AT Atlantic Power Corporation

147,000 net adds, ARPU increases in fourth quarter cap a year of wireless expansion Alltel (NYSE: AT) today announced that the company achieved double-digit growth in revenues and net income during the fourth quarter and for all of 2005, driven by its wireless business. Fully diluted earnings per share under Generally Accepted Accounting Principles (GAAP) was 66 cents for the quarter, including several one-time items such as integration and hurricane-related expenses. Fully diluted earnings per share under GAAP was $3.87 for the year. Fully diluted earnings per share from current businesses was 77 cents for the quarter, which includes a weighted average share count of 389 million, and $3.41 for the year. "This was a busy year strategically for our company and I am very proud of the entire team for all that we accomplished," said Scott Ford, Alltel president and chief executive officer. "We delivered a strong increase in wireless net customer additions and gains in average revenue per customer for the fourth quarter, capping a year where Alltel accelerated wireless growth by expanding our customer base and creating the nation's largest wireless network. This year we also launched a new brand with proof points that are resonating with our wireless customers." In 2005, Alltel completed transactions with Western Wireless, Cingular, PSC Wireless and U.S. Cellular. That expansion added parts of nine new states to the Alltel network: California, Idaho, Minnesota, Montana, Nevada, North Dakota, South Dakota, Utah and Wyoming. The transactions also significantly expanded Alltel's wireless operations in several other states, including Arizona, Colorado, New Mexico, Oklahoma and Texas. With those transactions, Alltel's wireless customer base increased to more than 10 million for the first time - a 24 percent year-over-year increase - and the company now serves a population of nearly 76 million, a 22 percent increase from 2004. Alltel is the nation's fifth-largest wireless carrier. In addition, Alltel is the largest independent roaming partner for the nation's top four wireless carriers. Alltel closed the year by announcing it would spin off its wireline business and merge it with VALOR Communications Group Inc. in a $9.1 billion transaction. "In 2006, we will create two companies - separate wireless and wireline businesses - that will be positioned to capitalize on strategic, operational and financial opportunities," Ford said. Among the financial highlights for the fourth quarter: -- Total revenues were $2.6 billion, a 21 percent increase from a year ago. Total operating income under GAAP was $523 million, a 4 percent increase. Operating income from current businesses was $572 million, a 14 percent increase. Net income under GAAP was $255 million. Net income from current businesses was $301 million, an 11 percent increase. -- Wireless revenues were $1.8 billion, a 33 percent increase from a year ago. Segment income was $300 million, a 15 percent increase. -- Total wireless ARPU was $52.13, a 6 percent increase year-over-year. Post-pay churn companywide was 1.83 percent. Within Alltel's heritage markets, ARPU was $50.54, a 3 percent increase. Post-pay churn in the heritage markets was 1.73 percent. -- The company added 147,000 net new wireless customers. Within the heritage markets, Alltel added 166,000 customers, including 76,000 post-paid and 90,000 pre-paid. Alltel added 18,000 net customers in the former Western Wireless markets. The company lost 37,000 customers in the former Cingular markets. -- Wireline revenues were $598 million, down 2 percent. Segment income was $256 million, an 8 percent increase. Alltel added 38,000 net new broadband customers. Wireline average revenue per customer was $68.72, a 3 percent increase. Feature revenue per eligible line increased 5 percent. -- Equity free cash flow from current businesses was $309 million, a 37 percent increase. Net cash from operations was $830 million. In the fourth quarter, Alltel agreed to purchase Midwest Wireless, which is expected to add about 400,000 wireless customers in southern Minnesota, northern and eastern Iowa, and western Wisconsin. The company also completed or announced transactions that will allow it to meet all divestiture requirements related to the merger with Western Wireless. "Alltel delivered fourth-quarter and annual results that were driven by solid performances in both our wireless and wireline businesses," Ford said. "We continue to improve our wireless customer growth and again delivered year-over-year increases in ARPU while the wireline business continued to grow our broadband customer base." Among the financial highlights for the year: -- Total revenues were $9.5 billion, a 15 percent increase from year-end 2004. Total operating income under GAAP was $2.1 billion, a 1 percent increase. Operating income from current businesses was $2.2 billion, an 11 percent increase. Net income under GAAP was $1.3 billion. Net income from current businesses was $1.2 billion, a 13 percent increase. -- Wireless revenues were $6.3 billion, a 24 percent increase. Segment income was $1.3 billion, a 23 percent increase. Alltel added 2 million new wireless customers, driven mainly by the acquisition of Western Wireless. -- Total wireless ARPU was $51.44, a 7 percent increase. Post-pay churn companywide was 1.8 percent. ARPU in Alltel's heritage markets was $50.42, a 5 percent increase. Post-pay churn in those markets was 1.7 percent. -- Wireline revenues were $2.4 billion, down 2 percent. Segment income was $904 million, also down 2 percent. The company added 154,000 broadband customers, a 71 percent increase that brings its broadband customer base to 398,000. Wireline average revenue per customers was $67.21, a 2 percent increase. Feature revenue per eligible line increased 5 percent. -- Equity free cash flow from current businesses was $1.3 billion, an 11 percent increase from a year ago. Net cash from operations was $2.7 billion. 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 Midwest Wireless and the pending dispositions of the Austrian, Bolivian and Haitian operations and the wireline business; 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 remaining international assets; adverse changes in the terms and conditions of the wireless roaming agreements of Alltel; the potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited ratings organizations; the availability and cost of financing in the corporate credit and debt markets necessary to consummate the disposition of the wireline business; 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 December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - UNDER GAAP: Revenues and sales: Wireless $1,760,178 $1,326,772 $433,406 33 Wireline 598,150 607,775 (9,625) (2) Communications support services 276,438 248,489 27,949 11 Total business segments 2,634,766 2,183,036 451,730 21 Less intercompany eliminations 53,015 43,243 9,772 23 Total revenues and sales $2,581,751 $2,139,793 $441,958 21 Segment income: Wireless $ 300,222 $ 260,154 $ 40,068 15 Wireline 255,543 235,666 19,877 8 Communications support services 24,389 13,885 10,504 76 Total segment income 580,154 509,705 70,449 14 Less: corporate expenses (A) 17,652 9,342 8,310 89 restructuring and other charges 39,844 (873) 40,717 4,664 Total operating income $ 522,658 $ 501,236 $ 21,422 4 Operating margin (B): Wireless 17.1% 19.6% (2.5%) (13) Wireline 42.7% 38.8% 3.9% 10 Communications support services 8.8% 5.6% 3.2% 57 Consolidated 20.2% 23.4% (3.2%) (14) Net income $ 255,149 $ 270,645 ($15,496) (6) Earnings per share: Basic $.66 $.89 $(.23) (26) Diluted $.66 $.89 $(.23) (26) Weighted average common shares: Basic 382,920 302,809 80,111 26 Diluted 389,343 304,095 85,248 28 Annual dividend rate per common share $1.52 $1.52 - - FROM CURRENT BUSINESSES (NON-GAAP) (C): Operating income $ 572,008 $ 500,363 $ 71,645 14 Operating margin (B) 22.2% 23.4% (1.2%) (5) Net income $ 300,613 $ 270,058 $ 30,555 11 Earnings per share: Basic $.78 $.89 $(.11) (12) Diluted $.77 $.89 $(.12) (13) (A) Corporate expenses for the three and twelve months ended December 31, 2005 include incremental costs associated with Hurricane Katrina of $9.5 million and $19.7 million, respectively. In addition, corporate expenses for the twelve months ended December 31, 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, 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, change in accounting for operating leases and conditional asset retirement obligations, 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 ------------------ December 31, December 31, 2005 2004 ---- ---- Revenues and sales: Service revenues $2,263,605 $1,897,402 Product sales 318,146 242,391 Total revenues and sales 2,581,751 2,139,793 Costs and expenses: Cost of services 736,857 604,818 Cost of products sold 381,764 299,603 Selling, general, administrative and other 496,549 402,489 Depreciation and amortization 404,079 332,520 Restructuring and other charges 39,844 (873) Total costs and expenses 2,059,093 1,638,557 Operating income 522,658 501,236 Equity earnings in unconsolidated partnerships 6,992 14,970 Minority interest in consolidated partnerships (11,267) (19,227) Other income, net 2,752 11,360 Interest expense (86,134) (87,512) Gain on exchange or disposal of assets and other - - Income from continuing operations before income taxes 435,001 420,827 Income taxes 176,681 150,182 Income from continuing operations 258,320 270,645 Income from discontinued operations (net of income taxes) 4,270 - Income before cumulative effect of accounting change 262,590 270,645 Cumulative effect of accounting change (net of income taxes) (7,441) - Net income 255,149 270,645 Preferred dividends 21 25 Net income applicable to common shares $ 255,128 $ 270,620 Basic earnings per share: Income from continuing operations $ .67 $.89 Income from discontinued operations .01 - Cumulative effect of accounting change (.02) - Net income $ .66 $.89 Diluted earnings per share: Income from continuing operations $ .67 $.89 Income from discontinued operations .01 - Cumulative effect of accounting change (.02) - Net income $ .66 $.89 ALLTEL CORPORATION CONSOLIDATED HIGHLIGHTS BUSINESS SEGMENTS AND OTHER CONSOLIDATED FINANCIAL INFORMATION (In thousands, except per share amounts) TWELVE MONTHS ENDED ------------------- Increase December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - UNDER GAAP: Revenues and sales: Wireless $6,275,857 $5,078,087 $1,197,770 24 Wireline 2,379,136 2,419,809 (40,673) (2) Communications support services 1,025,582 923,855 101,727 11 Total business segments 9,680,575 8,421,751 1,258,824 15 Less intercompany eliminations 193,616 175,610 18,006 10 Total revenues and sales $9,486,959 $8,246,141 $1,240,818 15 Segment income: Wireless $1,254,647 $1,020,239 $234,408 23 Wireline 903,723 925,991 (22,268) (2) Communications support services 68,198 62,717 5,481 9 Total segment income 2,226,568 2,008,947 217,621 11 Less: corporate expenses (A) 76,795 36,427 40,368 111 restructuring and other charges 58,717 50,892 7,825 15 Total operating income $2,091,056 $1,921,628 $169,428 9 Operating margin (B): Wireless 20.0% 20.1% (.1%) - Wireline 38.0% 38.3% (.3%) (1) Communications support services 6.6% 6.8% (.2%) (3) Consolidated 22.0% 23.3% (1.3%) (6) Net income $1,331,379 $1,046,235 $285,144 27 Earnings per share: Basic $3.91 $3.40 $.51 15 Diluted $3.87 $3.39 $.48 14 Weighted average common shares: Basic 340,791 307,288 33,503 11 Diluted 344,129 308,339 35,790 12 FROM CURRENT BUSINESSES (NON-GAAP) (C): Operating income $2,189,228 $1,972,520 $216,708 11 Operating margin (B) 23.1% 23.9% (.8%) (3) Net income $1,171,103 $1,038,110 $132,993 13 Earnings per share: Basic $3.44 $3.38 $.06 2 Diluted $3.41 $3.37 $.04 1 (A) Corporate expenses for the three and twelve months ended December 31, 2005 include incremental costs associated with Hurricane Katrina of $9.5 million and $19.7 million, respectively. In addition, corporate expenses for the twelve months ended December 31, 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, 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, change in accounting for operating leases and conditional asset retirement obligations, 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) TWELVE MONTHS ENDED ------------------- December 31, December 31, 2005 2004 ---- ---- Revenues and sales: Service revenues $8,380,501 $7,374,279 Product sales 1,106,458 871,862 Total revenues and sales 9,486,959 8,246,141 Costs and expenses: Cost of services 2,743,745 2,374,220 Cost of products sold 1,315,320 1,075,545 Selling, general, administrative and other 1,795,516 1,524,165 Depreciation and amortization 1,482,605 1,299,691 Restructuring and other charges 58,717 50,892 Total costs and expenses 7,395,903 6,324,513 Operating income 2,091,056 1,921,628 Equity earnings in unconsolidated partnerships 43,383 68,486 Minority interest in consolidated partnerships (69,105) (80,096) Other income, net 158,788 34,500 Interest expense (332,588) (352,490) Gain on exchange or disposal of assets and other 218,830 - Income from continuing operations before income taxes 2,110,364 1,592,028 Income taxes 801,836 565,331 Income from continuing operations 1,308,528 1,026,697 Income from discontinued operations (net of income taxes) 30,292 19,538 Income before cumulative effect of accounting change 1,338,820 1,046,235 Cumulative effect of accounting change (net of income taxes) (7,441) - Net income 1,331,379 1,046,235 Preferred dividends 93 103 Net income applicable to common shares $1,331,286 $1,046,132 Basic earnings per share: Income from continuing operations $3.84 $3.34 Income from discontinued operations .09 .06 Cumulative effect of accounting change (.02) - Net income $3.91 $3.40 Diluted earnings per share: Income from continuing operations $3.80 $3.33 Income from discontinued operations .09 .06 Cumulative effect of accounting change (.02) - Net income $3.87 $3.39 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 December 31, 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 $2,263,605 $ - $2,263,605 Product sales 318,146 - 318,146 Total revenues and sales 2,581,751 - 2,581,751 Costs and expenses: Cost of services 736,857 (9,506) (A) 727,351 Cost of products sold 381,764 - 381,764 Selling, general, administrative and other 496,549 - 496,549 Depreciation and amortization 404,079 - 404,079 Restructuring and other charges 39,844 (39,844) (B)(C) - Total costs and expenses 2,059,093 (49,350) 2,009,743 Operating income 522,658 49,350 572,008 Equity earnings in unconsolidated partnerships 6,992 - 6,992 Minority interest in consolidated partnerships (11,267) - (11,267) Other income, net 2,752 - 2,752 Interest expense (86,134) - (86,134) Gain on exchange or disposal of assets and other - - - Income from continuing operations before income taxes 435,001 49,350 484,351 Income taxes 176,681 7,057 (K) 183,738 Income from continuing operations 258,320 42,293 300,613 Income from discontinued operations (net of income taxes) 4,270 (4,270)(M) - Income before cumulative effect of accounting change 262,590 38,023 300,613 Cumulative effect of accounting change (net of income taxes) (7,441) 7,441 (N) - Net income 255,149 45,464 300,613 Preferred dividends 21 - 21 Net income applicable to common shares $ 255,128 $ 45,464 $ 300,592 Basic earnings per share: Income from continuing operations $ .67 $.11 $.78 Income from discontinued operations .01 (.01) - Cumulative effect of accounting change (.02) .02 - Net income $ .66 $.12 $.78 Diluted earnings per share: Income from continuing operations $ .67 $.10 $.77 Income from discontinued operations .01 (.01) - Cumulative effect of accounting change (.02) .02 - Net income $ .66 $.11 $.77 See notes on pages 7 and 8 for a description of the line items marked (A) - (N). 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 December 31, 2005 (In thousands, except per share amounts) Segment Information Corporate ----------------------------------- Operations Communications and Support Intercompany Wireless Wireline Services Eliminations -------- -------- -------- ------------ Revenues and sales: Service revenues $1,643,195 $588,349 $ 82,323 $(50,262) Product sales 116,983 9,801 194,115 (2,753) Total revenues and sales 1,760,178 598,150 276,438 (53,015) Costs and expenses: Cost of services 543,352 165,116 58,077 (39,194) Cost of products sold 218,678 6,899 168,545 (12,358) Selling, general, administrative and other 411,139 63,637 16,874 4,899 Depreciation and amortization 286,787 106,955 8,553 1,784 Restructuring and other charges - - - - Total costs and expenses 1,459,956 342,607 252,049 (44,869) Operating income $ 300,222 $255,543 $ 24,389 $ (8,146) 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 December 31, 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 $1,897,402 $ - $1,897,402 Product sales 242,391 - 242,391 Total revenues and sales 2,139,793 - 2,139,793 Costs and expenses: Cost of services 604,818 - 604,818 Cost of products sold 299,603 - 299,603 Selling, general, administrative and other 402,489 - 402,489 Depreciation and amortization 332,520 - 332,520 Restructuring and other charges (873) 873 (I) - Total costs and expenses 1,638,557 873 1,639,430 Operating income 501,236 (873) 500,363 Equity earnings in unconsolidated partnerships 14,970 - 14,970 Minority interest in consolidated partnerships (19,227) - (19,227) Other income, net 11,360 - 11,360 Interest expense (87,512) - (87,512) Gain on exchange or disposal of assets and other - - - Income from continuing operations before income taxes 420,827 (873) 419,954 Income taxes 150,182 (286) (K) 149,896 Income from continuing operations 270,645 (587) 270,058 Income from discontinued operations (net of income taxes) - - - Income before cumulative effect of accounting change 270,645 (587) 270,058 Cumulative effect of accounting change (net of income taxes) - - - Net income 270,645 (587) 270,058 Preferred dividends 25 - 25 Net income applicable to common shares $ 270,620 $ (587) $ 270,033 Basic earnings per share: Income from continuing operations $.89 $ - $.89 Income from discontinued operations - - - Cumulative effect of accounting change - - - Net income $.89 $ - $.89 Diluted earnings per share: Income from continuing operations $.89 $ - $.89 Income from discontinued operations - - - Cumulative effect of accounting change - - - Net income $.89 $ - $.89 See notes on pages 7 and 8 for a description of the line items marked (A) - (N). 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 December 31, 2004 (In thousands, except per share amounts) Segment Information Corporate ----------------------------------- Operations Communications and Support Intercompany Wireless Wireline Services Eliminations -------- -------- -------- ------------ Revenues and sales: Service revenues $1,252,773 $597,315 $ 81,462 $(34,148) Product sales 73,999 10,460 167,027 (9,095) Total revenues and sales 1,326,772 607,775 248,489 (43,243) Costs and expenses: Cost of services 399,114 173,146 64,297 (31,739) Cost of products sold 154,747 8,576 146,997 (10,717) Selling, general, administrative and other 318,968 62,466 14,856 6,199 Depreciation and amortization 193,789 127,921 8,454 2,356 Restructuring and other charges - - - - Total costs and expenses 1,066,618 372,109 234,604 (33,901) Operating income $ 260,154 $235,666 $ 13,885 $ (9,342) ALLTEL CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 5 for the twelve months ended December 31, 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 $8,380,501 $ - $8,380,501 Product sales 1,106,458 - 1,106,458 Total revenues and sales 9,486,959 - 9,486,959 Costs and expenses: Cost of services 2,743,745 (37,557)(D)(E) 2,706,188 Cost of products sold 1,315,320 - 1,315,320 Selling, general, administrative and other 1,795,516 (1,898)(D) 1,793,618 Depreciation and amortization 1,482,605 - 1,482,605 Restructuring and other charges 58,717 (58,717)(C)(F) - Total costs and expenses 7,395,903 (98,172) 7,297,731 Operating income 2,091,056 98,172 2,189,228 Equity earnings in unconsolidated partnerships 43,383 - 43,383 Minority interest in consolidated partnerships (69,105) - (69,105) Other income, net 158,788 (116,036)(D)(G) 42,752 Interest expense (332,588) - (332,588) Gain on exchange or disposal of assets and other 218,830 (218,830)(H) - Income from continuing operations before income taxes 2,110,364 (236,694) 1,873,670 Income taxes 801,836 (99,269)(K) 702,567 Income from continuing operations 1,308,528 (137,425) 1,171,103 Income from discontinued operations (net of income taxes) 30,292 (30,292)(M) - Income before cumulative effect of accounting change 1,338,820 (167,717) 1,171,103 Cumulative effect of accounting change (net of income taxes) (7,441) 7,441 (N) - Net income 1,331,379 (160,276) 1,171,103 Preferred dividends 93 - 93 Net income applicable to common shares $1,331,286 $(160,276) $1,171,010 Basic earnings per share: Income from continuing operations $3.84 $(.40) $3.44 Income from discontinued operations .09 (.09) - Cumulative effect of accounting change (.02) .02 - Net income $3.91 $(.47) $3.44 Diluted earnings per share: Income from continuing operations $3.80 $(.39) $3.41 Income from discontinued operations .09 (.09) - Cumulative effect of accounting change (.02) .02 - Net income $3.87 $(.46) $3.41 See notes on pages 7 and 8 for a description of the line items marked (A) - (N). ALLTEL CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 5 for the twelve months ended December 31, 2005 (In thousands, except per share amounts) Segment Information Corporate ------------------------------------- Operations Communications and Support Intercompany Wireless Wireline Services Eliminations -------- -------- -------- ------------ Revenues and sales: Service revenues $5,895,143 $2,336,741 $ 322,665 $(174,048) Product sales 380,714 42,395 702,917 (19,568) Total revenues and sales 6,275,857 2,379,136 1,025,582 (193,616) Costs and expenses: Cost of services 1,917,754 705,506 236,160 (153,232) Cost of products sold 697,593 32,919 621,864 (37,056) Selling, general, administrative and other 1,445,165 256,259 65,494 26,700 Depreciation and amortization 960,698 480,729 33,866 7,312 Restructuring and other charges - - - - Total costs and expenses 5,021,210 1,475,413 957,384 (156,276) Operating income $1,254,647 $ 903,723 $ 68,198 $ (37,340) ALLTEL CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 for the twelve months ended December 31, 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 $7,374,279 $ - $7,374,279 Product sales 871,862 - 871,862 Total revenues and sales 8,246,141 - 8,246,141 Costs and expenses: Cost of services 2,374,220 - 2,374,220 Cost of products sold 1,075,545 - 1,075,545 Selling, general, administrative and other 1,524,165 - 1,524,165 Depreciation and amortization 1,299,691 - 1,299,691 Restructuring and other charges 50,892 (50,892) (I)(J) - Total costs and expenses 6,324,513 (50,892) 6,273,621 Operating income 1,921,628 50,892 1,972,520 Equity earnings in unconsolidated partnerships 68,486 - 68,486 Minority interest in consolidated partnerships (80,096) - (80,096) Other income, net 34,500 - 34,500 Interest expense (352,490) - (352,490) Gain on exchange or disposal of assets and other - - - Income from continuing operations before income taxes 1,592,028 50,892 1,642,920 Income taxes 565,331 39,479 (K)(L) 604,810 Income from continuing operations 1,026,697 11,413 1,038,110 Income from discontinued operations (net of income taxes) 19,538 (19,538) (L) - Income before cumulative effect of accounting change 1,046,235 (8,125) 1,038,110 Cumulative effect of accounting change (net of income taxes) - - - Net income 1,046,235 (8,125) 1,038,110 Preferred dividends 103 - 103 Net income applicable to common shares $1,046,132 $ (8,125) $1,038,007 Basic earnings per share: Income from continuing operations $3.34 $ .04 $3.38 Income from discontinued operations .06 (.06) - Cumulative effect of accounting change - - - Net income $3.40 $(.02) $3.38 Diluted earnings per share: Income from continuing operations $3.33 $ .04 $3.37 Income from discontinued operations .06 (.06) - Cumulative effect of accounting change - - - Net income $3.39 $(.02) $3.37 See notes on pages 7 and 8 for a description of the line items marked (A) - (N). ALLTEL CORPORATION RECONCILIATION OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 for the twelve months ended December 31, 2004 (In thousands, except per share amounts) Segment Information Corporate ------------------------------------- Operations Communications and Support Intercompany Wireless Wireline Services Eliminations -------- -------- -------- ------------ Revenues and sales: Service revenues $4,791,235 $2,380,788 $346,662 $(144,406) Product sales 286,852 39,021 577,193 (31,204) Total revenues and sales 5,078,087 2,419,809 923,855 (175,610) Costs and expenses: Cost of services 1,543,576 704,335 257,845 (131,536) Cost of products sold 573,646 28,711 514,239 (41,051) Selling, general, administrative and other 1,201,789 244,327 54,729 23,320 Depreciation and amortization 738,837 516,445 34,325 10,084 Restructuring and other charges - - - - Total costs and expenses 4,057,848 1,493,818 861,138 (139,183) Operating income $1,020,239 $ 925,991 $ 62,717 $ (36,427) 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 January 20, 2006, 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 and conditional asset retirement obligations, 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's 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 conditional asset retirement obligations 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 $9.5 million of incremental costs related to Hurricane Katrina consisting of increased system maintenance costs to restore network facilities and additional losses from bad debts. (See Note D). (B) The Company incurred $2.1 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 costs. In addition, Alltel incurred $5.0 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. The Company also incurred $1.6 million of integration expenses related to its acquisition of Public Service Cellular Inc. ("PS Cellular") completed on February 28, 2005. The integration expenses related to the Cingular and PS Cellular acquisitions consisted of handset subsidies incurred to migrate the acquired customer base to CDMA handsets. The Company also recorded a $0.2 million reduction in the liabilities associated with the wireline restructuring activities initiated during the third quarter of 2005. (See Note F). (C) On December 9, 2005, Alltel announced that it would spin off its wireline telecommunications business to its stockholders and merge it with Valor Communications Group, Inc. In connection with the spin-off and merger, Alltel incurred $31.3 million of incremental costs principally consisting of investment banker, audit and legal fees. (D) Alltel incurred $19.7 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 by Alltel. (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 ("SFAS") No. 13, "Accounting for Leases" and Financial Accounting Standards Board ("FASB") 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. (F) The Company incurred $4.5 million of integration expenses related to its acquisition of Western Wireless. These expenses primarily consisted of system conversion costs and relocation expenses. In addition, Alltel incurred $16.9 million of integration expenses related to the exchange of certain wireless assets with Cingular and incurred $1.6 million of integration expenses related to its acquisition of PS Cellular. These integration expenses consisted of handset subsidies incurred to migrate the acquired customer base to CDMA handsets. The Company also incurred $4.4 million in restructuring charges related to a planned workforce reduction in its wireline operations. ALLTEL CORPORATION NOTES TO RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 8 (G) 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. (H) 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 $158.0 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. (I) The Company recorded a $0.9 million reduction in the liabilities associated with the restructuring efforts initiated in the first quarter of 2004 (see Note J), consisting of $0.7 million in employee relocated expenses and $0.2 million in severance and employee benefit costs. (J) 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. (K) Tax-related effect of the items discussed in Notes A - J above. (L) 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. 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 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 consolidated financial statements for the twelve months ended December 31, 2004. Discontinued operations for the twelve months ended December 31, 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. (M) 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 December 2005, Alltel completed an exchange of wireless properties with United States Cellular Corporation that included a substantial portion of the divestiture requirements related to the merger. During the third and fourth quarters of 2005, Alltel completed the sale of international operations in Georgia, Ghana and Ireland acquired from Western Wireless. Alltel also has pending definitive agreements to sell the international operations in Austria, Bolivia and Haiti and is actively pursuing the disposition of the remaining international operations 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. (N) Represents the cumulative effect of the change in accounting principle resulting from the Company's adoption of FASB Interpretation No. 47, "Accounting for Conditional Asset Retirement Obligations" ("FIN 47"). The Company evaluated the effects of FIN 47 on its operations and determined that, for certain buildings containing asbestos, Alltel is legally obligated to remediate the asbestos if the Company were to abandon, sell or otherwise dispose of the buildings. In addition, for its acquired Kentucky and Nebraska wireline operations not subject to SFAS No. 71, "Accounting for the Effects of Certain Types of Regulation", the Company is legally obligated to properly dispose of its chemically-treated telephone poles at the time they are removed from service. In accordance with federal and state regulations, depreciation expense for the Company's wireline operations that follow the accounting prescribed by SFAS No. 71 have historically included an additional provision for cost of removal, and accordingly, the adoption of FIN 47 had no impact to these operations. ALLTEL CORPORATION SUPPLEMENTAL OPERATING INFORMATION-Page 9 (Dollars in thousands, except per customer amounts) THREE MONTHS ENDED ------------------ Increase December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireless: Controlled POPs 75,907,644 62,313,192 13,594,452 22 Customers 10,662,324 8,626,487 2,035,837 24 Penetration rate 14.0% 13.8% .2% 1 Average customers 10,507,806 8,481,561 2,026,245 24 Gross customer additions: Internal 837,712 690,811 146,901 21 Acquired 90,356 92,345 (1,989) (2) Total 928,068 783,156 144,912 19 Net customer additions: Internal 147,258 139,415 7,843 6 Acquired 90,356 92,345 (1,989) (2) Total 237,614 231,760 5,854 3 Customer acquisition costs: Cost of products sold $104,735 $ 80,557 $24,178 30 Selling and marketing expenses 254,720 198,572 56,148 28 Less product sales 67,746 50,530 17,216 34 Total $291,709 $228,599 $63,110 28 Cost to acquire a new customer (A) $348 $331 $17 5 Cash costs: Cost of services $ 543,352 $399,114 $144,238 36 Cost of products sold 218,678 154,747 63,931 41 Selling, general, administrative and other 411,139 318,968 92,171 29 Less product sales 116,983 73,999 42,984 58 Total 1,056,186 798,830 257,356 32 Less customer acquisition costs 291,709 228,599 63,110 28 Total $ 764,477 $570,231 $194,246 34 Cash cost per unit per month, excluding customer acquisition costs (B) $24.25 $22.41 $1.84 8 Revenues: Service revenues $1,643,195 $1,252,773 $390,422 31 Less wholesale revenues 171,595 94,748 76,847 81 Retail revenues $1,471,600 $1,158,025 $313,575 27 Average revenue per customer per month (C) $52.13 $49.24 $2.89 6 Retail revenue per customer per month (D) $46.68 $45.51 $1.17 3 Retail minutes of use per customer per month (E) 626 534 92 17 Postpay churn 1.83% 1.68% .15% 9 Total churn 2.20% 2.17% .03% 1 Service revenue operating margin (F) 18.3% 20.8% (2.5%) (12) Capital expenditures (G) $271,440 $270,236 $1,204 - (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 December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireline: Customers 2,885,673 3,009,388 (123,715) (4) Average customers 2,901,310 3,024,635 (123,325) (4) Broadband customers 397,696 243,325 154,371 63 Net broadband additions 37,721 26,440 11,281 43 Average revenue per customer per month (H) $68.72 $66.98 $1.74 3 Capital expenditures (G) $119,342 $100,730 $18,612 18 Communications support services: Long-distance customers 1,750,762 1,770,852 (20,090) (1) Capital expenditures (G) $3,819 $5,738 $(1,919) (33) Consolidated: Equity free cash flow (I) $309,498 $225,693 $83,805 37 Capital expenditures (G) $395,194 $376,885 $18,309 5 Total assets $24,013,481 $16,603,736 $7,409,745 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) TWELVE MONTHS ENDED ------------------- Increase December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireless: Average customers 9,550,829 8,295,939 1,254,890 15 Gross customer additions: Internal 2,830,079 2,720,339 109,740 4 Acquired 1,693,162 92,345 1,600,817 1,734 Total 4,523,241 2,812,684 1,710,557 61 Net customer additions: Internal 342,675 510,717 (168,042) (33) Acquired 1,693,162 92,345 1,600,817 1,734 Total 2,035,837 603,062 1,432,775 238 Customer acquisition costs: Cost of products sold $320,769 $322,737 $ (1,968) (1) Selling and marketing expenses 870,536 743,889 126,647 17 Less product sales 230,262 209,874 20,388 10 Total $961,043 $856,752 $104,291 12 Cost to acquire a new customer (A) $340 $315 $25 8 Cash costs: Cost of services $1,917,754 $1,543,576 $374,178 24 Cost of products sold 697,593 573,646 123,947 22 Selling, general, administrative and other 1,445,165 1,201,789 243,376 20 Less product sales 380,714 286,852 93,862 33 Total 3,679,798 3,032,159 647,639 21 Less customer acquisition costs 961,043 856,752 104,291 12 Total $2,718,755 $2,175,407 $543,348 25 Cash cost per unit per month, excluding customer acquisition costs (B) $23.72 $21.85 $1.87 9 Revenues: Service revenues $5,895,143 $4,791,235 $1,103,908 23 Less wholesale revenues 545,109 372,446 172,663 46 Retail revenues $5,350,034 $4,418,789 $ 931,245 21 Average revenue per customer per month (C) $51.44 $48.13 $3.31 7 Retail revenue per customer per month (D) $46.68 $44.39 $2.29 5 Retail minutes of use per customer per month (E) 597 494 103 21 Postpay churn 1.77% 1.74% .03% 2 Total churn 2.17% 2.23% (.06%) (3) Service revenue operating margin (F) 21.3% 21.3% - - Capital expenditures (G) $978,970 $797,106 $181,864 23 (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) TWELVE MONTHS ENDED ------------------- Increase December 31, December 31, (Decrease) 2005 2004 Amount % ---- ---- ------ - Wireline: Average customers 2,950,022 3,061,529 (111,507) (4) Net broadband additions 154,371 90,297 64,074 71 Average revenue per customer per month (H) $67.21 $65.87 $1.34 2 Capital expenditures (G) $355,938 $336,498 $19,440 6 Communications support services: Capital expenditures (G) $13,646 $15,150 $(1,504) (10) Consolidated: Equity free cash flow (I) $1,304,052 $1,180,072 $123,980 11 Capital expenditures (G) $1,349,656 $1,157,729 $191,927 17 (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 December 31, December 31, 2005 2004 ---- ---- CURRENT ASSETS: Cash and short-term investments $ 989,153 $ 484,934 Accounts receivable (less allowance for doubtful accounts of $84,750 and $53,606, respectively) 1,077,207 912,665 Inventories 232,634 156,785 Prepaid expenses and other 115,179 62,383 Assets held for sale 2,018,701 - Total current assets 4,432,874 1,616,767 Investments 358,412 804,861 Goodwill 8,610,170 4,875,718 Other intangibles 2,179,107 1,306,140 PROPERTY, PLANT AND EQUIPMENT: Land 298,593 278,084 Buildings and improvements 1,211,359 1,134,824 Wireline 6,942,039 6,735,748 Wireless 6,852,565 5,763,965 Information processing 1,187,192 1,048,446 Other 530,333 489,936 Under construction 475,453 385,283 Total property, plant and equipment 17,497,534 15,836,286 Less accumulated depreciation 9,433,951 8,288,195 Net property, plant and equipment 8,063,583 7,548,091 Other assets 369,335 452,159 TOTAL ASSETS $24,013,481 $16,603,736 ALLTEL CORPORATION CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 11 (In thousands) LIABILITIES AND SHAREHOLDERS' EQUITY December 31, December 31, 2005 2004 ---- ---- CURRENT LIABILITIES: Current maturities of long-term debt $ 205,117 $ 224,958 Accounts payable 649,293 448,161 Advance payments and customer deposits 240,499 219,338 Accrued taxes 118,895 158,197 Accrued dividends 147,841 105,922 Accrued interest 102,512 120,259 Current deferred income taxes 501,672 - Other current liabilities 255,425 183,523 Liabilities related to assets held for sale 385,528 - Total current liabilities 2,606,782 1,460,358 Long-term debt 5,782,890 5,352,422 Deferred income taxes 1,659,410 1,715,119 Other liabilities 948,962 947,172 SHAREHOLDERS' EQUITY: Preferred stock 278 307 Common stock 383,613 302,268 Additional paid-in capital 5,339,321 197,902 Unrealized holding gain on investments 22,297 153,926 Foreign currency translation adjustment (2,841) 482 Retained earnings 7,272,769 6,473,780 Total shareholders' equity 13,015,437 7,128,665 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $24,013,481 $16,603,736 ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 12 (In thousands) THREE MONTHS ENDED ------------------ December 31, December 31, 2005 2004 ---- ---- Net Cash Provided from Operations: Net income $ 255,149 $ 270,645 Adjustments to reconcile net income to net cash provided from operations: Income from discontinued operations (4,270) - Cumulative effect of accounting change 7,441 - Depreciation and amortization 404,079 332,520 Provision for doubtful accounts 63,068 47,601 Non-cash portion of gain on exchange or disposal of assets and other - - Non-cash portion of restructuring and other charges 4,982 - Change in deferred income taxes (211,302) 74,794 Reversal of income tax contingency reserves - - Other, net (4,097) (5,861) Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: Accounts receivable (21,777) (41,856) Inventories (61,193) (44,750) Accounts payable 149,074 65,854 Other current liabilities 189,679 6,490 Other, net 59,312 (82,646) Net cash provided from operations 830,145 622,791 Cash Flows from Investing Activities: Additions to property, plant and equipment (386,895) (368,122) Additions to capitalized software development costs (8,299) (8,763) Additions to investments - (423) Purchases of property, net of cash acquired (1,535) (185,136) Proceeds from the sale of assets 48,243 - Proceeds from the sale of investments - - Proceeds from the return on investments 5,982 21,497 Other, net 5,795 (313) Net cash used in investing activities (336,709) (541,260) Cash Flows from Financing Activities: Dividends on preferred and common stock (145,303) (122,223) Reductions in long-term debt (21,139) (22,246) Distributions to minority investors (20,834) (17,240) Long-term debt issued 72,300 - Repurchases of common stock - (88,419) Common stock issued 20,714 5,146 Net cash used in financing activities (94,262) (244,982) Net cash provided from discontinued operations 544,612 - Effect of exchange rate changes on cash and short-term investments (24,061) - Increase (decrease) in cash and short-term investments 919,725 (163,451) Cash and Short-term Investments: Beginning of the period 69,428 648,385 End of the period $ 989,153 $ 484,934 ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 12 (In thousands) TWELVE MONTHS ENDED ------------------- December 31, December 31, 2005 2004 ---- ---- Net Cash Provided from Operations: Net income $ 1,331,379 $ 1,046,235 Adjustments to reconcile net income to net cash provided from operations: Income from discontinued operations (30,292) (19,538) Cumulative effect of accounting change 7,441 - Depreciation and amortization 1,482,605 1,299,691 Provision for doubtful accounts 215,087 184,871 Non-cash portion of gain on exchange or disposal of assets and other (232,742) - Non-cash portion of restructuring and other charges 14,982 25,569 Change in deferred income taxes (193,235) 263,390 Reversal of income tax contingency reserves - (19,656) Other, net 7,960 (14,336) Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: Accounts receivable (227,185) (206,132) Inventories (44,968) (33,842) Accounts payable 145,594 (27,174) Other current liabilities 195,889 70,602 Other, net 59,740 (102,831) Net cash provided from operations 2,732,255 2,466,849 Cash Flows from Investing Activities: Additions to property, plant and equipment (1,302,440) (1,125,402) Additions to capitalized software development costs (47,216) (32,327) Additions to investments (890) (3,228) Purchases of property, net of cash acquired (1,137,584) (185,136) Proceeds from the sale of assets 84,405 - Proceeds from the sale of investments 353,881 - Proceeds from the return on investments 36,872 88,612 Other, net 13,746 (907) Net cash used in investing activities (1,999,226) (1,258,388) Cash Flows from Financing Activities: Dividends on preferred and common stock (490,472) (467,570) Reductions in long-term debt (2,677,779) (277,240) Distributions to minority investors (65,642) (66,917) Long-term debt issued 1,000,000 - Repurchases of common stock - (595,350) Common stock issued 1,463,504 25,873 Net cash used in financing activities (770,389) (1,381,204) Net cash provided from discontinued operations 580,801 - Effect of exchange rate changes on cash and short-term investments (39,222) (87) Increase (decrease) in cash and short-term investments 504,219 (172,830) Cash and Short-term Investments: Beginning of the period 484,934 657,764 End of the period $ 989,153 $ 484,934 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 ------------------ December 31, December 31, 2005 2004 ---- ---- Net cash provided from operations $ 830,145 $ 622,791 Adjustments to reconcile to net income under GAAP: Income from discontinued operations 4,270 - Cumulative effect of accounting change (7,441) - Depreciation and amortization expense (404,079) (332,520) Provision for doubtful accounts (63,068) (47,601) Non-cash portion of gain on exchange or disposal of assets and other - - Non-cash portion of restructuring and other charges (4,982) - Change in deferred income taxes 211,302 (74,794) Reversal of income tax contingency reserves - - Other non-cash changes, net 4,097 5,861 Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions (315,095) 96,908 Net income under GAAP 255,149 270,645 Adjustments to reconcile to net income from current businesses: Restructuring and other charges, net of tax 36,484 (587) Gain on exchange or disposal of assets and other, net of tax - - 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 5,809 - Reversal of income tax contingency reserves - - Cumulative effect of accounting change 7,441 - Income from discontinued operations (4,270) - Net income from current businesses 300,613 270,058 Adjustments to reconcile to equity free cash flow from current businesses: Depreciation and amortization expense 404,079 332,520 Capital expenditures (395,194) (376,885) Equity free cash flow from current businesses $ 309,498 $ 225,693 ALLTEL CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 13 (In thousands) TWELVE MONTHS ENDED ------------------- December 31, December 31, 2005 2004 ---- ---- Net cash provided from operations $ 2,732,255 $ 2,466,849 Adjustments to reconcile to net income under GAAP: Income from discontinued operations 30,292 19,538 Cumulative effect of accounting change (7,441) - Depreciation and amortization expense (1,482,605) (1,299,691) Provision for doubtful accounts (215,087) (184,871) Non-cash portion of gain on exchange or disposal of assets and other 232,742 - Non-cash portion of restructuring and other charges (14,982) (25,569) Change in deferred income taxes 193,235 (263,390) Reversal of income tax contingency reserves - 19,656 Other non-cash changes, net (7,960) 14,336 Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions (129,070) 299,377 Net income under GAAP 1,331,379 1,046,235 Adjustments to reconcile to net income from current businesses: Restructuring and other charges, net of tax 48,053 31,069 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 8,962 - Reversal of income tax contingency reserves - (19,656) Cumulative effect of accounting change 7,441 - Income from discontinued operations (30,292) (19,538) Net income from current businesses 1,171,103 1,038,110 Adjustments to reconcile to equity free cash flow from current businesses: Depreciation and amortization expense 1,482,605 1,299,691 Capital expenditures (1,349,656) (1,157,729) Equity free cash flow from current businesses $ 1,304,052 $ 1,180,072 *T