ALEXANDRIA, Va., April 3 /PRNewswire-FirstCall/ -- USA Mobility, Inc. , 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 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_Art_3.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 http://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.
Contact: Bob Lougee (703) 721-3080
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 2005
Proforma
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, June 30, September 30, December 31,
2004 2004 2004 2004
Revenues:
Service, rental and
maintenance, net of
service credits $119,546 $111,174 $104,785 $135,246
Product sales 4,113 4,623 4,632 6,041
Total revenue 123,659 115,797 109,417 141,287
Operating expenses:
Cost of products sold 938 856 691 1,862
Service, rental and
maintenance 38,988 36,988 36,904 48,191
Selling and marketing 9,068 8,757 7,862 10,398
General and
administrative 31,304 29,150 27,615 41,977
Depreciation and
amortization 26,309 31,071 22,302 33,318
Stock based compensation 2,267 1,908 1,865 (1,177)
Severance and
restructuring 3,689 602 1,228 6,419
Total operating
expenses 112,563 109,332 98,467 140,988
Operating income (loss) 11,096 6,465 10,950 299
Interest expense (3,400) (1,770) (18) (1,177)
Interest income 71 70 89 221
Loss on extinguishment
of long-term debt - - - (1,031)
Other income, net 168 177 66 403
Income (loss) before
income tax expense $ 7,935 $ 4,942 $11,087 $(1,285)
Reconciliation of
operating income to
EBITDA:
Operating income
(loss) $ 11,096 $6,465 $10,950 $299
Addback:
Depreciation and
amortization 26,309 31,071 22,302 33,318
EBITDA $37,405 $37,536 $33,252 $33,617
For the three months ended
March 31, June 30, September 30, December 31,
2005 2005 2005 2005
Revenues:
Service, rental and
maintenance, net of
service credits $159,150 $151,483 $145,014 $137,043
Product sales 6,527 6,054 6,940 6,3611
Total revenue 165,677 157,537 151,954 143,404
Operating expenses:
Cost of products sold 1,279 929 945 1,330
Service, rental and
maintenance 56,648 56,429 54,490 50,593
Selling and marketing 10,402 11,156 11,276 10,311
General and
administrative 48,427 46,491 43,260 39,260
Depreciation and
amortization 42,312 39,005 33,277 38,809
Stock based
compensation 1,385 597 271 579
Severance and
restructuring 5,136 9,904 855 714
Total operating
expenses 165,589 164,511 144,374 141,596
Operating income (loss) 88 (6,974) 7,580 1,808
Interest expense (1,411) (734) (232) (35)
Interest income 197 235 214 443
Loss on extinguishment
of long-term debt (594) (432) (312) -
Other income, net 137 (73) 76 (1,144)
Income (loss) before
income tax expense $(1,583) $(7,978) $7,326 $1,072
Reconciliation of
operating income to
EBITDA:
Operating income
(loss) $ 88 $ (6,974) $7,580 $1,808
Addback:
Depreciation and
amortization 42,312 39,005 33,277 38,809
EBITDA $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, June 30, September 30, December 31,
2004 2004 2004 2004
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
Product sales 8,016 8,997 9,027 7,969
Total revenue 214,372 202,914 191,479 179,940
Operating expenses:
Cost of products sold 1,878 2,199 2,124 2,274
Service, rental and
maintenance 67,441 64,542 62,746 62,958
Selling and marketing 18,299 17,475 15,667 14,406
General and
administrative 53,707 51,181 50,289 61,140
Depreciation and
amortization 38,072 42,168 32,801 37,281
Stock based compensation 5,966 2,810 2,093 (2,784)
Severance and
restructuring 3,689 602 1,228 6,419
Total operating
expenses 189,052 180,977 166,948 181,694
Operating income (loss) 25,320 21,937 24,531 (1,754)
Interest expense (2,188) (1,971) (1,753) (1,448)
Interest income - - - 451
Loss on extinguishment
of long-term debt - - - -
Other income, net 110 201 17 (165)
Income (loss) before
income tax expense $23,242 $20,167 $22,795 $(2,916)
Reconciliation of
operating income
to EBITDA:
Operating income
(loss) $ 25,320 $ 21,937 $24,531 $(1,754)
Addback:
Depreciation and
amortization 38,072 42,168 32,801 37,281
EBITDA $63,392 $64,105 $57,332 $35,527
For the three months ended
March 31, June 30, September 30, December 31,
2005 2005 2005 2005
Revenues:
Service, rental and
maintenance, net of
service credits $159,150 $151,483 $145,014 $137,043
Product sales 6,527 6,054 6,940 6,3611
Total revenue 165,677 157,537 151,954 143,404
Operating expenses:
Cost of products sold 1,279 929 945 1,330
Service, rental and
maintenance 56,648 56,429 54,490 50,593
Selling and marketing 10,402 11,156 11,276 10,311
General and
administrative 48,427 46,491 43,260 39,260
Depreciation and
amortization 42,312 39,005 33,277 38,809
Stock based
compensation 1,385 597 271 579
Severance and
restructuring 5,136 9,904 855 714
Total operating
expenses 165,589 164,511 144,374 141,596
Operating income (loss) 88 (6,974) 7,580 1,808
Interest expense (1,411) (734) (232) (35)
Interest income 197 235 214 443
Loss on extinguishment
of long-term debt (594) (432) (312) -
Other income, net 137 (73) 76 (1,144)
Income (loss) before
income tax expense $(1,583) $(7,978) $7,326 $1,072
Reconciliation of
operating income to
EBITDA:
Operating income
(loss) $ 88 $ (6,974) $7,580 $1,808
Addback:
Depreciation and
amortization 42,312 39,005 33,277 38,809
EBITDA $42,400 $32,031 $40,857 $40,617
(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 (a)
(unaudited and in thousands)
Three Months Ended
March 2004 June 2004 Sept. 2004 Dec. 2004
Direct One-Way:
Beginning units
in service 5,329 5,100 4,909 4,690
Gross placements 226 181 182 166
Disconnects (455) (372) (401) (392)
Ending units in
service 5,100 4,909 4,690 4,464
Two-Way:
Beginning units
in service 506 483 462 449
Gross placements 40 32 35 29
Disconnects (63) (53) (48) (56)
Ending units in service 483 462 449 422
Indirect One-Way:
Beginning units in
service 1,716 1,474 1,253 1,101
Gross placements 157 145 160 143
Disconnects (399) (366) (312) (257)
Ending units in
service 1,474 1,253 1,101 987
Two-Way:
Beginning units in
service 131 123 121 115
Gross placements 20 16 20 7
Disconnects (28) (18) (26) (28)
Ending units in service 123 121 115 94
Total
Beginning units
in service 7,682 7,180 6,745 6,355
Gross placements 443 374 397 345
Disconnects (945) (809) (787) (733)
Ending units in
service 7,180 6,745 6,355 5,967
Adjusted Proforma ARPU
Direct One-Way $9.10 $8.96 $8.89 $8.75
Direct Two-Way $25.15 $24.68 $24.22 $23.93
Indirect One-Way $4.06 $4.26 $4.12 $4.26
Indirect Two-Way $12.89 $12.07 $11.30 $10.41
Total $9.15 $9.16 $9.14 $9.09
March 2005 June 2005 Sept. 2005 Dec. 2005
Direct One-Way:
Beginning units
in service 4,464 4,273 4,114 3,977
Gross placements 141 134 125 126
Disconnects (332) (293) (262) (268)
Ending units in
service 4,273 4,114 3,977 3,835
Two-Way:
Beginning units
in service 422 397 382 365
Gross placements
22 29 17 18
Disconnects (47) (44) (34) (36)
Ending units in service 397 382 365 347
Indirect One-Way:
Beginning units in
service 987 859 762 685
Gross placements 107 92 26 26
Disconnects (235) (189) (103) (107)
Ending units in
service 859 762 685 604
Two-Way:
Beginning units in
service 94 91 90 89
Gross placements 7 7 3 18
Disconnects (10) (8) (4) (7)
Ending units in service 91 90 89 100
Total
Beginning units
in service 5,967 5,620 5,348 5,116
Gross placements 277 262 171 188
Disconnects (624) (534) (403) (418)
Ending units in
service 5,620 5,348 5,116 4,886
Adjusted Proforma ARPU
Direct One-Way $8.65 $8.61 $8.48 $8.27
Direct Two-Way $23.98 $23.65 $24.28 $23.76
Indirect One-Way $4.07 $4.11 $4.36 $4.66
Indirect Two-Way $9.16 $8.71 $8.42 $7.80
Total $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.
