EX-99.1 2 w50781exv99w1.htm EX-99.1 exv99w1
 

Exhibit 99.1
(USAMOBILITY LOGO)
News Release
     
For Immediate Release   Contact: Bob Lougee (703) 721-3080
Wednesday, March 5, 2008    
USA Mobility Reports Fourth Quarter and 2007 Operating Results
Subscriber and Revenue Trends Improve, Expenses Decline;
Core Market Segments Show Continued Progress;
$98.3 Million in Capital Returned to Stockholders
Alexandria, VA (March 5, 2008) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the fourth quarter and year ended December 31, 2007.
Total revenue for the fourth quarter was $100.2 million, compared to $105.4 million in the third quarter of 2007 and $116.0 million in the fourth quarter of 2006. EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) for the fourth quarter of 2007 was $24.5 million, or 24.5 percent of revenue, and operating income was $13.6 million. Total revenue for 2007 was $424.6 million, compared to $497.7 million in 2006. EBITDA for 2007 was $124.5 million, or 29.3 percent of revenue, while operating income was $75.8 million.
The Company reported a net loss of $46.7 million, or $1.70 per fully diluted share, for the fourth quarter, compared to net income of $8.3 million, or $0.30 per fully diluted share, in the fourth quarter of 2006. The loss primarily resulted from a $54.3 million income tax expense in the fourth quarter due to a reduction in the carrying value of deferred income tax assets. Absent the incremental income tax expense, net income for the fourth quarter would have been $7.6 million, or $0.28 per fully diluted share. The higher income tax expense resulted in a net loss for the year of $5.2 million, or $0.19 per fully diluted share, from $40.2 million, or $1.46 per fully diluted share, in 2006. Third quarter net income has been adjusted to reflect a change in income tax expense due to the lapse of the statute of limitations on the 2003 income tax liabilities.

 

 

Key results for the fourth quarter and 2007 included:
  •   Quarterly net unit losses slowed to 135,000 in the fourth quarter from 193,000 in the first quarter, while the quarterly rate of unit erosion improved to 3.7 percent in the fourth quarter from 4.7 percent in the first quarter. The annual rate of unit erosion declined to 15.1 percent in 2007 from 16.0 percent in 2006. Net unit losses were 620,000 in 2007 versus 781,000 in 2006. Total units in service at year-end 2007 were 3,485,000, compared to 4,105,000 a year earlier.
 
  •   The quarterly rate of revenue erosion increased to 5.0 percent in the fourth quarter from 3.9 percent in the first quarter. However, the year-over-year rate of revenue decline improved from 19.5 percent in 2006 to 14.7 percent in 2007, the Company’s slowest rate of revenue decline in years.
 
  •   Operating expenses, excluding depreciation, amortization and accretion, were $75.7 million for the fourth quarter, a reduction of $9.5 million, or 11.2 percent, from $85.2 million in the year-earlier quarter. For the full year, operating expenses declined by $57.2 million, or 16.0 percent, to $300.1 million from $357.3 million in 2006. Expense reduction during the year was largely due to network rationalization, staff reductions and company-wide cost efficiencies.
 
  •   Average revenue per unit (ARPU) was $8.62 for the fourth quarter, an increase from $8.57 in the fourth quarter of 2006. For the year, ARPU totaled $8.55, compared to $8.60 in 2006. ARPU levels remained stable during 2007 due principally to structural pricing changes and a reduction in the rate of billing and service credits.
 
  •   EBITDA as a percentage of revenue, or EBITDA margin, was 24.5 percent in the fourth quarter, compared to 26.6 percent the year-earlier quarter.
 
  •   Capital expenses totaled $18.3 million in 2007, compared to $21.0 million in 2006.
 
  •   The Company generated $96.3 million in cash during the year from operating and investing activities and had a cash balance of $64.5 million at December 31, 2007.
 
  •   During the year the Company distributed to stockholders quarterly cash distributions of $0.65 per share of common stock plus a special distribution of $1.00 per share in the second quarter. Combined, the cash distributions represented a return of capital to stockholders of $98.3 million.
 
  •   The number of full-time equivalent employees declined from 1,235 at the beginning of the year to 1,003 at year end as a result of ongoing consolidation and expense control initiatives.

 

 

“We made excellent progress in the fourth quarter and during 2007,” said Vincent D. Kelly, president and chief executive officer. “We continued to operate the Company profitably while meeting our primary operating goals, reducing costs, increasing organizational efficiencies and expanding product offerings to our core market subscribers throughout the country. Despite ongoing competitive challenges, subscriber and revenue trends continued to improve, prices remained stable and we generated a sufficient level of cash flow to return capital to stockholders in the form of cash distributions.”
Kelly said the Company continued to concentrate its sales and marketing efforts during the year around its core market segments of Healthcare, Government and Large Enterprise. “At year end, our core market segments represented 77.6 percent of our direct subscriber base, compared with 67.7 percent at December 31, 2006, with Healthcare alone representing 42.1 percent. In addition, these core market segments made up approximately 68.1 percent of our direct paging revenue in 2007, compared to 57.2 percent in 2006. During the year,” he added, “we announced several new products and services designed to support our core customers. They included the nation’s first wide area coaster pager, called ReadyCall, to help hospital administrators ease congestion in patient waiting areas, an alliance with WeatherBug Professional to provide severe weather alerts to first responder organizations, and a customized paging solution, called PageSync, which gives customers using BlackBerry® smartphones paging reliability and multiple features in a single device. Going forward,” Kelly said, “we look to broaden our presence and create new sales and service opportunities in these core market segments.”
Consistent with its stated strategy, Kelly said USA Mobility generated sufficient cash flow in 2007 to again return capital to stockholders. The Company paid quarterly cash distributions of $0.65 per share and a special distribution of $1.00 per share in the second quarter, returning a total of $98.3 million in capital to stockholders during the year. “In addition,” Kelly noted, “our Board of Directors on February 13, 2008, declared a $0.65 per share quarterly cash distribution for stockholders of record as of February 25th, payable on March 13th. Similar to previous distributions, we expect the entire amount of the March 13th cash distribution to be paid as a return of capital.”
Kelly cautioned investors, however, that the rate at which the Company will continue to return capital to stockholders would depend largely on future operating results as well as various other business factors. “Additionally, in light of the deterioration in our stock price over the last nine months, as well as increased flexibility we have under Section 382, the Board of Directors is evaluating our strategy for returning capital to stockholders which may include periodic recurring cash distributions, special cash distributions, a stock repurchase program, or a combination of these alternatives.”

 

 

He also pointed out that a regulatory decision made during 2007 eventually could have a significant impact on the Company’s network cost structure and capital allocation strategy. “Last October the Federal Communications Commission (FCC) issued an Order on Reconsideration (Back-Up Power Order) requiring large commercial mobile radio service (CMRS) providers, including USA Mobility, to have at least eight hours of back-up power at each transmission site to minimize communications outages during emergencies. We do not believe the Back-Up Power Order should apply to paging carriers for a variety of reasons, including the unique simulcast and high-power network architecture of paging. Accordingly, along with numerous other wireless providers and trade associations, we appealed the Back-Up Power Order in January to the DC Circuit Court of Appeals. We expect the appeal to be heard around mid-year.”
Thomas L. Schilling, chief operating officer and chief financial officer, said: “We continued to strengthen our financial position in 2007, principally through ongoing cost reduction initiatives including our network rationalization program and efforts to ‘right size’ our organization as demand for paging products remained slow. While subscriber disconnect rates were higher than forecast, however, we continued to generate strong cash flow during the year and are pleased with our overall financial results.”
Schilling said the improvement in the rate of annual revenue erosion to 14.7 percent from 19.5 percent resulted in part from structural price increases in 2007 in selected distribution channels and improvements in the rate of service credits. “Total paging ARPU increased to $8.62 in the fourth quarter from $8.57 in the fourth quarter of 2006,” he noted, “while indirect ARPU increased to $5.06 from $4.92 in the year-earlier quarter and was our highest level of indirect ARPU in several years.” Schilling cautioned, however, that ARPU would likely trend downward going forward since further price increases were unlikely in the near term.
Commenting on the reduction of deferred income tax assets (DTAs) in the fourth quarter, Schilling explained: “Accounting rules require us to evaluate whether or not the Company will use all of its DTAs to offset future taxable income. As a result, based on current trends for subscribers, revenue, operating expenses and capital expenses — which, of course, are subject to change — we projected future levels of taxable income that mandated a reduction in the carrying value of our DTAs based on our effective tax rate of approximately 38 percent. Going forward, we will continue to evaluate our operating trends and will adjust the carrying value of our DTAs, either up or down, as circumstances warrant.”
Schilling also commented on the Company’s financial guidance. “We are pleased the financial guidance we provided for 2007 was largely on target,” he noted. “Total revenue of $424.6 million was within our guidance range of $420 million to $425 million; operating expenses (excluding depreciation, amortization

 

 

and accretion) of $300.1 million were slightly above the revised guidance range of $293 million to $298 million; and capital expenses of $18.3 million were within the guidance range of $18 million to $20 million. With respect to guidance for 2008, the Company expects revenue to be in a range from $345 million to $355 million, operating expenses (excluding depreciation, amortization and accretion) to be in a range from $250 million to $255 million, and capital expenses in a range from $18 million to $20 million.”
* * * * * * * * *
USA Mobility plans to host a conference call for investors on its fourth quarter and 2007 results at 11:00 a.m. Eastern Time on Thursday, March 6, 2008. The dial-in number for the call is 888-708-5691 (toll-free) or 913-981-5560 (toll). The pass code for the call is 9699744. A replay of the call will be available from 4:00 p.m. ET on March 6 until 11:59 p.m. on Thursday, March 20. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 9699744.
* * * * * * * * *
About USA Mobility
USA Mobility, Inc., headquartered in Alexandria, Virginia, is a comprehensive provider of reliable and affordable wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. As a single-source provider, USA Mobility‘s focus is on the business-to-business marketplace and supplying wireless connectivity solutions to over 70 percent of the Fortune 1000 companies. The Company operates nationwide networks for both one-way paging and advanced two-way messaging services. In addition, USA Mobility offers mobile voice and data services through Sprint Nextel, including BlackBerry® smartphones and GPS location applications. The Company’s product offerings include customized wireless connectivity systems for the healthcare, government and other campus environments. USA Mobility also offers M2M (machine-to-machine) telemetry solutions for numerous applications that include asset tracking, utility meter reading and other remote device monitoring applications on a national scale. 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 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.

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)
(unaudited and in thousands, except share and per share amounts)
                                                                   
    For the three months ended  
    3/31/06     6/30/06     9/30/06     12/31/06     3/31/07     6/30/07     9/30/07 (b)       12/31/07  
Revenues:
                                                                  
Paging service
   $ 125,673     $ 118,872     $ 112,129     $ 107,520     $ 104,003     $ 98,248     $ 95,393       $ 91,825  
Cellular
     2,026       2,096       1,728       1,877       2,087       2,497       2,035         1,705  
Product sales
     6,131       5,180       4,851       5,394       4,400       5,335       6,851         5,618  
Other
     1,062       1,057       845       1,253       1,052       1,390       1,145         1,040  
             
Total revenues
     134,892       127,205       119,553       116,044       111,542       107,470       105,424         100,188  
             
 
                                                                  
Operating expenses:
                                                                  
Cost of products sold
     786       1,169       1,184       698       687       1,508       2,435         1,603  
Service, rental and maintenance
     48,092       44,769       42,489       41,770       39,033       39,356       36,746         36,795  
Selling and marketing
     11,059       11,118       10,929       10,796       10,242       9,975       9,891         8,720  
General and administrative
     36,142       32,208       30,994       28,533       26,448       23,297       23,606         23,316  
Severance and restructuring
     170       321       682       3,413       17       —       1,177         5,235  
Depreciation, amortization and accretion
     18,794       18,900       18,361       17,244       13,318       12,450       12,048         10,872  
             
Total operating expenses
     115,043       108,485       104,639       102,454       89,745       86,586       85,903         86,541  
             
% of total revenues
     85.3 %     85.3 %     87.5 %     88.3 %     80.5 %     80.6 %     81.5 %       86.4 %
 
                                                                  
             
Operating income
     19,849       18,720       14,914       13,590       21,797       20,884       19,521         13,647  
             
% of total revenues
     14.7 %     14.7 %     12.5 %     11.7 %     19.5 %     19.4 %     18.5 %       13.6 %
 
                                                                  
Interest income, net
     549       1,023       717       1,579       951       932       856         709  
Other income (expense), net
     62       988       103       (353 )     (516 )     826       1,038         802  
             
Income before income tax expense
     20,460       20,731       15,734       14,816       22,232       22,642       21,415         15,158  
Income tax expense
     8,195       9,779       7,075       6,511       9,206       9,676       5,947         61,816  
             
Net income (loss)
   $ 12,265     $ 10,952     $ 8,659     $ 8,305     $ 13,026     $ 12,966     $ 15,468       $ (46,658 )
             
 
                                                                  
Basic net income (loss) per common share
   $ 0.45     $ 0.40     $ 0.32     $ 0.30     $ 0.47     $ 0.47     $ 0.56       $ (1.70 )
             
Diluted net income (loss) per common share
   $ 0.45     $ 0.40     $ 0.31     $ 0.30     $ 0.47     $ 0.47     $ 0.56       $ (1.70 )
             
 
                                                                  
Basic weighted average common shares outstanding
     27,397,307       27,399,533       27,400,853       27,401,492       27,434,418       27,440,094       27,445,028         27,450,035  
             
Diluted weighted average common shares
     27,503,230       27,587,958       27,575,039       27,596,451       27,578,066       27,570,346       27,594,513         27,450,035  
outstanding
                                                                  
             
 
                                                                  
Reconciliation of operating income to EBITDA (c):
                                                                  
Operating income
   $ 19,849     $ 18,720     $ 14,914     $ 13,590     $ 21,797     $ 20,884     $ 19,521       $ 13,647  
Add back: depreciation, amortization and accretion
     18,794       18,900       18,361       17,244       13,318       12,450       12,048         10,872  
             
EBITDA
   $ 38,643     $ 37,620     $ 33,275     $ 30,834     $ 35,115     $ 33,334     $ 31,569       $ 24,519  
             
% of total revenues
     28.6 %     29.6 %     27.8 %     26.6 %     31.5 %     31.0 %     29.9 %       24.5 %
 
(a)   Slight variations in totals are due to rounding.
 
(b)   Income tax expense increased by $4,838,000. This increase reflects a change in recognizing the lapse of the statute of limitations on the 2003 income tax liabilities.
 
(c)   EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.

 

 

USA MOBILITY, INC.
UNITS IN SERVICE ACTIVITY (a)
(unaudited and in thousands)
                                                                   
    For the three months ended  
    3/31/06     6/30/06     9/30/06     12/31/06     3/31/07     6/30/07     9/30/07       12/31/07  
Units in service
                                                                  
 
                                                                  
Beginning units in service
                                                                  
Direct one-way
     3,835       3,678       3,547       3,429       3,318       3,179       3,071         2,961  
Direct two-way
     348       324       307       292       280       263       245         232  
             
Total direct
     4,183       4,002       3,854       3,721       3,598       3,442       3,316         3,193  
             
Indirect one-way
     603       535       483       449       417       378       346         330  
Indirect two-way
     100       97       94       89       90       92       95         97  
             
Total indirect
     703       632       577       538       507       470       441         427  
             
Total beginning units in service
     4,886       4,634       4,431       4,259       4,105       3,912       3,757         3,620  
             
 
                                                                  
Gross placements
                                                                  
Direct one-way
     108       119       120       112       91       112       107         81  
Direct two-way
     15       15       15       15       12       14       13         10  
             
Total direct
     123       134       135       127       103       126       120         91  
             
Indirect one-way
     24       18       24       36       19       25       35         29  
Indirect two-way
     4       5       5       7       8       8       7         7  
             
Total indirect
     28       23       29       43       27       33       42         36  
             
Total gross placements
     151       157       164       170       130       159       162         127  
             
 
                                                                  
Gross disconnects
                                                                  
Direct one-way
     (265 )     (250 )     (238 )     (222 )     (230 )     (220 )     (217 )       (188 )
Direct two-way
     (39 )     (32 )     (30 )     (29 )     (29 )     (32 )     (26 )       (21 )
             
Total direct
     (304 )     (282 )     (268 )     (251 )     (259 )     (252 )     (243 )       (209 )
             
Indirect one-way
     (92 )     (70 )     (58 )     (68 )     (58 )     (57 )     (51 )       (47 )
Indirect two-way
     (8 )     (8 )     (10 )     (4 )     (6 )     (5 )     (5 )       (6 )
             
Total indirect
     (100 )     (78 )     (68 )     (72 )     (64 )     (62 )     (56 )       (53 )
             
Total gross disconnects
     (404 )     (360 )     (336 )     (323 )     (323 )     (314 )     (299 )       (262 )
             
 
                                                                  
Net gain (loss)
                                                                  
Direct one-way
     (157 )     (131 )     (118 )     (111 )     (139 )     (108 )     (110 )       (107 )
Direct two-way
     (24 )     (17 )     (15 )     (12 )     (17 )     (18 )     (13 )       (11 )
             
Total direct
     (181 )     (148 )     (133 )     (123 )     (156 )     (126 )     (123 )       (118 )
             
Indirect one-way
     (68 )     (52 )     (34 )     (32 )     (39 )     (32 )     (16 )       (18 )
Indirect two-way
     (4 )     (3 )     (5 )     1       2       3       2         1  
             
Total indirect
     (72 )     (55 )     (39 )     (31 )     (37 )     (29 )     (14 )       (17 )
             
Total net change
     (253 )     (203 )     (172 )     (154 )     (193 )     (155 )     (137 )       (135 )
             
 
                                                                  
Ending units in service
                                                                  
Direct one-way
     3,678       3,547       3,429       3,318       3,179       3,071       2,961         2,854  
Direct two-way
     324       307       292       280       263       245       232         221  
             
Total direct
     4,002       3,854       3,721       3,598       3,442       3,316       3,193         3,075  
             
Indirect one-way
     535       483       449       417       378       346       330         312  
Indirect two-way
     97       94       89       90       92       95       97         98  
             
Total indirect
     632       577       538       507       470       441       427         410  
             
Total ending units in service
     4,634       4,431       4,259       4,105       3,912       3,757       3,620         3,485  
             
 
(a)   Slight variations in totals are due to rounding.

 

 

USA MOBILITY, INC.
AVERAGE REVENUE PER UNIT (ARPU) AND CHURN (a)
(unaudited)
                                                                   
    For the three months ended  
    3/31/06     6/30/06     9/30/06     12/31/06     3/31/07     6/30/07     9/30/07       12/31/07  
ARPU
                                                                  
Direct one-way
   $ 8.17     $ 8.06     $ 7.95     $ 7.86     $ 7.96     $ 7.87     $ 7.98       $ 7.93  
Direct two-way
     23.61       23.75       23.27       23.61       23.91       24.02       24.17         24.06  
             
Total direct
     9.44       9.32       9.16       9.09       9.18       9.08       9.16         9.09  
 
                                                                  
Indirect one-way
     4.53       4.59       4.49       4.56       4.45       4.12       4.35         4.11  
Indirect two-way
     6.93       6.99       6.53       6.63       6.30       6.10       5.30         8.20  
             
Total indirect
     4.89       4.97       4.82       4.92       4.79       4.53       4.56         5.06  
 
                                                                  
Total one-way
     7.69       7.63       7.54       7.49       7.57       7.48       7.61         7.55  
Total two-way
     19.85       19.87       19.35       19.55       19.46       19.18       18.74         19.30  
             
Total paging ARPU
   $ 8.80     $ 8.74     $ 8.60     $ 8.57     $ 8.65     $ 8.54     $ 8.62       $ 8.62  
             
 
                                                                  
Gross disconnect rate (b)
                                                                  
Direct one-way
     -6.9 %     -6.8 %     -6.7 %     -6.5 %     -6.9 %     -6.9 %     -7.1 %       -6.4 %
Direct two-way
     -11.1 %     -9.8 %     -9.8 %     -9.8 %     -10.4 %     -12.2 %     -10.5 %       -9.1 %
             
Total direct
     -7.3 %     -7.0 %     -7.0 %     -6.7 %     -7.2 %     -7.3 %     -7.3 %       -6.6 %
 
                                                                  
Indirect one-way
     -15.3 %     -13.1 %     -12.0 %     -15.1 %     -14.0 %     -15.0 %     -14.7 %       -14.1 %
Indirect two-way
     -7.6 %     -8.2 %     -10.6 %     -4.7 %     -6.2 %     -5.9 %     -5.7 %       -6.7 %
             
Total indirect
     -14.2 %     -12.4 %     -11.8 %     -13.3 %     -12.6 %     -13.2 %     -12.8 %       -12.5 %
 
                                                                  
Total one-way
     -8.1 %     -7.6 %     -7.3 %     -7.5 %     -7.7 %     -7.8 %     -7.8 %       -7.1 %
Total two-way
     -10.2 %     -9.5 %     -10.0 %     -8.6 %     -9.4 %     -10.4 %     -9.2 %       -8.4 %
             
Total paging gross disconnect rate
     -8.3 %     -7.8 %     -7.6 %     -7.6 %     -7.9 %     -8.0 %     -8.0 %       -7.2 %
             
 
                                                                  
Net gain / loss rate (c)
                                                                  
Direct one-way
     -4.1 %     -3.6 %     -3.3 %     -3.2 %     -4.2 %     -3.4 %     -3.6 %       -3.6 %
Direct two-way
     -6.8 %     -5.2 %     -4.9 %     -4.1 %     -5.9 %     -6.9 %     -5.3 %       -4.6 %
             
Total direct
     -4.3 %     -3.7 %     -3.5 %     -3.3 %     -4.3 %     -3.6 %     -3.7 %       -3.7 %
 
                                                                  
Indirect one-way
     -11.3 %     -9.8 %     -7.1 %     -7.1 %     -9.5 %     -8.5 %     -4.6 %       -5.4 %
Indirect two-way
     -3.6 %     -2.9 %     -4.9 %     1.0 %     2.5 %     3.2 %     2.1 %       0.8 %
             
Total indirect
     -10.2 %     -8.7 %     -6.8 %     -5.7 %     -7.3 %     -6.2 %     -3.2 %       -4.0 %
 
                                                                  
Total one-way
     -5.1 %     -4.3 %     -3.8 %     -3.7 %     -4.8 %     -3.9 %     -3.7 %       -3.8 %
Total two-way
     -6.1 %     -4.7 %     -4.9 %     -2.9 %     -3.9 %     -4.2 %     -3.3 %       -3.0 %
             
Total paging net gain / loss rate
     -5.2 %     -4.4 %     -3.9 %     -3.6 %     -4.7 %     -4.0 %     -3.7 %       -3.7 %
             
 
(a)   Slight variations in totals are due to rounding.
 
(b)   Gross disconnect rate is current period disconnected units divided by prior period ending units in service.
 
(c)   Net gain / loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.

 

 

USA MOBILITY, INC.
SUPPLEMENTAL INFORMATION BY CUSTOMER SEGMENT (a)
(unaudited)
                                                                   
    For the three months ended  
    3/31/06     6/30/06     9/30/06     12/31/06     3/31/07     6/30/07     9/30/07       12/31/07  
Gross placement rate (b)
                                                                  
Healthcare
     3.8 %     4.5 %     4.1 %     4.2 %     3.6 %     4.8 %     4.5 %       3.6 %
Government
     2.2 %     2.3 %     2.6 %     2.1 %     2.2 %     2.5 %     2.5 %       2.0 %
Large enterprise
     2.6 %     3.0 %     3.8 %     3.9 %     2.7 %     3.0 %     2.9 %       2.7 %
Other
     2.7 %     3.0 %     3.3 %     3.1 %     2.6 %     3.2 %     3.4 %       2.4 %
             
Total direct
     2.9 %     3.3 %     3.5 %     3.4 %     2.9 %     3.7 %     3.6 %       2.8 %
Total indirect
     4.0 %     3.7 %     5.1 %     7.8 %     5.3 %     6.9 %     9.6 %       8.5 %
             
Total
     3.1 %     3.4 %     3.7 %     4.0 %     3.2 %     4.1 %     4.3 %       3.5 %
             
 
                                                                  
Gross disconnect rate (b)
                                                                  
Healthcare
     -4.6 %     -4.7 %     -5.3 %     -4.6 %     -4.6 %     -5.0 %     -5.6 %       -5.0 %
Government
     -5.7 %     -6.3 %     -5.9 %     -5.8 %     -5.8 %     -6.4 %     -6.8 %       -6.0 %
Large enterprise
     -7.7 %     -7.4 %     -6.9 %     -6.8 %     -8.4 %     -9.3 %     -7.6 %       -6.9 %
Other
     -10.3 %     -9.5 %     -9.3 %     -9.5 %     -10.9 %     -10.5 %     -10.5 %       -9.5 %
             
Total direct
     -7.3 %     -7.0 %     -7.0 %     -6.7 %     -7.2 %     -7.3 %     -7.3 %       -6.6 %
Total indirect
     -14.2 %     -12.4 %     -11.8 %     -13.3 %     -12.6 %     -13.2 %     -12.8 %       -12.5 %
             
Total
     -8.3 %     -7.8 %     -7.6 %     -7.6 %     -7.9 %     -8.0 %     -8.0 %       -7.2 %
             
 
                                                                  
Net loss rate (b)
                                                                  
Healthcare
     -0.7 %     -0.2 %     -1.1 %     -0.4 %     -1.1 %     -0.2 %     -1.0 %       -1.3 %
Government
     -3.5 %     -4.1 %     -3.3 %     -3.6 %     -3.6 %     -3.8 %     -4.3 %       -4.0 %
Large enterprise
     -5.1 %     -4.3 %     -3.0 %     -2.9 %     -5.7 %     -6.2 %     -4.6 %       -4.3 %
Other
     -7.5 %     -6.6 %     -6.1 %     -6.4 %     -8.3 %     -7.2 %     -7.2 %       -7.1 %
             
Total direct
     -4.3 %     -3.7 %     -3.5 %     -3.3 %     -4.3 %     -3.6 %     -3.7 %       -3.7 %
Total indirect
     -10.2 %     -8.7 %     -6.8 %     -5.7 %     -7.3 %     -6.2 %     -3.2 %       -4.0 %
             
Total
     -5.2 %     -4.4 %     -3.9 %     -3.6 %     -4.7 %     -4.0 %     -3.7 %       -3.7 %
             
 
                                                                  
End of period units in service % of total (b)
                                                                  
Healthcare
     29.0 %     30.5 %     31.5 %     32.5 %     33.6 %     35.0 %     36.2 %       37.1 %
Government
     16.4 %     16.4 %     16.6 %     16.5 %     17.9 %     18.0 %     17.8 %       17.8 %
Large enterprise
     10.2 %     10.2 %     10.1 %     10.3 %     13.8 %     13.6 %     13.5 %       13.5 %
Other
     30.8 %     29.9 %     29.2 %     28.3 %     22.6 %     21.7 %     20.7 %       19.8 %
             
Total direct
     86.4 %     87.0 %     87.4 %     87.6 %     88.0 %     88.3 %     88.2 %       88.2 %
Total indirect
     13.6 %     13.0 %     12.6 %     12.4 %     12.0 %     11.7 %     11.8 %       11.8 %
             
Total
     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %       100.0 %
             
 
(a)   Slight variations in totals are due to rounding.
 
(b)   Changes in the classification of units in service are reflected in the quarter when such changes are identified. Such changes are then appropriately reflected in calculating the gross placement, gross disconnet and net loss rates.

 

 

USA MOBILITY, INC.
SUPPLEMENTAL INFORMATION — DIRECT UNITS IN SERVICE AND CELLULAR
ACTIVATIONS (a)
(unaudited)
                                                                   
    For the three months ended
    3/31/06   6/30/06   9/30/06   12/31/06   3/31/07   6/30/07   9/30/07     12/31/07
Account size ending units in service (000’s)
                                                                  
1 to 3 units
     358       327       300       275       251       232       216         200  
4 to 10 units
     203       188       175       163       150       139       129         120  
11 to 50 units
     489       456       426       398       368       344       319         298  
51 to 100 units
     265       249       238       226       215       200       189         176  
101 to 1,000 units
     1,068       1,027       999       967       924       898       856         827  
>1,000 units
     1,619       1,607       1,583       1,568       1,534       1,503       1,483         1,454  
           
Total
     4,002       3,854       3,721       3,598       3,442       3,316       3,193         3,075  
           
 
                                                                  
End of period units in service % of total direct
                                                                  
1 to 3 units
     8.9 %     8.5 %     8.1 %     7.7 %     7.3 %     7.0 %     6.8 %       6.5 %
4 to 10 units
     5.1 %     4.9 %     4.7 %     4.5 %     4.4 %     4.2 %     4.1 %       3.9 %
11 to 50 units
     12.2 %     11.8 %     11.4 %     11.1 %     10.7 %     10.4 %     10.0 %       9.7 %
51 to 100 units
     6.6 %     6.5 %     6.4 %     6.3 %     6.2 %     6.0 %     5.9 %       5.7 %
101 to 1,000 units
     26.7 %     26.6 %     26.9 %     26.9 %     26.9 %     27.1 %     26.8 %       26.9 %
>1,000 units
     40.5 %     41.7 %     42.5 %     43.6 %     44.6 %     45.3 %     46.5 %       47.3 %
           
Total
     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %       100.0 %
           
 
                                                                  
Account size net loss rate
                                                                  
1 to 3 units
     -7.8 %     -8.7 %     -8.0 %     -8.3 %     -9.0 %     -7.6 %     -6.6 %       -7.6 %
4 to 10 units
     -8.2 %     -7.5 %     -6.9 %     -6.6 %     -7.9 %     -7.6 %     -7.0 %       -7.5 %
11 to 50 units
     -7.2 %     -6.8 %     -6.5 %     -6.6 %     -7.5 %     -6.4 %     -7.3 %       -6.6 %
51 to 100 units
     -7.0 %     -6.2 %     -4.2 %     -5.2 %     -4.9 %     -6.9 %     -5.7 %       -6.4 %
101 to 1,000 units
     -5.8 %     -3.8 %     -2.7 %     -3.2 %     -4.4 %     -2.8 %     -4.7 %       -3.3 %
>1,000 units
     -5.0 %     -0.7 %     -1.6 %     -0.9 %     -2.2 %     -2.0 %     -1.3 %       -2.0 %
           
Total
     -4.3 %     -3.7 %     -3.5 %     -3.3 %     -4.3 %     -3.6 %     -3.7 %       -3.7 %
           
 
                                                                  
Account size ARPU
                                                                  
1 to 3 units
   $ 14.02     $ 14.14     $ 14.07     $ 14.18     $ 14.68     $ 14.67     $ 14.90       $ 14.83  
4 to 10 units
     13.02       13.08       12.99       13.07       13.41       13.40       13.68         13.62  
11 to 50 units
     10.88       10.81       10.72       10.76       10.95       10.93       11.15         11.07  
51 to 100 units
     9.59       9.53       9.39       9.30       9.44       9.48       9.74         9.74  
101 to 1,000 units
     8.34       8.29       8.21       8.18       8.24       8.24       8.35         8.38  
>1,000 units
     8.18       8.05       7.89       7.91       7.93       7.80       7.86         7.81  
           
Total
   $ 9.44     $ 9.32     $ 9.16     $ 9.09     $ 9.18     $ 9.08     $ 9.16       $ 9.09  
           
 
                                                                  
Cellular revenue
                                                                  
Number of activations
     6,829       6,969       6,374       5,818       5,450       8,046       5,579         5,070  
           
Revenue from cellular services (000’s)
   $ 2,026     $ 2,096     $ 1,728     $ 1,877     $ 2,087     $ 2,497     $ 2,035       $ 1,705  
           
 
(a)   Slight variations in totals are due to rounding.

 

 

USA MOBILITY, INC.
CONSOLIDATED OPERATING EXPENSES SUPPLEMENTAL INFORMATION (a)
(unaudited and in thousands)
                                                                   
    For the three months ended  
    3/31/06     6/30/06     9/30/06     12/31/06     3/31/07     6/30/07     9/30/07       12/31/07  
Cost of products sold
   $ 786     $ 1,169     $ 1,184     $ 698     $ 687     $ 1,508     $ 2,435       $ 1,603  
             
 
                                                                  
Service, rental and maintenance
                                                                  
Site rent
     26,099       25,021       24,314       24,204       22,284       22,115       20,705         19,602  
Telecommunications
     9,099       8,480       7,343       7,185       7,058       6,622       5,289         6,356  
Payroll and related
     7,046       6,578       6,517       6,136       6,488       6,657       6,871         6,878  
Stock based compensation
     81       83       78       78       31       30       26         25  
Other
     5,767       4,607       4,237       4,167       3,172       3,932       3,855         3,934  
             
Total service, rental and maintenance
     48,092       44,769       42,489       41,770       39,033       39,356       36,746         36,795  
             
 
                                                                  
Selling and marketing
                                                                  
Payroll and related
     7,709       7,317       6,996       6,902       6,740       6,259       5,984         5,517  
Commissions
     2,226       2,373       2,407       2,577       2,170       2,386       2,140         2,056  
Stock based compensation
     171       166       178       55       93       91       67         52  
Other
     953       1,262       1,348       1,262       1,239       1,239       1,700         1,095  
             
Total selling and marketing
     11,059       11,118       10,929       10,796       10,242       9,975       9,891         8,720  
             
 
                                                                  
General and administrative
                                                                  
Payroll and related
     12,330       11,412       9,517       9,287       9,560       9,343       9,487         8,744  
Stock based compensation
     431       461       484       462       304       299       214         180  
Bad debt
     1,790       1,705       2,035       1,975       1,402       1,075       854         1,015  
Facility rent
     4,104       3,973       3,468       3,408       2,947       3,066       2,614         2,177  
Telecommunications
     2,248       1,982       1,858       1,714       1,764       1,526       1,402         1,366  
Outside services
     6,419       5,631       6,162       7,122       5,504       5,222       5,136         4,854  
Taxes, licenses and permits
     4,149       2,708       3,036       (501 )     2,316       (20 )     1,815         2,218  
Other
     4,671       4,336       4,434       5,066       2,651       2,786       2,084         2,762  
             
Total general and administrative
     36,142       32,208       30,994       28,533       26,448       23,297       23,606         23,316  
             
 
                                                                  
Severance and restructuring
     170       321       682       3,413       17       —       1,177         5,235  
Depreciation, amortization and accretion
     18,794       18,900       18,361       17,244       13,318       12,450       12,048         10,872  
 
                                                                  
             
Operating expenses
   $ 115,043     $ 108,485     $ 104,639     $ 102,454     $ 89,745     $ 86,586     $ 85,903       $ 86,541  
             
 
                                                                  
Capital expenses
   $ 4,424     $ 4,595     $ 5,152     $ 6,819     $ 5,086     $ 3,525     $ 4,528       $ 5,184  
 
(a)   Slight variations in totals are due to rounding.

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(in thousands)
                   
    12/31/06       12/31/07  
Assets
                  
Current assets:
                  
Cash and cash equivalents
   $ 66,507       $ 64,542  
Accounts receivable, net
     26,364         28,044  
Prepaid expenses and other
     12,294         8,608  
Deferred income tax assets, net
     18,399         8,267  
 
              
Total current assets
     123,564         109,461  
Property and equipment, net
     91,562         75,669  
Goodwill
     159,438         188,170  
Intangible assets, net
     26,339         16,929  
Deferred income tax assets, net
     180,244         86,219  
Other assets
     7,067         7,634  
 
              
Total assets
   $ 588,214       $ 484,082  
 
              
 
                  
Liabilities and stockholders’ equity
                  
Current liabilities:
                  
Accounts payable and accrued liabilities
   $ 63,979       $ 53,418  
Distributions payable
     435         93  
Customer deposits
     2,250         1,592  
Deferred revenue
     16,194         12,059  
 
              
Total current liabilities
     82,858         67,162  
Other long-term liabilities
     29,384         43,352  
 
              
Total liabilities
     112,242         110,514  
 
              
Stockholders’ equity:
                  
Preferred stock
     —         —  
Common stock
     3         3  
Additional paid-in capital
     475,969         373,565  
Retained earnings
     —         —  
 
              
Total stockholders’ equity
     475,972         373,568  
 
              
Total liabilities and stockholders’ equity
   $ 588,214       $ 484,082  
 
              
 
(a)   Slight variations in totals are due to rounding.

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(in thousands)
                   
    For the twelve months ended  
    12/31/06       12/31/07  
Cash flows from operating activities:
                  
Net income (loss)
   $ 40,181       $ (5,198 )
Adjustments to reconcile net income to net cash provided by operating activities:
                  
Depreciation, amortization and accretion
     73,299         48,688  
Deferred income tax expense
     16,197         91,995  
Amortization of stock based compensation
     2,728         1,412  
Provisions for doubtful accounts, service credits and other
     17,204         8,561  
Non-cash tax accrual adjustments
     (3,467 )       (6,789 )
Loss/(gain) on disposals of property and equipment
     601         (169 )
Changes in assets and liabilities:
                  
Accounts receivable
     (6,816 )       (10,240 )
Prepaid expenses and other
     (395 )       2,706  
Intangibles and other long-term assets
     (2,746 )       (582 )
Accounts payable and accrued liabilities
     816         (6,538 )
Customer deposits and deferred revenue
     (2,584 )       (4,793 )
Other long-term liabilities
     12,224         (4,768 )
 
              
Net cash provided by operating activities
     147,242         114,285  
 
              
 
                  
Cash flows from investing activities:
                  
Purchases of property and equipment
     (20,990 )       (18,323 )
Proceeds from disposals of property and equipment
     200         323  
Receipts from long-term notes receivable
     1,425         —  
 
              
Net cash used in investing activities
     (19,365 )       (18,000 )
 
              
 
                  
Cash flows from financing activities:
                  
Repayment of long-term debt
     (13 )       —  
Cash distributions to stockholders
     (98,904 )       (98,250 )
 
              
Net cash used in financing activities
     (98,917 )       (98,250 )
 
              
 
                  
Net increase (decrease) in cash and cash equivalents
     28,960         (1,965 )
Cash and cash equivalents, beginning of period
     37,547         66,507  
 
              
Cash and cash equivalents, end of period
   $ 66,507       $ 64,542  
 
              
 
                  
Supplemental disclosure:
                  
Interest paid
   $ 34       $ 13  
 
              
Income taxes paid (state and local)
   $ 49       $ 70  
 
              
 
(a)   Slight variations in totals are due to rounding.

 

 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)
(in thousands, except share and per share amounts)
                   
    For the year ended  
    December 31,  
    2006       2007  
Revenue:
                  
Paging service
   $ 464,194       $ 389,469  
Cellular
     7,727         8,324  
Product sales
     21,556         22,204  
Other
     4,217         4,627  
 
              
Total revenue
     497,694         424,624  
 
              
 
                  
Operating expenses:
                  
Cost of products sold
     3,837         6,233  
Service, rental and maintenance
     177,120         151,930  
Selling and marketing
     43,902         38,828  
General and administrative
     127,877         96,667  
Severance and restructuring
     4,586         6,429  
Depreciation, amortization and accretion
     73,299         48,688  
 
              
Total operating expenses
     430,621         348,775  
 
              
% of total revenue
     86.5 %       82.1 %
 
                  
 
              
Operating income
     67,073         75,849  
 
              
% of total revenue
     13.5 %       17.9 %
 
                  
Interest income, net
     3,868         3,448  
Other income, net
     800         2,150  
 
              
Income before income tax expense
     71,741         81,447  
Income tax expense
     31,560         86,645  
 
              
Net income (loss)
   $ 40,181       $ (5,198 )
 
              
 
                  
Basic net income (loss) per common share
   $ 1.47       $ (0.19 )
 
              
Diluted net income (loss) per common share
   $ 1.46       $ (0.19 )
 
              
 
                  
Basic weighted average common shares outstanding
     27,399,811         27,442,444  
 
              
Diluted weighted average common shares outstanding
     27,580,866         27,442,444  
 
              
 
                  
Reconciliation of operating income to EBITDA (b):
                  
Operating income
   $ 67,073       $ 75,849  
Add back: Depreciation, amortization and accretion
     73,299         48,688  
 
              
EBITDA
   $ 140,372       $ 124,537  
 
              
% of total revenue
     28.2 %       29.3 %
 
                
 
(a)   Slight variations in totals are due to rounding.
 
(b)   EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.