alltel 06 atar

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Slide 1: Annual Review 2006 WWW.ALLTEL.COM/2007ANNUAL is your destination for more in-depth information about our company’s strategy, performance and ﬁnancial highlights. Spending corporate dollars wisely is a responsibility we take seriously; sparing the environment is our contribution as a good corporate citizen. Slide 2: Jan 06 Feb 06 Mar 06 Launch of U Prepaid First Cellular acquisition announced Words of Wisdom scholarships announced Apr 06 May 06 Jun 06 Launch of My Circle Roaming agreements with Sprint and Cingular announced Virginia Cellular purchase completed Jul 06 Aug 06 Sep 06 Alltel recognized for having “Highest in Call Quality Performance Among Wireless Cell Phone Users in Southeast Region (Tie) and in Southwest Region”* Spin/merge of wireline business completed XM Satellite Radio service launched Oct 06 Nov 06 Dec 06 Midwest Wireless purchase completed Alltel customers get more power to shop and customize their phone using online tools Samsung SCH-u520 launched * Alltel Wireless received the highest numerical score among wireless cell phone providers in the Southwest and Southeast regions of the proprietary J.D. Power and Associates 2006 Wireless Call Quality Performance StudySM – Vol. 2. Study based on 23,626 wireless users measuring 5 providers in both the Southwest and Southeast regions and measures opinions of consumers with the call quality of their wireless service. Proprietary study results are based on experiences and perceptions of consumers surveyed in March and June 2006. Your experiences may vary. Visit jdpower.com. Slide 3: 2006 was the busiest and most challenging year in Alltel’s history. We formed Windstream Corporation through the historic spin-off/merger of our wireline business; sold our international assets for $2.3 billion; and acquired over 500,000 customers through the purchases of Midwest Wireless, First Cellular of Southern Illinois, Virginia Cellular and Cellular One in Amarillo, Texas. While reaching these milestones, we also delivered strong ﬁnancial performance. Revenues and fully diluted earnings per share from current businesses both increased by 20 percent, to $7.9 billion and $2.19, respectively, with a 35 percent increase in equity free cash ﬂow. During 2006, the Alltel board of directors declared dividends of over $500 million and approved a $3 billion share repurchase program. By the end of the year, Alltel had repurchased 28.5 million shares of common stock, representing almost 7.5% of our total shares outstanding, for approximately $1.6 billion. In total, we returned over $2.1 billion of cash to our shareholders in 2006 while maintaining one of the strongest balance sheets in the industry, ending the year with only $1.8 billion in outstanding net debt. For the year, including dividends and the value of Windstream stock received at the time of the spin-off, Alltel delivered a 22% return to its shareholders. OPERATIONAL HIGHLIGHTS In 2006 we became a wireless-only business and continued to increase our customer base both organically and through acquisition. With the customers gained from Midwest Wireless and our other newly acquired markets, we now serve almost 12 million people across a geographical area that is larger than that of any of our competitors. Average revenue per customer grew two percent to $52.68. This includes an average of $3.52 in data revenue per user, representing a 62 percent increase over 2005. At the same time, overall post-pay churn improved to 1.57 percent, reﬂecting the impact of innovative pricing plans and a continuing commitment to improving our service at all points of customer contact – whether in person, over the phone or over the Web. SENDING OUT A STRONG SIGNAL Alltel’s evolution as a wireless-only carrier conﬁrms the constancy of our underlying commitment to the stewardship of our shareholders’ investment. Our aim, as always, is to deliver superior shareholder returns by providing superior customer value, and our key achievements of 2006 once again demonstrated the wisdom of this approach. For example, last April we launched My Circle®, a groundbreaking new service that allows customers to select up to 10 numbers on any network (wireless or wireline) that they’d like to call for free at any time. They can change these numbers at any time using an on-line tool. We introduced users to the power of choice and control over their wireless service and self-service options for managing their account. This self-service will help us cut costs while continuing to deliver on our promise of treating customers with fairness and respect. Our new roaming agreement with Sprint and extended agreement with Cingular conﬁrms our position as the nation’s number one roaming partner. This is another illustration of Alltel’s ability to think outside the regional box and fully exploit the potential of America’s largest wireless network. Slide 4: We set ourselves apart from our competitors with the nation’s largest network and back it up with our network guarantee, which credits customers one minute for any dropped call. J.D. Powers and Associates conﬁrmed our credentials by ranking us highest in call quality in both the Southeast and Southwest regions of the country. We launched a record number of information and entertainment services for businesses and consumers, including a mobile podcast service, XM Radio Mobile and location-based services. To support these offerings, we installed more than 3,700 new DO sites in 33 markets, bringing customers next generation EVDO (evolution data optimized) technology along with unlimited wireless access to the Internet at speeds comparable to wired broadband connections such as cable modem or DSL. A STRONG TEAM Even though the list of 2006 accomplishments outlined above is quite impressive by almost any standard, it’s futile to attempt to describe here the debt of gratitude we owe to the outstanding men and women who made them happen. The wireline spin, combined at the same time with ﬁve signiﬁcant wireless integration projects, required unprecedented dedication and effort from the entire Alltel team. Looking back over the past two decades, few industries have experienced the growth that the wireless industry has seen. As technology continues to redeﬁne boundaries and business models, and as customers demand new ways of communicating using both voice and data products, the opportunities for Alltel remain undiminished. As such, Alltel’s message to shareholders, customers and employees remains the same: as stewards of our investors’ money, we will continue to strive to deliver superior ﬁnancial performance by delivering strong value and superior service to our customers. Scott T. Ford President and Chief Executive Ofﬁcer February 20, 2007 Slide 5: ALLTEL CORPORATION CONSOLIDATED BALANCE SHEET FOR THE YEARS ENDED DECEMBER 31, (Millions, except per share amounts) CURRENT ASSETS: Cash and short-term investments Accounts receivable (less allowance for doubtful accounts of $54.9 and $70.6, respectively) Inventories Prepaid expenses and other Assets related to discontinued operations Total current assets Investments Goodwill Other intangibles Property, Plant and Equipment: Land Building and improvements Operating plant and equipment Information processing Furniture and ﬁxtures Under construction Total property, plant and equipment Less accumulated depreciation Net property, plant and equipment Other assets Assets related to discontinued operations $ 934.2 $ 982.4 807.3 218.6 67.7 4.3 ____________ 2,032.1 368.9 8,447.0 2,129.4 314.9 955.1 7,933.8 1,048.1 173.8 496.0 ____________ 10,921.7 5,690.3 ____________ 5,231.4 89.4 45.5 761.8 195.2 92.1 565.4 _____________ 2,596.9 356.4 7,429.3 1,861.4 280.3 901.1 7,362.9 1,126.5 143.6 344.3 _____________ 10,158.7 5,056.0 _____________ 5,102.7 248.2 6,418.2 2006 2005 Total Assets LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Current maturities of long-term debt Accounts payable Advance payments and customer deposits Accrued taxes Accrued dividends Accrued interest Current deferred income taxes Other current liabilities Liabilities related to discontinued operations Total current liabilities Long-term debt Deferred income taxes Other liabilities Liabilities related to discontinued operations Total liabilities $18,343.7 $24,013.1 36.3 576.1 186.2 114.1 46.0 79.3 — 156.5 2.8 ____________ 1,197.3 2,697.4 1,109.5 677.6 — ____________ 5,681.8 $ 183.0 500.0 170.8 141.3 147.8 98.3 349.6 206.7 492.5 _____________ 2,290.0 5,544.1 1,142.3 796.9 1,224.3 _____________ 10,997.6 $ SHAREHOLDERS’ EQUITY: Preferred stock, Series C, $2.06, no par value, 10,307 and 11,122 shares issued and outstanding, respectively Common stock, par value $1 per share, 1.0 billion shares authorized, 364,505,820 and 383,605,936 shares issued and outstanding, respectively Additional paid-in capital Accumulated other comprehensive income Retained earnings Total shareholders’ equity 0.3 364.5 4,296.8 9.5 7,990.8 ____________ 12,661.9 0.3 383.6 5,339.3 19.5 7,272.8 _____________ 13,015.5 Total Liabilities and Shareholders’ Equity $18,343.7 $24,013.1 Slide 6: ALLTEL CORPORATION CONSOLIDATED HIGHLIGHTS AND OTHER FINANCIAL INFORMATION FOR THE YEARS ENDED DECEMBER 31 (Millions, except per share amounts) 2006 2005 Increase / (Decrease) Amount % UNDER GAAP: Revenues and sales Operating income Operating margin Net income Earnings per share: Basic Diluted Weighted average common shares: Basic Diluted Capital expenditures $ 7,884.0 $ 1,357.6 17.2% $ 1,129.4 $2.95 $2.93 $ 6,572.5 $ 1,134.2 17.3% $ 1,331.4 $3.91 $3.87 $ 1,311.5 $ 223.4 (.1%) $ (202.0) $(.96) $(.94) 20 20 (1) (15) (25) (24) 382.7 385.0 $ 1,197.1 $ 340.8 344.1 992.1 41.9 40.9 $ 205.0 12 12 21 AT YEAR END: Wireless Customers Equity Value 11,823.9 $ 22,045.3 10,662.3 $24,205.5 1,161.6 $(2,160.2) 11 (9) FROM CURRENT BUSINESSES (NON-GAAP): Operating income Operating margin Net income Earnings per share: Basic Diluted Equity free cash ﬂow $ 1,548.8 19.6% $ 841.9 $2.20 $2.19 708.6 $ 1,300.8 19.8% $ 627.6 $1.84 $1.83 525.8 $ 248.0 (.2%) $ 214.3 $.36 $.36 $ 182.8 19 (1) 34 20 20 35 $ $ Current businesses excludes the effects of discontinued operations, amortization expense related to acquired, ﬁnite-lived intangible assets, 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 expenses, costs associated with Hurricane Katrina, a change in accounting for operating leases, reversal of certain income tax contingency reserves and integration expenses and other charges. See the Financial Supplement to Alltel’s Form 10-K for the year ended December 31, 2006 for a further discussion of these items. Equity Value is calculated as total number of shares outstanding multiplied by the stock price at the end of the year. Operating margin is calculated by dividing operating income by revenues and sales. 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. Net income from current businesses increased to $842 earnings per share to $2.19. million in 2006, a jump of 34% from 2005, resulting in a 20% increase in Slide 7: RECONCILIATIONS OF RESULTS OF OPERATIONS UNDER GAAP TO RESULTS OF OPERATIONS FROM CURRENT BUSINESSES (NON-GAAP) (Millions, except per share amounts) For the Year Ended December 31, 2006 Operating Income Net Income Basic Earnings Per Share Diluted Earnings Per Share Under GAAP Items excluded from measuring results from current businesses: Amortization expense related to acquired, ﬁnite-lived intangible assets Reversal of excess bad debt reserve related to Hurricane Katrina Compensation expense due to accelerated vesting of restricted stock Integration expenses and other charges Gain on exchange or disposal of assets and other Adjustments to income tax liabilities, including contingency reserves Income from discontinued operations Net increase (decrease) From current businesses For the Year Ended December 31, 2005 Under GAAP Items excluded from measuring results from current businesses: Amortization expense related to acquired, ﬁnite-lived intangible assets Hurricane-related costs, net of insurance recoveries Integration expenses and other charges Gain on exchange or disposal of assets and other Special dividend received on Fidelity National common stock Change in accounting for operating leases Cumulative effect of accounting change Income from discontinued operations Net increase (decrease) From current businesses For the Years Ended December 31, $ 1,357.6 $ 1,129.4 $ 2.95 $ 2.93 176.1 (2.2) 3.6 13.7 — — — ________ 191.2 ________ $ 1,548.8 107.6 (1.4) 2.2 8.4 (68.8) (29.8) (305.7) ________ (287.5) ________ $ 841.9 .28 — .01 .02 (.18) (.08) (.80) ______ (.75) ______ $ 2.20 .28 — .01 .02 (.18) (.08) (.79) ______ (.74) ______ $ 2.19 $ 1,134.2 $ 1,331.4 $ 3.91 $ 3.87 104.4 19.4 23.1 — — 19.7 — — ________ 166.6 ________ $ 1,300.8 63.8 8.9 13.9 (136.7) (69.8) 12.0 7.4 (603.3) ________ (703.8) ________ $ 627.6 .19 .03 .04 (.40) (.21) .03 .02 (1.77) ______ (2.07) ______ $ 1.84 2006 .19 .03 .04 (.40) (.20) .03 .02 (1.75) ______ (2.04) ______ $ 1.83 2005 Net cash provided from operations under GAAP Adjustments to reconcile to net income under GAAP: Income (loss) from discontinued operations Cumulative effect of accounting change Depreciation and amortization expense Provision for doubtful accounts Non-cash portion of gain on exchange or disposal of assets and other Non-cash portion of integration expenses and other charges Adjustments to income tax liabilities, including contingency reserves Change in deferred income taxes Other non-cash changes, net Changes in operating assets and liabilities, net of the effects of acquisitions and dispositions Net income under GAAP Adjustments to reconcile to net income from current businesses, net of tax (See items excluded from measuring results from current businesses above) Net income from current businesses Adjustments to reconcile to equity free cash ﬂow from current businesses: Depreciation expense from current businesses Capital expenditures Equity free cash ﬂow from current businesses $ 1,490.2 $ 1,565.3 305.7 — (1,239.9) (227.3) 80.0 — 29.9 (38.7) 13.9 715.6 ________ 1,129.4 603.3 (7.4) (994.8) (192.5) 232.7 (14.9) — (71.8) (5.1) 216.6 _________ 1,331.4 (287.5) ________ 841.9 (703.8) _________ 627.6 1,063.8 (1,197.1) ________ $ 708.6 890.4 (992.2) _________ $ 525.8 Slide 8: ALLTEL CORPORATION One Allied Drive Little Rock, AR 72202 501.905.8000 www.alltel.com Minot Great Falls Missoula Helena Butte-Silver Bow Bismarck Billings Grand Forks Fargo Cheboygan Traverse City Appleton Houghton Lake Aberdeen Rapid City Casper Scottsbluff Norfolk Omaha North Platte Kearney Lincoln Beatrice Pierre Eau Claire New Ulm Rochester Sioux Falls Lansing Kalamazoo Cleveland Akron Elko Fallon Price Richfield Cheyenne Pueblo Bishop Cedar City St. George Santa Fe Albuquerque Wichita Springfield Charleston Richmond Lynchburg Norfolk Durham Raleigh Charlotte Fayetteville Greenville Tupelo Columbia South Augusta Macon Charleston Savannah Pampa Amarillo Oklahoma City Fort Smith Little Rock Phoenix Tucson El Paso Roswell Lubbock Fort Worth Shreveport Jackson Montgomery Hobbs Odessa San Angelo Alexandria Hattiesburg Mobile Baton Rouge New Orleans Albany Tallahassee Jacksonville Tampa McAllen Brownsville