Alltel produces double-digit revenue growth in first quarter; Company adds 165,000 net new wireless customers, reduces churn rate.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) produced double-digit dou·ble-dig·it adj. Being between 10 and 99 percent: double-digit inflation. revenue growth, strong wireless customer net additions and record 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). wireline customer growth in the first quarter. Alltel reported 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). ) of 77 cents, which includes a net gain in discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. and expenses related to the integration of Western Wireless properties and the pending wireline separation. Excluding the one-time one-time adj. 1. or one·time a. Occurring or undertaken only once: a one-time winner in 1995. b. items, fully diluted earnings per share from current businesses was 82 cents. Results from current businesses also now exclude the effects of non-cash amortization related to the company's previous wireless acquisitions, which was 7 cents in the quarter. "We are very pleased with the performance of the wireless business and are encouraged by the opportunities we see going forward," said 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. 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. . "The wireless growth in this quarter was fueled by strong customer growth and a continued focus on reducing churn churn: see butter. . We made progress on several strategic goals, including remaining on track to complete the spin-merge of our wireline business with VALOR valor a rodenticide no longer marketed because of toxicity in horses causing dehydration, abdominal pain, hindlimb weakness, inappetence, fishy smell in urine. Called also N-3-pyridyl methyl N1-p-nitrophenyl urea. Communications Group by mid-year." Among other highlights for the first quarter: --Total revenues were $2.5 billion, a 19 percent increase from a year ago. Net income under GAAP was $297 million, down 5 percent. Net income from current businesses was $320 million, a 21 percent increase from a year ago. --Wireless revenue was $1.8 billion, a 30 percent increase from a year ago. Service revenue was $1.64 billion, a 29 percent increase. Segment income was $356 million, a 25 percent increase. --Alltel added 165,000 net new wireless customers. Average revenue per wireless customer (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. ) was $50.90, a 4 percent increase. Data revenue per customer was $2.86, a 59 percent increase, and now represents more than 5 percent of total ARPU. Post-pay churn improved to 1.66 percent from 1.72 percent a year ago. --Wireline revenue was $575 million, down 3 percent from the previous year. Segment income was $227 million, up 6 percent from a year ago. The company added a record 44,000 broadband customers, bringing its total broadband customer base to 441,000, a penetration The successful unauthorized breach of a security perimeter. See penetration test. rate of 15 percent of total access lines. Feature revenue per eligible line increased 2 percent, and total average revenue per wireline customer was $66.77, a 1 percent increase. --Equity free cash flow from current businesses was $504 million, a 49 percent increase. Net cash provided from operations was $733 million. 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, including the pending acquisition of Midwest Wireless Midwest Wireless was a wireless telephone company serving southern Minnesota, northern Iowa and western Wisconsin in the United States. The company served roughly 400,000 customers and used CDMA phone technology. The company's slogan was "We answer to you. and the pending dispositions of the Bolivian operations and the wireline business; the risks associated with the integration of acquired businesses; 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 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 potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited accredited recognition by an appropriate authority that the performance of a particular institution has satisfied a prestated set of criteria. accredited herds cattle herds which have achieved a low level of reactors to, e.g. ratings organizations; the availability and cost of financing in the corporate credit and debt markets necessary to consummate To carry into completion; to fulfill; to accomplish. A Common-Law Marriage is consummated when the parties live in a manner intended to bring about public recognition of their relationship as Husband and Wife. 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 wireline business; 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
March 31, March 31, (Decrease)
2006 2005 Amount %
---- ---- ------ -
UNDER GAAP:
Revenues and sales:
Wireless $1,757,390 $1,352,009 $405,381 30
Wireline 575,435 593,632 (18,197) (3)
Communications support
services 250,928 224,705 26,223 12
Total business segments 2,583,753 2,170,346 413,407 19
Less intercompany
eliminations 44,017 44,363 (346) (1)
Total revenues and
sales $2,539,736 $2,125,983 $413,753 19
Segment income:
Wireless $ 355,555 $ 285,332 $ 70,223 25
Wireline 226,566 214,501 12,065 6
Communications support
services 21,481 11,902 9,579 80
Total segment income 603,602 511,735 91,867 18
Less: corporate
expenses (A) 54,884 42,467 12,417 29
integration
expenses and
other charges 19,525 - 19,525 -
Total operating income $ 529,193 $ 469,268 $ 59,925 13
Operating margin (B):
Wireless 20.2% 21.1% (.9%) (4)
Wireline 39.4% 36.1% 3.3% 9
Communications support
services 8.6% 5.3% 3.3% 62
Consolidated 20.8% 22.1% (1.3%) (6)
Net income $ 297,407 $ 313,004 $(15,597) (5)
Earnings per share:
Basic $.77 $1.04 $(.27) (26)
Diluted $.77 $1.03 $(.26) (25)
Weighted average common shares:
Basic 386,782 302,172 84,610 28
Diluted 389,676 303,468 86,208 28
Annual dividend rate per common
share $1.54 $1.52 $.02 1
FROM CURRENT BUSINESSES
(NON-GAAP) (C):
Operating income $ 594,210 $ 502,836 $ 91,374 18
Operating margin (B) 23.4% 23.7% (.3%) (1)
Net income $ 320,102 $ 263,765 $ 56,337 21
Earnings per share:
Basic $.83 $.87 $(.04) (5)
Diluted $.82 $.87 $(.05) (6)
(A) Corporate expenses include amortization expense related to
intangible assets recorded in connection with the acquisition of
wireless properties. Corporate expenses for 2005 also include 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, amortization expense related to intangible assets
recorded in connection with the acquisition of wireless
properties, a special cash dividend received on the Company's
investment in Fidelity National Financial, Inc. common stock, a
change in accounting for operating leases and integration expenses
and other charges.
ALLTEL CORPORATION
CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP-Page 2
(In thousands, except per share amounts)
THREE MONTHS ENDED
------------------
March 31, March 31,
2006 2005
---- ----
Revenues and sales:
Service revenues $2,247,719 $1,898,262
Product sales 292,017 227,721
Total revenues and sales 2,539,736 2,125,983
Costs and expenses:
Cost of services 731,725 626,260
Cost of products sold 355,793 281,773
Selling, general, administrative and
other 498,959 407,465
Depreciation and amortization 404,541 341,217
Integration expenses and other charges 19,525 -
Total costs and expenses 2,010,543 1,656,715
Operating income 529,193 469,268
Equity earnings in unconsolidated
partnerships 12,932 10,743
Minority interest in consolidated
partnerships (13,895) (18,347)
Other income, net 11,882 120,735
Interest expense (88,974) (86,689)
Income from continuing operations
before income taxes 451,138 495,710
Income taxes 171,559 182,706
Income from continuing operations 279,579 313,004
Income from discontinued operations
(net of income taxes) 17,828 -
Net income 297,407 313,004
Preferred dividends 21 24
Net income applicable to common shares $ 297,386 $ 312,980
Basic earnings per share:
Income from continuing operations $.72 $1.04
Income from discontinued operations .05 -
Net income $.77 $1.04
Diluted earnings per share:
Income from continuing operations $.72 $1.03
Income from discontinued operations .05 -
Net income $.77 $1.03
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 March 31, 2006
(In thousands, except per share amounts)
Items Results of
Results Excluded from Operations
of Operations Current from Current
Under GAAP Businesses Businesses
---------- ---------- ----------
Revenues and sales:
Service revenues $2,247,719 $ - $2,247,719
Product sales 292,017 - 292,017
Total revenues and sales 2,539,736 - 2,539,736
Costs and expenses:
Cost of services 731,725 - 731,725
Cost of products sold 355,793 - 355,793
Selling, general,
administrative
and other 498,959 - 498,959
Depreciation and
amortization 404,541 (45,492) (A) 359,049
Integration expenses and
other charges 19,525 (19,525) (B) -
Total costs and expenses 2,010,543 (65,017) 1,945,526
Operating income 529,193 65,017 594,210
Equity earnings in
unconsolidated partnerships 12,932 - 12,932
Minority interest in
consolidated partnerships (13,895) - (13,895)
Other income, net 11,882 - 11,882
Interest expense (88,974) - (88,974)
Income from continuing
operations before
income taxes 451,138 65,017 516,155
Income taxes 171,559 24,494 (E) 196,053
Income from continuing
operations 279,579 40,523 320,102
Income from discontinued
operations (net of income
taxes) 17,828 (17,828) (F) -
Net income 297,407 22,695 320,102
Preferred dividends 21 - 21
Net income applicable to
common shares $ 297,386 $ 22,695 $ 320,081
Basic earnings per share:
Income from continuing
operations $.72 $ .11 $.83
Income from discontinued
operations .05 (.05) -
Net income $.77 $ .06 $.83
Diluted earnings per share:
Income from continuing
operations $.72 $ .10 $.82
Income from discontinued
operations .05 (.05) -
Net income $.77 $ .05 $.82
See notes on page 5 for a description of the line items marked
(A) - (F).
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 March 31, 2006
(In thousands, except per share amounts)
Segment Information Corporate
------------------------------------ Operations
Communications and
Support Intercompany
Wireless Wireline Services Eliminations
-------- -------- -------- ------------
Revenues and sales:
Service revenues $1,638,798 $565,845 $ 84,954 $(41,878)
Product sales 118,592 9,590 165,974 (2,139)
Total revenues
and sales 1,757,390 575,435 250,928 (44,017)
Costs and expenses:
Cost of services 537,839 175,874 57,853 (39,841)
Cost of products
sold 204,430 7,353 147,649 (3,639)
Selling, general,
administrative
and other 413,106 62,059 16,532 7,262
Depreciation and
amortization 246,460 103,583 7,413 1,593
Integration
expenses and
other charges - - - -
Total costs and
expenses 1,401,835 348,869 229,447 (34,625)
Operating income $ 355,555 $226,566 $ 21,481 $ (9,392)
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 March 31, 2005
(In thousands, except per share amounts)
Items Results of
Results Excluded from Operations
of Operations Current from Current
Under GAAP Businesses Businesses
---------- ---------- ----------
Revenues and sales:
Service revenues $1,898,262 $ - $1,898,262
Product sales 227,721 - 227,721
Total revenues and sales 2,125,983 - 2,125,983
Costs and expenses:
Cost of services 626,260 (19,791) (C) 606,469
Cost of products sold 281,773 - 281,773
Selling, general,
administrative
and other 407,465 - 407,465
Depreciation and
amortization 341,217 (13,777) (A) 327,440
Integration expenses and
other charges - - -
Total costs and expenses 1,656,715 (33,568) 1,623,147
Operating income 469,268 33,568 502,836
Equity earnings in
unconsolidated partnerships 10,743 - 10,743
Minority interest in
consolidated partnerships (18,347) - (18,347)
Other income, net 120,735 (111,036) (D) 9,699
Interest expense (86,689) - (86,689)
Income from continuing
operations before
income taxes 495,710 (77,468) 418,242
Income taxes 182,706 (28,229) (E) 154,477
Income from continuing
operations 313,004 (49,239) 263,765
Income from discontinued
operations (net of income
taxes) - - -
Net income 313,004 (49,239) 263,765
Preferred dividends 24 - 24
Net income applicable to
common shares $ 312,980 $ (49,239) $ 263,741
Basic earnings per share:
Income from continuing
operations $1.04 $(.17) $.87
Income from discontinued
operations - - -
Net income $1.04 $(.17) $.87
Diluted earnings per share:
Income from continuing
operations $1.03 $(.16) $.87
Income from discontinued
operations - - -
Net income $1.03 $(.16) $.87
See notes on page 5 for a description of the line items marked
(A) - (F).
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 March 31, 2005
(In thousands, except per share amounts)
Segment Information Corporate
------------------------------------ Operations
Communications and
Support Intercompany
Wireless Wireline Services Eliminations
-------- -------- -------- ------------
Revenues and sales:
Service revenues $1,274,377 $583,815 $ 77,842 $(37,772)
Product sales 77,632 9,817 146,863 (6,591)
Total revenues
and sales 1,352,009 593,632 224,705 (44,363)
Costs and expenses:
Cost of services 405,673 181,024 56,343 (36,571)
Cost of products
sold 148,806 6,998 133,060 (7,091)
Selling, general,
administrative
and other 322,477 63,806 14,928 6,254
Depreciation and
amortization 189,721 127,303 8,472 1,944
Integration
expenses
and other charges - - - -
Total costs and
expenses 1,066,677 379,131 212,803 (35,464)
Operating income $ 285,332 $214,501 $ 11,902 $ (8,899)
ALLTEL CORPORATION
NOTES TO RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO
RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 5
As disclosed in the ALLTEL Corporation ("Alltel" or the "Company")
Form 8-K filed on May 3, 2006, Alltel has presented in this earnings
release results of operations from current businesses which exclude
the effects of discontinued operations, amortization expense related
to intangible assets recorded in connection with the acquisition of
wireless properties, a special cash dividend received on the Company's
investment in Fidelity National Financial, Inc. ("Fidelity National")
common stock, a change in accounting for certain operating leases and
integration expenses and other charges. Alltel's purpose for excluding
items from the current business measures is to focus on Alltel's true
earnings capacity associated with providing 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,
resource allocation 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, the effects of the change in accounting for
operating leases and integration expenses and other charges have not
been allocated to the business segments. Wireless segment income also
excludes amortization expense related to acquired intangible assets.
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) Eliminates the effects of amortization expense related to
intangible assets recorded in connection with the acquisition of
wireless properties.
(B) The Company incurred $10.8 million of integration expenses related
to its acquisition completed on August 1, 2005 of Western Wireless
Corporation ("Western Wireless"). These expenses consisted of $8.3
million of rebranding costs and $2.5 million of system conversion
costs and other integration costs. 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 $8.7 million of incremental costs
consisting of employee benefit costs, consulting and legal fees.
(C) 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.
(D) 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.
(E) Tax-related effect of the items discussed in Notes A - D above.
(F) 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. In the first quarter of 2006, Alltel completed the
required divestitures with the sale of the remaining property in
Arkansas. During the third and fourth quarters of 2005, Alltel
completed the sale of international operations acquired from
Western Wireless in Georgia, Ghana and Ireland, and on April 28,
2006, Alltel sold the international operations in Austria and
Haiti. Alltel has a pending definitive agreement to sell the
international operations in Bolivia 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.
ALLTEL CORPORATION
SUPPLEMENTAL OPERATING INFORMATION-Page 6
(Dollars in thousands, except per customer amounts)
THREE MONTHS ENDED
------------------
Increase
March 31, March 31, (Decrease)
2006 2005 Amount %
---- ---- ------ -
Wireless:
Controlled POPs 77,292,038 63,745,833 13,546,205 21
Customers 10,827,065 8,801,285 2,025,780 23
Penetration rate 14.0% 13.8% .2% 1
Average customers 10,731,389 8,704,634 2,026,755 23
Gross customer additions:
Internal 805,454 669,704 135,750 20
Acquired - 53,961 (53,961) (100)
Total 805,454 723,665 81,789 11
Net customer additions:
Internal 164,741 120,837 43,904 36
Acquired - 53,961 (53,961) (100)
Total 164,741 174,798 (10,057) (6)
Customer acquisition
costs:
Cost of products sold $ 95,138 $ 69,697 $ 25,441 37
Selling and marketing
expenses 253,669 184,992 68,677 37
Less product sales 65,221 49,859 15,362 31
Total $ 283,586 $204,830 $ 78,756 38
Cost to acquire a new
customer (A) $352 $306 $46 15
Cash costs:
Cost of services $ 537,839 $405,673 $132,166 33
Cost of products sold 204,430 148,806 55,624 37
Selling, general,
administrative and
other 413,106 322,477 90,629 28
Less product sales 118,592 77,632 40,960 53
Total 1,036,783 799,324 237,459 30
Less customer
acquisition costs 283,586 204,830 78,756 38
Total $ 753,197 $594,494 $158,703 27
Cash cost per unit per
month, excluding customer
acquisition costs (B) $23.40 $22.77 $.63 3
Revenues:
Service revenues $1,638,798 $1,274,377 $364,421 29
Less wholesale
revenues 151,003 91,066 59,937 66
Retail revenues $1,487,795 $1,183,311 $304,484 26
Average revenue per
customer per month (C) $50.90 $48.80 $2.10 4
Retail revenue per
customer per month (D) $46.21 $45.31 $.90 2
Retail minutes of use per
customer per month (E) 610 547 63 12
Postpay churn 1.66% 1.72% (.06%) (3)
Total churn 2.00% 2.11% (.11%) (5)
Service revenue operating
margin (F) 21.7% 22.4% (.7%) (3)
Capital expenditures (G) $156,119 $190,576 $(34,457) (18)
(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 7
(Dollars in thousands, except per customer amounts)
THREE MONTHS ENDED
------------------
Increase
March 31, March 31, (Decrease)
2006 2005 Amount %
---- ---- ------ -
Wireline:
Customers 2,862,545 2,983,250 (120,705) (4)
Average customers 2,872,688 2,994,716 (122,028) (4)
Broadband customers 441,475 283,126 158,349 56
Net broadband additions 43,779 39,801 3,978 10
Average revenue per
customer per month (H) $66.77 $66.08 $.69 1
Capital expenditures (G) $62,188 $73,070 $(10,882) (15)
Communications support services:
Long-distance customers 1,750,630 1,793,069 (42,439) (2)
Capital expenditures (G) $2,433 $2,243 $190 8
Consolidated:
Equity free cash flow (I) $503,788 $339,020 $164,768 49
Capital expenditures (G) $220,855 $265,962 $(45,107) (17)
Total assets $24,046,118 $16,773,214 $7,272,904 43
(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 8
(In thousands)
ASSETS
March 31, December 31,
2006 2005
---- ----
CURRENT ASSETS:
Cash and short-term investments $ 886,531 $ 989,153
Accounts receivable (less allowance
for doubtful accounts of $70,021
and $84,750, respectively) 1,014,989 1,077,207
Inventories 193,882 232,634
Prepaid expenses and other 100,451 115,179
Assets held for sale 2,027,093 1,951,240
Total current assets 4,222,946 4,365,413
Investments 374,834 358,412
Goodwill 8,981,758 8,677,251
Other intangibles 2,207,574 2,179,107
PROPERTY, PLANT AND EQUIPMENT:
Land 310,081 298,593
Buildings and improvements 1,237,686 1,211,359
Wireline 6,988,358 6,942,039
Wireless 6,970,980 6,852,565
Information processing 1,223,305 1,187,192
Other 539,999 530,333
Under construction 412,204 475,453
Total property, plant and equipment 17,682,613 17,497,534
Less accumulated depreciation 9,759,582 9,433,951
Net property, plant and equipment 7,923,031 8,063,583
Other assets 335,975 369,335
TOTAL ASSETS $24,046,118 $24,013,101
ALLTEL CORPORATION
CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 8
(In thousands)
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2006 2005
---- ----
CURRENT LIABILITIES:
Current maturities of long-term debt $ 205,096 $ 205,117
Accounts payable 517,178 645,443
Advance payments and customer deposits 239,684 240,499
Accrued taxes 233,711 174,693
Accrued dividends 149,497 147,841
Accrued interest 79,247 102,512
Current deferred income taxes 340,087 339,014
Other current liabilities 262,680 255,425
Liabilities related to assets held
for sale 301,716 294,364
Total current liabilities 2,328,896 2,404,908
Long-term debt 5,661,938 5,782,890
Deferred income taxes 1,868,547 1,860,904
Other liabilities 890,984 948,962
SHAREHOLDERS' EQUITY:
Preferred stock 268 278
Common stock 388,861 383,613
Additional paid-in capital 5,440,811 5,339,321
Unrealized holding gain on investments 30,368 22,297
Foreign currency translation adjustment 14,786 (2,841)
Retained earnings 7,420,659 7,272,769
Total shareholders' equity 13,295,753 13,015,437
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $24,046,118 $24,013,101
ALLTEL CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 9
(In thousands)
THREE MONTHS ENDED
------------------
March 31, March 31,
2006 2005
---- ----
Net Cash Provided from Operations:
Net income $ 297,407 $ 313,004
Adjustments to reconcile net income to
net cash provided from operations:
Income from discontinued operations (17,828) -
Depreciation and amortization 404,541 341,217
Provision for doubtful accounts 53,657 40,915
Change in deferred income taxes 21,535 (19,120)
Other, net 11,218 13,559
Changes in operating assets and
liabilities, net of the effects
of acquisitions and dispositions:
Accounts receivable 9,244 16,527
Inventories 38,742 8,661
Accounts payable (120,508) 17,610
Other current liabilities 33,627 86,590
Other, net 1,482 (40,306)
Net cash provided from operations 733,117 778,657
Cash Flows from Investing Activities:
Additions to property, plant and
equipment (213,709) (254,862)
Additions to capitalized software
development costs (7,146) (11,100)
Additions to investments - (753)
Purchases of property, net of
cash acquired (458,931) (51,835)
Proceeds from the return on investments 8,927 7,826
Other, net (922) 3,021
Net cash used in investing
activities (671,781) (307,703)
Cash Flows from Financing Activities:
Dividends on preferred and common stock (147,737) (105,731)
Reductions in long-term debt (744) (1,874)
Distributions to minority investors (11,810) (12,743)
Conversion of convertible debt (59,848) -
Excess tax benefits from stock option
exercises 1,927 -
Long-term debt issued - 50,000
Common stock issued 54,896 2,832
Net cash used in financing
activities (163,316) (67,516)
Net cash used in discontinued operations (1,227) -
Effect of exchange rate changes on
cash and short-term investments 585 -
Increase (decrease) in cash and short-term
investments (102,622) 403,438
Cash and short-term investments:
Beginning of the period 989,153 484,934
End of the period $ 886,531 $ 888,372
ALLTEL CORPORATION
RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF
OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 10
(In thousands)
THREE MONTHS ENDED
------------------
March 31, March 31,
2006 2005
---- ----
Net cash provided from operations $ 733,117 $ 778,657
Adjustments to reconcile to net income
under GAAP:
Income from discontinued operations 17,828 -
Depreciation and amortization expense (404,541) (341,217)
Provision for doubtful accounts (53,657) (40,915)
Change in deferred income taxes (21,535) 19,120
Other non-cash changes, net (11,218) (13,559)
Changes in operating assets and
liabilities, net of the effects
of acquisitions and dispositions 37,413 (89,082)
Net income under GAAP 297,407 313,004
Adjustments to reconcile to net income from
current businesses:
Amortization expense related to
acquired wireless intangible assets,
net of tax 27,799 8,481
Integration expenses and other
charges, net of tax 12,724 -
Special dividend received on Fidelity
National common stock, net of tax - (69,812)
Change in accounting for operating
leases, net of tax - 12,092
Income from discontinued operations (17,828) -
Net income from current businesses 320,102 263,765
Adjustments to reconcile to equity free
cash flow from current businesses:
Depreciation and amortization expense 404,541 341,217
Capital expenditures (220,855) (265,962)
Equity free cash flow from current
businesses $ 503,788 $ 339,020
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