EX-99.1 2 w11797exv99w1.htm EXHIBIT 99.1 exv99w1
 

EXHIBIT 99.1
(USAMOBILITY LOGO)
“Your Business Communications Partner”
News Release
For Immediate Release
Tuesday, August 9, 2005 		  Contact: Bob Lougee (703) 721-3080
USA Mobility Reports Second Quarter Operating Results
Significant Improvement in Subscriber and Revenue Trends
Continued Debt Reduction and Cash Generation
Solid Progress on Merger Integration Objectives
Financial Guidance for 2005
Alexandria, VA (August 9, 2005) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced operating results for the second quarter ended June 30, 2005. USA Mobility was formed on November 16, 2004 by the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. USA Mobility’s historical financials are those of Arch Wireless, which was deemed the accounting acquirer in the merger.
Reported revenue for the second quarter of 2005 was $157.5 million, compared to $115.8 million in the second quarter of 2004, with the increase due entirely to the inclusion of Metrocall revenue for the three-month period ended June 30, 2005. Second quarter revenue decreased 4.9% from $165.7 million reported for the first quarter of 2005.
The company’s reported net loss for the second quarter of 2005 was $2.6 million, or $0.10 per fully diluted share, compared to net income of $3.1 million, or $0.15 per fully diluted share, in the second quarter of 2004. Included in second quarter 2005 operating expenses were non-recurring severance and related costs of $9.4 million.
Units in service totaled 5,348,000 at June 30, 2005, with 4,496,000 direct units in service and 852,000 indirect units in service. One-way units in service at June 30, 2005 totaled 4,876,000 while two-way units in service totaled 472,000. For the quarter, average revenue per unit was $9.89 for direct units in service and $4.58 per indirect unit

 

 

in service. USA Mobility reported a reduction of 510,000 units in service in the second quarter, including a one-time adjustment of 238,000 units (see explanation below). Excluding the one-time adjustment, net unit loss activity for the second quarter was 272,000 units in service, including 256,000 one-way units and 16,000 two-way units.
“We continue to see steady improvement in the rate of subscriber losses and pace of revenue decline,” said Vincent D. Kelly, president and chief executive officer. “Unit losses of 272,000 during the quarter compared to 347,000 in the first quarter and 388,000 in the fourth quarter of 2004 on a pro forma basis, represent an improvement in the sequential rate of decline from 6.1% to 5.8% to 4.8% over the past three quarters. At the same time,” Kelly said, “the decrease in revenue of 4.9% for the second quarter improved from a decrease of 7.9% in the prior period. While we cannot ensure a continuation of these trends, we are encouraged by these results.”
“In addition,” Kelly said, “we continued to make significant progress during the quarter to integrate our company. Key steps included consolidating the company’s operating structure, reorganizing senior management, streamlining sales and marketing operations, conversion to a single customer billing platform, and solid progress in network rationalization. While the paging and wireless messaging industry remains highly competitive,” he added, “we believe our efforts to successfully implement merger-related cost savings and operational synergies will allow us to continue to generate positive results over time.”
Kelly also noted that the company’s financial position improved significantly during the second quarter. “Our outstanding bank debt was $26.5 million at June 30, 2005 and our cash balance was $42.6 million, putting us in a positive net cash position at mid-year. In addition, since June 30 we have repaid an additional $8.5 million of debt, leaving us with a total bank debt balance of $18 million and a cash balance of $39.8 million as of July 31, 2005. Because we expect to be debt free before the end of the current quarter,” Kelly added, “our Board of Directors has determined that it is in the best interest of our shareholders to declare a special one-time dividend near the end of the year. The exact amount of the dividend and the date of payment have not yet been determined and will be disclosed in the future. Additionally, we have made no determination on future uses of cash beyond this one-time dividend. However, our Board will consider our options to return capital to our shareholders as time progresses.”
The company also announced financial guidance for 2005. Thomas L. Schilling, chief financial officer, said: “While projections are based on current trends and are always subject to change, USA Mobility expects to generate between $605 million and $615 million of revenue for the 12-month period ending December 31, 2005. The company also expects 2005 operating expenses (excluding depreciation and amortization expense) to be in a range between $465 million and $475 million. In addition, we expect capital expenditures for 2005 to range between $12 million and $15 million. This would put our potential year-end cash balance at approximately $75 million. We currently anticipate retaining approximately $25 million for working capital purposes and will revisit this requirement as time goes by and our operating expenses are reduced.”

 

 

Ending units in service at June 30th and revenue per unit for the second quarter reflect a one-time unit adjustment of 238,000 units (see attached schedule). The adjustment was made in connection with the company’s recently completed billing system consolidation of Metrocall’s legacy billing system to Arch’s billing system. As a result of the consolidation, 77,000 units were adjusted due to the definitional differences between the two systems, and another 161,000 units were adjusted to remove cellular phones sold by Metrocall in prior periods that had been inadvertently counted as paging units in service in Metrocall’s billing system. The unit adjustment had no impact on reported revenue, income or expenses for the second quarter or previous quarters.
* * * * * * * * *
USA Mobility plans to host a conference call for investors on its second quarter results at 11:00 a.m. Eastern Time on Wednesday, August 10, 2005. The call-in number is 888-203-7667 (toll-free) or 719-955-1567 (toll). The pass code for the call is 2516741 (followed by the # sign). A replay of the call will be available from 3:00 p.m. ET on August 10 until 11:59 p.m. on Friday, August 26. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 2516741 (followed by the # sign).
* * * * * * * * *
About USA Mobility
USA Mobility, Inc., headquartered in Alexandria, Virginia, is a leading provider of paging products and other wireless services to the business, government and healthcare sectors. USA Mobility offers traditional one-way and advanced two-way paging via its nationwide networks covering more than 90% of the U.S. population and with roaming partners in Canada and Mexico. In addition, the company offers mobile voice and data services through Nextel and Cingular/AT&T Wireless, including BlackBerry and GPS location applications. The company’s product offerings include wireless connectivity systems for medical, business, government and other campus environments. USA Mobility focuses on the business-to-business marketplace and supplies mobile connectivity solutions to over two-thirds of the Fortune 1000 companies. For further information visit www.usamobility.com.
Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding USA Mobility’s expectations for future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause USA Mobility’s actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, the ability to continue to reduce operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, government regulation, reliance upon third-party providers for certain equipment and services, the timely and efficient integration of the operations and facilities of Metrocall and Arch as well as other risks described from time to time in periodic reports and registration statements filed with the Securities and Exchange Commission. Although USA Mobility believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. USA Mobility disclaims any intent or obligation to update any forward-looking statements.

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
                 
    December 31, 2004   June 30, 2005
            (Unaudited)
ASSETS
                
Current assets:
                
Cash and cash equivalents
   $ 46,995     $ 42,643  
Accounts receivable, net
     37,750       35,545  
Prepaid rent, expenses and other
     15,460       13,504  
Deferred income tax assets
     26,906       28,088  
 
                
Total current assets
   $ 127,111     $ 119,780  
Property and equipment, net
     216,508       163,771  
Goodwill
     151,791       152,250  
Intangible assets, net
     67,129       52,004  
Deferred income tax assets
     225,253       223,682  
Other assets
     5,517       5,010  
 
                
TOTAL ASSETS
   $ 793,309     $ 716,497  
 
                
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
                
Current liabilities:
                
Current maturities of long-term debt
   $ 47,558     $ 17,681  
Accounts payable and other accrued liabilities
     76,420       74,772  
Customer deposits
     4,316       3,606  
Deferred revenue
     23,623       20,921  
 
                
Total current liabilities
   $ 151,917     $ 116,980  
Long-term debt, less current maturities
     47,500       8,833  
Other long-term liabilities
     10,555       5,233  
 
                
TOTAL LIABILITIES
   $ 209,972     $ 131,046  
 
                
Stockholders’ equity:
                
Preferred stock
     —       —  
Common stock
     3       3  
Additional paid-in capital
     554,946       558,417  
Retained earnings
     28,388       27,031  
 
                
TOTAL STOCKHOLDERS’ EQUITY
     583,337       585,451  
 
                
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
   $ 793,309     $ 716,497  
 
                

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS
(unaudited and in thousands, except share and per share amounts)
                                 
    Three Months Ended June 30,   Six Months Ended June 30,
    2004   2005   2004   2005
Revenue:
                                
Service, rental and maintenance, net of service credits
   $ 111,174     $ 151,483     $ 230,720     $ 310,633  
Product sales
     4,623       6,054       8,736       12,581  
 
                                
Total revenue
     115,797       157,537       239,456       323,214  
 
                                
 
                                
Operating expenses:
                                
Cost of products sold
     856       929       1,794       2,208  
Service, rental and maintenance
     36,988       56,429       75,976       113,078  
Selling and marketing
     8,757       11,156       17,825       21,558  
General and administrative
     28,968       47,624       60,085       96,136  
Depreciation and amortization
     31,071       32,890       57,380       71,425  
Stock based compensation
     2,054       668       4,321       2,079  
Severance and related costs
     456       9,442       4,145       14,462  
 
                                
Total operating expenses
     109,150       159,138       221,526       320,946  
 
                                
 
                                
Operating income (loss)
     6,647       (1,601 )     17,930       2,268  
Interest expense, net
     (1,700 )     (499 )     (5,029 )     (1,712 )
Loss on extinguishment of long-term debt
     —       (432 )     —       (1,026 )
Other income (expense)
     177       (73 )     345       219  
 
                                
Income (loss) before income tax expense
     5,124       (2,605 )     13,246       (251 )
Income tax expense
     (2,060 )     (44 )     (5,325 )     (1,106 )
 
                                
Net income (loss)
   $ 3,064     $ (2,649 )   $ 7,921     $ (1,357 )
 
                                
 
                                
Basic net income (loss) per common share
   $ 0.15     $ (0.10 )   $ 0.40     $ (0.05 )
 
                                
Diluted net income (loss) per common share
   $ 0.15     $ (0.10 )   $ 0.39     $ (0.05 )
 
                                
 
                                
Basic weighted average common shares outstanding
     19,965,076       27,226,076       19,982,635       27,167,381  
 
                                
Diluted weighted average common shares outstanding
     20,109,191       27,404,543       20,093,617       27,393,390  
 
                                

 

 

USA MOBILITY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
                 
    Six Months Ended June 30,
    2004   2005
Cash flows from operating activities:
                
Net income (loss)
   $ 7,921     $ (1,357 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                
Depreciation and amortization
     57,380       71,425  
Amortization of deferred financing costs
     —       630  
Amortization of stock based compensation
     1,448       2,079  
Deferred income tax expense
     5,325       389  
Loss on extinguishment of long-term debt
     —       1,026  
Gain on disposals of property and equipment
     (230 )     (32 )
Provisions for doubtful accounts, service credits and other
     4,268       11,328  
Changes in assets and liabilities:
                
Accounts receivable
     1,395       (9,304 )
Prepaid expenses and other
     (129 )     2,018  
Intangibles and other long-term assets
     —       1,346  
Accounts payable and accrued expenses
     (18,711 )     (1,650 )
Customer deposits and deferred revenue
     (4,161 )     (3,412 )
Other long-term liabilities
     2,801       (5,322 )
 
                
Net cash provided by operating activities
   $ 57,307     $ 69,164  
 
                
 
                
Cash flows from investing activities:
                
Purchases of property and equipment
     (8,138 )     (5,383 )
Proceeds from disposals of property and equipment
     1,618       176  
Receipts from note receivable
     110       181  
 
                
Net cash used for investing activities
   $ (6,410 )   $ (5,026 )
 
                
 
                
Cash flows from financing activities:
                
Repayment of long-term debt
     (60,000 )     (68,544 )
Proceeds from exercise of options
     —       54  
Purchase of treasury shares
     (3,112 )     —  
 
                
Net cash used for financing activities
   $ (63,112 )   $ (68,490 )
 
                
 
                
Net decrease in cash and cash equivalents
   $ (12,215 )   $ (4,352 )
Cash and cash equivalents, beginning of period
     34,582       46,995  
 
                
Cash and cash equivalents, end of period
   $ 22,367     $ 42,643  
 
                
Supplemental disclosure:
                
Interest paid
   $ 6,690     $ 1,996  
 
                
Income taxes paid
   $ —     $ —  
 
                

 

 

USA MOBILITY, INC.
PRO FORMA AND ADJUSTED UNITS IN SERVICE ACTIVITY (a) (b)
units in thousands (unaudited)
                                                 
    Three Months Ended
    March 2004   June 2004   September 2004   December 2004   March 2005   June 2005
Direct     One-Way:
                                                
Beginning units in service
     5,329       5,100       4,909       4,690       4,464       4,273  
Gross placements
     225       182       182       166       141       134  
Disconnects
     (455 )     (372 )     (401 )     (392 )     (332 )     (293 )
 
                                                
Ending units in service
     5,100       4,909       4,690       4,464       4,273       4,114  
 
                                                
 
                                                
Two-Way:
                                                
Beginning units in service
     506       483       462       449       422       397  
Gross placements
     40       32       35       29       22       29  
Disconnects
     (63 )     (53 )     (48 )     (56 )     (47 )     (44 )
 
                                                
Ending units in service
     483       462       449       422       397       382  
 
                                                
 
                                                
Indirect     One-Way:
                                                
Beginning units in service
     1,716       1,474       1,253       1,101       987       859  
Gross placements
     157       145       160       143       107       92  
Disconnects
     (399 )     (366 )     (312 )     (257 )     (235 )     (189 )
 
                                                
Ending units in service
     1,474       1,253       1,101       987       859       762  
 
                                                
 
                                                
Two-Way:
                                                
Beginning units in service
     131       123       121       115       94       91  
Gross placements
     20       16       20       7       7       7  
Disconnects
     (28 )     (18 )     (26 )     (28 )     (10 )     (8 )
 
                                                
Ending units in service
     123       121       115       94       91       90  
 
                                                
 
                                                
Total
                                                
Beginning units in service
     7,683       7,180       6,746       6,355       5,967       5,620  
Gross placements
     442       375       397       345       277       262  
Disconnects
     (945 )     (809 )     (787 )     (733 )     (624 )     (534 )
 
                                                
Ending units in service
     7,180       6,746       6,355       5,967       5,620       5,348  
 
                                                
 
(a)   Assumes Arch and Metrocall combined as of January 1, 2004 and the unit in service adjustment reflected in March 2004.
 
(b)    Amounts have been adjusted for rounding.

 

 

USA MOBILITY, INC.
IMPACT OF THE ADJUSTMENT TO UNITS IN SERVICE
(unaudited and in thousands except for average revenue per unit)
                                                 
    Three Months Ended
    March 2004   June 2004   September 2004   December 2004   March 2005   June 2005
Units in Service Adjustment Summary
                                                
 
                                                
Revised Adjusted Proforma Ending UIS
                                               
Direct One-Way
     5,100       4,909       4,690       4,464       4,273       4,114  
Direct Two-Way
     483       462       449       422       397       382  
Indirect One-Way
     1,474       1,253       1,101       987       859       762  
Indirect Two-Way
     123       121       115       94       91       90  
 
                                                
Total
     7,180       6,746       6,355       5,967       5,620       5,348  
 
                                                
 
                                                
Previous Unadjusted Proforma & Reported Ending UIS
                                                
Direct One-Way
     5,181       4,994       4,779       4,557       4,368          
Direct Two-Way
     507       486       473       446       422          
Indirect One-Way
     1,603       1,382       1,230       1,117       989          
Indirect Two-Way
     112       110       104       83       80          
 
                                                
Total
     7,403       6,972       6,586       6,202       5,858          
 
                                                
 
                                                
Adjustment to Ending UIS
                                                
Direct One-Way
     (81 )     (85 )     (89 )     (93 )     (95 )        
Direct Two-Way
     (24 )     (24 )     (24 )     (24 )     (25 )        
Indirect One-Way
     (129 )     (129 )     (129 )     (130 )     (129 )        
Indirect Two-Way
     11       11       11       11       12          
 
                                                
Total
     (223 )     (226 )     (231 )     (235 )     (238 )        
 
                                                
 
                                                
ARPU Adjustment Summary
                                                
 
                                                
Revised Adjusted Proforma ARPU
                                                
Direct One-Way
   $ 9.10     $ 8.96     $ 8.89     $ 8.75     $ 8.65     $ 8.62  
Direct Two-Way
   $ 25.15     $ 24.68     $ 24.22     $ 23.93     $ 24.00     $ 23.69  
Indirect One-Way
   $ 4.06     $ 4.26     $ 4.12     $ 4.26     $ 4.07     $ 4.11  
Indirect Two-Way
   $ 12.89     $ 12.07     $ 11.30     $ 10.41     $ 9.12     $ 8.63  
 
                                                
Total
   $ 9.15     $ 9.16     $ 9.14     $ 9.09     $ 9.01     $ 9.02  
 
                                                
 
                                                
Previous Unadjusted Proforma & Reported ARPU
                                                
Direct One-Way
   $ 8.96     $ 8.81     $ 8.73     $ 8.58     $ 8.46          
Direct Two-Way
   $ 23.98     $ 23.48     $ 23.00     $ 22.68     $ 22.64          
Indirect One-Way
   $ 3.76     $ 3.89     $ 3.71     $ 3.79     $ 3.57          
Indirect Two-Way
   $ 14.17     $ 13.32     $ 12.51     $ 11.69     $ 10.46          
 
                                                
Total
   $ 8.89     $ 8.84     $ 8.79     $ 8.75     $ 8.67          
 
                                                
 
                                                
Adjustment to ARPU
                                                
Direct One-Way
   $ 0.14     $ 0.15     $ 0.16     $ 0.17     $ 0.19          
Direct Two-Way
   $ 1.17     $ 1.20     $ 1.22     $ 1.25     $ 1.36          
Indirect One-Way
   $ 0.30     $ 0.37     $ 0.41     $ 0.47     $ 0.50          
Indirect Two-Way
   ($ 1.28 )   ($ 1.25 )   ($ 1.21 )   ($ 1.28 )   ($ 1.34 )        
 
                                                
Total
   $ 0.26     $ 0.32     $ 0.35     $ 0.34     $ 0.34