Alltel Sets Records for Wireless Revenues, Operating Income in First Quarter

Alltel (NYSE: AT) produced double-digit revenue growth and strong customer additions in the first quarter. Alltel reported fully diluted earnings per share under Generally Accepted Accounting Principles (GAAP) of 64 cents and fully diluted earnings per share of 63 cents from current businesses, a 47 percent increase from a year ago. For the second quarter in a row, Alltel set a record for net customer additions, which were up 44 percent year-over-year to 237,000. "This was a record-setting quarter for Alltel in both our financial and operational results. We are continuing to win new customers in the market, as demonstrated by new records in wireless revenues, operating income and customer growth,” said Alltel President and CEO Scott Ford. "At the same time, our company is delivering value to shareholders through our quarterly dividend and the current share repurchase program. In the first quarter we acquired an additional 15.3 million shares for $939 million, bringing our total share repurchases to 44 million shares at an average price of $58. Since the inception of the program, Alltel has returned $2.7 billion to shareholders through dividends and the repurchase program.” Among the highlights for the first quarter: Revenues were $2 billion, a 13 percent increase from a year ago. Net income under GAAP was $230 million. Net income from current businesses was $225 million, a 34 percent increase from a year ago. Alltel added 867,000 customers, up 8 percent over the same period last year. Post-pay net additions were 109,000, a 102 percent increase, and pre-pay net additions were 128,000, an increase of 15 percent. Post-pay churn was 1.33 percent and total churn was 1.77 percent. Both are record lows for Alltel and year-over-year improvements for the fifth consecutive quarter. Average revenue per wireless customer (ARPU) was $52.49, a 2 percent increase from last year. Data revenue per customer was $4.70, up 64 percent from last year and 14 percent sequentially. Equity free cash flow from current businesses was $359 million, a 36 percent increase. Net cash provided from operations was $561 million. Alltel operates America’s largest wireless network, which delivers voice and advanced data services nationwide to 12 million customers. Headquartered in Little Rock, Ark., Alltel is a Forbes 500 company with annual revenues of nearly $8 billion. Alltel claims the protection of the safe-harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to uncertainties that could cause actual future events and results to differ materially from those expressed in the forward-looking statements. These forward-looking statements are based on estimates, projections, beliefs, and assumptions and are not guarantees of future events and results. Actual future events and results may differ materially from those expressed in these forward-looking statements as a result of a number of important factors. Representative examples of these factors include (without limitation) adverse changes in economic conditions in the markets served by Alltel; the extent, timing, and overall effects of competition in the communications business; material changes in the communications industry generally that could adversely affect vendor relationships with equipment and network suppliers and customer relationships with wholesale customers; changes in communications technology; the risks associated with the integration of acquired businesses; adverse changes in the terms and conditions of the wireless roaming agreements of Alltel; the potential for adverse changes in the ratings given to Alltel's debt securities by nationally accredited ratings organizations; the uncertainties related to Alltel’s strategic investments; the effects of litigation; and the effects of federal and state legislation, rules, and regulations governing the communications industry. In addition to these factors, actual future performance, outcomes, and results may differ materially because of more general factors including (without limitation) general industry and market conditions and growth rates, economic conditions, and governmental and public policy changes. Alltel, NYSE: AT www.alltel.com   ALLTEL CORPORATION CONSOLIDATED HIGHLIGHTS AND OTHER FINANCIAL INFORMATION (In thousands, except per share amounts)     THREE MONTHS ENDED Increase March 31, March 31, (Decrease) 2007  2006  Amount % UNDER GAAP: Service revenues $ 1,880,120  $ 1,649,148  $ 230,972  14  Total revenues and sales $ 2,078,548  $ 1,843,233  $ 235,315  13  Operating income $ 354,291  $ 291,954  $ 62,337  21  Service revenue operating margin (A) 18.8% 17.7% 1.1% 6  Operating margin (B) 17.0% 15.8% 1.2% 8  Income from continuing operations $ 230,283  $ 134,184  $ 96,099  72  Net income $ 230,138  $ 297,407  $ (67,269) (23) Earnings per share: Basic $.64  $.77  $(.13) (17) Diluted $.64  $.77  $(.13) (17)   Weighted average common shares: Basic 357,180  386,782  (29,602) (8) Diluted 359,815  389,676  (29,861) (8)   Capital expenditures (C) $ 169,648  $ 158,387  $ 11,261  7  Total assets $ 17,575,613  $ 24,046,118  $ (6,470,505) (27)   FROM CURRENT BUSINESSES (NON-GAAP) (D): Operating income $ 406,518  $ 348,236  $ 58,282  17  Service revenue operating margin (A) 21.6% 21.1% .5% 2  Operating margin (B) 19.6% 18.9% .7% 4  Net income $ 225,437  $ 168,573  $ 56,864  34  Earnings per share: Basic $.63  $.44  $.19  43  Diluted $.63  $.43  $.20  47  Equity free cash flow (E) $ 359,417  $ 264,006  $ 95,411  36      (A) Service revenue operating margin is calculated by dividing operating income by service revenues. (B) Operating margin is calculated by dividing operating income by total revenues and sales. (C) Includes capitalized software development costs. (D) Current businesses excludes the effects of discontinued operations, amortization expense related to acquired, finite-lived intangible assets, gain on disposal of assets and integration expenses and other charges. (E) Equity free cash flow is calculated as the sum of net income from current businesses plus depreciation expense less capital expenditures, which includes capitalized software development costs as indicated in Note C.   Operating results from current businesses have been reconciled to operating results under GAAP on page 6 of this release.   ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF INCOME UNDER GAAP-Page 2 (In thousands, except per share amounts)   THREE MONTHS ENDED March 31, March 31, 2007  2006  Revenues and sales: Service revenues $ 1,880,120  $ 1,649,148  Product sales 198,428  194,085  Total revenues and sales 2,078,548  1,843,233  Costs and expenses: Cost of services 610,995  542,784  Cost of products sold 287,509  272,697  Selling, general, administrative and other 469,898  425,696  Depreciation and amortization 349,505  299,312  Integration expenses and other charges 6,350  10,790  Total costs and expenses 1,724,257  1,551,279    Operating income 354,291  291,954    Equity earnings in unconsolidated partnerships 14,979  12,932  Minority interest in consolidated partnerships (9,694) (13,895) Other income, net 7,672  10,791  Interest expense (46,695) (84,716) Gain on disposal of assets 56,548  -    Income from continuing operations before income taxes 377,101  217,066  Income taxes 146,818  82,882    Income from continuing operations 230,283  134,184  Income (loss) from discontinued operations (145) 163,223    Net income 230,138  297,407  Preferred dividends 20  21  Net income applicable to common shares $ 230,118  $ 297,386    Basic earnings per share: Income from continuing operations $.64  $.35  Income (loss) from discontinued operations -  .42  Net income $.64  $.77    Diluted earnings per share: Income from continuing operations $.64  $.35  Income (loss) from discontinued operations -  .42  Net income $.64  $.77      ALLTEL CORPORATION CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 3 (In thousands)     ASSETS   March 31, December 31, 2007  2006    CURRENT ASSETS: Cash and short-term investments $ 576,829  $ 934,228  Accounts receivable (less allowance for doubtful accounts of $43,101 and $54,865, respectively) 765,223  807,307  Inventories 214,362  218,629  Prepaid expenses and other 82,373  67,665  Assets related to discontinued operations 3,976  4,321    Total current assets 1,642,763  2,032,150    Investments 184,540  368,871  Goodwill 8,418,777  8,447,013  Other intangibles 2,083,806  2,129,346      PROPERTY, PLANT AND EQUIPMENT: Land 322,142  314,902  Buildings and improvements 973,330  955,061  Operating plant and equipment 8,144,201  7,933,840  Information processing 1,081,295  1,048,136  Furniture and fixtures 177,268  173,835  Under construction 360,060  495,968    Total property, plant and equipment 11,058,296  10,921,742  Less accumulated depreciation 5,971,119  5,690,360    Net property, plant and equipment 5,087,177  5,231,382    Other assets 114,011  89,455  Assets related to discontinued operations 44,539  45,497      TOTAL ASSETS $ 17,575,613  $ 18,343,714      ALLTEL CORPORATION CONSOLIDATED BALANCE SHEETS UNDER GAAP-Page 3 (In thousands)     LIABILITIES AND SHAREHOLDERS' EQUITY   March 31, December 31, 2007  2006    CURRENT LIABILITIES: Current maturities of long-term debt $ 75,263  $ 36,285  Accounts payable 487,872  576,126  Advance payments and customer deposits 204,908  186,193  Accrued taxes 204,246  114,109  Accrued dividends 44,644  46,039  Accrued interest 49,057  79,281  Other current liabilities 153,226  156,471  Liabilities related to discontinued operations 374  2,761    Total current liabilities 1,219,590  1,197,265      Long-term debt 2,661,310  2,697,412  Deferred income taxes 1,059,562  1,109,479  Other liabilities 698,733  677,609    Total liabilities 5,639,195  5,681,765        SHAREHOLDERS' EQUITY: Preferred stock 253  258  Common stock 350,411  364,572  Additional paid-in capital 3,433,180  4,296,786  Accumulated other comprehensive income (loss) (27,042) 9,525  Retained earnings 8,179,616  7,990,808    Total shareholders' equity 11,936,418  12,661,949      TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 17,575,613  $ 18,343,714        ALLTEL CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS UNDER GAAP-Page 4 (In thousands)   THREE MONTHS ENDED March 31, March 31, 2007  2006  Net Cash Provided from Operations: Net income $ 230,138  $ 297,407  Adjustments to reconcile net income to net cash provided from operations: Loss (income) from discontinued operations 145  (163,223) Depreciation and amortization expense 349,505  299,312  Provision for doubtful accounts 37,261  48,700  Non-cash portion of gain on disposal of assets (56,548) -  Change in deferred income taxes 12,155  40,487  Other, net (6,722) (70) Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions: Accounts receivable 3,559  (8,693) Inventories 4,267  36,664  Accounts payable (89,778) (100,635) Other current liabilities 99,001  (46,801) Other, net (21,822) (18,311) Net cash provided from operations 561,161  384,837    Cash Flows from Investing Activities: Additions to property, plant and equipment (161,855) (150,673) Additions to capitalized software development costs (7,793) (7,714) Purchases of property, net of cash acquired (2,500) (458,931) Proceeds from the sale of investments 188,711  -  Proceeds from the return on investments 10,931  8,914  Other, net (356) 7,319  Net cash provided from (used in) investing activities 27,138  (601,085)   Cash Flows from Financing Activities: Dividends on common and preferred stock (45,961) (147,737) Repayments of long-term debt (664) (689) Distributions to minority investors (7,772) (11,810) Repurchases of common stock (938,784) -  Excess tax benefits from stock option exercises 3,830  3,381  Cash payments to effect conversion of convertible notes -  (59,848) Common stock issued 42,448  54,896  Net cash used in financing activities (946,903) (161,807)   Cash Flows from Discontinued Operations: Cash provided from operating activities 1,929  434,471  Cash used in investing activities (724) (65,813) Cash used in financing activities -  (91,757) Net cash provided from discontinued operations 1,205  276,901    Effect of exchange rate changes on cash and short-term investments -  585    Decrease in cash and short-term investments (357,399) (100,569)   Cash and Short-term Investments: Beginning of the period 934,228  982,407  End of the period $ 576,829  $ 881,838    ALLTEL CORPORATION SUPPLEMENTAL OPERATING INFORMATION-Page 5 (Dollars in thousands, except per customer amounts)   THREE MONTHS ENDED Increase March 31, March 31, (Decrease) 2007  2006  Amount %   Controlled POPs 79,575,793  77,292,038  2,283,755  3  Customers 12,060,572  10,827,065  1,233,507  11  Penetration rate 15.2% 14.0% 1.2% 9  Average customers 11,940,660  10,731,389  1,209,271  11  Gross customer additions: Internal 867,473  805,454  62,019  8  Acquired -  -  -  -  Total 867,473  805,454  62,019  8  Net customer additions: Internal 236,634  164,741  71,893  44  Acquired -  -  -  -  Total 236,634  164,741  71,893  44  Cash costs: Cost of services $ 610,995  $ 542,784  $ 68,211  13  Cost of products sold 287,509  272,697  14,812  5  Selling, general, administrative and other 469,898  425,696  44,202  10  Less product sales 198,428  194,085  4,343  2  Total $ 1,169,974  $ 1,047,092  $ 122,882  12  Cash costs per unit per month (A) $32.66  $32.52  $.14  -  Revenues: Service revenues $ 1,880,120  $ 1,649,148  $ 230,972  14  Less wholesale roaming revenues 154,187  151,003  3,184  2  Less wholesale transport revenues 46,434  10,350  36,084  349  Retail revenues $ 1,679,499  $ 1,487,795  $ 191,704  13  Average revenue per customer per month (B) $52.49  $51.23  $1.26  2  Retail revenue per customer per month (C) $46.88  $46.21  $.67  1  Retail minutes of use per customer per month (D) 651  610  41  7  Postpay churn 1.33% 1.66% (.33%) (20) Total churn 1.77% 2.00% (.23%) (12)     (A) Cash costs per unit per month is calculated by dividing the sum of the reported cost of services, cost of products sold, selling, general, administrative and other expenses less product sales, as reported in the Consolidated Statements of Income, by the number of average customers for the period. (B) Average revenue per customer per month is calculated by dividing service revenues by average customers for the period. (C) Retail revenue per customer per month is calculated by dividing retail revenues (service revenues less wholesale revenues) by average customers for the period. (D) Retail minutes of use per customer per month represents the average monthly minutes that Alltel's customers use on both the Company's network and while roaming on other carriers' networks.   ALLTEL CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 (In thousands)   THREE MONTHS ENDED MARCH 31, 2007     Income Depreciation Before and Operating Income Income Amortization Income Taxes Taxes Under GAAP $ 349,505  $ 354,291  $ 377,101  $ 146,818  Items excluded from measuring results from current businesses: Amortization expense related to acquired, finite-lived intangible assets (A) (45,877) 45,877  45,877  17,846  Integration expenses and other charges (B) -  6,350  6,350  2,471  Gain on disposal of assets (C) -  -  (56,548) (19,792) Loss from discontinued operations (E) -  -  -  -  Net increase (decrease) (45,877) 52,227  (4,321) 525  From current businesses $ 303,628  $ 406,518  $ 372,780  $ 147,343      Income From Basic Diluted Continuing Net Earnings Earnings Operations Income Per Share Per Share Under GAAP $ 230,283  $ 230,138  $.64  $.64  Items excluded from measuring results from current businesses: Amortization expense related to acquired, finite-lived intangible assets (A) 28,031  28,031  .08  .08  Integration expenses and other charges (B) 3,879  3,879  .01  .01  Gain on disposal of assets (C) (36,756) (36,756) (.10) (.10) Loss from discontinued operations (E) -  145  -  -  Net increase (decrease) (4,846) (4,701) (.01) (.01) From current businesses $ 225,437  $ 225,437  $.63  $.63          ALLTEL CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 6 (In thousands)   THREE MONTHS ENDED MARCH 31, 2006     Income Depreciation Before and Operating Income Income Amortization Income Taxes Taxes Under GAAP $ 299,312  $ 291,954  $ 217,066  $ 82,882  Items excluded from measuring results from current businesses: Amortization expense related to acquired, finite-lived intangible assets (A) (45,492) 45,492  45,492  17,696  Integration expenses and other charges (D) -  10,790  10,790  4,197  Income from discontinued operations (E) -  -  -  -  Net increase (decrease) (45,492) 56,282  56,282  21,893  From current businesses $ 253,820  $ 348,236  $ 273,348  $ 104,775        Income From Basic Diluted Continuing Net Earnings Earnings Operations Income Per Share Per Share Under GAAP $ 134,184  $ 297,407  $.77  $.77  Items excluded from measuring results from current businesses: Amortization expense related to acquired, finite-lived intangible assets (A) 27,796  27,796  .07  .07  Integration expenses and other charges (D) 6,593  6,593  .02  .01  Income from discontinued operations (E) -  (163,223) (.42) (.42) Net increase (decrease) 34,389  (128,834) (.33) (.34) From current businesses $ 168,573  $ 168,573  $.44  $.43    ALLTEL CORPORATION RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 7 (In thousands)   THREE MONTHS ENDED March 31, March 31, 2007  2006    Net cash provided from operations $ 561,161  $ 384,837  Adjustments to reconcile to net income under GAAP: Income (loss) from discontinued operations (145) 163,223  Depreciation and amortization expense (349,505) (299,312) Provision for doubtful accounts (37,261) (48,700) Non-cash portion of gain on disposal of assets 56,548  -  Change in deferred income taxes (12,155) (40,487) Other non-cash changes, net 6,722  70  Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions 4,773  137,776  Net income under GAAP 230,138  297,407  Adjustments to reconcile to net income from current businesses, net of tax (see specific items listed on page 6) (4,701) (128,834) Net income from current businesses 225,437  168,573  Adjustments to reconcile to equity free cash flow from current businesses: Depreciation expense from current businesses 303,628  253,820  Capital expenditures (169,648) (158,387) Equity free cash flow from current businesses $ 359,417  $ 264,006    ALLTEL CORPORATION NOTES TO RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP)-Page 8   As disclosed in the ALLTEL Corporation ("Alltel" or the "Company") Form 8-K filed on April 27, 2007, Alltel has presented in this earnings release results of operations from current businesses which exclude the effects of discontinued operations, amortization expense related to acquired, finite-lived intangible assets, gain on disposal of assets and integration expenses and other charges. Alltel's purpose for excluding items from the current business measures is to focus on Alltel's true earnings capacity associated with providing wireless communications services. Management believes the items excluded from the current business measures are related to strategic activities or other events, specific to the time and opportunity available, and, accordingly, should be excluded when evaluating the trends of the Company's operations.   Alltel believes that presenting the current business measures assists investors in assessing the true business performance of the Company by clarifying for investors the effects that certain items such as asset sales, integration expenses and other business consolidation costs arising from past acquisition and integration activities had on the Company’s GAAP consolidated results of operations. The Company uses results from current businesses as management’s primary measure of the performance of its business operations. Alltel's management, including the chief operating decision-maker, uses the current business measures consistently for all purposes, including internal reporting purposes, the evaluation of business objectives, opportunities and performance and the determination of management compensation.   (A) Eliminates the effects of amortization expense related to acquired, finite-lived intangible assets.   (B) The Company incurred $2.6 million of integration expenses related to its acquisitions of Midwest Wireless Holdings ("Midwest Wireless") and wireless properties in Illinois, Texas and Virginia completed during 2006. These expenses primarily consisted of branding, signage and computer system conversion costs. Alltel also recorded a pretax charge of $3.7 million associated with the closing of two call centers consisting of severance and employee benefit costs related to a planned workforce reduction.   (C) Alltel completed the sale of marketable equity securities that had been acquired in connection with its August 1, 2005 merger with Western Wireless Corporation ("Western Wireless"). In connection with the sale of these securities, Alltel recorded a pretax gain of $56.5 million.   (D) The Company incurred $10.8 million of integration expenses related to its acquisition of Western Wireless. These expenses consisted of $8.3 million of rebranding costs and $2.5 million of system conversion costs and other integration costs.   (E) Eliminates the effects of discontinued operations. Loss from discontinued operations in the first quarter of 2007 included an impairment charge of $1.7 million to reflect the fair value less cost to sell of the four rural markets in Minnesota required to be divested, as further discussed below.   As a condition of receiving approval from the Department of Justice ("DOJ") and the Federal Communications Commission ("FCC") for its acquisition of Midwest Wireless, on September 7, 2006, Alltel agreed to divest certain wireless operations in four rural markets in Minnesota. Accordingly, the four markets to be divested in Minnesota have been classified as discontinued operations in the accompanying unaudited consolidated financial statements. On April 3, 2007, Alltel completed the sale of these properties.   On July 17, 2006, Alltel completed the spin-off of its wireline telecommunications business to its stockholders and the merger of that wireline business with Valor Communications Group, Inc. ("Valor"). The spin-off included the majority of Alltel's communications support services, including directory publishing, information technology outsourcing services, retail long-distance and the wireline sales portion of communications products. The new wireline company formed in the merger of Alltel's wireline operations and Valor is named Windstream Corporation. As a result, Alltel's historical results of operations have been adjusted to reflect the wireline business as discontinued operations in the accompanying unaudited consolidated financial statements.   In addition, as a condition of receiving approval for the Western Wireless acquisition from the DOJ and the FCC, Alltel agreed to divest certain wireless operations of Western Wireless in 16 markets in Arkansas, Kansas and Nebraska. In December 2005, Alltel completed an exchange of wireless properties with United States Cellular Corporation that included a substantial portion of the divestiture requirements related to the merger. In the first quarter of 2006, Alltel completed the required divestitures with the sale of the remaining property in Arkansas. During 2005, Alltel completed the sales of international operations in Georgia, Ghana and Ireland acquired from Western Wireless. During the second quarter of 2006, Alltel completed the sales of the remaining international operations acquired from Western Wireless in Austria, Bolivia, Cote d'Ivoire, Haiti, and Slovenia. As a result, the acquired international operations and interests of Western Wireless and the 16 markets to be divested in Arkansas, Kansas and Nebraska have been classified as discontinued operations in the accompanying unaudited consolidated financial statements.