Alltel (NYSE: AT) produced double-digit revenue growth and strong
customer additions in the first quarter. Alltel reported fully
diluted earnings per share under Generally Accepted Accounting
Principles (GAAP) of 64 cents and fully diluted earnings per share
of 63 cents from current businesses, a 47 percent increase from a
year ago. For the second quarter in a row, Alltel set a record for
net customer additions, which were up 44 percent year-over-year to
237,000. �This was a record-setting quarter for Alltel in both our
financial and operational results. We are continuing to win new
customers in the market, as demonstrated by new records in wireless
revenues, operating income and customer growth,� said Alltel
President and CEO Scott Ford. �At the same time, our company is
delivering value to shareholders through our quarterly dividend and
the current share repurchase program. In the first quarter we
acquired an additional 15.3 million shares for $939 million,
bringing our total share repurchases to 44 million shares at an
average price of $58. Since the inception of the program, Alltel
has returned $2.7 billion to shareholders through dividends and the
repurchase program.� Among the highlights for the first quarter:
Revenues were $2 billion, a 13 percent increase from a year ago.
Net income under GAAP was $230 million. Net income from current
businesses was $225 million, a 34 percent increase from a year ago.
Alltel added 867,000 customers, up 8 percent over the same period
last year. Post-pay net additions were 109,000, a 102 percent
increase, and pre-pay net additions were 128,000, an increase of 15
percent. Post-pay churn was 1.33 percent and total churn was 1.77
percent. Both are record lows for Alltel and year-over-year
improvements for the fifth consecutive quarter. Average revenue per
wireless customer (ARPU) was $52.49, a 2 percent increase from last
year. Data revenue per customer was $4.70, up 64 percent from last
year and 14 percent sequentially. Equity free cash flow from
current businesses was $359 million, a 36 percent increase. Net
cash provided from operations was $561 million. Alltel operates
America�s largest wireless network, which delivers voice and
advanced data services nationwide to 12 million customers.
Headquartered in Little Rock, Ark., Alltel is a Forbes 500 company
with annual revenues of nearly $8 billion. 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 the integration of acquired businesses; 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 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 � ALLTEL CORPORATION CONSOLIDATED
HIGHLIGHTS AND OTHER FINANCIAL INFORMATION (In thousands, except
per share amounts) � � THREE MONTHS ENDED Increase March 31, March
31, (Decrease) 2007� 2006� Amount % UNDER GAAP: Service revenues $
1,880,120� $ 1,649,148� $ 230,972� 14� Total revenues and sales $
2,078,548� $ 1,843,233� $ 235,315� 13� Operating income $ 354,291�
$ 291,954� $ 62,337� 21� Service revenue operating margin (A) 18.8%
17.7% 1.1% 6� Operating margin (B) 17.0% 15.8% 1.2% 8� Income from
continuing operations $ 230,283� $ 134,184� $ 96,099� 72� Net
income $ 230,138� $ 297,407� $ (67,269) (23) Earnings per share:
Basic $.64� $.77� $(.13) (17) Diluted $.64� $.77� $(.13) (17) �
Weighted average common shares: Basic 357,180� 386,782� (29,602)
(8) Diluted 359,815� 389,676� (29,861) (8) � Capital expenditures
(C) $ 169,648� $ 158,387� $ 11,261� 7� Total assets $ 17,575,613� $
24,046,118� $ (6,470,505) (27) � FROM CURRENT BUSINESSES (NON-GAAP)
(D): Operating income $ 406,518� $ 348,236� $ 58,282� 17� Service
revenue operating margin (A) 21.6% 21.1% .5% 2� Operating margin
(B) 19.6% 18.9% .7% 4� Net income $ 225,437� $ 168,573� $ 56,864�
34� Earnings per share: Basic $.63� $.44� $.19� 43� Diluted $.63�
$.43� $.20� 47� Equity free cash flow (E) $ 359,417� $ 264,006� $
95,411� 36� � � (A) Service revenue operating margin is calculated
by dividing operating income by service revenues. (B) Operating
margin is calculated by dividing operating income by total revenues
and sales. (C) Includes capitalized software development costs. (D)
Current businesses excludes the effects of discontinued operations,
amortization expense related to acquired, finite-lived intangible
assets, gain on disposal of assets and integration expenses and
other charges. (E) Equity free cash flow is calculated as the sum
of net income from current businesses plus depreciation expense
less capital expenditures, which includes capitalized software
development costs as indicated in Note C. � Operating results from
current businesses have been reconciled to operating results under
GAAP on page 6 of this release. � ALLTEL CORPORATION CONSOLIDATED
STATEMENTS OF INCOME UNDER GAAP-Page 2 (In thousands, except per
share amounts) � THREE MONTHS ENDED March 31, March 31, 2007� 2006�
Revenues and sales: Service revenues $ 1,880,120� $ 1,649,148�
Product sales 198,428� 194,085� Total revenues and sales 2,078,548�
1,843,233� Costs and expenses: Cost of services 610,995� 542,784�
Cost of products sold 287,509� 272,697� Selling, general,
administrative and other 469,898� 425,696� Depreciation and
amortization 349,505� 299,312� Integration expenses and other
charges 6,350� 10,790� Total costs and expenses 1,724,257�
1,551,279� � Operating income 354,291� 291,954� � Equity earnings
in unconsolidated partnerships 14,979� 12,932� Minority interest in
consolidated partnerships (9,694) (13,895) Other income, net 7,672�
10,791� Interest expense (46,695) (84,716) Gain on disposal of
assets 56,548� -� � Income from continuing operations before income
taxes 377,101� 217,066� Income taxes 146,818� 82,882� � Income from
continuing operations 230,283� 134,184� Income (loss) from
discontinued operations (145) 163,223� � Net income 230,138�
297,407� Preferred dividends 20� 21� Net income applicable to
common shares $ 230,118� $ 297,386� � Basic earnings per share:
Income from continuing operations $.64� $.35� Income (loss) from
discontinued operations -� .42� Net income $.64� $.77� � Diluted
earnings per share: Income from continuing operations $.64� $.35�
Income (loss) from discontinued operations -� .42� Net income $.64�
$.77� � � ALLTEL CORPORATION CONSOLIDATED BALANCE SHEETS UNDER
GAAP-Page 3 (In thousands) � � ASSETS � March 31, December 31,
2007� 2006� � CURRENT ASSETS: Cash and short-term investments $
576,829� $ 934,228� Accounts receivable (less allowance for
doubtful accounts of $43,101 and $54,865, respectively) 765,223�
807,307� Inventories 214,362� 218,629� Prepaid expenses and other
82,373� 67,665� Assets related to discontinued operations 3,976�
4,321� � Total current assets 1,642,763� 2,032,150� � Investments
184,540� 368,871� Goodwill 8,418,777� 8,447,013� Other intangibles
2,083,806� 2,129,346� � � PROPERTY, PLANT AND EQUIPMENT: Land
322,142� 314,902� Buildings and improvements 973,330� 955,061�
Operating plant and equipment 8,144,201� 7,933,840� Information
processing 1,081,295� 1,048,136� Furniture and fixtures 177,268�
173,835� Under construction 360,060� 495,968� � Total property,
plant and equipment 11,058,296� 10,921,742� Less accumulated
depreciation 5,971,119� 5,690,360� � Net property, plant and
equipment 5,087,177� 5,231,382� � Other assets 114,011� 89,455�
Assets related to discontinued operations 44,539� 45,497� � � TOTAL
ASSETS $ 17,575,613� $ 18,343,714� � � ALLTEL CORPORATION
CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 3 (In thousands) � �
LIABILITIES AND SHAREHOLDERS' EQUITY � March 31, December 31, 2007�
2006� � CURRENT LIABILITIES: Current maturities of long-term debt $
75,263� $ 36,285� Accounts payable 487,872� 576,126� Advance
payments and customer deposits 204,908� 186,193� Accrued taxes
204,246� 114,109� Accrued dividends 44,644� 46,039� Accrued
interest 49,057� 79,281� Other current liabilities 153,226�
156,471� Liabilities related to discontinued operations 374� 2,761�
� Total current liabilities 1,219,590� 1,197,265� � � Long-term
debt 2,661,310� 2,697,412� Deferred income taxes 1,059,562�
1,109,479� Other liabilities 698,733� 677,609� � Total liabilities
5,639,195� 5,681,765� � � � SHAREHOLDERS' EQUITY: Preferred stock
253� 258� Common stock 350,411� 364,572� Additional paid-in capital
3,433,180� 4,296,786� Accumulated other comprehensive income (loss)
(27,042) 9,525� Retained earnings 8,179,616� 7,990,808� � Total
shareholders' equity 11,936,418� 12,661,949� � � TOTAL LIABILITIES
AND SHAREHOLDERS' EQUITY $ 17,575,613� $ 18,343,714� � � � ALLTEL
CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 4
(In thousands) � THREE MONTHS ENDED March 31, March 31, 2007� 2006�
Net Cash Provided from Operations: Net income $ 230,138� $ 297,407�
Adjustments to reconcile net income to net cash provided from
operations: Loss (income) from discontinued operations 145�
(163,223) Depreciation and amortization expense 349,505� 299,312�
Provision for doubtful accounts 37,261� 48,700� Non-cash portion of
gain on disposal of assets (56,548) -� Change in deferred income
taxes 12,155� 40,487� Other, net (6,722) (70) Changes in operating
assets and liabilities, net of the effects of acquisitions and
dispositions: Accounts receivable 3,559� (8,693) Inventories 4,267�
36,664� Accounts payable (89,778) (100,635) Other current
liabilities 99,001� (46,801) Other, net (21,822) (18,311) Net cash
provided from operations 561,161� 384,837� � Cash Flows from
Investing Activities: Additions to property, plant and equipment
(161,855) (150,673) Additions to capitalized software development
costs (7,793) (7,714) Purchases of property, net of cash acquired
(2,500) (458,931) Proceeds from the sale of investments 188,711� -�
Proceeds from the return on investments 10,931� 8,914� Other, net
(356) 7,319� Net cash provided from (used in) investing activities
27,138� (601,085) � Cash Flows from Financing Activities: Dividends
on common and preferred stock (45,961) (147,737) Repayments of
long-term debt (664) (689) Distributions to minority investors
(7,772) (11,810) Repurchases of common stock (938,784) -� Excess
tax benefits from stock option exercises 3,830� 3,381� Cash
payments to effect conversion of convertible notes -� (59,848)
Common stock issued 42,448� 54,896� Net cash used in financing
activities (946,903) (161,807) � Cash Flows from Discontinued
Operations: Cash provided from operating activities 1,929� 434,471�
Cash used in investing activities (724) (65,813) Cash used in
financing activities -� (91,757) Net cash provided from
discontinued operations 1,205� 276,901� � Effect of exchange rate
changes on cash and short-term investments -� 585� � Decrease in
cash and short-term investments (357,399) (100,569) � Cash and
Short-term Investments: Beginning of the period 934,228� 982,407�
End of the period $ 576,829� $ 881,838� � ALLTEL CORPORATION
SUPPLEMENTAL OPERATING INFORMATION-Page 5 (Dollars in thousands,
except per customer amounts) � THREE MONTHS ENDED Increase March
31, March 31, (Decrease) 2007� 2006� Amount % � Controlled POPs
79,575,793� 77,292,038� 2,283,755� 3� Customers 12,060,572�
10,827,065� 1,233,507� 11� Penetration rate 15.2% 14.0% 1.2% 9�
Average customers 11,940,660� 10,731,389� 1,209,271� 11� Gross
customer additions: Internal 867,473� 805,454� 62,019� 8� Acquired
-� -� -� -� Total 867,473� 805,454� 62,019� 8� Net customer
additions: Internal 236,634� 164,741� 71,893� 44� Acquired -� -� -�
-� Total 236,634� 164,741� 71,893� 44� Cash costs: Cost of services
$ 610,995� $ 542,784� $ 68,211� 13� Cost of products sold 287,509�
272,697� 14,812� 5� Selling, general, administrative and other
469,898� 425,696� 44,202� 10� Less product sales 198,428� 194,085�
4,343� 2� Total $ 1,169,974� $ 1,047,092� $ 122,882� 12� Cash costs
per unit per month (A) $32.66� $32.52� $.14� -� Revenues: Service
revenues $ 1,880,120� $ 1,649,148� $ 230,972� 14� Less wholesale
roaming revenues 154,187� 151,003� 3,184� 2� Less wholesale
transport revenues 46,434� 10,350� 36,084� 349� Retail revenues $
1,679,499� $ 1,487,795� $ 191,704� 13� Average revenue per customer
per month (B) $52.49� $51.23� $1.26� 2� Retail revenue per customer
per month (C) $46.88� $46.21� $.67� 1� Retail minutes of use per
customer per month (D) 651� 610� 41� 7� Postpay churn 1.33% 1.66%
(.33%) (20) Total churn 1.77% 2.00% (.23%) (12) � � (A) Cash costs
per unit per month is calculated by dividing the sum of the
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, by the number of average
customers for the period. (B) Average revenue per customer per
month is calculated by dividing service revenues by average
customers for the period. (C) Retail revenue per customer per month
is calculated by dividing retail revenues (service revenues less
wholesale revenues) by average customers for the period. (D) 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. � ALLTEL
CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 (In
thousands) � THREE MONTHS ENDED MARCH 31, 2007 � � Income
Depreciation Before and Operating Income Income Amortization Income
Taxes Taxes Under GAAP $ 349,505� $ 354,291� $ 377,101� $ 146,818�
Items excluded from measuring results from current businesses:
Amortization expense related to acquired, finite-lived intangible
assets (A) (45,877) 45,877� 45,877� 17,846� Integration expenses
and other charges (B) -� 6,350� 6,350� 2,471� Gain on disposal of
assets (C) -� -� (56,548) (19,792) Loss from discontinued
operations (E) -� -� -� -� Net increase (decrease) (45,877) 52,227�
(4,321) 525� From current businesses $ 303,628� $ 406,518� $
372,780� $ 147,343� � � Income From Basic Diluted Continuing Net
Earnings Earnings Operations Income Per Share Per Share Under GAAP
$ 230,283� $ 230,138� $.64� $.64� Items excluded from measuring
results from current businesses: Amortization expense related to
acquired, finite-lived intangible assets (A) 28,031� 28,031� .08�
.08� Integration expenses and other charges (B) 3,879� 3,879� .01�
.01� Gain on disposal of assets (C) (36,756) (36,756) (.10) (.10)
Loss from discontinued operations (E) -� 145� -� -� Net increase
(decrease) (4,846) (4,701) (.01) (.01) From current businesses $
225,437� $ 225,437� $.63� $.63� � � � � ALLTEL CORPORATION
RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 (In thousands)
� THREE MONTHS ENDED MARCH 31, 2006 � � Income Depreciation Before
and Operating Income Income Amortization Income Taxes Taxes Under
GAAP $ 299,312� $ 291,954� $ 217,066� $ 82,882� Items excluded from
measuring results from current businesses: Amortization expense
related to acquired, finite-lived intangible assets (A) (45,492)
45,492� 45,492� 17,696� Integration expenses and other charges (D)
-� 10,790� 10,790� 4,197� Income from discontinued operations (E)
-� -� -� -� Net increase (decrease) (45,492) 56,282� 56,282�
21,893� From current businesses $ 253,820� $ 348,236� $ 273,348� $
104,775� � � � Income From Basic Diluted Continuing Net Earnings
Earnings Operations Income Per Share Per Share Under GAAP $
134,184� $ 297,407� $.77� $.77� Items excluded from measuring
results from current businesses: Amortization expense related to
acquired, finite-lived intangible assets (A) 27,796� 27,796� .07�
.07� Integration expenses and other charges (D) 6,593� 6,593� .02�
.01� Income from discontinued operations (E) -� (163,223) (.42)
(.42) Net increase (decrease) 34,389� (128,834) (.33) (.34) From
current businesses $ 168,573� $ 168,573� $.44� $.43� � ALLTEL
CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 7 (In
thousands) � THREE MONTHS ENDED March 31, March 31, 2007� 2006� �
Net cash provided from operations $ 561,161� $ 384,837� Adjustments
to reconcile to net income under GAAP: Income (loss) from
discontinued operations (145) 163,223� Depreciation and
amortization expense (349,505) (299,312) Provision for doubtful
accounts (37,261) (48,700) Non-cash portion of gain on disposal of
assets 56,548� -� Change in deferred income taxes (12,155) (40,487)
Other non-cash changes, net 6,722� 70� Changes in operating assets
and liabilities, net of the effects of acquisitions and
dispositions 4,773� 137,776� Net income under GAAP 230,138�
297,407� Adjustments to reconcile to net income from current
businesses, net of tax (see specific items listed on page 6)
(4,701) (128,834) Net income from current businesses 225,437�
168,573� Adjustments to reconcile to equity free cash flow from
current businesses: Depreciation expense from current businesses
303,628� 253,820� Capital expenditures (169,648) (158,387) Equity
free cash flow from current businesses $ 359,417� $ 264,006� �
ALLTEL CORPORATION NOTES TO RECONCILIATIONS OF RESULTS OF
OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT
BUSINESSES (NON-GAAP)-Page 8 � As disclosed in the ALLTEL
Corporation ("Alltel" or the "Company") Form 8-K filed on April 27,
2007, Alltel has presented in this earnings release results of
operations from current businesses which exclude the effects of
discontinued operations, amortization expense related to acquired,
finite-lived intangible assets, gain on disposal of assets and
integration expenses 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 wireless
communications 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, integration expenses and other business consolidation
costs arising from past acquisition and integration 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 operations.
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. � (A) Eliminates the effects of
amortization expense related to acquired, finite-lived intangible
assets. � (B) The Company incurred $2.6 million of integration
expenses related to its acquisitions of Midwest Wireless Holdings
("Midwest Wireless") and wireless properties in Illinois, Texas and
Virginia completed during 2006. These expenses primarily consisted
of branding, signage and computer system conversion costs. Alltel
also recorded a pretax charge of $3.7 million associated with the
closing of two call centers consisting of severance and employee
benefit costs related to a planned workforce reduction. � (C)
Alltel completed the sale of marketable equity securities that had
been acquired in connection with its August 1, 2005 merger with
Western Wireless Corporation ("Western Wireless"). In connection
with the sale of these securities, Alltel recorded a pretax gain of
$56.5 million. � (D) The Company incurred $10.8 million of
integration expenses related to its acquisition of Western
Wireless. These expenses consisted of $8.3 million of rebranding
costs and $2.5 million of system conversion costs and other
integration costs. � (E) Eliminates the effects of discontinued
operations. Loss from discontinued operations in the first quarter
of 2007 included an impairment charge of $1.7 million to reflect
the fair value less cost to sell of the four rural markets in
Minnesota required to be divested, as further discussed below. � As
a condition of receiving approval from the Department of Justice
("DOJ") and the Federal Communications Commission ("FCC") for its
acquisition of Midwest Wireless, on September 7, 2006, Alltel
agreed to divest certain wireless operations in four rural markets
in Minnesota. Accordingly, the four markets to be divested in
Minnesota have been classified as discontinued operations in the
accompanying unaudited consolidated financial statements. On April
3, 2007, Alltel completed the sale of these properties. � On July
17, 2006, Alltel completed the spin-off of its wireline
telecommunications business to its stockholders and the merger of
that wireline business with Valor Communications Group, Inc.
("Valor"). The spin-off included the majority of Alltel's
communications support services, including directory publishing,
information technology outsourcing services, retail long-distance
and the wireline sales portion of communications products. The new
wireline company formed in the merger of Alltel's wireline
operations and Valor is named Windstream Corporation. As a result,
Alltel's historical results of operations have been adjusted to
reflect the wireline business as discontinued operations in the
accompanying unaudited consolidated financial statements. � In
addition, as a condition of receiving approval for the Western
Wireless acquisition from the DOJ and the FCC, 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. In the first
quarter of 2006, Alltel completed the required divestitures with
the sale of the remaining property in Arkansas. During 2005, Alltel
completed the sales of international operations in Georgia, Ghana
and Ireland acquired from Western Wireless. During the second
quarter of 2006, Alltel completed the sales of the remaining
international operations acquired from Western Wireless in Austria,
Bolivia, Cote d'Ivoire, Haiti, and Slovenia. 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 in the accompanying
unaudited consolidated financial statements.
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