diluted $.85 $ - $.85 See notes on page
7 for a description of the line items marked (A) - (E). ALLTEL
CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 4 for
the three months ended June 30, 2004 (In thousands, except per
share amounts) Segment Information Corporate
------------------------------------ Operations Communications and
Support Intercompany Wireless Wireline Services Eliminations
-------- -------- -------- ------------ Revenues and sales: Service
revenues $1,183,549 $599,567 $ 84,583 $(41,805) Product sales
69,533 10,065 144,596 (8,024) Total revenues and sales 1,253,082
609,632 229,179 (49,829) Costs and expenses: Cost of services
382,060 178,599 58,679 (35,149) Cost of products sold 135,048 7,158
127,799 (13,950) Selling, general, administrative and other 293,009
60,908 13,050 5,892 Depreciation and amortization 181,350 128,610
8,755 2,436 Restructuring and other charges - - - - Total costs and
expenses 991,467 375,275 208,283 (40,771) Operating income $
261,615 $234,357 $ 20,896 $ (9,058) ALLTEL CORPORATION
RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 5 for the six
months ended June 30, 2005 (In thousands, except per share amounts)
Items Results of Results Excluded from Operations of Operations
Current from Current Under GAAP Businesses Businesses ----------
---------- ---------- Revenues and sales: Service revenues
$3,887,526 $ - $3,887,526 Product sales 498,563 - 498,563 Total
revenues and sales 4,386,089 - 4,386,089 Costs and expenses: Cost
of services 1,287,205 (19,791) (B) 1,267,414 Cost of products sold
589,838 - 589,838 Selling, general, administrative and other
828,001 - 828,001 Depreciation and amortization 689,537 - 689,537
Restructuring and other charges - - - Total costs and expenses
3,394,581 (19,791) 3,374,790 Operating income 991,508 19,791
1,011,299 Equity earnings in unconsolidated partnerships 25,957 -
25,957 Minority interest in consolidated partnerships (37,265) -
(37,265) Other income, net 128,711 (111,036) (C) 17,675 Interest
expense (163,032) - (163,032) Gain on exchange or disposal of
assets and other 188,273 (188,273) (A) - Income before income taxes
1,134,152 (279,518) 854,634 Income taxes 419,087 (103,759) (E)
315,328 Net income 715,065 (175,759) 539,306 Preferred dividends 48
- 48 Net income applicable to common shares $ 715,017 $(175,759) $
539,258 Earnings per share: Basic $2.32 $(.57) $1.75 Diluted $2.31
$(.57) $1.74 See notes on page 7 for a description of the line
items marked (A) - (E). ALLTEL CORPORATION RECONCILIATION OF
RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM
CURRENT BUSINESSES (NON-GAAP)-Page 5 for the six months ended June
30, 2005 (In thousands, except per share amounts) Segment
Information Corporate ------------------------------------
Operations Communications and Support Intercompany Wireless
Wireline Services Eliminations -------- -------- --------
------------ Revenues and sales: Service revenues $2,645,466
$1,167,831 $155,614 $(81,385) Product sales 161,855 20,872 330,321
(14,485) Total revenues and sales 2,807,321 1,188,703 485,935
(95,870) Costs and expenses: Cost of services 859,479 363,691
119,119 (74,875) Cost of products sold 299,084 15,999 294,459
(19,704) Selling, general, administrative and other 654,220 126,468
31,910 15,403 Depreciation and amortization 416,058 252,748 16,973
3,758 Restructuring and other charges - - - - Total costs and
expenses 2,228,841 758,906 462,461 (75,418) Operating income $
578,480 $ 429,797 $ 23,474 $(20,452) ALLTEL CORPORATION
RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 for the six
months ended June 30, 2004 (In thousands, except per share amounts)
Items Results of Results Excluded from Operations of Operations
Current from Current Under GAAP Businesses Businesses ----------
---------- ---------- Revenues and sales: Service revenues
$3,591,472 $ - $3,591,472 Product sales 411,764 - 411,764 Total
revenues and sales 4,003,236 - 4,003,236 Costs and expenses: Cost
of services 1,144,960 - 1,144,960 Cost of products sold 513,338 -
513,338 Selling, general, administrative and other 748,052 -
748,052 Depreciation and amortization 642,493 - 642,493
Restructuring and other charges 51,765 (51,765) (D) - Total costs
and expenses 3,100,608 (51,765) 3,048,843 Operating income 902,628
51,765 954,393 Equity earnings in unconsolidated partnerships
29,178 - 29,178 Minority interest in consolidated partnerships
(37,222) - (37,222) Other income, net 7,488 - 7,488 Interest
expense (178,279) - (178,279) Gain on exchange or disposal of
assets and other - - - Income before income taxes 723,793 51,765
775,558 Income taxes 271,422 20,109 (E) 291,531 Net income 452,371
31,656 484,027 Preferred dividends 53 - 53 Net income applicable to
common shares $ 452,318 $ 31,656 $ 483,974 Earnings per share:
Basic $1.46 $.10 $1.56 Diluted $1.46 $.10 $1.56 See notes on page 7
for a description of the line items marked (A) - (E). ALLTEL
CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 for
the six months ended June 30, 2004 (In thousands, except per share
amounts) Segment Information Corporate
------------------------------------ Operations Communications and
Support Intercompany Wireless Wireline Services Eliminations
-------- -------- -------- ------------ Revenues and sales: Service
revenues $2,299,053 $1,191,100 $178,338 $(77,019) Product sales
138,515 17,998 269,891 (14,640) Total revenues and sales 2,437,568
1,209,098 448,229 (91,659) Costs and expenses: Cost of services
737,802 351,470 124,638 (68,950) Cost of products sold 279,598
12,313 242,667 (21,240) Selling, general, administrative and other
588,751 121,828 26,280 11,193 Depreciation and amortization 358,879
260,944 17,301 5,369 Restructuring and other charges - - - - Total
costs and expenses 1,965,030 746,555 410,886 (73,628) Operating
income $ 472,538 $ 462,543 $ 37,343 $(18,031) ALLTEL CORPORATION
NOTES TO RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 7 As
disclosed in the ALLTEL Corporation ("Alltel" or the "Company")
Form 8-K filed on August 4, 2005, Alltel has presented in this
earnings release results of operations from current businesses
which exclude the effects of a special cash dividend received on
the Company's investment in Fidelity National Financial, Inc.
("Fidelity National") common stock, gain on exchange or disposal of
assets, termination fees associated with the early retirement of
long-term debt, a change in accounting for certain operating leases
and restructuring and other charges. Alltel's purpose for excluding
items from the current business measures is to focus on Alltel's
true earnings capacity associated with providing telecommunication
services. Management believes the items excluded from the current
business measures are related to strategic activities or other
events, specific to the time and opportunity available, and,
accordingly, should be excluded when evaluating the trends of the
Company's operations. Alltel believes that presenting the current
business measures assists investors in assessing the true business
performance of the Company by clarifying for investors the effects
that certain items such as asset sales, restructuring expenses and
other business consolidation costs arising from past acquisition
and restructuring activities had on the Company's GAAP consolidated
results of operations. The Company uses results from current
businesses as management's primary measure of the performance of
its business segments. Alltel management, including the chief
operating decision-maker, uses the current business measures
consistently for all purposes, including internal reporting
purposes, the evaluation of business objectives, opportunities and
performance and the determination of management compensation. As
the Company evaluates segment performance based on segment income,
which is computed as revenues and sales less operating expenses,
the special cash dividend, gain on the exchange or disposal of
assets, debt prepayment costs, the effects of the change in
accounting for operating leases and restructuring and other charges
have not been allocated to the business segments. In addition, none
of the non-operating items such as equity earnings in
unconsolidated partnerships, minority interest expense, other
income, net, interest expense and income taxes have been allocated
to the segments. (A) On April 15, 2005, Alltel and Cingular
Wireless LLC completed the exchange of certain wireless assets. In
connection with this transaction, Alltel recorded a pretax gain of
$127.5 million. On April 6, 2005, Alltel recorded a pretax gain of
$75.8 million from the sale of all of its shares of Fidelity
National common stock. In addition, on April 8, 2005, Alltel
retired all of its issued and outstanding 7.50 percent senior notes
due March 1, 2006, representing an aggregate principal amount of
$450.0 million. Concurrent with the debt retirement, Alltel also
terminated the related pay variable/receive fixed, interest rate
swap agreement that had been designated as a fair value hedge
against the $450.0 million senior notes. In connection with the
early termination of the debt and interest rate swap agreement,
Alltel incurred net pretax termination fees of approximately $15.0
million. (B) Effective January 1, 2005, Alltel changed its
accounting for operating leases with scheduled rent increases.
Certain of the Company's operating lease agreements for cell sites
and for office and retail locations include scheduled rent
escalations during the initial lease term and/or during succeeding
optional renewal periods. Previously, the Company had not
recognized the scheduled increases in rent expense on a
straight-line basis in accordance with the provisions of Statement
of Financial Accounting Standards No. 13, "Accounting for Leases"
and Financial Accounting Standards Board Technical Bulletin No.
85-3, "Accounting for Operating Leases with Scheduled Rent
Increases". The effects of this change, which are included in
corporate expenses, were not material to the Company's previously
reported consolidated results of operations, financial position or
cash flows. (C) On March 9, 2005, Fidelity National declared a
special $10 per share cash dividend to Fidelity National
stockholders. The special cash dividend was received by Alltel on
March 28, 2005. (D) The Company announced its plans to reorganize
its operating structure and exit its competitive local exchange
carrier operations in the Jacksonville, Florida market. In
connection with these activities, the Company recorded a
restructuring charge of $29.3 million consisting of severance and
employee benefit costs related to a planned workforce reduction,
employee relocation costs, lease termination and other
restructuring-related costs. The Company also recorded a $2.3
million reduction in the liabilities associated with various
restructuring activities initiated prior to 2003. In addition, the
Company recorded a write-down of $24.8 million in the carrying
value of certain corporate and regional facilities to fair value in
conjunction with the proposed leasing or sale of those facilities.
(E) Tax-related effect of the items discussed in Notes A - D above.
ALLTEL CORPORATION SUPPLEMENTAL OPERATING INFORMATION-Page 8
(Dollars in thousands, except per customer amounts) THREE MONTHS
ENDED ------------------ Increase June 30, June 30, (Decrease) 2005
2004 Amount % ---- ---- ------ - Wireless: Controlled POPs
66,401,653 61,313,088 5,088,565 8 Customers 9,067,508 8,336,473
731,035 9 Penetration rate 13.7% 13.6% .1% 1 Average customers
9,040,259 8,255,983 784,276 9 Gross customer additions: Internal
593,045 650,149 (57,104) (9) Acquired 212,530 - 212,530 - Total
805,575 650,149 155,426 24 Net customer additions: Internal 53,693
155,307 (101,614) (65) Acquired 212,530 - 212,530 - Total 266,223
155,307 110,916 71 Customer acquisition costs: Cost of products
sold $ 62,516 $ 77,345 $(14,829) (19) Selling and marketing
expenses 198,938 177,939 20,999 12 Less product sales 51,046 51,787
(741) (1) Total $210,408 $203,497 $ 6,911 3 Cost to acquire a new
customer (A) $355 $313 $42 13 Cash costs: Cost of services $453,806
$382,060 $ 71,746 19 Cost of products sold 150,278 135,048 15,230
11 Selling, general, administrative and other 331,743 293,009
38,734 13 Less product sales 84,223 69,533 14,690 21 Total 851,604
740,584 111,020 15 Less customer acquisition costs 210,408 203,497
6,911 3 Total $641,196 $537,087 $104,109 19 Cash cost per unit per
month, excluding customer acquisition costs (B) $23.64 $21.68 $1.96
9 Revenues: Service revenues $1,371,089 $1,183,549 $187,540 16 Less
wholesale revenues 112,227 91,673 20,554 22 Retail revenues
$1,258,862 $1,091,876 $166,986 15 Average revenue per customer per
month (C) $50.55 $47.79 $2.76 6 Retail revenue per customer per
month (D) $46.42 $44.08 $2.34 5 Retail minutes of use per customer
per month (E) 593 490 103 21 Postpay churn 1.58% 1.57% .01% 1 Total
churn 1.99% 2.00% (.01%) (1) Service revenue operating margin (F)
22.4% 22.1% .3% 1 Capital expenditures (G) $283,166 $198,937
$84,229 42 (A) Cost to acquire a new customer is calculated by
dividing the sum of the GAAP reported cost of products sold and
sales and marketing expenses (included within "Selling, general,
administrative and other") less product sales, as reported in the
Consolidated Statements of Income, by the number of internal gross
customer additions in the period. Customer acquisition costs
exclude amounts related to the Company's customer retention
efforts. (B) Cash cost per unit per month, excluding customer
acquisition costs, is calculated by dividing the sum of the GAAP
reported cost of services, cost of products sold, selling, general,
administrative and other expenses less product sales, as reported
in the Consolidated Statements of Income, less customer acquisition
costs, by the number of average customers for the period. (C)
Average revenue per customer per month is calculated by dividing
wireless service revenues by average customers for the period. (D)
Retail revenue per customer per month is calculated by dividing
wireless retail revenues (service revenues less wholesale revenues)
by average customers for the period. (E) Retail minutes of use per
customer per month represents the average monthly minutes that
Alltel's customers use on both the Company's network and while
roaming on other carriers' networks. (F) Service revenue operating
margin is calculated by dividing wireless segment income by
wireless service revenues. (G) Includes capitalized software
development costs. ALLTEL CORPORATION SUPPLEMENTAL OPERATING
INFORMATION-Page 9 (Dollars in thousands, except per customer
amounts) THREE MONTHS ENDED ------------------ Increase June 30,
June 30, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireline:
Customers 2,953,000 3,066,081 (113,081) (4) Average customers
2,967,986 3,079,609 (111,623) (4) Broadband customers 319,315
194,534 124,781 64 Net broadband additions 36,189 20,045 16,144 81
Average revenue per customer per month (H) $66.83 $65.99 $.84 1
Capital expenditures (G) $85,354 $77,748 $7,606 10 Communications
support services: Long-distance customers 1,779,813 1,717,603
62,210 4 Capital expenditures (G) $3,376 $3,223 $153 5
Consolidated: Equity free cash flow (I) $260,277 $303,584 $(43,307)
(14) Capital expenditures (G) $372,065 $280,095 $91,970 33 Total
assets $17,914,892 $16,462,064 $1,452,828 9 (G) Includes
capitalized software development costs. (H) Average revenue per
customer per month is calculated by dividing total wireline
revenues by average customers for the period. (I) Equity free cash
flow is calculated as the sum of net income from current businesses
plus depreciation and amortization less capital expenditures which
includes capitalized software development costs as indicated in
Note G. ALLTEL CORPORATION SUPPLEMENTAL OPERATING INFORMATION-Page
8 (Dollars in thousands, except per customer amounts) SIX MONTHS
ENDED ---------------- Increase June 30, June 30, (Decrease) 2005
2004 Amount % ---- ---- ------ - Wireless: Average customers
8,869,945 8,171,753 698,192 9 Gross customer additions: Internal
1,262,749 1,387,534 (124,785) (9) Acquired 266,491 - 266,491 -
Total 1,529,240 1,387,534 141,706 10 Net customer additions:
Internal 174,530 313,048 (138,518) (44) Acquired 266,491 - 266,491
- Total 441,021 313,048 127,973 41 Customer acquisition costs: Cost
of products sold $132,213 $164,137 $(31,924) (19) Selling and
marketing expenses 383,930 363,812 20,118 6 Less product sales
100,905 104,109 (3,204) (3) Total $415,238 $423,840 $ (8,602) (2)
Cost to acquire a new customer (A) $329 $305 $24 8 Cash costs: Cost
of services $ 859,479 $ 737,802 $121,677 16 Cost of products sold
299,084 279,598 19,486 7 Selling, general administrative and other
654,220 588,751 65,469 11 Less product sales 161,855 138,515 23,340
17 Total 1,650,928 1,467,636 183,292 12 Less customer acquisition
costs 415,238 423,840 (8,602) (2) Total $1,235,690 $1,043,796
$191,894 18 Cash cost per unit per month, excluding customer
acquisition costs (B) $23.22 $21.29 $1.93 9 Revenues: Service
revenues $2,645,466 $2,299,053 $346,413 15 Less wholesale revenues
203,293 174,342 28,951 17 Retail revenues $2,442,173 $2,124,711
$317,462 15 Average revenue per customer per month (C) $49.71
$46.89 $2.82 6 Retail revenue per customer per month (D) $45.89
$43.33 $2.56 6 Retail minutes of use per customer per month (E) 571
461 110 24 Postpay churn 1.65% 1.75% (.10%) (6) Total churn 2.05%
2.20% (.15%) (7) Service revenue operating margin (F) 21.9% 20.6%
1.3% 6 Capital expenditures (G) $473,742 $326,533 $147,209 45 (A)
Cost to acquire a new customer is calculated by dividing the sum of
the GAAP reported cost of products sold and sales and marketing
expenses (included within "Selling, general, administrative and
other") less product sales, as reported in the Consolidated
Statements of Income, by the number of internal gross customer
additions in the period. Customer acquisition costs exclude amounts
related to the Company's customer retention efforts. (B) Cash cost
per unit per month, excluding customer acquisition costs, is
calculated by dividing the sum of the GAAP reported cost of
services, cost of products sold, selling, general, administrative
and other expenses less product sales, as reported in the
Consolidated Statements of Income, less customer acquisition costs,
by the number of average customers for the period. (C) Average
revenue per customer per month is calculated by dividing wireless
service revenues by average customers for the period. (D) Retail
revenue per customer per month is calculated by dividing wireless
retail revenues (service revenues less wholesale revenues) by
average customers for the period. (E) Retail minutes of use per
customer per month represents the average monthly minutes that
Alltel's customers use on both the Company's network and while
roaming on other carriers' networks. (F) Service revenue operating
margin is calculated by dividing wireless segment income by
wireless service revenues. (G) Includes capitalized software
development costs. ALLTEL CORPORATION SUPPLEMENTAL OPERATING
INFORMATION-Page 9 (Dollars in thousands, except per customer
amounts) SIX MONTHS ENDED ---------------- Increase June 30, June
30, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireline:
Average customers 2,981,080 3,085,391 (104,311) (3) Net broadband
additions 75,990 41,506 34,484 83 Average revenue per customer per
month (H) $66.46 $65.31 $1.15 2 Capital expenditures (G) $158,424
$155,109 $3,315 2 Communications support services: Capital
expenditures (G) $5,619 $4,912 $707 14 Consolidated: Equity free
cash flow (I) $590,816 $631,196 $(40,380) (6) Capital expenditures
(G) $638,027 $495,324 $142,703 29 (G) Includes capitalized software
development costs. (H) Average revenue per customer per month is
calculated by dividing total wireline revenues by average customers
for the period. (I) Equity free cash flow is calculated as the sum
of net income from current businesses plus depreciation and
amortization less capital expenditures which includes capitalized
software development costs as indicated in Note G. ALLTEL
CORPORATION CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 10 (In
thousands) ASSETS June 30, December 31, 2005 2004 ---- ---- CURRENT
ASSETS: Cash and short-term investments $ 2,027,662 $ 484,934
Accounts receivable (less allowance for doubtful accounts of
$55,010 and $53,606, respectively) 928,967 912,665 Inventories
159,938 156,785 Prepaid expenses and other 89,153 62,383 Total
current assets 3,205,720 1,616,767 Investments 207,119 804,861
Goodwill 5,151,945 4,875,718 Other intangibles 1,380,758 1,306,140
PROPERTY, PLANT AND EQUIPMENT: Land 280,448 278,084 Buildings and
improvements 1,147,101 1,134,824 Wireline 6,824,900 6,735,748
Wireless 6,057,450 5,763,965 Information processing 1,099,127
1,048,446 Other 495,390 489,936 Under construction 492,460 385,283
Total property, plant and equipment 16,396,876 15,836,286 Less
accumulated depreciation 8,853,510 8,288,195 Net property, plant
and equipment 7,543,366 7,548,091 Other assets 425,984 452,159
TOTAL ASSETS $17,914,892 $16,603,736 ALLTEL CORPORATION
CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 10 (In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY June 30, December 31, 2005
2004 ---- ---- CURRENT LIABILITIES: Current maturities of long-term
debt $ 222,832 $ 224,958 Accounts payable 422,379 448,161 Advance
payments and customer deposits 219,444 219,338 Accrued taxes
286,251 158,197 Accrued dividends 124,620 105,922 Accrued interest
106,214 120,259 Other current liabilities 169,306 183,523 Total
current liabilities 1,551,046 1,460,358 Long-term debt 4,953,949
5,352,422 Deferred income taxes 1,632,913 1,715,119 Other
liabilities 922,015 947,172 SHAREHOLDERS' EQUITY: Preferred stock
305 307 Common stock 327,320 302,268 Additional paid-in capital
1,577,438 197,902 Unrealized holding gain on investments - 153,926
Foreign currency translation adjustment 482 482 Retained earnings
6,949,424 6,473,780 Total shareholders' equity 8,854,969 7,128,665
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $17,914,892 $16,603,736
ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER
GAAP-Page 11 (In thousands) THREE MONTHS ENDED ------------------
June 30, June 30, 2005 2004 ---- ---- Net Cash Provided from
Operations: Net income $ 402,061 $ 262,528 Adjustments to reconcile
net income to net cash provided from operations: Depreciation and
amortization 348,320 321,151 Provision for doubtful accounts 49,744
46,168 Non-cash portion of gain on exchange or disposal of assets
and other (202,185) - Non-cash portion of restructuring and other
charges - - Increase in deferred income taxes 25,401 73,781 Other,
net (2,443) 2,735 Changes in operating assets and liabilities, net
of the effects of acquisitions and dispositions: Accounts
receivable (122,360) (70,014) Inventories (10,956) 20,372 Accounts
payable (48,905) (279) Other current liabilities 14,027 54,837
Other, net 12,239 (14,634) Net cash provided from operations
464,943 696,645 Cash Flows from Investing Activities: Additions to
property, plant and equipment (356,277) (273,333) Additions to
capitalized software development costs (15,788) (6,762) Additions
to investments (129) (1,469) Purchases of property, net of cash
acquired (171,897) - Proceeds from the sale of assets 36,162 -
Proceeds from the sale of investments 350,769 - Proceeds from the
return on investments 15,238 16,660 Other, net 82 1,622 Net cash
used in investing activities (141,840) (263,282) Cash Flows from
Financing Activities: Dividends on preferred and common stock
(114,989) (115,811) Reductions in long-term debt (451,039)
(251,456) Distributions to minority investors (14,266) (16,509)
Preferred stock redemptions - (82) Long-term debt issued - -
Repurchases of common stock - - Common stock issued 1,396,481 797
Net cash provided from (used in) financing activities 816,187
(383,061) Effect of exchange rate changes on cash and short-term
investments - (316) Increase in cash and short-term investments
1,139,290 49,986 Cash and Short-term Investments: Beginning of the
period 888,372 637,432 End of the period $2,027,662 $ 687,418
ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER
GAAP-Page 11 (In thousands) SIX MONTHS ENDED ---------------- June
30, June 30, 2005 2004 ---- ---- Net Cash Provided from Operations:
Net income $ 715,065 $ 452,371 Adjustments to reconcile net income
to net cash provided from operations: Depreciation and amortization
689,537 642,493 Provision for doubtful accounts 90,659 88,766
Non-cash portion of gain on exchange or disposal of assets and
other (202,185) - Non-cash portion of restructuring and other
charges - 25,569 Increase in deferred income taxes 6,281 145,924
Other, net 11,116 (159) Changes in operating assets and
liabilities, net of the effects of acquisitions and dispositions:
Accounts receivable (105,833) (65,539) Inventories (2,295) 25,802
Accounts payable (31,295) (75,310) Other current liabilities
100,617 39,873 Other, net (28,067) (31,612) Net cash provided from
operations 1,243,600 1,248,178 Cash Flows from Investing
Activities: Additions to property, plant and equipment (611,139)
(480,538) Additions to capitalized software development costs
(26,888) (14,786) Additions to investments (882) (2,526) Purchases
of property, net of cash acquired (223,732) - Proceeds from the
sale of assets 36,162 - Proceeds from the sale of investments
353,445 - Proceeds from the return on investments 20,388 36,946
Other, net 3,103 (4,231) Net cash used in investing activities
(449,543) (465,135) Cash Flows from Financing Activities: Dividends
on preferred and common stock (220,720) (231,300) Reductions in
long-term debt (452,913) (252,950) Distributions to minority
investors (27,009) (32,683) Preferred stock redemptions - (82)
Long-term debt issued 50,000 - Repurchases of common stock -
(243,033) Common stock issued 1,399,313 6,724 Net cash provided
from (used in) financing activities 748,671 (753,324) Effect of
exchange rate changes on cash and short-term investments - (65)
Increase in cash and short-term investments 1,542,728 29,654 Cash
and Short-term Investments: Beginning of the period 484,934 657,764
End of the period $2,027,662 $ 687,418 ALLTEL CORPORATION
RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 12 (In
thousands) THREE MONTHS ENDED ------------------ June 30, June 30,
2005 2004 ---- ---- Net cash provided from operations $ 464,943 $
696,645 Adjustments to reconcile to net income under GAAP:
Depreciation and amortization expense (348,320) (321,151) Provision
for doubtful accounts (49,744) (46,168) Non-cash portion of gain on
exchange or disposal of assets and other 202,185 - Non-cash portion
of restructuring and other charges - - Change in deferred income
taxes (25,401) (73,781) Other non-cash changes, net 2,443 (2,735)
Changes in operating assets and liabilities, net of the effects of
acquisitions and dispositions 155,955 9,718 Net income under GAAP
402,061 262,528 Adjustments to reconcile to net income from current
businesses: Restructuring and other charges, net of tax - - Gain on
exchange or disposal of assets and other, net of tax (118,039) -
Special dividend received on Fidelity National common stock, net of
tax - - Change in accounting for operating leases, net of tax - -
Net income from current businesses 284,022 262,528 Adjustments to
reconcile to equity free cash flow from current businesses:
Depreciation and amortization expense 348,320 321,151 Capital
expenditures (372,065) (280,095) Equity free cash flow from current
businesses $ 260,277 $ 303,584 ALLTEL CORPORATION RECONCILIATIONS
OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM
CURRENT BUSINESSES (NON-GAAP)-Page 12 (In thousands) SIX MONTHS
ENDED ---------------- June 30, June 30, 2005 2004 ---- ---- Net
cash provided from operations $1,243,600 $1,248,178 Adjustments to
reconcile to net income under GAAP: Depreciation and amortization
expense (689,537) (642,493) Provision for doubtful accounts
(90,659) (88,766) Non-cash portion of gain on exchange or disposal
of assets and other 202,185 - Non-cash portion of restructuring and
other charges - (25,569) Change in deferred income taxes (6,281)
(145,924) Other non-cash changes, net (11,116) 159 Changes in
operating assets and liabilities, net of the effects of
acquisitions and dispositions 66,873 106,786 Net income under GAAP
715,065 452,371 Adjustments to reconcile to net income from current
businesses: Restructuring and other charges, net of tax - 31,656
Gain on exchange or disposal of assets and other, net of tax
(118,039) - Special dividend received on Fidelity National common
stock, net of tax (69,812) - Change in accounting for operating
leases, net of tax 12,092 - Net income from current businesses
539,306 484,027 Adjustments to reconcile to equity free cash flow
from current businesses: Depreciation and amortization expense
689,537 642,493 Capital expenditures (638,027) (495,324) Equity
free cash flow from current businesses $ 590,816 $ 631,196 *T
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