Alltel achieved solid results in the third quarter, driven by
wireless growth and profitability as the company surpassed the
milestone of 10 million wireless customers. Alltel reported fully
diluted earnings per share under Generally Accepted Accounting
Principles (GAAP) of 98 cents, including several one-time items
that resulted in a net after-tax gain of $30 million. Excluding the
one-time items, fully diluted earnings per share from current
businesses was 90 cents. In the quarter, Alltel completed its
merger with Western Wireless Corporation, further expanding the
company's 850 megahertz wireless business and increasing the
company's wireless revenue mix to nearly 70 percent. Alltel now
owns and operates the nation's largest wireless network. Also this
quarter, Alltel continued with a formal process to assess the
market environment for strategic repositioning of its wireline
business. "Our wireless business continued to produce solid results
this quarter, with our heritage markets showing good top-line and
post-pay customer growth along with a reduction in post-pay churn,"
said Alltel President and CEO Scott Ford. "Our wireline business
lost access lines, but added a record 41,000 net broadband
customers during the quarter. Our strategic review process has gone
well with significant interest expressed by several parties, and we
are on pace to finalize our review before the end of the year."
Among other highlights for the third quarter: -- Total revenues
were $2.5 billion, a 20 percent increase from a year ago. Net
income under GAAP was $361 million, a 12 percent increase. Net
income from current businesses was $331 million, a 17 percent
increase from a year ago. -- Wireless revenue was $1.7 billion, a
30 percent increase from a year ago. Segment income was $376
million, a 31 percent increase. -- Average revenue per wireless
customer (ARPU) in Alltel's heritage markets was $51.83 cents, a 5
percent increase. Post-pay churn in the heritage markets improved
to 1.73 percent from 1.8 percent a year ago. Total ARPU was $53.78,
which includes markets gained in the Western Wireless transaction.
Post-pay churn companywide was 1.92 percent. -- The heritage
markets recorded a net gain of 77,000 post-pay customers and lost
17,000 prepaid customers. The Western Wireless markets added about
28,000 net customers. Alltel lost 67,000 customers in its recently
acquired markets, excluding Western Wireless. Total net customer
additions were 21,000. -- Wireline revenue was $592 million, down 2
percent from the previous year. Segment income was $218 million, a
4 percent decline. The company added a record 41,000 broadband
customers, bringing its total broadband customer base to 360,000.
Average revenue per wireline customer was $67.21, a 2 percent
increase. -- Equity free cash flow from current businesses was $404
million, a 25 percent increase. Net cash provided from operations
was $659 million. 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, including the pending acquisition of
the Idaho markets and the pending dispositions of Western Wireless'
Kansas and Nebraska markets and international assets; the risks
associated with the integration of acquired businesses, including
the integration of Western Wireless; the uncertainties related to
any discussions or negotiations regarding the sale of any of the
international assets or the wireline repositioning; 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 September 30, September 30,
(Decrease) 2005 2004 Amount % ---- ---- ------ - UNDER GAAP:
Revenues and sales: Wireless $1,708,358 $1,313,747 $394,611 30
Wireline 592,283 602,936 (10,653) (2) Communications support
services 263,209 227,137 36,072 16 Total business segments
2,563,850 2,143,820 420,030 20 Less intercompany eliminations
44,731 40,708 4,023 10 Total revenues and sales $2,519,119
$2,103,112 $416,007 20 Segment income: Wireless $ 375,945 $ 287,547
$ 88,398 31 Wireline 218,383 227,782 (9,399) (4) Communications
support services 20,335 11,489 8,846 77 Total segment income
614,663 526,818 87,845 17 Less: corporate expenses (A) 18,900 9,054
9,846 109 restructuring and other charges 18,873 - 18,873 - Total
operating income $ 576,890 $ 517,764 $ 59,126 11 Operating margin
(B): Wireless 22.0% 21.9% .1% - Wireline 36.9% 37.8% (.9%) (2)
Communications support services 7.7% 5.1% 2.6% 51 Consolidated
22.9% 24.6% (1.7%) (7) Net income $ 361,165 $ 323,219 $ 37,946 12
Earnings per share: Basic $.99 $1.05 $(.06) (6) Diluted $.98 $1.05
$(.07) (7) Weighted average common shares: Basic 363,638 306,843
56,795 19 Diluted 367,794 307,841 59,953 19 Annual dividend rate
per common share $1.52 $1.48 $.04 3 FROM CURRENT BUSINESSES
(NON-GAAP) (C): Operating income $ 605,921 $ 517,764 $ 88,157 17
Operating margin (B) 24.1% 24.6% (.5%) (2) Net income $ 331,184 $
284,025 $ 47,159 17 Earnings per share: Basic $.91 $.93 $(.02) (2)
Diluted $.90 $.92 $(.02) (2) (A) Corporate expenses for the three
and nine months ended September 30, 2005 primarily includes $10.2
million of incremental costs related to Hurricane Katrina. In
addition, corporate expenses for the nine months ended September
30, 2005 also includes $19.8 million primarily 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
discontinued operations, 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, costs associated with Hurricane Katrina, a change in
accounting for operating leases, reversal of certain income tax
contingency reserves and restructuring and other charges. ALLTEL
CORPORATION CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP-Page 2 (In
thousands, except per share amounts) THREE MONTHS ENDED
------------------ September 30, September 30, 2005 2004 ---- ----
Revenues and sales: Service revenues $2,229,370 $1,885,405 Product
sales 289,749 217,707 Total revenues and sales 2,519,119 2,103,112
Costs and expenses: Cost of services 719,683 624,442 Cost of
products sold 343,718 262,604 Selling, general, administrative and
other 470,966 373,624 Depreciation and amortization 388,989 324,678
Restructuring and other charges 18,873 - Total costs and expenses
1,942,229 1,585,348 Operating income 576,890 517,764 Equity
earnings in unconsolidated partnerships 10,434 24,338 Minority
interest in consolidated partnerships (20,573) (23,647) Other
income, net 27,325 15,652 Interest expense (83,422) (86,699) Gain
on exchange or disposal of assets and other 30,557 - Income from
continuing operations before income taxes 541,211 447,408 Income
taxes 206,068 143,727 Income from continuing operations 335,143
303,681 Discontinued operations: Income from discontinued
operations (net of income taxes) 26,022 19,538 Gain on sale of
discontinued operations (net of income taxes) - - Net income
361,165 323,219 Preferred dividends 24 25 Net income applicable to
common shares $ 361,141 $ 323,194 Basic earnings per share: Income
from continuing operations $.92 $ .99 Income from discontinued
operations .07 .06 Net income $.99 $1.05 Diluted earnings per
share: Income from continuing operations $.91 $ .99 Income from
discontinued operations .07 .06 Net income $.98 $1.05 ALLTEL
CORPORATION CONSOLIDATED HIGHLIGHTS BUSINESS SEGMENTS AND OTHER
CONSOLIDATED FINANCIAL INFORMATION (In thousands, except per share
amounts) NINE MONTHS ENDED ----------------- Increase September 30,
September 30, (Decrease) 2005 2004 Amount % ---- ---- ------ -
UNDER GAAP: Revenues and sales: Wireless $4,515,679 $3,751,315
$764,364 20 Wireline 1,780,986 1,812,034 (31,048) (2)
Communications support services 749,144 675,366 73,778 11 Total
business segments 7,045,809 6,238,715 807,094 13 Less intercompany
eliminations 140,601 132,367 8,234 6 Total revenues and sales
$6,905,208 $6,106,348 $798,860 13 Segment income: Wireless $
954,425 $ 760,085 $194,340 26 Wireline 648,180 690,325 (42,145) (6)
Communications support services 43,809 48,832 (5,023) (10) Total
segment income 1,646,414 1,499,242 147,172 10 Less: corporate
expenses (A) 59,143 27,085 32,058 118 restructuring and other
charges 18,873 51,765 (32,892) (64) Total operating income
$1,568,398 $1,420,392 $148,006 10 Operating margin (B): Wireless
21.1% 20.3% .8% 4 Wireline 36.4% 38.1% (1.7%) (4) Communications
support services 5.8% 7.2% (1.4%) (19) Consolidated 22.7% 23.3%
(.6%) (3) Net income $1,076,230 $ 775,590 $300,640 39 Earnings per
share: Basic $3.29 $2.51 $.78 31 Diluted $3.27 $2.50 $.77 31
Weighted average common shares: Basic 326,752 308,781 17,971 6
Diluted 329,186 309,752 19,434 6 FROM CURRENT BUSINESSES (NON-GAAP)
(C): Operating income $1,617,220 $1,472,157 $145,063 10 Operating
margin (B) 23.4% 24.1% (.7%) (3) Net income $ 870,490 $ 768,052
$102,438 13 Earnings per share: Basic $2.66 $2.49 $.17 7 Diluted
$2.64 $2.48 $.16 6 (A) Corporate expenses for the three and nine
months ended September 30, 2005 primarily includes $10.2 million of
incremental costs related to Hurricane Katrina. In addition,
corporate expenses for the nine months ended September 30, 2005
also includes $19.8 million primarily 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 discontinued
operations, 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, costs
associated with Hurricane Katrina, a change in accounting for
operating leases, reversal of certain income tax contingency
reserves and restructuring and other charges. ALLTEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP-Page 2 (In thousands,
except per share amounts) NINE MONTHS ENDED -----------------
September 30, September 30, 2005 2004 ---- ---- Revenues and sales:
Service revenues $6,116,896 $5,476,877 Product sales 788,312
629,471 Total revenues and sales 6,905,208 6,106,348 Costs and
expenses: Cost of services 2,006,888 1,769,402 Cost of products
sold 933,556 775,942 Selling, general, administrative and other
1,298,967 1,121,676 Depreciation and amortization 1,078,526 967,171
Restructuring and other charges 18,873 51,765 Total costs and
expenses 5,336,810 4,685,956 Operating income 1,568,398 1,420,392
Equity earnings in unconsolidated partnerships 36,391 53,516
Minority interest in consolidated partnerships (57,838) (60,869)
Other income, net 156,036 23,140 Interest expense (246,454)
(264,978) Gain on exchange or disposal of assets and other 218,830
- Income from continuing operations before income taxes 1,675,363
1,171,201 Income taxes 625,155 415,149 Income from continuing
operations 1,050,208 756,052 Discontinued operations: Income from
discontinued operations (net of income taxes) 26,022 19,538 Gain on
sale of discontinued operations (net of income taxes) - - Net
income 1,076,230 775,590 Preferred dividends 72 78 Net income
applicable to common shares $1,076,158 $ 775,512 Basic earnings per
share: Income from continuing operations $3.21 $2.45 Income from
discontinued operations .08 .06 Net income $3.29 $2.51 Diluted
earnings per share: Income from continuing operations $3.19 $2.44
Income from discontinued operations .08 .06 Net income $3.27 $2.50
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 September 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 $2,229,370 $ - $2,229,370
Product sales 289,749 - 289,749 Total revenues and sales 2,519,119
- 2,519,119 Costs and expenses: Cost of services 719,683 (8,260)
(A) 711,423 Cost of products sold 343,718 - 343,718 Selling,
general, administrative and other 470,966 (1,898) (A) 469,068
Depreciation and amortization 388,989 - 388,989 Restructuring and
other charges 18,873 (18,873) (B) - Total costs and expenses
1,942,229 (29,031) 1,913,198 Operating income 576,890 29,031
605,921 Equity earnings in unconsolidated partnerships 10,434 -
10,434 Minority interest in consolidated partnerships (20,573) -
(20,573) Other income, net 27,325 (5,000) (A) 22,325 Interest
expense (83,422) - (83,422) Gain on exchange or disposal of assets
and other 30,557 (30,557) (C) - Income from continuing operations
before income taxes 541,211 (6,526) 534,685 Income taxes 206,068
(2,567) (H) 203,501 Income from continuing operations 335,143
(3,959) 331,184 Discontinued operations: Income from discontinued
operations (net of income taxes) 26,022 (26,022) (J) - Gain on sale
of discontinued operations (net of income taxes) - - - Net income
361,165 (29,981) 331,184 Preferred dividends 24 - 24 Net income
applicable to common shares $ 361,141 $(29,981) $ 331,160 Basic
earnings per share: Income from continuing operations $.92 $(.01)
$.91 Income from discontinued operations .07 (.07) - Net income
$.99 $(.08) $.91 Diluted earnings per share: Income from continuing
operations $.91 $(.01) $.90 Income from discontinued operations .07
(.07) - Net income $.98 $(.08) $.90 See notes on pages 7 and 8 for
a description of the line items marked (A) - (J). 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 September 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 $1,606,482 $580,561 $ 84,728 $(42,401) Product sales
101,876 11,722 178,481 (2,330) Total revenues and sales 1,708,358
592,283 263,209 (44,731) Costs and expenses: Cost of services
514,923 176,699 58,964 (39,163) Cost of products sold 179,831
10,021 158,860 (4,994) Selling, general, administrative and other
379,806 66,154 16,710 6,398 Depreciation and amortization 257,853
121,026 8,340 1,770 Restructuring and other charges - - - - Total
costs and expenses 1,332,413 373,900 242,874 (35,989) Operating
income $ 375,945 $218,383 $ 20,335 $ (8,742) 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 September 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 $1,885,405 $ - $1,885,405 Product sales 217,707 - 217,707
Total revenues and sales 2,103,112 - 2,103,112 Costs and expenses:
Cost of services 624,442 - 624,442 Cost of products sold 262,604 -
262,604 Selling, general, administrative and other 373,624 -
373,624 Depreciation and amortization 324,678 - 324,678
Restructuring and other charges - - - Total costs and expenses
1,585,348 - 1,585,348 Operating income 517,764 - 517,764 Equity
earnings in unconsolidated partnerships 24,338 - 24,338 Minority
interest in consolidated partnerships (23,647) - (23,647) Other
income, net 15,652 - 15,652 Interest expense (86,699) - (86,699)
Gain on exchange or disposal of assets and other - - - Income from
continuing operations before income taxes 447,408 - 447,408 Income
taxes 143,727 19,656 (I) 163,383 Income from continuing operations
303,681 (19,656) 284,025 Discontinued operations: Income from
discontinued operations (net of income taxes) 19,538 (19,538) (I) -
Gain on sale of discontinued operations (net of income taxes) - - -
Net income 323,219 (39,194) 284,025 Preferred dividends 25 - 25 Net
income applicable to common shares $ 323,194 $(39,194) $ 284,000
Basic earnings per share: Income from continuing operations $ .99
$(.06) $.93 Income from discontinued operations .06 (.06) - Net
income $1.05 $(.12) $.93 Diluted earnings per share: Income from
continuing operations $ .99 $(.07) $.92 Income from discontinued
operations .06 (.06) - Net income $1.05 $(.13) $.92 See notes on
pages 7 and 8 for a description of the line items marked (A) - (J).
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 September 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 $1,239,409 $592,373 $ 86,862 $(33,239) Product sales
74,338 10,563 140,275 (7,469) Total revenues and sales 1,313,747
602,936 227,137 (40,708) Costs and expenses: Cost of services
406,660 179,719 68,910 (30,847) Cost of products sold 139,301 7,822
124,575 (9,094) Selling, general, administrative and other 294,070
60,033 13,593 5,928 Depreciation and amortization 186,169 127,580
8,570 2,359 Restructuring and other charges - - - - Total costs and
expenses 1,026,200 375,154 215,648 (31,654) Operating income $
287,547 $227,782 $ 11,489 $ (9,054) ALLTEL CORPORATION
RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 5 for the nine
months ended September 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 $6,116,896 $ - $6,116,896 Product sales 788,312 - 788,312
Total revenues and sales 6,905,208 - 6,905,208 Costs and expenses:
Cost of services 2,006,888 (28,051) (A)(E) 1,978,837 Cost of
products sold 933,556 - 933,556 Selling, general, administrative
and other 1,298,967 (1,898) (A) 1,297,069 Depreciation and
amortization 1,078,526 - 1,078,526 Restructuring and other charges
18,873 (18,873) (B) - Total costs and expenses 5,336,810 (48,822)
5,287,988 Operating income 1,568,398 48,822 1,617,220 Equity
earnings in unconsolidated partnerships 36,391 - 36,391 Minority
interest in consolidated partnerships (57,838) - (57,838) Other
income, net 156,036 (116,036) (A)(F) 40,000 Interest expense
(246,454) - (246,454) Gain on exchange or disposal of assets and
other 218,830 (218,830) (C)(D) - Income from continuing operations
before income taxes 1,675,363 (286,044) 1,389,319 Income taxes
625,155 (106,326) (H) 518,829 Income from continuing operations
1,050,208 (179,718) 870,490 Discontinued operations: Income from
discontinued operations (net of income taxes) 26,022 (26,022) (J) -
Gain on sale of discontinued operations (net of income taxes) - - -
Net income 1,076,230 (205,740) 870,490 Preferred dividends 72 - 72
Net income applicable to common shares $1,076,158 $(205,740) $
870,418 Basic earnings per share: Income from continuing operations
$3.21 $(.55) $2.66 Income from discontinued operations .08 (.08) -
Net income $3.29 $(.63) $2.66 Diluted earnings per share: Income
from continuing operations $3.19 $(.55) $2.64 Income from
discontinued operations .08 (.08) - Net income $3.27 $(.63) $2.64
See notes on pages 7 and 8 for a description of the line items
marked (A) - (J). ALLTEL CORPORATION RECONCILIATION OF RESULTS OF
OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT
BUSINESSES (NON-GAAP)-Page 5 for the nine months ended September
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 $4,251,948
$1,748,392 $240,342 $(123,786) Product sales 263,731 32,594 508,802
(16,815) Total revenues and sales 4,515,679 1,780,986 749,144
(140,601) Costs and expenses: Cost of services 1,374,402 540,390
178,083 (114,038) Cost of products sold 478,915 26,020 453,319
(24,698) Selling, general, administrative and other 1,034,026
192,622 48,620 21,801 Depreciation and amortization 673,911 373,774
25,313 5,528 Restructuring and other charges - - - - Total costs
and expenses 3,561,254 1,132,806 705,335 (111,407) Operating income
$ 954,425 $ 648,180 $ 43,809 $ (29,194) ALLTEL CORPORATION
RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 for the nine
months ended September 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 $5,476,877 $ - $5,476,877 Product sales 629,471 - 629,471
Total revenues and sales 6,106,348 - 6,106,348 Costs and expenses:
Cost of services 1,769,402 - 1,769,402 Cost of products sold
775,942 - 775,942 Selling, general, administrative and other
1,121,676 - 1,121,676 Depreciation and amortization 967,171 -
967,171 Restructuring and other charges 51,765 (51,765) (G) - Total
costs and expenses 4,685,956 (51,765) 4,634,191 Operating income
1,420,392 51,765 1,472,157 Equity earnings in unconsolidated
partnerships 53,516 - 53,516 Minority interest in consolidated
partnerships (60,869) - (60,869) Other income, net 23,140 - 23,140
Interest expense (264,978) - (264,978) Gain on exchange or disposal
of assets and other - - - Income from continuing operations before
income taxes 1,171,201 51,765 1,222,966 Income taxes 415,149 39,765
(H)(I) 454,914 Income from continuing operations 756,052 12,000
768,052 Discontinued operations: Income from discontinued
operations (net of income taxes) 19,538 (19,538) (I) - Gain on sale
of discontinued operations (net of income taxes) - - - Net income
775,590 (7,538) 768,052 Preferred dividends 78 - 78 Net income
applicable to common shares $ 775,512 $ (7,538) $ 767,974 Basic
earnings per share: Income from continuing operations $2.45 $ .04
$2.49 Income from discontinued operations .06 (.06) - Net income
$2.51 $(.02) $2.49 Diluted earnings per share: Income from
continuing operations $2.44 $ .04 $2.48 Income from discontinued
operations .06 (.06) - Net income $2.50 $(.02) $2.48 See notes on
pages 7 and 8 for a description of the line items marked (A) - (J).
ALLTEL CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER
GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES
(NON-GAAP)-Page 6 for the nine months ended September 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 $3,538,462 $1,783,473 $265,200 $(110,258) Product sales
212,853 28,561 410,166 (22,109) Total revenues and sales 3,751,315
1,812,034 675,366 (132,367) Costs and expenses: Cost of services
1,144,462 531,189 193,548 (99,797) Cost of products sold 418,899
20,135 367,242 (30,334) Selling, general, administrative and other
882,821 181,861 39,873 17,121 Depreciation and amortization 545,048
388,524 25,871 7,728 Restructuring and other charges - - - - Total
costs and expenses 2,991,230 1,121,709 626,534 (105,282) Operating
income $ 760,085 $ 690,325 $ 48,832 $ (27,085) 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 October 21, 2005, Alltel has presented in this
earnings release results of operations from current businesses
which exclude the effects of discontinued operations, 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, costs associated with
Hurricane Katrina, a change in accounting for certain operating
leases, reversal of certain income tax contingency reserves 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, early termination of debt, costs associated with Hurricane
Katrina, 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) Alltel
incurred $10.2 million of incremental costs related to Hurricane
Katrina consisting of increased long distance and roaming expenses
due to providing these services to affected customers at no charge,
system maintenance costs to restore network facilities and
additional losses from bad debts. These incremental costs also
included Company donations to support the hurricane relief efforts.
These incremental expenses were partially offset by $5.0 million of
insurance proceeds received to date by Alltel. (B) The Company
incurred $2.4 million of integration expenses related to its
acquisition completed on August 1, 2005 of Western Wireless
Corporation ("Western Wireless"). These expenses primarily
consisted of system conversion and relocation costs. In addition,
the Company incurred $11.9 million of integration expenses related
to the exchange of certain wireless assets with Cingular Wireless
LLC ("Cingular") completed during the second and third quarters of
2005. These expenses consisted of handset subsidies incurred to
migrate the acquired customer base to CDMA handsets. The Company
also incurred $4.6 million in restructuring charges associated with
its wireline operations. These charges consisted of severance and
employee benefit costs related to a planned workforce reduction.
(C) Primarily due to certain minority partners'
right-of-first-refusal, three of the wireless partnership interests
to be exchanged between Alltel and Cingular, as discussed in Note D
below, were not completed until July 29, 2005. As a result of
completing the exchange transaction, Alltel recorded an additional
pretax gain of $30.5 million. (D) On April 15, 2005, Alltel and
Cingular 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 redemption, 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. (E) 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. ALLTEL CORPORATION NOTES TO RECONCILIATIONS OF RESULTS
OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT
BUSINESSES (NON-GAAP)-Page 8 (F) 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. (G) 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.
(H) Tax-related effect of the items discussed in Notes A - G above.
(I) During the third quarter of 2004, the Internal Revenue Service
("IRS") completed its fieldwork related to the audits of the
Company's consolidated federal income tax returns for the fiscal
years 1997 through 2001. As a result of the IRS completing this
phase of their audits, Alltel reassessed its income tax contingency
reserves related to the periods under examination. Based upon this
reassessment, Alltel recorded a $129.3 million reduction in its
income tax contingency reserves in the third quarter of 2004. The
corresponding effects of the reversal of these tax contingencies
resulted in a reduction in goodwill of $94.5 million and a
reduction in income tax expense associated with continuing
operations of $19.7 million. In addition, $15.1 million of the
income tax contingency reserves reversed related to the financial
services division of Alltel's information services subsidiary,
ALLTEL Information Services, Inc., that was sold to Fidelity
National on April 1, 2003. Pursuant to the terms of the sale
agreement, Alltel retained, as of the date of sale, all income tax
liabilities related to the sold operations and agreed to indemnify
Fidelity National from any future tax liability imposed on the
financial services division for periods prior to the date of sale.
The adjustment of the tax contingency reserves related to the
disposed financial services division has been reported as
"discontinued operations" in the Company's interim consolidated
financial statements for the three and nine months ended September
30, 2004. Discontinued operations for the three and nine months
ended September 30, 2004 also included a tax benefit of $4.4
million attributable to a foreign tax credit carryback recognized
as a result of the IRS audits. (J) Eliminates the effects of
discontinued operations. On August 1, 2005, Alltel completed its
acquisition of Western Wireless. As a condition of receiving
approval for the acquisition from the Department of Justice and the
Federal Communications Commission, Alltel agreed to divest certain
wireless operations of Western Wireless in 16 markets in Arkansas,
Kansas and Nebraska. In September 2005, Alltel completed the sale
of international operations in Georgia and Ghana acquired from
Western Wireless. Alltel also has entered into definitive
agreements to sell the Austria and Irish operations acquired from
Western Wireless and Alltel is actively pursuing the disposition of
all remaining international operations and interests acquired from
Western Wireless. As a result, the acquired international
operations and interests of Western Wireless and the 16 markets to
be divested in Arkansas, Kansas and Nebraska have been classified
as discontinued operations and assets held for sale in the
accompanying consolidated financial statements. ALLTEL CORPORATION
SUPPLEMENTAL OPERATING INFORMATION-Page 9 (Dollars in thousands,
except per customer amounts) THREE MONTHS ENDED ------------------
Increase September 30, September 30, (Decrease) 2005 2004 Amount %
---- ---- ------ - Wireless: Controlled POPs 75,410,320 61,313,088
14,097,232 23 Customers 10,424,710 8,394,727 2,029,983 24
Penetration rate 13.8% 13.7% .1% 1 Average customers 9,956,726
8,369,785 1,586,941 19 Gross customer additions: Internal 729,618
641,994 87,624 14 Acquired 1,336,315 - 1,336,315 - Total 2,065,933
641,994 1,423,939 222 Net customer additions: Internal 20,887
58,254 (37,367) (64) Acquired 1,336,315 - 1,336,315 - Total
1,357,202 58,254 1,298,948 2,230 Customer acquisition costs: Cost
of products sold $ 83,821 $ 78,043 $ 5,778 7 Selling and marketing
expenses 231,886 181,505 50,381 28 Less product sales 61,611 55,235
6,376 12 Total $254,096 $204,313 $49,783 24 Cost to acquire a new
customer (A) $348 $318 $30 9 Cash costs: Cost of services $514,923
$406,660 $108,263 27 Cost of products sold 179,831 139,301 40,530
29 Selling, general, administrative and other 379,806 294,070
85,736 29 Less product sales 101,876 74,338 27,538 37 Total 972,684
765,693 206,991 27 Less customer acquisition costs 254,096 204,313
49,783 24 Total $718,588 $561,380 $157,208 28 Cash cost per unit
per month, excluding customer acquisition costs (B) $24.06 $22.36
$1.70 8 Revenues: Service revenues $1,606,482 $1,239,409 $367,073
30 Less wholesale revenues 170,221 103,356 66,865 65 Retail
revenues $1,436,261 $1,136,053 $300,208 26 Average revenue per
customer per month (C) $53.78 $49.36 $4.42 9 Retail revenue per
customer per month (D) $48.08 $45.24 $2.84 6 Retail minutes of use
per customer per month (E) 614 516 98 19 Postpay churn 1.92% 1.80%
.12% 7 Total churn 2.37% 2.33% .04% 2 Service revenue operating
margin (F) 23.4% 23.2% .2% 1 Capital expenditures (G) $233,788
$200,337 $33,451 17 (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 10 (Dollars in thousands, except per customer
amounts) THREE MONTHS ENDED ------------------ Increase September
30, September 30, (Decrease) 2005 2004 Amount % ---- ---- ------ -
Wireline: Customers 2,919,862 3,040,512 (120,650) (4) Average
customers 2,937,588 3,052,548 (114,960) (4) Broadband customers
359,975 216,885 143,090 66 Net broadband additions 40,660 22,351
18,309 82 Average revenue per customer per month (H) $67.21 $65.84
$1.37 2 Capital expenditures (G) $78,172 $80,659 $(2,487) (3)
Communications support services: Long-distance customers 1,757,069
1,739,974 17,095 1 Capital expenditures (G) $4,208 $4,500 $(292)
(6) Consolidated: Equity free cash flow (I) $403,738 $323,183
$80,555 25 Capital expenditures (G) $316,435 $285,520 $30,915 11
Total assets $23,796,703 $16,368,782 $7,427,921 45 (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
9 (Dollars in thousands, except per customer amounts) NINE MONTHS
ENDED ----------------- Increase September 30, September 30,
(Decrease) 2005 2004 Amount % ---- ---- ------ - Wireless: Average
customers 9,229,636 8,234,494 995,142 12 Gross customer additions:
Internal 1,992,367 2,029,528 (37,161) (2) Acquired 1,602,806 -
1,602,806 - Total 3,595,173 2,029,528 1,565,645 77 Net customer
additions: Internal 195,417 371,302 (175,885) (47) Acquired
1,602,806 - 1,602,806 - Total 1,798,223 371,302 1,426,921 384
Customer acquisition costs: Cost of products sold $216,034 $242,180
$(26,146) (11) Selling and marketing expenses 615,816 545,317
70,499 13 Less product sales 162,516 159,344 3,172 2 Total $669,334
$628,153 $ 41,181 7 Cost to acquire a new customer (A) $336 $310
$26 8 Cash costs: Cost of services $1,374,402 $1,144,462 $229,940
20 Cost of products sold 478,915 418,899 60,016 14 Selling, general
administrative and other 1,034,026 882,821 151,205 17 Less product
sales 263,731 212,853 50,878 24 Total 2,623,612 2,233,329 390,283
17 Less customer acquisition costs 669,334 628,153 41,181 7 Total
$1,954,278 $1,605,176 $349,102 22 Cash cost per unit per month,
excluding customer acquisition costs (B) $23.53 $21.66 $1.87 9
Revenues: Service revenues $4,251,948 $3,538,462 $713,486 20 Less
wholesale revenues 373,514 277,698 95,816 35 Retail revenues
$3,878,434 $3,260,764 $617,670 19 Average revenue per customer per
month (C) $51.19 $47.75 $3.44 7 Retail revenue per customer per
month (D) $46.69 $44.00 $2.69 6 Retail minutes of use per customer
per month (E) 586 480 106 22 Postpay churn 1.75% 1.77% (.02%) (1)
Total churn 2.17% 2.24% (.07%) (3) Service revenue operating margin
(F) 22.4% 21.5% .9% 4 Capital expenditures (G) $707,530 $526,870
$180,660 34 (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 10 (Dollars in thousands, except per customer
amounts) NINE MONTHS ENDED ----------------- Increase September 30,
September 30, (Decrease) 2005 2004 Amount % ---- ---- ------ -
Wireline: Average customers 2,966,491 3,074,185 (107,694) (4) Net
broadband additions 116,650 63,857 52,793 83 Average revenue per
customer per month (H) $66.71 $65.49 $1.22 2 Capital expenditures
(G) $236,596 $235,768 $828 - Communications support services:
Capital expenditures (G) $9,827 $9,412 $415 4 Consolidated: Equity
free cash flow (I) $994,554 $954,379 $ 40,175 4 Capital
expenditures (G) $954,462 $780,844 $173,618 22 (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 11 (In thousands) ASSETS September 30, December 31, 2005
2004 ---- ---- CURRENT ASSETS: Cash and short-term investments $
69,428 $ 484,934 Accounts receivable (less allowance for doubtful
accounts of $76,414 and $53,606, respectively) 1,116,991 912,665
Inventories 177,026 156,785 Prepaid expenses and other 131,159
62,383 Assets held for sale 2,739,566 - Total current assets
4,234,170 1,616,767 Investments 359,295 804,861 Goodwill 8,827,913
4,875,718 Other intangibles 1,977,344 1,306,140 PROPERTY, PLANT AND
EQUIPMENT: Land 287,618 278,084 Buildings and improvements
1,189,690 1,134,824 Wireline 6,886,844 6,735,748 Wireless 6,664,603
5,763,965 Information processing 1,150,249 1,048,446 Other 494,307
489,936 Under construction 494,266 385,283 Total property, plant
and equipment 17,167,577 15,836,286 Less accumulated depreciation
9,158,549 8,288,195 Net property, plant and equipment 8,009,028
7,548,091 Other assets 388,953 452,159 TOTAL ASSETS $23,796,703
$16,603,736 ALLTEL CORPORATION CONSOLIDATED BALANCE SHEETS UNDER
GAAP-Page 11 (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31, 2005 2004 ---- ---- CURRENT LIABILITIES:
Current maturities of long-term debt $ 137,920 $ 224,958 Accounts
payable 496,027 448,161 Advance payments and customer deposits
224,152 219,338 Accrued taxes 224,125 158,197 Accrued dividends
145,481 105,922 Accrued interest 81,300 120,259 Current deferred
income taxes 490,491 - Other current liabilities 244,090 183,523
Liabilities related to assets held for sale 397,965 - Total current
liabilities 2,441,551 1,460,358 Long-term debt 5,805,200 5,352,422
Deferred income taxes 1,681,917 1,715,119 Other liabilities 955,756
947,172 SHAREHOLDERS' EQUITY: Preferred stock 287 307 Common stock
382,917 302,268 Additional paid-in capital 5,313,384 197,902
Unrealized holding gain on investments 23,512 153,926 Foreign
currency translation adjustment 26,895 482 Retained earnings
7,165,284 6,473,780 Total shareholders' equity 12,912,279 7,128,665
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $23,796,703 $16,603,736
ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER
GAAP-Page 12 (In thousands) THREE MONTHS ENDED ------------------
September 30, September 30, 2005 2004 ---- ---- Net Cash Provided
from Operations: Net income $ 361,165 $ 323,219 Adjustments to
reconcile net income to net cash provided from operations: Income
from discontinued operations (26,022) (19,538) Depreciation and
amortization 388,989 324,678 Provision for doubtful accounts 61,360
48,504 Non-cash portion of gain on exchange or disposal of assets
and other (30,557) - Non-cash portion of restructuring and other
charges 10,000 - Increase in deferred income taxes 11,786 42,672
Reversal of income tax contingency reserves - (19,656) Other, net
941 (8,305) Changes in operating assets and liabilities, net of the
effects of acquisitions and dispositions: Accounts receivable
(99,575) (98,737) Inventories 18,520 (14,894) Accounts payable
27,815 (17,718) Other current liabilities (94,407) 24,239 Other,
net 28,495 11,427 Net cash provided from operations 658,510 595,891
Cash Flows from Investing Activities: Additions to property, plant
and equipment (304,406) (276,742) Additions to capitalized software
development costs (12,029) (8,778) Additions to investments (75)
(279) Purchases of property, net of cash acquired (912,317) -
Proceeds from the sale of assets - - Proceeds from the sale of
investments 436 - Proceeds from the return on investments 10,569
30,169 Other, net 4,848 3,637 Net cash used in investing activities
(1,212,974) (251,993) Cash Flows from Financing Activities:
Dividends on preferred and common stock (124,449) (114,047)
Reductions in long-term debt (2,203,727) (2,044) Distributions to
minority investors (17,799) (16,994) Long-term debt issued 877,700
- Repurchases of common stock - (263,898) Common stock issued
43,477 14,074 Net cash used in financing activities (1,424,798)
(382,909) Net cash provided from discontinued operations 36,189 -
Effect of exchange rate changes on cash and short-term investments
(15,161) (22) Decrease in cash and short-term investments
(1,958,234) (39,033) Cash and Short-term Investments: Beginning of
the period 2,027,662 687,418 End of the period $ 69,428 $ 648,385
ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER
GAAP-Page 12 (In thousands) NINE MONTHS ENDED -----------------
September 30, September 30, 2005 2004 ---- ---- Net Cash Provided
from Operations: Net income $ 1,076,230 $ 775,590 Adjustments to
reconcile net income to net cash provided from operations: Income
from discontinued operations (26,022) (19,538) Depreciation and
amortization 1,078,526 967,171 Provision for doubtful accounts
152,019 137,270 Non-cash portion of gain on exchange or disposal of
assets and other (232,742) - Non-cash portion of restructuring and
other charges 10,000 25,569 Increase in deferred income taxes
18,067 188,596 Reversal of income tax contingency reserves -
(19,656) Other, net 12,057 (8,475) Changes in operating assets and
liabilities, net of the effects of acquisitions and dispositions:
Accounts receivable (205,408) (164,276) Inventories 16,225 10,908
Accounts payable (3,480) (93,028) Other current liabilities 6,210
64,112 Other, net 428 (20,185) Net cash provided from operations
1,902,110 1,844,058 Cash Flows from Investing Activities: Additions
to property, plant and equipment (915,545) (757,280) Additions to
capitalized software development costs (38,917) (23,564) Additions
to investments (957) (2,805) Purchases of property, net of cash
acquired (1,136,049) - Proceeds from the sale of assets 36,162 -
Proceeds from the sale of investments 353,881 - Proceeds from the
return on investments 30,957 67,115 Other, net 7,951 (594) Net cash
used in investing activities (1,662,517) (717,128) Cash Flows from
Financing Activities: Dividends on preferred and common stock
(345,169) (345,347) Reductions in long-term debt (2,656,640)
(254,994) Distributions to minority investors (44,808) (49,677)
Long-term debt issued 927,700 - Repurchases of common stock -
(506,931) Common stock issued 1,442,790 20,727 Net cash used in
financing activities (676,127) (1,136,222) Net cash provided from
discontinued operations 36,189 - Effect of exchange rate changes on
cash and short-term investments (15,161) (87) Decrease in cash and
short-term investments (415,506) (9,379) Cash and Short-term
Investments: Beginning of the period 484,934 657,764 End of the
period $ 69,428 $ 648,385 ALLTEL CORPORATION RECONCILIATIONS OF
RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM
CURRENT BUSINESSES (NON-GAAP)-Page 13 (In thousands) THREE MONTHS
ENDED ------------------ September 30, September 30, 2005 2004 ----
---- Net cash provided from operations $ 658,510 $ 595,891
Adjustments to reconcile to net income under GAAP: Income from
discontinued operations 26,022 19,538 Depreciation and amortization
expense (388,989) (324,678) Provision for doubtful accounts
(61,360) (48,504) Non-cash portion of gain on exchange or disposal
of assets and other 30,557 - Non-cash portion of restructuring and
other charges (10,000) - Change in deferred income taxes (11,786)
(42,672) Reversal of income tax contingency reserves - 19,656 Other
non-cash changes, net (941) 8,305 Changes in operating assets and
liabilities, net of the effects of acquisitions and dispositions
119,152 95,683 Net income under GAAP 361,165 323,219 Adjustments to
reconcile to net income from current businesses: Restructuring and
other charges, net of tax 11,569 - Gain on exchange or disposal of
assets and other, net of tax (18,681) - Special dividend received
on Fidelity National common stock, net of tax - - Change in
accounting for operating leases, net of tax - - Hurricane-related
costs, net of insurance recoveries and tax 3,153 - Reversal of
income tax contingency reserves - (19,656) Income from discontinued
operations (26,022) (19,538) Net income from current businesses
331,184 284,025 Adjustments to reconcile to equity free cash flow
from current businesses: Depreciation and amortization expense
388,989 324,678 Capital expenditures (316,435) (285,520) Equity
free cash flow from current businesses $ 403,738 $ 323,183 ALLTEL
CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 13
(In thousands) NINE MONTHS ENDED ----------------- September 30,
September 30, 2005 2004 ---- ---- Net cash provided from operations
$ 1,902,110 $1,844,058 Adjustments to reconcile to net income under
GAAP: Income from discontinued operations 26,022 19,538
Depreciation and amortization expense (1,078,526) (967,171)
Provision for doubtful accounts (152,019) (137,270) Non-cash
portion of gain on exchange or disposal of assets and other 232,742
- Non-cash portion of restructuring and other charges (10,000)
(25,569) Change in deferred income taxes (18,067) (188,596)
Reversal of income tax contingency reserves - 19,656 Other non-cash
changes, net (12,057) 8,475 Changes in operating assets and
liabilities, net of the effects of acquisitions and dispositions
186,025 202,469 Net income under GAAP 1,076,230 775,590 Adjustments
to reconcile to net income from current businesses: Restructuring
and other charges, net of tax 11,569 31,656 Gain on exchange or
disposal of assets and other, net of tax (136,720) - Special
dividend received on Fidelity National common stock, net of tax
(69,812) - Change in accounting for operating leases, net of tax
12,092 - Hurricane-related costs, net of insurance recoveries and
tax 3,153 - Reversal of income tax contingency reserves - (19,656)
Income from discontinued operations (26,022) (19,538) Net income
from current businesses 870,490 768,052 Adjustments to reconcile to
equity free cash flow from current businesses: Depreciation and
amortization expense 1,078,526 967,171 Capital expenditures
(954,462) (780,844) Equity free cash flow from current businesses $
994,554 $ 954,379 *T
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