EX-99.1 2 w19488exv99w1.htm EXHIBIT 99.1 exv99w1
 

Exhibit 99.1
(USAMOBILITY LOGO)
"Your Business Communications Partner”
(NEWS RELEASE)
     
For Immediate Release
  Contact:          Bob Lougee (703) 721-3080
Monday, April 3, 2006
   
USA Mobility Reports Preliminary 2005 Operating Results
First Year Marked by Successful Merger Integration,
Repayment of Debt and Return of Capital to Shareholders
Alexandria, VA (Apri1 3, 2006) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced preliminary and unaudited operating results for the fourth quarter and year ended December 31, 2005, its first full year of operations following the merger between Arch Wireless, Inc. and Metrocall Holdings, Inc. on November 16, 2004.
The company announced on March 31, 2006 that it delayed the filing of its 2005 Form 10-K and its amended Form 10-K/A for the year ended December 31, 2004, and amended Form 10-Q/A’s for the three interim quarterly periods for 2004 and 2005. The delay was the result of unforeseen time requirements in connection with completing its restatements of income taxes and deferred tax assets for the years 2003 and 2004, and interim periods of 2004 and 2005. The company is working diligently on completing this work and intends to file these statements as soon as practicable.
Upon completion of the audit and related filings, USA Mobility expects to report the following results: revenue of $618.6 million for 2005, with EBITDA of $155.9 million, or 25 percent of revenue; and operating income for 2005 of $2.5 million, as the company accelerated depreciation of the former Arch two-way paging system. Decommissioning of the system was completed in the fourth quarter of 2005. Additionally, the company recorded operating expenses in 2005 of $16.6 million for severance and contract termination costs associated with the integration of Arch and Metrocall.

 


 

The company said the merger integration, which is substantially complete, was the catalyst for significant improvements in 2005 operating results for the combined company.
Highlights of 2005 included:
    The company completed a new long-term contract with its largest tower landlord. In addition, subsequent to year end and effective January 1, 2006, the company completed a long-term contract with its second largest landlord. These contracts are expected to provide substantial cost savings compared to its previous site rent expense.
 
    In the fourth quarter of 2005, the company completed its planned decommissioning of the former Arch two-way paging system. The process included the decommissioning of more than 2,100 transmitters and will ultimately result in $21 million of annual savings by 2009 when all lease commitments expire.
 
    The company made substantial progress in rationalizing its one-way paging systems, decommissioning approximately 1,200 one-way transmitters during the year.
 
    Through new landlord contracts and network rationalization the company expects to reduce its total annual site rent expense $87 million, or 70 percent, by 2010.
 
    Integration and consolidation efforts reduced the number of employees from more than 2,800 at the time of the merger to 1,617 at December 31, 2005. This 43 percent reduction in workforce unlocked significant improvement in revenue per employee, which had been decreasing for both Arch and Metrocall over the four quarters leading up to the merger. Since the merger, revenue per employee has increased 40 percent and reached $343,000 of annualized revenue per employee as of the fourth quarter of 2005.
 
    The company streamlined its sales organization from three divisions, which included 15 regions, to a single nationwide sales organization with 11 regions. The consolidation included a significant reduction in management overhead.
 
    In total, all integration and cost consolidation efforts reduced the company’s operating expense, excluding depreciation and amortization, by $41.6 million per quarter, from $144.4 million on a pro-forma basis in the fourth quarter of 2004, to $102.8 million in the fourth quarter of 2005.
 
    The company repaid $140 million in debt, which it incurred to consummate the merger, within the first nine months of operations.
 
    The company paid a $1.50 per share dividend in December 2005, representing a $41 million return of capital to its investors.
 
    The company began exploring alternative revenue sources, including the execution of an agreement with Advanced Metering Data Systems (AMDS) in which USA Mobility would share revenue derived from its narrowband PCS meter reading network.

 


 

    USA Mobility strengthened and enhanced its executive management team, including the recruitment of its chief financial officer, general counsel and executive vice president for marketing, as well as filled the positions of chief operating officer and executive vice president of sales through internal promotions.
In addition to the benefits of the merger and subsequent integration, the company also experienced improved revenue and subscriber trends during 2005.
    The rate of revenue erosion continued to show improvement. In all four quarters since the merger the year-over-year rate of revenue decline improved on a pro-forma basis from 22.7 percent in first quarter, 22.4 percent in second quarter, 20.6 percent third quarter and finally to 20.3 percent in the fourth quarter.
    The quarterly loss in subscribers slowed significantly from over 500,000 in the first quarter of 2004 on a pro-forma basis to 230,000 in the fourth quarter of 2005. More importantly, the quarterly rate of erosion declined from 6.5 percent to 4.5 percent during the same period.
“We made excellent progress in our first year following the merger,” said Vincent D. Kelly, president and chief executive officer. “We substantially integrated the nation’s two largest paging carriers, achieving significant synergies and operational costs savings.” Kelly added: “In addition, while the paging and wireless messaging sector remains challenging, we were encouraged by the improvement in subscriber erosion during the year as well as the improving trends in the pace of revenue decline. As we move forward to complete the integration process and implement new sales and marketing initiatives in 2006, we anticipate even further financial and operational improvements that will allow us to better meet the needs of our customers nationwide.”
Thomas L. Schilling, chief financial officer, said: “We continued to strengthen our financial position since the merger. We significantly reduced our operating costs, paid off $140 million in debt, paid out $41 million in dividends and ended the year with $37.5 million in cash, and expect to end the first quarter of 2006 with a cash balance of approximately $73 million.” Schilling also outlined the company’s guidance for 2006, stating: “In 2006 the company expects revenue to be in a range from $480 million to $500 million, operating expenses, excluding depreciation and amortization, are expected to be in a range from $370 million to $380 million, and capital expenses in a range from $15 million to $20 million.”
Additional information on USA Mobility’s historical subscriber trends and operating efficiency is available at: http://media.corporate-ir.net/media_files/priv/usmo/USAM_Chart_Art3.pdf.
* * * * * * * * *

 


 

USA Mobility plans to host a conference call for investors on its fourth quarter and year-end results at 11:00 a.m. Eastern Time on Tuesday, April 4, 2006. The call-in number is 800-262-1292 (toll-free) or 719-457-2680 (toll). The pass code for the call is 4879478. A replay of the call will be available from 3:00 p.m. on April 4 until 11:59 p.m. on Tuesday, April 18, 2006. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4879478.
* * * * * * * * *
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, healthcare and emergency response 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. In addition, the company offers mobile voice and data services through Sprint Nextel and Cingular 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, 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.
Tables to Follow

 


 

Transmitter metrics
                                                 
    2005     2006     2007     2008     2009     2010  
Total End of Year Active Transmitters
    15,521       14,245       11,645       8,950       8,450       7,995  
Average Active Transmitters
    17,019       14,883       12,945       10,298       8,700       8,223  
Average Cost Per Transmitter
  $ 611     $ 588     $ 515     $ 445     $ 402     $ 385  
Rate of Decline in Average Cost
            -4 %     -12 %     -14 %     -10 %     -4 %
Expected Total Cost ( $ in millions)
  $ 124.8     $ 105.0     $ 80.0     $ 55.0     $ 42.0     $ 38.0  
Rate of Decline in Expected Total Cost
            -16 %     -24 %     -31 %     -24 %     -10 %
Note: The transmitter metrics presented above represent projections by USA Mobility and are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS

(unaudited and in thousands)
                 
    For the year ended December 31,  
    2004     2005  
Revenues:
               
Service, rental and maintenance, net of service credits
  $ 470,751     $ 592,690  
Product sales
    19,409       25,882  
 
           
Total revenue
    490,160       618,572  
Operating expenses:
               
Cost of products sold
    4,347       4,483  
Service, rental and maintenance
    161,071       218,160  
Selling and marketing
    36,085       43,145  
General and administrative
    130,046       177,438  
Depreciation and amortization
    113,000       153,403  
Stock based compensation
    4,863       2,832  
Severance and restructuring
    11,938       16,609  
 
           
Total operating expenses
    461,350       616,070  
 
           
Operating income (loss)
    28,810       2,502  
 
           
Interest expense
    (6,365 )     (2,412 )
Interest income
    451       1,089  
Loss on extinguishment of long-term debt
    (1,031 )     (1,338 )
Other income, net
    814       (1,004 )
 
           
Income (loss) before income tax expense
  $ 22,679     $ (1,163 )
 
           
Reconciliation of operating income to EBITDA:
               
Operating income (loss)
  $ 28,810     $ 2,502  
Addback:
               
Depreciation and amortization
    113,000       153,403  
 
           
EBITDA
  $ 141,810     $ 155,905  
 
           
EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results. USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business. EBITDA should not be considered in isolation or as a substitute for net income.

 


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED CASH FLOWS

(unaudited and in thousands)
                 
    Year Ended December 31,  
    2004     2005  
Net cash provided by operating activities
  $ 114,265     $ 139,254  
 
           
Net cash used in investing activities
  $ (133,722 )   $ (13,046 )
 
           
Net cash (used in) provided by financing activities
  $ 31,870     $ (135,656 )
 
           
Net increase (decrease) in cash and cash equivalents
  $ 12,413     $ (9,448 )
Cash and cash equivalents, beginning of period
    34,582       46,995  
 
           
Cash and cash equivalents, end of period
  $ 46,995     $ 37,547  
 
           

 


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)

(unaudited and in thousands)
                 
    For the year ended December 31,  
    2004        
    Proforma     2005  
Revenues:
               
Service, rental and maintenance, net of service credits
  $ 754,696     $ 592,690  
Product sales
    34,009       25,882  
 
           
Total revenue
    788,705       618,572  
Operating expenses:
               
Cost of products sold
    8,475       4,483  
Service, rental and maintenance
    257,687       218,160  
Selling and marketing
    65,847       43,145  
General and administrative
    216,317       177,438  
Depreciation and amortization
    150,321       153,403  
Stock based compensation
    6,401       2,832  
Severance and restructuring
    13,622       16,609  
 
           
Total operating expenses
    718,670       616,070  
 
           
Operating income (loss)
    70,035       2,502  
 
           
Interest expense
    (7,360 )     (2,412 )
Interest income
    451       1,089  
Loss on extinguishment of long-term debt
          (1,338 )
Other income, net
    163       (1,004 )
 
           
Income (loss) before income tax expense
  $ 63,289     $ (1,163 )
 
           
Reconciliation of operating income to EBITDA:
               
Operating income (loss)
  $ 70,035     $ 2,502  
Addback:
               
Depreciation and amortization
    150,321       153,403  
 
           
EBITDA
  $ 220,356     $ 155,905  
 
           
 
(a)   Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.
EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results. USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business. EBITDA should not be considered in isolation or as a substitute for net income.

 


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS

(unaudited and in thousands)
                                                                 
    For the three months ended  
    March 31, 2004     June 30, 2004     September 30, 2004     December 31, 2004     March 31, 2005     June 30, 2005     September 30, 2005     December 31, 2005  
Revenues:
                                                               
Service, rental and maintenance, net of service credits
  $ 119,546     $ 111,174     $ 104,785     $ 135,246     $ 159,150     $ 151,483     $ 145,014     $ 137,043  
Product sales
    4,113       4,623       4,632       6,041       6,527       6,054       6,940       6,361  
 
                                               
Total revenue
    123,659       115,797       109,417       141,287       165,677       157,537       151,954       143,404  
Operating expenses:
                                                               
Cost of products sold
    938       856       691       1,862       1,279       929       945       1,330  
Service, rental and maintenance
    38,988       36,988       36,904       48,191       56,648       56,429       54,490       50,593  
Selling and marketing
    9,068       8,757       7,862       10,398       10,402       11,156       11,276       10,311  
General and administrative
    31,304       29,150       27,615       41,977       48,427       46,491       43,260       39,260  
Depreciation and amortization
    26,309       31,071       22,302       33,318       42,312       39,005       33,277       38,809  
Stock based compensation
    2,267       1,908       1,865       (1,177 )     1,385       597       271       579  
Severance and restructuring
    3,689       602       1,228       6,419       5,136       9,904       855       714  
 
                                               
Total operating expenses
    112,563       109,332       98,467       140,988       165,589       164,511       144,374       141,596  
 
                                               
Operating income (loss)
    11,096       6,465       10,950       299       88       (6,974 )     7,580       1,808  
 
                                               
Interest expense
    (3,400 )     (1,770 )     (18 )     (1,177 )     (1,411 )     (734 )     (232 )     (35 )
Interest income
    71       70       89       221       197       235       214       443  
Loss on extinguishment of long-term debt
                      (1,031 )     (594 )     (432 )     (312 )      
Other income, net
    168       177       66       403       137       (73 )     76       (1,144 )
 
                                               
Income (loss) before income tax expense
  $ 7,935     $ 4,942     $ 11,087     $ (1,285 )   $ (1,583 )   $ (7,978 )   $ 7,326     $ 1,072  
 
                                               
Reconciliation of operating income to EBITDA:
                                                               
Operating income (loss)
  $ 11,096     $ 6,465     $ 10,950     $ 299     $ 88     $ (6,974 )   $ 7,580     $ 1,808  
Addback:
                                                               
Depreciation and amortization
    26,309       31,071       22,302       33,318       42,312       39,005       33,277       38,809  
 
                                               
EBITDA
  $ 37,405     $ 37,536     $ 33,252     $ 33,617     $ 42,400     $ 32,031     $ 40,857     $ 40,617  
 
                                               
EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results. USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business. EBITDA should not be considered in isolation or as a substitute for net income.


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)

(unaudited and in thousands)
                                                                 
    For the three months ended  
    March 31, 2004     June 30, 2004     September 30, 2004     December 31, 2004     March 31, 2005     June 30, 2005     September 30, 2005     December 31, 2005  
    Pro forma     Pro forma     Pro forma     Pro forma                                  
Revenues:
                                                               
Service, rental and maintenance, net of service credits
  $ 206,356     $ 193,917     $ 182,452     $ 171,971     $ 159,150     $ 151,483     $ 145,014     $ 137,043  
Product sales
    8,016       8,997       9,027       7,969       6,527       6,054       6,940       6,361  
 
                                               
Total revenue
    214,372       202,914       191,479       179,940       165,677       157,537       151,954       143,404  
Operating expenses:
                                                               
Cost of products sold
    1,878       2,199       2,124       2,274       1,279       929       945       1,330  
Service, rental and maintenance
    67,441       64,542       62,746       62,958       56,648       56,429       54,490       50,593  
Selling and marketing
    18,299       17,475       15,667       14,406       10,402       11,156       11,276       10,311  
General and administrative
    53,707       51,181       50,289       61,140       48,427       46,491       43,260       39,260  
Depreciation and amortization
    38,072       42,168       32,801       37,281       42,312       39,005       33,277       38,809  
Stock based compensation
    5,966       2,810       2,093       (2,784 )     1,385       597       271       579  
Severance and restructuring
    3,689       602       1,228       6,419       5,136       9,904       855       714  
 
                                               
Total operating expenses
    189,052       180,977       166,948       181,694       165,589       164,511       144,374       141,596  
 
                                               
Operating income (loss)
    25,320       21,937       24,531       (1,754 )     88       (6,974 )     7,580       1,808  
 
                                               
Interest expense
    (2,188 )     (1,971 )     (1,753 )     (1,448 )     (1,411 )     (734 )     (232 )     (35 )
Interest income
                      451       197       235       214       443  
Loss on extinguishment of long-term debt
                            (594 )     (432 )     (312 )      
Other income, net
    110       201       17       (165 )     137       (73 )     76       (1,144 )
 
                                               
Income (loss) before income tax expense
  $ 23,242     $ 20,167     $ 22,795     $ (2,916 )   $ (1,583 )   $ (7,978 )   $ 7,326     $ 1,072  
 
                                               
Reconciliation of operating income to EBITDA:
                                                               
Operating income (loss)
  $ 25,320     $ 21,937     $ 24,531     $ (1,754 )   $ 88     $ (6,974 )   $ 7,580     $ 1,808  
Addback:
                                                               
Depreciation and amortization
    38,072       42,168       32,801       37,281       42,312       39,005       33,277       38,809  
 
                                               
EBITDA
  $ 63,392     $ 64,105     $ 57,332     $ 35,527     $ 42,400     $ 32,031     $ 40,857     $ 40,616.7  
 
                                               
 
(a)   Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.
EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results. USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business. EBITDA should not be considered in isolation or as a substitute for net income.

 


 

USA MOBILITY, INC.
PRO FORMA 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     September 2005     December 2005  
Direct One-Way:
                                                               
Beginning units in service
    5,329       5,100       4,909       4,690       4,464       4,273       4,114       3,977  
Gross placements
    226       181       182       166       141       134       125       126  
Disconnects
    (455 )     (372 )     (401 )     (392 )     (332 )     (293 )     (262 )     (268 )
 
                                               
Ending units in service
    5,100       4,909       4,690       4,464       4,273       4,114       3,977       3,835  
 
                                               
Two-Way:
                                                               
Beginning units in service
    506       483       462       449       422       397       382       365  
Gross placements
    40       32       35       29       22       29       17       18  
Disconnects
    (63 )     (53 )     (48 )     (56 )     (47 )     (44 )     (34 )     (36 )
 
                                               
Ending units in service
    483       462       449       422       397       382       365       347  
 
                                               
Indirect One-Way:
                                                               
Beginning units in service
    1,716       1,474       1,253       1,101       987       859       762       685  
Gross placements
    157       145       160       143       107       92       26       26  
Disconnects
    (399 )     (366 )     (312 )     (257 )     (235 )     (189 )     (103 )     (107 )
 
                                               
Ending units in service
    1,474       1,253       1,101       987       859       762       685       604  
 
                                               
Two-Way:
                                                               
Beginning units in service
    131       123       121       115       94       91       90       89  
Gross placements
    20       16       20       7       7       7       3       18  
Disconnects
    (28 )     (18 )     (26 )     (28 )     (10 )     (8 )     (4 )     (7 )
 
                                               
Ending units in service
    123       121       115       94       91       90       89       100  
 
                                               
Total
                                                               
Beginning units in service
    7,682       7,180       6,745       6,355       5,967       5,620       5,348       5,116  
Gross placements
    443       374       397       345       277       262       171       188  
Disconnects
    (945 )     (809 )     (787 )     (733 )     (624 )     (534 )     (403 )     (418 )
 
                                               
Ending units in service
    7,180       6,745       6,355       5,967       5,620       5,348       5,116       4,886  
 
                                               
 
                                                               
 
 
                                                               
Adjusted Proforma ARPU Direct One-Way
  $ 9.10     $ 8.96     $ 8.89     $ 8.75     $ 8.65     $ 8.61     $ 8.48     $ 8.27  
Direct Two-Way
  $ 25.15     $ 24.68     $ 24.22     $ 23.93     $ 23.98     $ 23.65     $ 24.28     $ 23.76  
Indirect One-Way
  $ 4.06     $ 4.26     $ 4.12     $ 4.26     $ 4.07     $ 4.11     $ 4.36     $ 4.66  
Indirect Two-Way
  $ 12.89     $ 12.07     $ 11.30     $ 10.41     $ 9.16     $ 8.71     $ 8.42     $ 7.80  
 
                                               
Total
  $ 9.15     $ 9.16     $ 9.14     $ 9.09     $ 9.01     $ 9.02     $ 9.04     $ 8.90  
 
                                               
 
(a)   Assumes Arch and Metrocall combined as of January 1, 2004.
(b)   Amounts have been adjusted for rounding.