ALLTEL CORP 
By Alltel (NYSE:AT) recorded strong growth in the second quarter by adding 181,000 post-pay customers and dropping churn to an all-time low. Alltel reported fully diluted earnings per share under Generally Accepted Accounting Principles (GAAP) of 56 cents and fully diluted earnings per share of 75 cents from current businesses, a 42 percent increase from a year ago and a record high for the quarter.
?This was truly an exceptional quarter that saw our company establish new records for earnings per share, service revenue, operating income, post-pay additions and churn,? said Alltel President and CEO Scott Ford. ?The entire Alltel team has done an outstanding job of delivering strong financial results while remaining focused on our customers and working to obtain the approvals necessary to close on the merger agreement.?
Among the highlights for the second quarter:
- Revenues were $2 billion, a 12 percent increase from a year ago. Net income under GAAP was $196 million. Net income from current businesses was $261 million, a 25 percent increase from a year ago.
- Alltel added 181,000 post-pay customers, up 46 percent from a year ago. Pre-pay net additions were flat during the quarter due to seasonal trends.
- Wireless service revenue was $1.97 billion, a new record and an increase of 14 percent from a year ago.
- Post-pay churn was 1.16 percent and total churn was 1.67 percent. Both are record lows for Alltel and year-over-year improvements for the sixth consecutive quarter.
- Average revenue per wireless customer (ARPU) was $54.10, a 3 percent increase from last year. Data revenue per customer was $5.63, up 73 percent from last year and 20 percent sequentially.
- Equity free cash flow from current businesses was $243 million, a 42 percent increase. Net cash provided from operations was $552 million, a 114 percent increase from last year.
In the quarter, Alltel announced on May 20 it has agreed to be acquired by TPG Capital and Goldman Sachs Capital Partners for $71.50 per share in cash. The necessary regulatory approvals are progressing well. As expected, the Hart-Scott-Rodino waiting period expired on July 5 without issue. Proxy statements were mailed to Alltel shareholders on July 25 and the shareholder meeting to approve the transaction is scheduled for Aug. 29. The Federal Communications Commission filed a Public Notice related to the transfer of Alltel's licenses on June 25 and, while the company is waiting to hear from the FCC more definitively on the timing of its approval process, Alltel expects a favorable FCC vote this year.
The merger agreement (which is summarized in Alltel's proxy statement and available on the company website) provides that the obligations of TPG/Goldman Sachs to acquire Alltel are not conditioned on financing. TPG and Goldman received written commitments at the time of the deal from several of the largest financial institutions in the world to back their obligations. Alltel has been given no reason to believe that these firms will not honor their obligations. Alltel expects the transaction to close by year end.
Alltel operates America's largest wireless network, which delivers voice and advanced data services nationwide to 12 million customers. Headquartered in Little Rock, Ark., Alltel is a Forbes 500 company with annual revenues of nearly $8 billion.
Alltel claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events and results. Actual future events and results may differ materially from those expressed in these forward-looking statements as a result of a number of important factors. Representative examples of these factors include (without limitation) occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement with TPG and GS Capital; the inability to complete the merger due to the failure to obtain stockholder approval for the merger or the failure to satisfy other conditions to completion of the merger, including the receipt of all regulatory approvals related to the merger; risks that the proposed transaction disrupts current plans and operations; adverse changes in economic conditions in the markets served by Alltel; the extent, timing, and overall effects of competition in the communications business; material changes in the communications industry generally that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers; changes in communications technology; the risks associated with the integration of acquired businesses; adverse changes in the terms and conditions of the wireless roaming agreements of Alltel; the potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited ratings organizations; the uncertainties related to Alltel's strategic investments; the effects of litigation; and the effects of federal and state legislation, rules, and regulations governing the communications industry. In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes.
Alltel, NYSE: AT
www.alltel.com
| ALLTEL CORPORATION | |||||||||||||||
| CONSOLIDATED HIGHLIGHTS AND OTHER FINANCIAL INFORMATION (UNAUDITED) | |||||||||||||||
| (In thousands, except per share amounts) | |||||||||||||||
| THREE MONTHS ENDED | |||||||||||||||
| Increase | |||||||||||||||
| June 30, | June 30, | (Decrease) | |||||||||||||
| 2007 | 2006 | Amount | % | ||||||||||||
| UNDER GAAP: | |||||||||||||||
| Service revenues | $ | 1,971,616 | $ | 1,734,128 | $ | 237,488 | 14 | ||||||||
| Total revenues and sales | $ | 2,175,088 | $ | 1,945,232 | $ | 229,856 | 12 | ||||||||
| Operating income | $ | 378,534 | $ | 343,831 | $ | 34,703 | 10 | ||||||||
Service revenue operating margin (A) | 19.2% |
| 19.8% |
| (.6% | ) | (3 | ) | |||||||
| Operating margin (B) | 17.4% |
| 17.7% |
| (.3% | ) | (2 | ) | |||||||
Income from continuing operations | $ | 198,579 | $ | 288,429 | $ | (89,850 | ) | (31 | ) | ||||||
| Net income | $ | 195,696 | $ | 428,903 | $ | (233,207 | ) | (54 | ) | ||||||
| Earnings per share: | |||||||||||||||
| Basic | $.57 | $1.10 | $(.53 | ) | (48 | ) | |||||||||
| Diluted | $.56 | $1.10 | $(.54 | ) | (49 | ) | |||||||||
| Weighted average common shares: | |||||||||||||||
| Basic | 344,641 | 388,752 | (44,111 | ) | (11 | ) | |||||||||
| Diluted | 347,727 | 390,463 | (42,736 | ) | (11 | ) | |||||||||
| Capital expenditures (C) | $ | 325,400 | $ | 299,830 | $ | 25,570 | 9 | ||||||||
| Total assets | $ | 17,438,572 | $ | 23,933,548 | $ | (6,494,976 | ) | (27 | ) | ||||||
FROM CURRENT BUSINESSES (NON-GAAP) (D): | |||||||||||||||
| Operating income | $ | 459,740 | $ | 388,572 | $ | 71,168 | 18 | ||||||||
Service revenue operating margin (A) | 23.3% |
| 22.4% |
| .9% |
| 4 | ||||||||
| Operating margin (B) | 21.1% |
| 20.0% |
| 1.1% |
| 6 | ||||||||
| Net income | $ | 261,084 | $ | 208,193 | $ | 52,891 | 25 | ||||||||
| Earnings per share: | |||||||||||||||
| Basic | $.76 | $.54 | $.22 | 41 | |||||||||||
| Diluted | $.75 | $.53 | $.22 | 42 | |||||||||||
| Equity free cash flow (E) | $ | 242,740 | $ | 170,951 | $ | 71,789 | 42 | ||||||||
| (A) | Service revenue operating margin is calculated by dividing operating income by service revenues. |
| (B) | Operating margin is calculated by dividing operating income by total revenues and sales. |
| (C) | Includes capitalized software development costs. |
| (D) | Current businesses excludes the effects of discontinued operations, amortization expense related to acquired, finite-lived intangible assets, gain on disposal of assets, costs associated with Hurricane Katrina, and integration expenses and other charges. |
| (E) | Equity free cash flow is calculated as the sum of net income from current businesses plus depreciation expense less capital expenditures, which includes capitalized software development costs as indicated in Note C. |
| Operating results from current businesses have been reconciled to operating results under GAAP on pages 6 and 7 of this release. | |
| ALLTEL CORPORATION | |||||||||
| CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP (UNAUDITED)-Page 2 | |||||||||
| (In thousands, except per share amounts) | |||||||||
| THREE MONTHS ENDED | |||||||||
| June 30, | June 30, | ||||||||
| 2007 | 2006 | ||||||||
| Revenues and sales: | |||||||||
| Service revenues | $ | 1,971,616 | $ | 1,734,128 | |||||
| Product sales | 203,472 | 211,104 | |||||||
| Total revenues and sales | 2,175,088 | 1,945,232 | |||||||
| Costs and expenses: | |||||||||
| Cost of services | 640,212 | 573,977 | |||||||
| Cost of products sold | 288,638 | 283,351 | |||||||
Selling, general, administrative and other | 479,442 | 434,509 | |||||||
| Depreciation and amortization | 352,271 | 309,564 | |||||||
| Integration expenses and other charges | 35,991 | - | |||||||
| Total costs and expenses | 1,796,554 | 1,601,401 | |||||||
| Operating income | 378,534 | 343,831 | |||||||
Equity earnings in unconsolidated partnerships | 16,406 | 15,399 | |||||||
Minority interest in consolidated partnerships | (8,889 | ) | (11,482 | ) | |||||
| Other income, net | 5,591 | 21,016 | |||||||
| Interest expense | (47,437 | ) | (86,438 | ) | |||||
| Gain on disposal of assets | - | 176,639 | |||||||
Income from continuing operations before income taxes | 344,205 | 458,965 | |||||||
| Income taxes | |||||||||
