EX-99.1 2 w71363exv99w1.htm EX-99.1 exv99w1
EXHIBIT 99.1
(USA MOBILITY LOGO)
News Release
(GRAPHIC)
     
For Immediate Release   Contact: Bob Lougee (703) 721-3080      
Wednesday, October 29, 2008   bob.lougee@usamobility.com
USA Mobility Reports Third Quarter Operating Results;
Board Declares Quarterly Cash Distribution
Revenue Per Unit and Expense Trends Continue to Improve
Alexandria, VA (October 29, 2008) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the third quarter ended September 30, 2008.
In addition, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share. The cash distribution will be paid on December 10, 2008 to stockholders of record on November 14, 2008. The Company expects the entire amount of the cash distribution to be paid as a return of capital.
Total revenue for the third quarter was $88.4 million, compared to $92.1 million in the second quarter and $105.4 million in the third quarter of 2007. Net income in the third quarter was $2.4 million, or $0.09 per fully diluted share, compared to net income of $15.5 million, or $0.56 per fully diluted share, in the year-earlier quarter. The decrease in net income primarily resulted from a $7.3 million income tax expense in the third quarter due to a reduction in the carrying value of deferred income tax assets (DTAs). Absent the incremental income tax expenses, net income for the third quarter would have been $9.7 million, or $0.35 per fully diluted share.
Third quarter results included:
    Total paging ARPU (average revenue per unit) increased to $8.69 in the third quarter, compared to $8.54 in the second quarter and $8.62 in the year-earlier quarter.
 
    Operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) were $62.8 million in the third quarter, compared to $61.5 million in the second quarter. The increase resulted from severance and restructuring charges of $5.1 million. Absent severance and restructuring

 


 

      charges, operating expenses in the third quarter would have been $57.7 million, a decrease of 5.8 percent from the second quarter and 20.5 percent from the third quarter of 2007.
 
    EBITDA (earnings before interest, taxes, depreciation, amortization, accretion and goodwill impairment) in the third quarter totaled $25.5 million, compared to $30.6 million in the second quarter and $31.6 million in the third quarter of 2007. Excluding the $5.1 million of severance and restructuring charges, EBITDA would have been $30.6 million in the third quarter, approximately the same as the prior quarter.
 
    EBITDA margin (or EBITDA as a percentage of revenue) was 28.9 percent in the third quarter, compared to 33.2 percent in the second quarter and 29.9 percent in the third quarter of 2007. Absent the severance and restructuring charges, EBITDA margin in the third quarter would have been 34.6 percent.
 
    Units in service totaled 3,002,000 at September 30, 2008, compared to 3,176,000 at June 30, 2008. Net unit loss in the third quarter was 174,000, compared to 157,000 in the second quarter and 137,000 in the third quarter of 2007.
 
    The annual rate of subscriber erosion was 17.1 percent, compared to 15.5 percent in the second quarter and 15.0 percent in the year-earlier quarter. The quarterly rate of subscriber loss was 5.5 percent, compared to 4.7 percent in second quarter and 3.7 percent in the third quarter of 2007.
 
    The annual rate of revenue erosion was 16.2 percent, compared to 14.3 percent in the second quarter, while the quarterly rate of revenue erosion was 4.0 percent, compared to 2.8 percent in the prior quarter.
 
    Capital expenses were $6.2 million, compared to $3.9 million in the second quarter.
 
    The Company’s cash balance at September 30, 2008 was $103.7 million.
“USA Mobility again made excellent progress during the third quarter,” said Vincent D. Kelly, president and chief executive officer, “as we continued to successfully manage our costs, maximize cash flow, and generate solid revenue and profitability. In addition, we restructured pricing on selected products to better reflect current values, resulting in higher average revenue per unit and a strong operating margin, and continued to focus on sales opportunities in our core market segments of Healthcare, Government and Large Enterprise. At the same time,” he added, “we were disappointed at the continued high level of net unit loss during the quarter as gross unit placements slowed relative to past trends. In fact, in the third quarter we lost almost 2.7 subscribers for every new subscriber we added.” Kelly noted, however, that net unit loss rates among the Company’s core market segments were again lower than for other customers. “Healthcare, in particular, continues to be our most stable segment,” he said, “and now represents 41.5 percent of our customer base.”
Kelly said the Company ended the quarter with a strong balance sheet, including cash balances exceeding $100 million. “USA Mobility is an unusual company in today’s market environment, with no debt, significant cash and a

 


 

high cash flow margin,” he said. “As a result, our Board today declared a $0.25 quarterly cash distribution consistent with our policy to return capital to stockholders.” Kelly cautioned, however, that the Board will continue to monitor the Company’s capital distribution policy going forward. “Notwithstanding our strong results over the past two quarters due to ARPU enhancements and cost control, we recognize that continued levels of subscriber erosion, exacerbated by a challenging economy, will reduce our future cash flow levels and operating margins.”
In response to the declining subscriber base and weakening economy, Kelly said the Company recently launched a series of internal initiatives for the balance of 2008 and throughout 2009 designed to create greater operational efficiencies throughout the organization as well as enhance existing cost reduction efforts. Included among the initiatives are plans to accelerate the Company’s network rationalization program to further reduce site rent costs, restructure sales and marketing operations to better focus resources on core market segments, and consolidate various administrative functions and responsibilities. “These changes are necessary in order for us to partially offset the impact of declining revenues and to meet our long-term goals for free cash flow, customer sales and retention, quality customer service, and technically efficient networks,” said Kelly, “as we continue to provide reliable and cost effective wireless communications services to our customers nationwide.”
Commenting on the Company’s appeal of the Federal Communications Commission’s Back-Up Power Order (Order), Kelly said the case is still pending. “In the meantime,” he added, “we made significant progress during the third quarter to deconstruct redundant transmitters in connection with our long-term network rationalization program. While we believe the Court will ultimately vacate the Order based on the merits of our appeal, our ongoing program to eliminate transmitters is steadily reducing the potential cost of compliance should the Order eventually be upheld.”
Additionally, the FCC is considering changes to its rules governing the collection of universal service fees. Such changes could significantly increase the contributions the Company is required to make to the Universal Service Fund. Currently, the FCC assesses universal service contributions based on telecommunications carriers’ interstate revenues, but it is considering imposing instead a flat monthly charge of $1.00 or more per assigned telephone number. Contributing on the basis of assigned telephone numbers would cost the Company far more than the existing revenue-based methodology. The Company has presented its position to the FCC that paging carriers should be exempt from any numbers-based contribution requirement in light of important public policy and legal considerations. If the FCC adopts a numbers-based methodology and refuses to grant an exemption for paging carriers, the Company’s attempt to recover the increased contribution costs from customers could significantly diminish demand for the Company’s services, and our failure to recover such increased contribution costs could have a material adverse impact on the Company’s financial performance.
Thomas L. Schilling, chief operating officer and chief financial officer, said the Company reported solid financial and operating results for the third quarter. “Higher revenue per unit was largely the result of our program to adjust retail prices that we initiated last June,” he said, “while a continued emphasis on cost reduction contributed to our

 


 

strong EBITDA and cash flow margins. Our recurring operating expenses, excluding a $5.1 million charge for severance and restructuring in the third quarter, continued to decline as a result of numerous cost control efforts,” Schilling noted, “and are down 20.5 percent from the third quarter of 2007, continuing to outpace the 16.2 percent annual rate of revenue erosion.”
Commenting on the reduction of DTAs in the third 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, 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 noted that the Company was maintaining its previously announced financial guidance for 2008, with revenues for the year expected to be between $355 million to $360 million, operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) expected to be between $245 million to $250 million, and capital expenses for 2008 to range from $18 million to $20 million.
* * * * * * * * *
USA Mobility plans to host a conference call for investors on its third quarter results at 10:00 a.m. Eastern Time on Thursday, October 30, 2008. The dial-in number for the call is 866-316-1372 (toll-free) or 913-312-1272 (toll). The pass code for the call is 4281933. A replay of the call will be available from 2:00 p.m. ET on October 30 until 11:59 p.m. on Thursday, November 13. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4281933.
* * * * * * * * *
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 Mobilitys focus is on the business-to-business marketplace and supplying wireless connectivity solutions to a majority 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 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, our ability to continue to reduce operating expenses and to generate cash from operations, our future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, technological improvements in hand-held devices and transmission services offered by our competitors, 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

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)

(unaudited and in thousands, except share and per share amounts)
                                                           
    For the three months ended  
    3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
Revenues:
                                                         
Paging service
  $ 104,003     $ 98,248     $ 95,393     $ 91,825     $ 86,773     $ 83,360       $ 80,533  
Cellular
    2,087       2,497       2,035       1,705       1,859       1,547         1,494  
Product sales
    4,400       5,335       6,851       5,618       4,871       5,741         5,014  
Other
    1,052       1,390       1,145       1,040       1,255       1,427         1,316  
             
Total revenues
    111,542       107,470       105,424       100,188       94,758       92,075         88,357  
             
 
                                                         
Operating expenses:
                                                         
Cost of products sold
    687       1,508       2,435       1,603       1,081       1,408         1,291  
Service, rental and maintenance
    39,033       39,356       36,746       36,795       33,969       31,583         29,069  
Selling and marketing
    10,242       9,975       9,891       8,720       7,836       7,549         6,756  
General and administrative
    26,448       23,297       23,606       23,316       21,808       20,782         20,631  
Severance and restructuring
    17             1,177       5,235       145       153         5,063  
Depreciation, amortization and accretion
    13,318       12,450       12,048       10,872       12,513       11,674         11,075  
Goodwill impairment
                            188,170                
             
Total operating expenses
    89,745       86,586       85,903       86,541       265,522       73,149         73,885  
             
% of total revenues
    80.5 %     80.6 %     81.5 %     86.4 %     280.2 %     79.4 %       83.6 %
 
                                                         
             
Operating income (loss)
    21,797       20,884       19,521       13,647       (170,764 )     18,926         14,472  
             
% of total revenues
    19.5 %     19.4 %     18.5 %     13.6 %     -180.2 %     20.6 %       16.4 %
 
                                                         
Interest income, net
    951       932       856       709       578       672         471  
Other (expense) income, net
    (516 )     826       1,038       802       125       202         205  
             
Income (loss) before income tax expense
    22,232       22,642       21,415       15,158       (170,061 )     19,800         15,148  
Income tax expense
    9,206       9,676       5,947       61,816       7,739       9,528         12,730  
             
Net income (loss)
  $ 13,026     $ 12,966     $ 15,468     $ (46,658 )   $ (177,800 )   $ 10,272       $ 2,418  
             
Basic net income (loss) per common share
  $ 0.47     $ 0.47     $ 0.56     $ (1.70 )   $ (6.48 )   $ 0.37       $ 0.09  
             
Diluted net income (loss) per common share
  $ 0.47     $ 0.47     $ 0.56     $ (1.70 )   $ (6.48 )   $ 0.37       $ 0.09  
             
Basic weighted average common shares outstanding
    27,434,418       27,440,094       27,445,028       27,450,035       27,459,068       27,474,156         27,474,156  
             
Diluted weighted average common shares outstanding
    27,578,066       27,570,346       27,594,513       27,450,035       27,459,068       27,600,976         27,602,296  
             
 
                                                         
Reconciliation of operating income (loss) to EBITDA (b):
                                                         
Operating income (loss)
  $ 21,797     $ 20,884     $ 19,521     $ 13,647     $ (170,764 )   $ 18,926       $ 14,472  
Add back: depreciation, amortization and accretion
    13,318       12,450       12,048       10,872       12,513       11,674         11,075  
Add back: goodwill impairment
                            188,170                
             
EBITDA
  $ 35,115     $ 33,334     $ 31,569     $ 24,519     $ 29,919     $ 30,600       $ 25,547  
             
% of total revenues
    31.5 %     31.0 %     29.9 %     24.5 %     31.6 %     33.2 %       28.9 %
 
                                                       
 
(a)   Slight variations in totals are due to rounding.
 
(b)   EBITDA or earnings before interest, taxes, depreciation, amortization, accretion and goodwill impairment 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  
Units in service   3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
Beginning units in service
                                                         
Direct one-way
    3,318       3,179       3,071       2,961       2,854       2,733         2,614  
Direct two-way
    280       263       245       232       221       206         196  
             
Total direct
    3,598       3,442       3,316       3,193       3,075       2,939         2,810  
             
Indirect one-way
    417       378       346       330       312       286         261  
Indirect two-way
    90       92       95       97       98       108         105  
             
Total indirect
    507       470       441       427       410       394         366  
             
Total beginning units in service
    4,105       3,912       3,757       3,620       3,485       3,333         3,176  
             
 
                                                         
Gross placements
                                                         
Direct one-way
    91       112       107       81       77       90         76  
Direct two-way
    12       14       13       10       8       11         8  
             
Total direct
    103       126       120       91       85       101         84  
             
Indirect one-way
    19       25       35       29       17       22         12  
Indirect two-way
    8       8       7       7       16       7         7  
             
Total indirect
    27       33       42       36       33       29         19  
             
Total gross placements
    130       159       162       127       118       130         103  
             
 
                                                         
Gross disconnects
                                                         
Direct one-way
    (230 )     (220 )     (217 )     (188 )     (199 )     (209 )       (199 )
Direct two-way
    (29 )     (32 )     (26 )     (21 )     (22 )     (21 )       (20 )
             
Total direct
    (259 )     (252 )     (243 )     (209 )     (221 )     (230 )       (219 )
             
Indirect one-way
    (58 )     (57 )     (51 )     (47 )     (44 )     (47 )       (47 )
Indirect two-way
    (6 )     (5 )     (5 )     (6 )     (5 )     (10 )       (11 )
             
Total indirect
    (64 )     (62 )     (56 )     (53 )     (49 )     (57 )       (58 )
             
Total gross disconnects
    (323 )     (314 )     (299 )     (262 )     (270 )     (287 )       (277 )
             
 
                                                         
Net gain (loss)
                                                         
Direct one-way
    (139 )     (108 )     (110 )     (107 )     (122 )     (119 )       (123 )
Direct two-way
    (17 )     (18 )     (13 )     (11 )     (14 )     (10 )       (12 )
             
Total direct
    (156 )     (126 )     (123 )     (118 )     (136 )     (129 )       (135 )
             
Indirect one-way
    (39 )     (32 )     (16 )     (18 )     (27 )     (25 )       (35 )
Indirect two-way
    2       3       2       1       11       (3 )       (4 )
             
Total indirect
    (37 )     (29 )     (14 )     (17 )     (16 )     (28 )       (39 )
             
Total net change
    (193 )     (155 )     (137 )     (135 )     (152 )     (157 )       (174 )
             
 
                                                         
Ending units in service
                                                         
Direct one-way
    3,179       3,071       2,961       2,854       2,732       2,614         2,491  
Direct two-way
    263       245       232       221       207       196         184  
             
Total direct
    3,442       3,316       3,193       3,075       2,939       2,810         2,675  
             
Indirect one-way
    378       346       330       312       285       261         226  
Indirect two-way
    92       95       97       98       109       105         101  
             
Total indirect
    470       441       427       410       394       366         327  
             
Total ending units in service
    3,912       3,757       3,620       3,485       3,333       3,176         3,002  
             
 
(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  
    3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
ARPU
                                                         
Direct one-way
  $ 7.96     $ 7.87     $ 7.98     $ 7.93     $ 7.83     $ 7.85       $ 8.08  
Direct two-way
    23.91       24.02       24.17       24.06       23.68       23.90         23.78  
             
Total direct
    9.18       9.08       9.16       9.09       8.95       8.97         9.16  
 
                                                         
Indirect one-way
    4.45       4.12       4.35       4.11       4.10       4.57         4.79  
Indirect two-way
    6.30       6.10       5.30       8.20       7.52       7.08         5.35  
             
Total indirect
    4.79       4.53       4.56       5.06       4.97       5.28         4.96  
 
                                                         
Total one-way
    7.57       7.48       7.61       7.55       7.47       7.54         7.79  
Total two-way
    19.46       19.18       18.74       19.30       18.44       18.07         17.29  
             
Total paging ARPU
  $ 8.65     $ 8.54     $ 8.62     $ 8.62     $ 8.49     $ 8.54       $ 8.69  
             
 
                                                         
Gross disconnect rate (b)
                                                         
Direct one-way
    -6.9 %     -6.9 %     -7.1 %     -6.4 %     -7.0 %     -7.6 %       -7.6 %
Direct two-way
    -10.4 %     -12.2 %     -10.5 %     -9.1 %     -10.2 %     -10.4 %       -10.2 %
             
Total direct
    -7.2 %     -7.3 %     -7.3 %     -6.6 %     -7.2 %     -7.8 %       -7.8 %
 
                                                         
Indirect one-way
    -14.0 %     -15.0 %     -14.7 %     -14.1 %     -13.9 %     -16.4 %       -17.9 %
Indirect two-way
    -6.2 %     -5.9 %     -5.7 %     -6.7 %     -5.3 %     -8.8 %       -10.3 %
             
Total indirect
    -12.6 %     -13.2 %     -12.8 %     -12.5 %     -11.8 %     -14.3 %       -15.7 %
 
                                                         
Total one-way
    -7.7 %     -7.8 %     -7.8 %     -7.1 %     -7.7 %     -8.5 %       -8.6 %
Total two-way
    -9.4 %     -10.4 %     -9.2 %     -8.4 %     -8.7 %     -9.8 %       -10.2 %
             
Total paging gross disconnect rate
    -7.9 %     -8.0 %     -8.0 %     -7.2 %     -7.7 %     -8.6 %       -8.7 %
             
 
                                                         
Net gain / loss rate (c)
                                                         
Direct one-way
    -4.2 %     -3.4 %     -3.6 %     -3.6 %     -4.3 %     -4.3 %       -4.7 %
Direct two-way
    -5.9 %     -6.9 %     -5.3 %     -4.6 %     -6.4 %     -5.2 %       -6.1 %
             
Total direct
    -4.3 %     -3.6 %     -3.7 %     -3.7 %     -4.4 %     -4.4 %       -4.8 %
 
                                                         
Indirect one-way
    -9.5 %     -8.5 %     -4.6 %     -5.4 %     -8.5 %     -8.6 %       -13.2 %
Indirect two-way
    2.5 %     3.2 %     2.1 %     0.8 %     11.0 %     -2.4 %       -4.1 %
             
Total indirect
    -7.3 %     -6.2 %     -3.2 %     -4.0 %     -3.9 %     -6.9 %       -10.6 %
 
                                                         
Total one-way
    -4.8 %     -3.9 %     -3.7 %     -3.8 %     -4.7 %     -4.8 %       -5.5 %
Total two-way
    -3.9 %     -4.2 %     -3.3 %     -3.0 %     -1.1 %     -4.2 %       -5.4 %
             
Total paging net gain / loss rate
    -4.7 %     -4.0 %     -3.7 %     -3.7 %     -4.4 %     -4.7 %       -5.5 %
             
 
(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 MARKET SEGMENT (a)

(unaudited)
                                                           
    For the three months ended  
    3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
Gross placement rate (b)
                                                         
Healthcare
    3.6 %     4.8 %     4.5 %     3.6 %     3.3 %     4.8 %       3.8 %
Government
    2.2 %     2.5 %     2.5 %     2.0 %     2.2 %     2.1 %       2.2 %
Large enterprise
    2.7 %     3.0 %     2.9 %     2.7 %     2.4 %     2.3 %       2.2 %
Other
    2.6 %     3.2 %     3.4 %     2.4 %     2.5 %     2.6 %       2.4 %
             
Total direct
    2.9 %     3.7 %     3.6 %     2.8 %     2.8 %     3.4 %       3.0 %
Total indirect
    5.3 %     6.9 %     9.6 %     8.5 %     8.0 %     7.4 %       5.1 %
             
Total
    3.2 %     4.1 %     4.3 %     3.5 %     3.4 %     3.9 %       3.2 %
             
 
                                                         
Gross disconnect rate (b)
                                                         
Healthcare
    -4.6 %     -5.0 %     -5.6 %     -5.0 %     -5.1 %     -5.8 %       -6.0 %
Government
    -5.8 %     -6.4 %     -6.8 %     -6.0 %     -6.7 %     -8.5 %       -8.5 %
Large enterprise
    -8.4 %     -9.3 %     -7.6 %     -6.9 %     -8.6 %     -9.2 %       -9.2 %
Other
    -10.9 %     -10.5 %     -10.5 %     -9.5 %     -10.7 %     -10.5 %       -10.1 %
             
Total direct
    -7.2 %     -7.3 %     -7.3 %     -6.6 %     -7.2 %     -7.8 %       -7.8 %
Total indirect
    -12.6 %     -13.2 %     -12.8 %     -12.5 %     -11.8 %     -14.3 %       -15.7 %
             
Total
    -7.9 %     -8.0 %     -8.0 %     -7.2 %     -7.7 %     -8.6 %       -8.7 %
             
 
                                                         
Net loss rate (b)
                                                         
Healthcare
    -1.1 %     -0.2 %     -1.0 %     -1.3 %     -1.7 %     -0.9 %       -2.1 %
Government
    -3.6 %     -3.8 %     -4.3 %     -4.0 %     -4.5 %     -6.4 %       -6.3 %
Large enterprise
    -5.7 %     -6.2 %     -4.6 %     -4.3 %     -6.2 %     -6.9 %       -7.0 %
Other
    -8.3 %     -7.2 %     -7.2 %     -7.1 %     -8.2 %     -7.9 %       -7.8 %
             
Total direct
    -4.3 %     -3.6 %     -3.7 %     -3.7 %     -4.4 %     -4.4 %       -4.8 %
Total indirect
    -7.3 %     -6.2 %     -3.2 %     -4.0 %     -3.9 %     -6.9 %       -10.6 %
             
Total
    -4.7 %     -4.0 %     -3.7 %     -3.7 %     -4.4 %     -4.7 %       -5.5 %
             
 
                                                         
End of period units in service % of total (b)
                                                         
Healthcare
    33.6 %     35.0 %     36.2 %     37.1 %     38.3 %     40.0 %       41.5 %
Government
    17.9 %     18.0 %     17.8 %     17.8 %     17.9 %     17.7 %       17.6 %
Large enterprise
    13.8 %     13.6 %     13.5 %     13.5 %     13.1 %     12.8 %       12.6 %
Other
    22.6 %     21.7 %     20.7 %     19.8 %     18.9 %     18.0 %       17.4 %
             
Total direct
    88.0 %     88.3 %     88.2 %     88.2 %     88.2 %     88.5 %       89.1 %
Total indirect
    12.0 %     11.7 %     11.8 %     11.8 %     11.8 %     11.5 %       10.9 %
             
Total
    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 disconnect and net loss rates.

 


 

USA MOBILITY, INC.
SUPPLEMENTAL INFORMATION — DIRECT UNITS IN SERVICE AND CELLULAR ACTIVATIONS (a)

(unaudited)
                                                           
    For the three months ended  
    3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
Account size ending units in service (000’s)
                                                         
1 to 3 units
    251       232       216       200       184       172         159  
4 to 10 units
    150       139       129       120       112       104         97  
11 to 50 units
    368       344       319       298       276       255         236  
51 to 100 units
    215       200       189       176       164       155         144  
101 to 1,000 units
    924       898       856       827       784       750         716  
>1,000 units
    1,534       1,503       1,483       1,454       1,419       1,374         1,323  
             
Total
    3,442       3,316       3,193       3,075       2,939       2,810         2,675  
             
 
                                                         
End of period units in service % of total direct
                                                         
1 to 3 units
    7.2 %     7.0 %     6.7 %     6.5 %     6.2 %     6.1 %       6.0 %
4 to 10 units
    4.4 %     4.2 %     4.1 %     3.9 %     3.8 %     3.7 %       3.6 %
11 to 50 units
    10.7 %     10.4 %     10.0 %     9.7 %     9.4 %     9.1 %       8.8 %
51 to 100 units
    6.2 %     6.0 %     5.9 %     5.7 %     5.6 %     5.5 %       5.4 %
101 to 1,000 units
    26.9 %     27.1 %     26.8 %     26.9 %     26.7 %     26.7 %       26.8 %
>1,000 units
    44.6 %     45.3 %     46.5 %     47.3 %     48.3 %     48.9 %       49.4 %
             
Total
    100.0 %     100.0 %     100.0 %     100.0 %     100.0 %     100.0 %       100.0 %
             
 
                                                         
Account size net loss rate
                                                         
1 to 3 units
    -9.0 %     -7.6 %     -6.6 %     -7.6 %     -7.8 %     -6.9 %       -7.0 %
4 to 10 units
    -7.9 %     -7.6 %     -7.0 %     -7.5 %     -6.5 %     -7.2 %       -6.7 %
11 to 50 units
    -7.5 %     -6.4 %     -7.3 %     -6.6 %     -7.6 %     -7.4 %       -7.4 %
51 to 100 units
    -4.9 %     -6.9 %     -5.7 %     -6.4 %     -6.9 %     -5.5 %       -7.5 %
101 to 1,000 units
    -4.4 %     -2.8 %     -4.7 %     -3.3 %     -5.2 %     -4.3 %       -4.6 %
>1,000 units
    -2.2 %     -2.0 %     -1.3 %     -2.0 %     -2.4 %     -3.2 %       -3.7 %
             
Total
    -4.3 %     -3.6 %     -3.7 %     -3.7 %     -4.4 %     -4.4 %       -4.8 %
             
 
                                                         
Account size ARPU
                                                         
1 to 3 units
  $ 14.68     $ 14.67     $ 14.90     $ 14.83     $ 14.66     $ 14.62       $ 14.72  
4 to 10 units
    13.41       13.40       13.68       13.62       13.56       13.56         13.92  
11 to 50 units
    10.95       10.93       11.15       11.07       10.99       11.03         11.40  
51 to 100 units
    9.44       9.48       9.74       9.74       9.57       9.76         10.36  
101 to 1,000 units
    8.24       8.24       8.35       8.38       8.23       8.45         8.91  
>1,000 units
    7.93       7.80       7.86       7.81       7.75       7.70         7.72  
             
Total
  $ 9.18     $ 9.08     $ 9.16     $ 9.09     $ 8.95     $ 8.97       $ 9.16  
             
 
                                                         
Cellular revenue
                                                         
Number of activations
    5,450       8,046       5,579       5,070       4,509       3,970         3,779  
             
Revenue from cellular services (000’s)
  $ 2,087     $ 2,497     $ 2,035     $ 1,705     $ 1,859     $ 1,547       $ 1,494  
             
 
(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  
    3/31/07     6/30/07     9/30/07     12/31/07     3/31/08     6/30/08       9/30/08  
Cost of products sold
  $ 687     $ 1,508     $ 2,435     $ 1,603     $ 1,081     $ 1,408       $ 1,291  
             
 
                                                         
Service, rental and maintenance
                                                         
Site rent
    22,284       22,115       20,705       19,602       17,792       16,756         15,463  
Telecommunications
    7,058       6,622       5,289       6,356       6,204       5,503         5,072  
Payroll and related
    6,488       6,657       6,871       6,878       6,683       6,504         5,827  
Stock based compensation
    31       30       26       25       17       19         19  
Other
    3,172       3,932       3,855       3,934       3,273       2,801         2,688  
             
Total service, rental and maintenance
    39,033       39,356       36,746       36,795       33,969       31,583         29,069  
             
 
                                                         
Selling and marketing
                                                         
Payroll and related
    6,740       6,259       5,984       5,517       5,164       4,797         4,317  
Commissions
    2,170       2,386       2,140       2,056       1,724       2,037         1,742  
Stock based compensation
    93       91       67       52       39       50         49  
Other
    1,239       1,239       1,700       1,095       909       665         648  
             
Total selling and marketing
    10,242       9,975       9,891       8,720       7,836       7,549         6,756  
             
 
                                                         
General and administrative
                                                         
Payroll and related
    9,560       9,343       9,487       8,744       8,682       8,129         7,847  
Stock based compensation
    304       299       214       180       190       247         253  
Bad debt
    1,402       1,075       854       1,015       711       691         680  
Facility rent
    2,947       3,066       2,614       2,177       2,073       2,199         1,937  
Telecommunications
    1,764       1,526       1,402       1,366       1,048       983         936  
Outside services
    5,504       5,222       5,136       4,854       5,359       4,584         4,632  
Taxes, licenses and permits
    2,316       (20 )     1,815       2,218       1,958       2,055         2,216  
Other
    2,651       2,786       2,084       2,762       1,787       1,894         2,130  
             
Total general and administrative
    26,448       23,297       23,606       23,316       21,808       20,782         20,631  
             
 
                                                         
Severance and restructuring
    17             1,177       5,235       145       153         5,063  
Depreciation, amortization and accretion
    13,318       12,450       12,048       10,872       12,513       11,674         11,075  
Goodwill impairment
                            188,170                
 
                                                         
             
Operating expenses
  $ 89,745     $ 86,586     $ 85,903     $ 86,541     $ 265,522     $ 73,149       $ 73,885  
             
 
                                                         
Capital expenditures
  $ 5,086     $ 3,525     $ 4,528     $ 5,184     $ 3,988     $ 3,892       $ 6,214  
 
                                                       
 
(a)   Slight variations in totals are due to rounding.

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)

(in thousands)
                   
    12/31/07       9/30/08  
              (unaudited)  
Assets
                 
Current assets:
                 
Cash and cash equivalents
  $ 64,542       $ 103,728  
Accounts receivable, net
    28,044         25,866  
Prepaid expenses and other
    8,608         6,859  
Deferred income tax assets, net
    8,267         5,948  
 
             
Total current assets
    109,461         142,401  
Property and equipment, net
    75,669         63,102  
Goodwill
    188,170          
Intangible assets, net
    16,929         9,791  
Deferred income tax assets, net
    93,884         69,601  
Other assets
    7,634         5,535  
 
             
Total assets
  $ 491,747       $ 290,430  
 
             
 
                 
Liabilities and stockholders’ equity
                 
Current liabilities:
                 
Accounts payable and accrued liabilities
  $ 52,568       $ 48,843  
Distributions payable
    93         972  
Customer deposits
    1,592         1,285  
Deferred revenue
    12,059         11,087  
 
             
Total current liabilities
    66,312         62,187  
Other long-term liabilities
    51,867         50,249  
 
             
Total liabilities
    118,179         112,436  
 
             
Stockholders’ equity:
                 
Preferred stock
             
Common stock
    3         3  
Additional paid-in capital
    373,565         343,101  
Accumulated deficit
            (165,110 )
 
             
Total stockholders’ equity
    373,568         177,994  
 
             
Total liabilities and stockholders’ equity
  $ 491,747       $ 290,430  
 
             
 
(a)   Slight variations in totals are due to rounding.

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)

(unaudited and in thousands)
                   
    For the nine months ended  
    9/30/07       9/30/08  
Cash flows from operating activities:
                 
Net income (loss)
  $ 41,460       $ (165,110 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
                 
Depreciation, amortization and accretion
    37,816         35,262  
Goodwill impairment
            188,170  
Deferred income tax expense
    24,231         27,871  
Amortization of stock based compensation
    1,155         884  
Provisions for doubtful accounts, service credits and other
    7,573         4,566  
Non-cash transaction tax accrual adjustments
    (6,130 )       (1,717 )
Changes in assets and liabilities:
                 
Accounts receivable
    (8,892 )       (2,388 )
Prepaid expenses and other
    3,341         2,501  
Intangibles and other long-term assets
    (212 )       2,498  
Accounts payable and accrued liabilities
    (6,500 )       (6,787 )
Customer deposits and deferred revenue
    (3,303 )       (1,279 )
 
             
Net cash provided by operating activities
  $ 90,539       $ 84,471  
 
             
 
                 
Cash flows from investing activities:
                 
Purchases of property and equipment
    (13,139 )       (14,094 )
Proceeds from disposals of property and equipment
    155         176  
 
             
Net cash used in investing activities
  $ (12,984 )     $ (13,918 )
 
             
 
                 
Cash flows from financing activities:
                 
Cash distributions to stockholders
    (80,530 )       (31,367 )
 
             
Net cash used in financing activities
  $ (80,530 )     $ (31,367 )
 
             
 
                 
Net (decrease) increase in cash and cash equivalents
    (2,975 )       39,186  
Cash and cash equivalents, beginning of period
    66,507         64,542  
 
             
Cash and cash equivalents, end of period
  $ 63,532       $ 103,728  
 
             
 
                 
Supplemental disclosure:
                 
Interest paid
  $ 11       $ 3  
 
             
Income taxes paid (state and local)
  $ 404       $ 1  
 
             
 
(a)   Slight variations in totals are due to rounding.