EX-99.A 2 alltelex99a012006.htm PRESS RELEASE DATED JANUARY 20, 2006 OF ALLTEL CORPORATION Unassociated Document
Exhibit 99(a)
 
For additional information contact: Andrew Moreau 501-905-7962
  Vice President - Corporate Communications
  andrew.moreau@alltel.com
   
  Rob Clancy 501-905-8991
  Vice President - Investor Relations
  rob.clancy@alltel.com
   
   
Release Date: Jan. 20, 2006
 
 

 
Alltel achieves double-digit growth in revenues,
net income driven by wireless business
147,000 net adds, ARPU increases in fourth quarter cap a year of wireless expansion

LITTLE ROCK, Ark. - Alltel 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.
-more-
 
 
 
 
 
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.
-end-

Alltel, NYSE: AT
www.alltel.com
 
 
 

                                 
CONSOLIDATED HIGHLIGHTS
                                  
BUSINESS SEGMENTS AND OTHER CONSOLIDATED FINANCIAL INFORMATION
                          
(In thousands, except per share amounts)
                                  
                                       
       
THREE MONTHS ENDED
  
TWELVE MONTHS ENDED
  
               
Increase
              
Increase
      
       
December 31,
  
December 31,
  
(Decrease)
      
December 31,
  
December 31,
  
(Decrease)
      
       
2005
  
2004
  
Amount
  
 %
  
2005
  
2004
  
Amount
  
 %
  
UNDER GAAP:
  
 
              
 
              
Revenues and sales:                                    
Wireless
$
1,760,178
  
$
1,326,772
  
$
433,406
    
33
 
$
6,275,857
  
$
5,078,087
  
$
1,197,770
    
24
 
Wireline
  
598,150
   
607,775
   
(9,625
)
  
(2
)
  
2,379,136
   
2,419,809
   
(40,673
)
  
(2
)
Communications support services
  
276,438
   
248,489
   
27,949
   
11
   
1,025,582
   
923,855
   
101,727
   
11
 
Total business segments
  
2,634,766
   
2,183,036
   
451,730
   
21
   
9,680,575
   
8,421,751
   
1,258,824
   
15
 
Less intercompany eliminations
  
53,015
   
43,243
   
9,772
   
23
   
193,616
   
175,610
   
18,006
   
10
 
Total revenues and sales
$
2,581,751
  
$
2,139,793
  
$
441,958
    
21
 
$
9,486,959
  
$
8,246,141
  
$
1,240,818
    
15
 
                                                         
Segment income:
                                                      
Wireless
$
300,222
  
$
260,154
  
$
40,068
    
15
 
$
1,254,647
  
$
1,020,239
  
$
234,408
    
23
 
Wireline
  
255,543
   
235,666
   
19,877
   
8
   
903,723
   
925,991
   
(22,268
)
  
(2
)
Communications support services
  
24,389
   
13,885
   
10,504
   
76
   
68,198
   
62,717
   
5,481
   
9
 
Total segment income
  
580,154
   
509,705
   
70,449
   
14
   
2,226,568
   
2,008,947
   
217,621
   
11
 
Less: corporate expenses (A)
  
17,652
   
9,342
   
8,310
   
89
   
76,795
   
36,427
   
40,368
   
111
 
restructuring and other charges
          
39,844
   
(873
)
  
40,717
   
4,664
   
58,717
   
50,892
   
7,825
   
15
 
Total operating income
$
522,658
  
$
501,236
  
$
21,422
    
4
 
$
2,091,056
  
$
1,921,628
  
$
169,428
    
9
 
                                                   
Operating margin (B):
                                                     
Wireless
  
17.1
%
  
19.6
%
  
(2.5
%)
  
(13
)
  
20.0
%
  
20.1
%
  
(.1
%)
  
-
 
Wireline
  
42.7
%
  
38.8
%
  
3.9
%
  
10
   
38.0
%
  
38.3
%
  
(.3
%)
  
(1
)
Communications support services
  
8.8
%
  
5.6
%
  
3.2
%
  
57
   
6.6
%
  
6.8
%
  
(.2
%)
  
(3
)
Consolidated
  
20.2
%
  
23.4
%
  
(3.2
%)
  
(14
)
  
22.0
%
  
23.3
%
  
(1.3
%)
  
(6
)
                                                         
Net income
        
$
255,149
  
$
270,645
  
$
(15,496
)
  
(6
)
$
1,331,379
  
$
1,046,235
  
$
285,144
    
27
 
Earnings per share:
                                                        
Basic
        
 
$.66
  
 
$.89
  
 
$(.23
)
  
(26
)
 
$3.91
  
 
$3.40
  
 
$.51
    
15
 
Diluted
        
 
$.66
  
 
$.89
  
 
$(.23
)
  
(26
)
 
$3.87
  
 
$3.39
  
 
$.48
    
14
 
                                                         
Weighted average common shares:
                                                    
Basic
          
382,920
   
302,809
   
80,111
   
26
   
340,791
   
307,288
   
33,503
   
11
 
Diluted
          
389,343
   
304,095
   
85,248
   
28
   
344,129
   
308,339
   
35,790
   
12
 
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
 
$
2,189,228
  
$
1,972,520
  
$
216,708
    
11
 
Operating margin (B)
          
22.2
%
  
23.4
%
  
(1.2
%)
  
(5
)
  
23.1
%
  
23.9
%
  
(.8
%)
  
(3
)
Net income
        
$
300,613
  
$
270,058
  
$
30,555
    
11
 
$
1,171,103
  
$
1,038,110
  
$
132,993
    
13
 
Earnings per share:
                                                  
Basic
        
 
$.78
  
 
$.89
  
 
$(.11
)
  
(12
)
 
$3.44
  
 
$3.38
  
 
$.06
    
2
 
Diluted
        
 
$.77
  
 
$.89
  
 
$(.12
)
  
(13
)
 
$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.
 
 -more-
 
 
 
 
 
                 
CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP-Page 2
              
(In thousands, except per share amounts)
                  
                   
   
THREE MONTHS ENDED
  
TWELVE MONTHS ENDED
  
   
December 31,
  
December 31,
  
December 31,
  
December 31,
  
   
2005
  
2004
  
2005
  
2004
  
Revenues and sales:
                  
Service revenues
  
$
2,263,605
  
$
1,897,402
  
$
8,380,501
  
$
7,374,279
  
Product sales
    
318,146
   
242,391
   
1,106,458
   
871,862
 
Total revenues and sales
    
2,581,751
   
2,139,793
   
9,486,959
   
8,246,141
 
Costs and expenses:
                      
Cost of services
    
736,857
   
604,818
   
2,743,745
   
2,374,220
 
Cost of products sold
    
381,764
   
299,603
   
1,315,320
   
1,075,545
 
Selling, general, administrative and other
    
496,549
   
402,489
   
1,795,516
   
1,524,165
 
Depreciation and amortization
    
404,079
   
332,520
   
1,482,605
   
1,299,691
 
Restructuring and other charges
    
39,844
   
(873
)
  
58,717
   
50,892
 
Total costs and expenses
    
2,059,093
   
1,638,557
   
7,395,903
   
6,324,513
 
                           
Operating income
    
522,658
   
501,236
   
2,091,056
   
1,921,628
 
                           
Equity earnings in unconsolidated partnerships
    
6,992
   
14,970
   
43,383
   
68,486
 
Minority interest in consolidated partnerships
    
(11,267
)
  
(19,227
)
  
(69,105
)
  
(80,096
)
Other income, net
    
2,752
   
11,360
   
158,788
   
34,500
 
Interest expense
    
(86,134
)
  
(87,512
)
  
(332,588
)
  
(352,490
)
Gain on exchange or disposal of assets and other
    
-
   
-
   
218,830
   
-
 
                           
 
                          
Income from continuing operations before income taxes
    
435,001
   
420,827
   
2,110,364
   
1,592,028
 
Income taxes
    
176,681
   
150,182
   
801,836
   
565,331
 
                           
Income from continuing operations
    
258,320
   
270,645
   
1,308,528
   
1,026,697
 
                           
Income from discontinued operations (net of income taxes)
    
4,270
   
-
   
30,292
   
19,538
 
                           
Income before cumulative effect of accounting change
    
262,590
   
270,645
   
1,338,820
   
1,046,235
 
Cumulative effect of accounting change (net of income taxes)
    
(7,441
)
  
-
   
(7,441
)
  
-
 
                           
                           
Net income
    
255,149
   
270,645
   
1,331,379
   
1,046,235
 
Preferred dividends
    
21
   
25
   
93
   
103
 
Net income applicable to common shares
  
$
255,128
  
$
270,620
  
$
1,331,286
  
$
1,046,132
  
                         
Basic earnings per share:
                          
Income from continuing operations
  
 
$.67
  
 
$.89
  
 
$3.84
  
 
$3.34
  
Income from discontinued operations
    
.01
   
-
   
.09
   
.06
 
Cumulative effect of accounting change
    
(.02
)
  
-
   
(.02
)
  
-
 
Net income
  
 
$.66
  
 
$.89
  
 
$3.91
  
 
$3.40
  
                           
Diluted earnings per share:
                          
Income from continuing operations
  
 
$.67
  
 
$.89
  
 
$3.80
  
 
$3.33
  
Income from discontinued operations
    
.01
   
-
   
.09
   
.06
 
Cumulative effect of accounting change
    
(.02
)
  
-
   
(.02
)
  
-
 
Net income
  
 
$.66
  
 
$.89
  
 
$3.87
  
 
$3.39
  
                           
 -more-
 
 
 
 
 

                                 
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)
                                  
                               
Corporate
  
   
Results of
  
Items
      
Results of
  
Segment Information
  
Operations
  
   
Operations
  
Excluded from
      
Operations
          
Communications
  
and
  
   
Under
  
Current
      
from Current
          
Support
  
Intercompany
  
   
GAAP
  
Businesses
      
Businesses
  
Wireless
  
Wireline
  
Services
  
Eliminations
  
                                   
Revenues and sales:
                                  
Service revenues
  
$
2,263,605
  
$
-
        
$
2,263,605
  
$
1,643,195
  
$
588,349
  
$
82,323
  
$
(50,262
)
Product sales
    
318,146
   
-
         
318,146
   
116,983
   
9,801
   
194,115
   
(2,753
)
Total revenues and sales
    
2,581,751
   
-
         
2,581,751
   
1,760,178
   
598,150
   
276,438
   
(53,015
)
Costs and expenses:
                                        
Cost of services
    
736,857
   
(9,506
)
  
(A)
 
  
727,351
   
543,352
   
165,116
   
58,077
   
(39,194
)
Cost of products sold
    
381,764
   
-
         
381,764
   
218,678
   
6,899
   
168,545
   
(12,358
)
Selling, general, administrative and other
    
496,549
   
-
         
496,549
   
411,139
   
63,637
   
16,874
   
4,899
 
Depreciation and amortization
    
404,079
   
-
         
404,079
   
286,787
   
106,955
   
8,553
   
1,784
 
Restructuring and other charges
    
39,844
   
(39,844
)
  
(B)(C)
 
  
-
   
-
   
-
   
-
   
-
 
Total costs and expenses
    
2,059,093
   
(49,350
)
        
2,009,743
   
1,459,956
   
342,607
   
252,049
   
(44,869
)
                                                   
Operating income
    
522,658
   
49,350
         
572,008
 
$
300,222
  
$
255,543
  
$
24,389
  
$
(8,146
)
                                           
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).
 
 -more-
 
 
 
 
                                 
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)
                                  
                               
Corporate
  
   
Results of
  
Items
      
Results of
  
Segment Information
  
Operations
  
   
Operations
  
Excluded from
      
Operations
          
Communications
  
and
  
   
Under
  
Current
      
from Current
          
Support
  
Intercompany
  
   
GAAP
  
Businesses
      
Businesses
  
Wireless
  
Wireline
  
Services
  
Eliminations
  
                           
 
      
Revenues and sales:
                                  
Service revenues
  
$
1,897,402
  
$
-
        
$
1,897,402
  
$
1,252,773
  
$
597,315
  
$
81,462
  
$
(34,148
)
Product sales
    
242,391
   
-
         
242,391
   
73,999
   
10,460
   
167,027
   
(9,095
)
Total revenues and sales
    
2,139,793
   
-
         
2,139,793
   
1,326,772
   
607,775
   
248,489
   
(43,243
)
Costs and expenses:
                                      
Cost of services
    
604,818
   
-
       
604,818
   
399,114
   
173,146
   
64,297
   
(31,739
)
Cost of products sold
    
299,603
   
-
         
299,603
   
154,747
   
8,576
   
146,997
   
(10,717
)
Selling, general, administrative and other
    
402,489
   
-
         
402,489
   
318,968
   
62,466
   
14,856
   
6,199
 
Depreciation and amortization
    
332,520
   
-
         
332,520
   
193,789
   
127,921
   
8,454
   
2,356
 
Restructuring and other charges
    
(873
)
  
873
   
(I)
 
  
-
   
-
   
-
   
-
   
-
 
Total costs and expenses
    
1,638,557
   
873
         
1,639,430
   
1,066,618
   
372,109
   
234,604
   
(33,901
)
                                                   
Operating income
    
501,236
   
(873
)
        
500,363
 
$
260,154
  
$
235,666
  
$
13,885
  
$
(9,342
)
                                           
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).
 
 -more-
 
 
 
 
                                 
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)
                                  
                               
Corporate
  
   
Results of
  
Items
      
Results of
  
Segment Information
  
Operations
  
   
Operations
  
Excluded from
      
Operations
          
Communications
  
and
  
   
Under
  
Current
      
from Current
          
Support
  
Intercompany
  
   
GAAP
  
Businesses
      
Businesses
  
Wireless
  
Wireline
  
Services
  
Eliminations
  
                   
 
              
Revenues and sales:
                  
 
              
Service revenues
  
$
8,380,501
  
$
-
        
$
8,380,501
  
$
5,895,143
  
$
2,336,741
  
$
322,665
  
$
(174,048
)
Product sales
    
1,106,458
   
-
         
1,106,458
   
380,714
   
42,395
   
702,917
   
(19,568
)
Total revenues and sales
    
9,486,959
   
-
       
9,486,959
   
6,275,857
   
2,379,136
   
1,025,582
   
(193,616
)
Costs and expenses:
                                        
Cost of services
    
2,743,745
   
(37,557
)
  
(D)(E)
 
  
2,706,188
   
1,917,754
   
705,506
   
236,160
   
(153,232
)
Cost of products sold
    
1,315,320
   
-
         
1,315,320
   
697,593
   
32,919
   
621,864
   
(37,056
)
Selling, general, administrative and other
    
1,795,516
   
(1,898
)
  
(D)
 
  
1,793,618
   
1,445,165
   
256,259
   
65,494
   
26,700
 
Depreciation and amortization
    
1,482,605
   
-
         
1,482,605
   
960,698
   
480,729
   
33,866
   
7,312
 
Restructuring and other charges
    
58,717
   
(58,717
)
  
(C)(F)
 
  
-
   
-
   
-
   
-
   
-
 
Total costs and expenses
    
7,395,903
   
(98,172
)
        
7,297,731
   
5,021,210
   
1,475,413
   
957,384
   
(156,276
)
                                                   
Operating income
    
2,091,056
   
98,172
         
2,189,228
 
$
1,254,647
  
$
903,723
  
$
68,198
  
$
(37,340
)
                                                   
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).
 
 -more-
 
 
 
 

                                 
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)
                                  
                               
Corporate
  
   
Results of
  
Items
      
Results of
  
Segment Information
  
Operations
  
   
Operations
  
Excluded from
      
Operations
          
Communications
  
and
  
   
Under
  
Current
      
from Current
          
Support
  
Intercompany
  
   
GAAP
  
Businesses
      
Businesses
  
Wireless
  
Wireline
  
Services
  
Eliminations
  
                                   
Revenues and sales:
                  
 
      
 
      
Service revenues
  
$
7,374,279
  
$
-
        
$
7,374,279
  
$
4,791,235
  
$
2,380,788
  
$
346,662
  
$
(144,406
)
Product sales
    
871,862
   
-
         
871,862
   
286,852
   
39,021
   
577,193
   
(31,204
)
Total revenues and sales
    
8,246,141
   
-
         
8,246,141
   
5,078,087
   
2,419,809
   
923,855
   
(175,610
)
Costs and expenses:
                                              
Cost of services
    
2,374,220
   
-
         
2,374,220
   
1,543,576
   
704,335
   
257,845
   
(131,536
)
Cost of products sold
    
1,075,545
   
-
         
1,075,545
   
573,646
   
28,711
   
514,239
   
(41,051
)
Selling, general, administrative and other
    
1,524,165
   
-
         
1,524,165
   
1,201,789
   
244,327
   
54,729
   
23,320
 
Depreciation and amortization
    
1,299,691
   
-
         
1,299,691
   
738,837
   
516,445
   
34,325
   
10,084
 
Restructuring and other charges
    
50,892
   
(50,892
)
  
(I)(J)
 
  
-
   
-
   
-
   
-
   
-
 
Total costs and expenses
    
6,324,513
   
(50,892
)
        
6,273,621
   
4,057,848
   
1,493,818
   
861,138
   
(139,183
)
                                                   
Operating income
    
1,921,628
   
50,892
         
1,972,520
 
$
1,020,239
  
$
925,991
  
$
62,717
  
$
(36,427
)
                                           
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).
 
 -more-
 
 
 
 
 
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.
-more-
 
 
 
 

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.
-more-
 
 
 
 
 
                                         
SUPPLEMENTAL OPERATING INFORMATION-Page 9
                                      
(Dollars in thousands, except per customer amounts)
                                          
                                           
   
THREE MONTHS ENDED
  
TWELVE MONTHS ENDED
  
           
Increase
                  
Increase
          
   
December 31,
  
December 31,
  
(Decrease)
          
December 31,
  
December 31,
  
(Decrease)
          
   
2005
  
2004
  
Amount
    
% 
  
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
   
9,550,829
   
8,295,939
   
1,254,890
         
15
 
Gross customer additions:
                                                        
Internal
    
837,712
   
690,811
   
146,901
         
21
   
2,830,079
   
2,720,339
   
109,740
         
4
 
Acquired
    
90,356
   
92,345
   
(1,989
)
        
(2
)
  
1,693,162
   
92,345
   
1,600,817
         
1,734
 
Total
    
928,068
   
783,156
   
144,912
         
19
   
4,523,241
   
2,812,684
   
1,710,557
         
61
 
Net customer additions:
                                                          
Internal
    
147,258
   
139,415
   
7,843
         
6
   
342,675
   
510,717
   
(168,042
)
        
(33
)
Acquired
    
90,356
   
92,345
   
(1,989
)
        
(2
)
  
1,693,162
   
92,345
   
1,600,817
         
1,734
 
Total
    
237,614
   
231,760
   
5,854
         
3
   
2,035,837
   
603,062
   
1,432,775
         
238
 
Customer acquisition costs:
                                                          
Cost of products sold
  
$
104,735
  
$
80,557
  
$
24,178
          
30
 
$
320,769
  
$
322,737
  
$
(1,968
)
        
(1
)
Selling and marketing expenses
    
254,720
   
198,572
   
56,148
         
28
   
870,536
   
743,889
   
126,647
         
17
 
Less product sales
    
67,746
   
50,530
   
17,216
         
34
   
230,262
   
209,874
   
20,388
         
10
 
Total
  
$
291,709
  
$
228,599
  
$
63,110
          
28
 
$
961,043
  
$
856,752
  
$
104,291
          
12
 
Cost to acquire a new customer (A)
  
 
$348
  
 
$331
  
 
$17
          
5
 
 
$340
  
 
$315
  
 
$25
          
8
 
Cash costs:
                                                          
Cost of services
  
$
543,352
  
$
399,114
  
$
144,238
          
36
 
$
1,917,754
  
$
1,543,576
  
$
374,178
          
24
 
Cost of products sold
    
218,678
   
154,747
   
63,931
         
41
   
697,593
   
573,646
   
123,947
         
22
 
Selling, general, administrative and other
    
411,139
   
318,968
   
92,171
         
29
   
1,445,165
   
1,201,789
   
243,376
         
20
 
Less product sales
    
116,983
   
73,999
   
42,984
         
58
   
380,714
   
286,852
   
93,862
         
33
 
Total
    
1,056,186
   
798,830
   
257,356
         
32
   
3,679,798
   
3,032,159
   
647,639
         
21
 
Less customer acquisition costs
    
291,709
   
228,599
   
63,110
         
28
   
961,043
   
856,752
   
104,291
         
12
 
Total
  
$
764,477
  
$
570,231
  
$
194,246
          
34
 
$
2,718,755
  
$
2,175,407
  
$
543,348
          
25
 
Cash cost per unit per month, excluding
                                                          
customer acquisition costs (B)
  
 
$24.25
  
 
$22.41
  
 
$1.84
          
8
 
 
$23.72
  
 
$21.85
  
 
$1.87
          
9
 
Revenues:
                                                              
Service revenues
  
$
1,643,195
  
$
1,252,773
  
$
390,422
          
31
 
$
5,895,143
  
$
4,791,235
  
$
1,103,908
          
23
 
Less wholesale revenues
    
171,595
   
94,748
   
76,847
         
81
   
545,109
   
372,446
   
172,663
         
46
 
Retail revenues
  
$
1,471,600
  
$
1,158,025
  
$
313,575
          
27
 
$
5,350,034
  
$
4,418,789
  
$
931,245
          
21
 
Average revenue per customer per month (C)
  
 
$52.13
  
 
$49.24
  
 
$2.89
          
6
 
 
$51.44
  
 
$48.13
  
 
$3.31
          
7
 
Retail revenue per customer per month (D)
  
 
$46.68
  
 
$45.51
  
 
$1.17
          
3
 
 
$46.68
  
 
$44.39
  
 
$2.29
          
5
 
Retail minutes of use per customer per month (E)
    
626
   
534
   
92
         
17
   
597
   
494
   
103
         
21
 
Postpay churn
    
1.83
%
  
1.68
%
  
.15
%
        
9
   
1.77
%
  
1.74
%
  
.03
%
        
2
 
Total churn
    
2.20
%
  
2.17
%
  
.03
%
        
1
   
2.17
%
  
2.23
%
  
(.06
%)
        
(3
)
Service revenue operating margin (F)
    
18.3
%
  
20.8
%
  
(2.5
%)
        
(12
)
  
21.3
%
  
21.3
%
  
-
          
-
 
Capital expenditures (G)
  
$
271,440
  
$
270,236
  
$
1,204
          
-
 
$
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.
 
 -more-
 
 
 
 

                                         
SUPPLEMENTAL OPERATING INFORMATION-Page 10
                                      
(Dollars in thousands, except per customer amounts)
                                          
                                           
   
THREE MONTHS ENDED
  
TWELVE MONTHS ENDED
  
           
Increase
                  
Increase
          
   
December 31,
  
December 31,
  
(Decrease)
          
December 31,
  
December 31,
  
(Decrease)
          
   
2005
  
2004
  
Amount
    
% 
  
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
)
  
2,950,022
   
3,061,529
   
(111,507
)
        
(4
)
Broadband customers
    
397,696
   
243,325
   
154,371
         
63
                             
Net broadband additions
    
37,721
   
26,440
   
11,281
         
43
   
154,371
   
90,297
   
64,074
         
71
 
Average revenue per customer per month (H)
  
 
$68.72
  
 
$66.98
  
 
$1.74
          
3
 
 
$67.21
  
 
$65.87
  
 
$1.34
          
2
 
Capital expenditures (G)
  
$
119,342
  
$
100,730
  
$
18,612
          
18
 
$
355,938
  
$
336,498
  
$
19,440
          
6
 
                                                             
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
)
$
13,646
  
$
15,150
  
$
(1,504
)
        
(10
)
                                                           
Consolidated:
                                                          
Equity free cash flow (I)
  
$
309,498
  
$
225,693
  
$
83,805
          
37
 
$
1,304,052
  
$
1,180,072
  
$
123,980
          
11
 
Capital expenditures (G)
  
$
395,194
  
$
376,885
  
$
18,309
          
5
 
$
1,349,656
  
$
1,157,729
  
$
191,927
          
17
 
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.
 
 -more-
 
 
 
 
 
ALLTEL CORPORATION
                         
CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 11
                      
(In thousands)
                          
                           
                           
ASSETS
          
LIABILITIES AND SHAREHOLDERS' EQUITY
          
                           
   
December 31,
  
December 31,
          
December 31,
  
December 31,
  
   
2005
  
2004
          
2005
  
2004
  
                           
CURRENT ASSETS:
          
CURRENT LIABILITIES:
          
Cash and short-term investments
  
$
989,153
  
$
484,934
  
Current maturities of long-term debt
$
205,117
  
$
224,958
  
Accounts receivable (less allowance for
              
Accounts payable
  
649,293
   
448,161
 
doubtful accounts of $84,750 and
            
Advance payments and customer deposits
  
240,499
   
219,338
 
$53,606, respectively)
    
1,077,207
   
912,665
 
Accrued taxes
  
118,895
   
158,197
 
Inventories
    
232,634
   
156,785
 
Accrued dividends
  
147,841
   
105,922
 
Prepaid expenses and other
    
115,179
   
62,383
 
Accrued interest
  
102,512
   
120,259
 
Assets held for sale
    
2,018,701
   
-
 
Current deferred income taxes
  
501,672
   
-
 
 
              
Other current liabilities
  
255,425
   
183,523
 
Total current assets
    
4,432,874
   
1,616,767
 
Liabilities related to assets held for sale
 
    
385,528
   
-
 
                                       
Investments
    
358,412
   
804,861
 
Total current liabilities
  
2,606,782
   
1,460,358
 
Goodwill
    
 8,610,170
   
4,875,718
                         
Other intangibles
    
2,179,107
   
1,306,140
                         
                                       
 
              
Long-term debt
  
5,782,890
   
5,352,422
 
PROPERTY, PLANT AND EQUIPMENT:
              
Deferred income taxes
  
1,659,410
   
1,715,119
 
Land
    
298,593
   
278,084
 
Other liabilities
  
948,962
   
947,172
 
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
 
SHAREHOLDERS' EQUITY:
            
Other
    
530,333
   
489,936
 
Preferred stock
  
278
   
307
 
Under construction
    
475,453
   
385,283
 
Common stock
  
383,613
   
302,268
 
 
            
Additional paid-in capital
  
5,339,321
   
197,902
 
Total property, plant and equipment
    
17,497,534
   
15,836,286
 
Unrealized holding gain on investments
  
22,297
   
153,926
 
Less accumulated depreciation
    
9,433,951
   
8,288,195
 
Foreign currency translation adjustment
  
(2,841
)
  
482
 
 
              
Retained earnings
  
7,272,769
   
6,473,780
 
Net property, plant and equipment
    
8,063,583
   
7,548,091
                         
 
              
Total shareholders' equity
  
13,015,437
   
7,128,665
 
Other assets
    
369,335
   
452,159
                         
                                       
 
              
TOTAL LIABILITIES AND
           
TOTAL ASSETS
  
$
24,013,481
  
$
16,603,736
  
SHAREHOLDERS' EQUITY
$
24,013,481
  
$
16,603,736
  
                             
             
-more-  
            
 
 
 
 
 
ALLTEL CORPORATION
                  
CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 12
                  
(In thousands)
                  
                   
   
THREE MONTHS ENDED
  
TWELVE MONTHS ENDED
  
   
December 31,
  
December 31,
  
December 31,
  
December 31,
  
   
2005
  
2004
  
2005
  
2004
  
Net Cash Provided from Operations:
                  
Net income
  
$
255,149
  
$
270,645
  
$
1,331,379
  
$
1,046,235
  
Adjustments to reconcile net income to net cash provided from
  operations:
                          
Income from discontinued operations
    
(4,270
)
  
-
   
(30,292
)
  
(19,538
)
Cumulative effect of accounting change
    
7,441
   
-
   
7,441
   
-
 
Depreciation and amortization
    
404,079
   
332,520
   
1,482,605
   
1,299,691
 
Provision for doubtful accounts
    
63,068
   
47,601
   
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
    
4,982
   
-
   
14,982
   
25,569
 
Change in deferred income taxes
    
(211,302
)
  
74,794
   
(193,235
)
  
263,390
 
Reversal of income tax contingency reserves
    
-
   
-
   
-
   
(19,656
)
Other, net
    
(4,097
)
  
(5,861
)
  
7,960
   
(14,336
)
Changes in operating assets and liabilities, net of the effects of
                          
acquisitions and dispositions:
                          
Accounts receivable
    
(21,777
)
  
(41,856
)
  
(227,185
)
  
(206,132
)
Inventories
    
(61,193
)
  
(44,750
)
  
(44,968
)
  
(33,842
)
Accounts payable
    
149,074
   
65,854
   
145,594
   
(27,174
)
Other current liabilities
    
189,679
   
6,490
   
195,889
   
70,602
 
Other, net
    
59,312
   
(82,646
)
  
59,740
   
(102,831
)
Net cash provided from operations
    
830,145
   
622,791
   
2,732,255
   
2,466,849
 
                         
Cash Flows from Investing Activities:
                          
Additions to property, plant and equipment
    
(386,895
)
  
(368,122
)
  
(1,302,440
)
  
(1,125,402
)
Additions to capitalized software development costs
    
(8,299
)
  
(8,763
)
  
(47,216
)
  
(32,327
)
Additions to investments
    
-
   
(423
)
  
(890
)
  
(3,228
)
Purchases of property, net of cash acquired
    
(1,535
)
  
(185,136
)
  
(1,137,584
)
  
(185,136
)
Proceeds from the sale of assets
    
48,243
   
-
   
84,405
   
-
 
Proceeds from the sale of investments
    
-
   
-
   
353,881
   
-
 
Proceeds from the return on investments
    
5,982
   
21,497
   
36,872
   
88,612
 
Other, net
    
5,795
   
(313
)
  
13,746
   
(907
)
Net cash used in investing activities
    
(336,709
)
  
(541,260
)
  
(1,999,226
)
  
(1,258,388
)
                           
Cash Flows from Financing Activities:
                          
Dividends on preferred and common stock
    
(145,303
)
  
(122,223
)
  
(490,472
)
  
(467,570
)
Reductions in long-term debt
    
(21,139
)
  
(22,246
)
  
(2,677,779
)
  
(277,240
)
Distributions to minority investors
    
(20,834
)
  
(17,240
)
  
(65,642
)
  
(66,917
)
Long-term debt issued
    
72,300
   
-
   
1,000,000
   
-
 
Repurchases of common stock
    
-
   
(88,419
)
  
-
   
(595,350
)
Common stock issued
    
20,714
   
5,146
   
1,463,504
   
25,873
 
Net cash used in financing activities
    
(94,262
)
  
(244,982
)
  
(770,389
)
  
(1,381,204
)
                           
Net cash provided from discontinued operations
    
544,612
   
-
   
580,801
   
-
 
                           
Effect of exchange rate changes on cash and short-term investments
    
(24,061
)
  
-
   
(39,222
)
  
(87
)
                           
Increase (decrease) in cash and short-term investments
    
919,725
   
(163,451
)
  
504,219
   
(172,830
)
                           
Cash and Short-term Investments:
                          
Beginning of the period
    
69,428
   
648,385
   
484,934
   
657,764
 
End of the period
  
$
989,153
  
$
484,934
  
$
989,153
  
$
484,934
  
                           
 -more-
 
 
 
 

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
  
TWELVE MONTHS ENDED
  
   
December 31,
  
December 31,
  
December 31,
  
December 31,
  
   
2005
  
2004
  
2005
  
2004
  
                   
                   
Net cash provided from operations
  
$
830,145
  
$
622,791
  
$
2,732,255
  
$
2,466,849
  
Adjustments to reconcile to net income under GAAP:
                          
Income from discontinued operations
    
4,270
   
-
   
30,292
   
19,538
 
Cumulative effect of accounting change
    
(7,441
)
  
-
   
(7,441
)
  
-
 
Depreciation and amortization expense
    
(404,079
)
  
(332,520
)
  
(1,482,605
)
  
(1,299,691
)
Provision for doubtful accounts
    
(63,068
)
  
(47,601
)
  
(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
    
(4,982
)
  
-
   
(14,982
)
  
(25,569
)
Change in deferred income taxes
    
211,302
   
(74,794
)
  
193,235
   
(263,390
)
Reversal of income tax contingency reserves
    
-
   
-
   
-
   
19,656
 
Other non-cash changes, net
    
4,097
   
5,861
   
(7,960
)
  
14,336
 
Changes in operating assets and liabilities, net of the
                          
effects of acquisitions and dispositions
    
(315,095
)
  
96,908
   
(129,070
)
  
299,377
 
Net income under GAAP
    
255,149
   
270,645
   
1,331,379
   
1,046,235
 
Adjustments to reconcile to net income from current businesses:
                        
Restructuring and other charges, net of tax
    
36,484
   
(587
)
  
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
    
5,809
   
-
   
8,962
   
-
 
Reversal of income tax contingency reserves
    
-
   
-
   
-
   
(19,656
)
Cumulative effect of accounting change
    
7,441
   
-
   
7,441
   
-
 
Income from discontinued operations
    
(4,270
)
  
-
   
(30,292
)
  
(19,538
)
Net income from current businesses
    
300,613
   
270,058
   
1,171,103
   
1,038,110
 
Adjustments to reconcile to equity free cash flow from current businesses:
                        
Depreciation and amortization expense
    
404,079
   
332,520
   
1,482,605
   
1,299,691
 
Capital expenditures
    
(395,194
)
  
(376,885
)
  
(1,349,656
)
  
(1,157,729
)
Equity free cash flow from current businesses
  
$
309,498
  
$
225,693
  
$
1,304,052
  
$
1,180,072
  
                           
     
 -end-