Exhibit 99(a)
Unaudited Pro Forma Combined Condensed Financial Statements
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The following unaudited pro forma combined condensed financial statements give
effect to the exchange of wireless properties between ALLTEL Corporation
("ALLTEL" or the "Company") and Bell Atlantic Corporation ("Bell Atlantic") and
GTE Corporation ("GTE") utilizing the purchase method of accounting. These pro
forma statements are presented for illustrative purposes only. The pro forma
adjustments are based upon available information and assumptions that management
believes are reasonable. The pro forma combined condensed financial statements
do not purport to represent what the results of operations of ALLTEL would
actually have been if the exchange transactions had in fact occurred on such
dates, nor do they purport to project the results of operations of ALLTEL for
any future period or as of any date, respectively.
Under the purchase method of accounting, tangible and identifiable intangible
assets acquired are recorded at their estimated fair values. The excess of the
purchase price over the net assets acquired by ALLTEL in the exchange
transactions of $1,401.2 million has been initially allocated to goodwill and is
being amortized on a straight-line basis over 25 years. The fair values and
useful lives of assets acquired have been estimated based on a preliminary
valuation and are subject to final valuation adjustments. ALLTEL has engaged a
third-party appraisal firm to perform a study to determine the allocation of the
total purchase price to the various assets acquired. Accordingly, a portion of
the excess cost may be classified as other intangibles and may be amortized over
different periods other than the goodwill amortization period of 25 years.
ALLTEL's management believes that when the final purchase price allocation is
completed, amounts allocated to goodwill will be amortized over a life not to
exceed 25 years, while other intangibles will be amortized over different
periods, which would affect net income reported by ALLTEL.
The unaudited consolidated balance sheet as of June 30, 2000 included in
ALLTEL's Quarterly Report on Form 10-Q for the period ended June 30, 2000,
incorporated by reference into this filing, includes the effects of the exchange
transactions with Bell Atlantic and GTE. Accordingly, a pro forma condensed
balance sheet is not required to be presented in this filing pursuant to
Regulation S-X Rule 11-02(c)(1).
The operating results of the properties acquired from Bell Atlantic on April 3,
2000, are reflected in the unaudited consolidated statement of income included
in ALLTEL's Quarterly Report on Form 10-Q for the period ended June 30, 2000,
from the date of acquisition. Accordingly, the unaudited pro forma combined
condensed statement of income for the six months ended June 30, 2000 reflects,
as an adjustment to ALLTEL's as reported results, the operating results of the
acquired Bell Atlantic properties for the period January 1, 2000 to March 31,
2000. Conversely, the operating results of the ALLTEL properties divested to
Bell Atlantic for the period January 1, 2000 to March 31, 2000 have been
deducted from ALLTEL's as reported results in preparing the unaudited pro forma
combined condensed statement of income for the six months ended June 30, 2000.
Operating results for the properties acquired from and divested to GTE for the
period January 1, 2000 to June 30, 2000 are reflected as adjustments to ALLTEL's
as reported results in preparing the unaudited pro forma combined condensed
statement of income for the six months ended June 30, 2000.
The unaudited pro forma combined condensed statement of income for the twelve
months ended December 31, 1999 was prepared by combining ALLTEL's consolidated
statement of income for the year ended December 31, 1999 with the statements of
income of the Bell Atlantic and GTE properties acquired for the same periods and
deducting the corresponding statements of income related to the ALLTEL
properties divested.
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Unaudited Pro Forma Combined Condensed Financial Statements, Continued:
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The unaudited pro forma combined condensed statements of income for the six
months ended June 30, 2000 and for the twelve months ended December 31, 1999,
give effect as though the exchange transactions had occurred on January 1, 1999.
The unaudited pro forma combined condensed financial data does not give effect
to any restructuring costs or to any potential cost savings or other operating
efficiencies that could result from these transactions. ALLTEL is in the process
of integrating the operations of the acquired Bell Atlantic and GTE properties.
As a result of its integration efforts, ALLTEL recorded a charge of $8.8 million
during the second quarter of 2000, consisting of $5.0 million of severance and
employee benefit costs associated with a planned workforce reduction and $3.8
million in branding and signage costs. The Company expects to incur an
additional $13 million of integration expenses during the third quarter of 2000.
Also during the second quarter of 2000, ALLTEL recorded a pretax gain for
financial reporting purposes of $1,353.1 million (related tax effect of
approximately $568.8 million) from the exchange of wireless properties with Bell
Atlantic and GTE. In accordance with Regulation S-X Rule 11-02(b)(5), the net
gain and the acquisition-related charges have not been reflected in the pro
forma condensed income statements included in this filing.
The unaudited financial statements of the Bell Atlantic and GTE properties
acquired by ALLTEL that are included in the pro forma combined condensed
financial statements were derived from unaudited financial information provided
by Bell Atlantic and GTE. The unaudited consolidated financial statements of
ALLTEL for the six months ended June 30, 2000 are contained in ALLTEL's
Quarterly Report on Form 10-Q for the period ended June 30, 2000 and are
incorporated by reference herein. The consolidated financial statements of
ALLTEL for the year ended December 31, 1999 are contained in ALLTEL's Annual
Report on Form 10-K for the year ended December 31, 1999 and are incorporated by
reference herein.
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<TABLE>
ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED June 30, 2000
(Dollars in thousands, except per share amounts)
Unaudited
----------------------------------------
Less: Add: Add:
ALLTEL Bell Atlantic GTE Pro Forma
---------------------------
ALLTEL, Properties Properties Properties Add (Deduct)
As Reported Divested Acquired Acquired Adjustments Combined
----------- ---------- -------- -------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $3,419,985 $(211,262) $69,024 $267,683 $ (20,061) A $3,525,369
Costs and expenses:
Operations 1,790,294 (110,957) 39,791 180,544 (20,061) A 1,879,611
Cost of products sold 307,940 (5,990) 5,714 6,259 - 313,923
Depreciation and amortization 453,677 (21,197) 12,844 27,931 21,303 B 494,558
Merger and integration expenses
and other charges 16,906 - - - (8,770) C 8,136
---------- ---------- ------- -------- ------------ -----------
Total costs and expenses 2,568,817 (138,144) 58,349 214,734 (7,528) 2,696,228
---------- ---------- ------- -------- ------------ -----------
Operating income 851,168 (73,118) 10,675 52,949 (12,533) 829,141
Equity earnings in unconsolidated
partnerships 71,718 (26,989) - - - 44,729
Minority interest in consolidated
partnerships (51,756) 6,870 - - - (44,886)
Other income, net 24,427 (42) 581 (3,746) - 21,220
Interest expense (144,937) (6,641) (5,360) (6,689) (10,262) D (173,889)
Gain on disposal of assets
and other 1,338,085 - - - (1,353,085) E (15,000)
---------- ---------- ------- -------- ------------ -----------
Income before taxes 2,088,705 (99,920) 5,896 42,514 (1,375,880) 661,315
Income taxes 869,143 (42,513) - - (551,528) F 275,102
---------- ---------- ------- -------- ------------ -----------
Net income 1,219,562 (57,407) 5,896 42,514 (824,352) 386,213
Preferred dividends 81 - - - - 81
---------- ---------- ------- -------- ------------ -----------
Net income applicable
to common shares $1,219,481 $(57,407) $ 5,896 $ 42,514 $ (824,352) $ 386,132
========== ========== ======= ======== ============ ===========
Earnings per Share:
Basic $3.87 $1.22
Diluted $3.84 $1.21
Average common shares outstanding:
Basic 315,194 315,194
Diluted 317,843 317,843
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
</TABLE>
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<TABLE>
ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(In thousands, except per share amounts)
Unaudited
----------------------------------------
Less: Add: Add:
ALLTEL Bell Atlantic GTE Pro Forma
-----------------------------
ALLTEL, Properties Properties Properties Add (Deduct)
As Reported Divested Acquired Acquired Adjustments Combined
----------- ---------- -------- -------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues and sales $6,302,271 $(487,064) $287,940 $522,985 $ (52,409)A $6,732,823
159,100 G
Costs and expenses:
Operations 3,225,676 (258,126) 145,813 371,766 106,691 A,G 3,591,820
Cost of products sold 598,796 (13,687) 23,307 12,660 - 621,076
Depreciation and amortization 862,172 (49,331) 49,862 56,649 56,049 B 975,401
Merger and integration expenses
and other charges 90,520 - - - - 90,520
---------- ---------- --------- -------- --------- ----------
Total costs and expenses 4,777,164 (321,144) 218,982 441,075 162,740 5,278,817
---------- ---------- --------- -------- --------- ----------
Operating income 1,525,107 (165,920) 68,958 81,910 (56,049) 1,454,006
Equity earnings in unconsolidated
partnerships 105,025 (39,185) - - - 65,840
Minority interest in consolidated
partnerships (116,647) 15,774 - - - (100,873)
Other income, net 54,471 712 1,496 (3,207) - 53,472
Interest expense (280,175) (8,934) (20,155) 1,413 (30,227)D (338,078)
Gain on disposal of assets
and other 43,071 - - - - 43,071
---------- ---------- --------- -------- ---------- ----------
Income before taxes 1,330,852 (197,553) 50,299 80,116 (86,276) 1,177,438
Income taxes 547,218 (83,565) - - 36,137 E 499,790
---------- ---------- --------- -------- ---------- ----------
Net income 783,634 (113,988) 50,299 80,116 (122,413) 677,648
Preferred dividends 889 - - - - 889
---------- ---------- --------- -------- ---------- ----------
Net income applicable
to common shares $ 782,745 $(113,988) $ 50,299 $ 80,116 $(122,413) $ 676,759
========== ========== ========= ========= ========== ==========
Earnings per Share:
Basic $2.50 $2.16
Diluted $2.47 $2.14
Average common shares outstanding:
Basic 312,841 312,841
Diluted 316,814 316,814
The accompanying notes are an integral part of these unaudited pro forma combined financial statements.
</TABLE>
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ALLTEL CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
PRO FORMA STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2000
AND FOR THE YEAR ENDED DECEMBER 31, 1999
The unaudited pro forma financial data presented herein is not necessarily
indicative of the operating results of ALLTEL that would have occurred had the
exchange transactions been completed at the dates indicated, nor are they
necessarily indicative of future operating results of the Company. The purchase
accounting adjustments made in connection with the development of the unaudited
pro forma condensed combined financial statements are preliminary and have been
made solely for purposes of developing such pro forma financial information.
A. To eliminate the revenues and operating costs attributable to intercompany
transactions between the ALLTEL and Bell Atlantic and GTE properties
included in this transaction.
B. To reflect the periodic amortization of the excess of purchase price over
the net assets acquired by ALLTEL in this transaction. For purposes
of the unaudited pro forma condensed financial statements, the excess
purchase price of $1,401.2 million has been allocated to goodwill and
is being amortized over a 25 year life. The Company believes that
when the final purchase price allocation is completed, goodwill will
be amortized over a life not to exceed 25 years, while other
identifiable intangibles may be amortized over different periods,
which would impact ALLTEL's reported net income. A final
determination of the amounts to be allocated to and the lives
attributable to identifiable intangible assets has not yet been made.
C. To eliminate integration expenses and other charges of $8.8 million
recorded by ALLTEL in the second quarter of 2000 in connection with
the exchange of wireless assets with Bell Atlantic and GTE. These
expenses include $5.0 million in severance and employee benefit costs
related to a planned workforce reduction and $3.8 million in branding
and signage costs. Pursuant to Rule 11.02(b)(5) of Regulation S-X,
these non-recurring charges have been excluded in preparing the
accompanying unaudited pro forma financial statements.
D. To reflect the additional interest expense incurred by ALLTEL as a result
of the issuance of long-term debt to finance the net acquisition
cost of $431.6 million ($624.1 million paid to Bell Atlantic, net of
$192.5 million received from GTE) and the assumption of $425.0
million of long- term debt. The adjusment also reflects the
elimination of intercompany interest expense related to the Bell
Atlantic and GTE properties acquired in this transaction.
E. To eliminate the gain on exchange of wireless assets of $1,353.1 million
recorded by ALLTEL in the second quarter of 2000 related to the
transactions with Bell Atlantic and GTE. Pursuant to Rule 11.02(b)(5)
of Regulation S-X, this non-recurring gain has been excluded in
preparing the accompanying unaudited pro forma financial statements.
F. To reflect the federal and state income tax expense of the pro forma
adjustments at the statutory tax rate and to reflect federal and
state income tax expense of the acquired Bell Atlantic and GTE
properties at ALLTEL's statutory tax rate.
G. To adjust ALLTEL's historical financial statements to reflect wireless
roaming revenues reported on a gross basis. During the second
quarter of 2000, ALLTEL changed the reporting presentation for
wireless roaming revenues. This change conforms the Company's
financial reporting policies to prevailing wireless industry practice
and is consistent with the reporting policies of the acquired Bell
Atlantic and GTE properties. Previously, ALLTEL netted these
revenues against roaming charges from other wireless service
providers and included the net amount in operations expense. This
change does not affect ALLTEL's previously reported operating income
or net income.
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