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