Attached files

file filename
8-K - FORM 8-K - Spok Holdings, Incw81618e8vk.htm
Exhibit 99.1
(USAMOBILITY LOGO)
News Release
                 
For Immediate Release
  Contact:   Bob Lougee (800) 611-8488
Wednesday, February 23, 2011
          bob.lougee@usamobility.com
USA Mobility Reports Fourth Quarter and 2010 Operating Results;
Announces Regular Quarterly Dividend
Subscriber and Revenue Trends Improve; Operating Expenses Decline;
$44.2 Million in Capital Returned to Stockholders in 2010
Springfield, VA (February 23, 2011) — 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, 2010.
In addition, the Company’s Board of Directors declared a regular quarterly dividend distribution of $0.25 per share. The dividend distribution will be paid on March 31, 2011 to stockholders of record on March 17, 2011.
For the fourth quarter, total revenues were $54.6 million, compared to $56.7 million in the third quarter of 2010 and $65.4 million in the fourth quarter of 2009. EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) was $16.9 million in the fourth quarter of 2010, compared to $21.0 million in the year-earlier quarter. Fourth quarter operating income was $12.7 million, compared to $12.2 million in the fourth quarter of 2009. Fourth quarter results were negatively impacted by a one-time litigation settlement expense of $2.1 million in connection with breach of contract claims and by $1.7 million in severance expenses for planned headcount reductions in 2011. Absent the one-time litigation settlement and severance expenses, operating income would have been $16.5 million and EBITDA $20.7 million.
Net income for the fourth quarter of 2010 was $40.5 million, or $1.82 per fully diluted share, compared to $3.6 million, or $0.16 per fully diluted share, in the year-earlier quarter. The significant increase in net

 


 

income in the fourth quarter was largely the result of a $32.9 million decrease in the deferred income tax asset valuation allowance, which adjusted the balance of deferred income tax assets to their estimated realizable amounts. This resulted in an offsetting benefit to income tax expense. Excluding the income tax benefit, the one-time litigation settlement and severance expenses, net income in the fourth quarter would have been $10.0 million, or $0.45 per fully diluted share.
For the full-year 2010, revenues totaled $233.3 million, compared to $289.7 million in 2009, while EBITDA was $81.3 million, or 34.9 percent of revenue, compared to $99.3 million, or 34.3 percent of revenue, in the prior year. The Company reported net income for 2010 of $77.9 million, or $3.45 per fully diluted share, compared to a net income of $67.6 million, or $2.90 per fully diluted share, for 2009.
Key results and highlights for the fourth quarter and 2010 included:
    Net unit losses were 61,000 in the fourth quarter, compared to 77,000 in the third quarter and 115,000 in the year-earlier quarter, while the quarterly rate of unit erosion improved to 3.2 percent from 3.8 percent in the third quarter and 5.0 percent in the fourth quarter of 2009. The annual rate of unit erosion was 13.4 percent in 2010, compared to 22.5 percent in 2009. Net unit losses were 293,000 in 2010 versus 633,000 in 2009. Units in service at year-end 2010 totaled 1,889,000, compared to 2,182,000 a year earlier.
 
    The quarterly rate of revenue erosion improved to 3.6 percent in the fourth quarter from 4.1 percent in the third quarter. The annual rate of revenue erosion was 16.4 percent, compared to 18.4 percent in the third quarter and 22.4 percent in the year-earlier quarter. The year-over-year rate of revenue decline was 19.5 percent in 2010 compared to 19.4 percent in 2009.
 
    Operating expenses (excluding depreciation, amortization and accretion) were $37.8 million for the fourth quarter, a reduction of 14.9 percent from $44.4 million in the year-earlier quarter. Fourth quarter 2010 operating expenses included a one-time litigation settlement expense of $2.1 million and severance expenses of $1.7 million. For 2010, operating expenses declined 20.2 percent to $151.9 million from $190.4 million in 2009. Expense reduction during the year was largely the result of continued network rationalization, staff reductions and implementation of other company-wide cost efficiencies.
 
    Average revenue per unit (ARPU) was $8.74 for the fourth quarter, compared to $8.85 in the third quarter and $8.88 in the fourth quarter of 2009. For the year, ARPU totaled $8.84, compared to $8.77 in 2009.

 


 

    EBITDA as a percentage of revenue (EBITDA margin) was 30.9 percent in the fourth quarter, compared to 32.2 percent the year-earlier quarter. Absent the severance and litigation settlement expenses, EBITDA margin would have been 37.8 percent in the fourth quarter of 2010.
 
    Capital expenses were $4.7 million in the fourth quarter versus $5.0 million in the year-earlier quarter. For 2010, capital expenses totaled $8.7 million, compared to $17.2 million in 2009.
 
    The Company generated $72.8 million in cash during the year from operating and investing activities and had an ending cash balance of $129.2 million at December 31, 2010.
 
    The number of full-time equivalent employees declined from 672 at the beginning of the year to 540 at year-end as a result of various consolidation and expense control initiatives.
“Despite a still recovering economy, we made excellent progress in the fourth quarter and throughout 2010,” said Vincent D. Kelly, president and chief executive officer. “We continued to operate the Company profitably while meeting our primary performance goals, including improved rates of subscriber and revenue erosion, significant expense reduction, solid ARPU, strong operating margins and enhanced organizational efficiencies. We also continued to focus sales and marketing initiatives around our core market segments, especially Healthcare. In addition, we again met our goal of generating sufficient cash flow to return significant capital to stockholders.”
Kelly said subscriber and revenue trends, after deteriorating for much of 2008 and 2009, began to improve in the fourth quarter of 2009 and improved steadily throughout 2010 as the overall economy stabilized. “We were pleased to see marked improvement in the pace of subscriber and revenue erosion over the past year as our net loss rates reached their lowest level in more than five years. Healthcare continued to be our best performing market segment, contributing 73.8 percent of our direct gross placements in the fourth quarter, while a net churn of 1.1 percent among Healthcare accounts remained significantly lower than all other subscriber segments.” He added that the Healthcare market segment represented 62.9 percent of the Company’s direct subscriber base at year-end as well as 57.0 percent of direct paging revenue in the fourth quarter.
Kelly said USA Mobility paid cash distributions to stockholders totaling $2.00 per share during 2010, including regular quarterly cash distributions of $0.25 per share and a special cash distribution of $1.00 per share in the fourth quarter. The distributions represented a return of capital to stockholders of $1.90 per share, and cash dividends of $0.10 per share. “We were delighted to be able to return capital to stockholders during the year, consistent with our capital allocation strategy, as well as distribute a portion of cash as dividends. Over the past six years we have now returned $366.6 million to our stockholders. In addition,”

 


 

he noted, “we repurchased $8.9 million of our common stock during 2010, and have now repurchased a total of $51.7 million since the inception of our stock buy-back program in 2008.”
Shawn E. Endsley, chief financial officer, said: “Overall, we were pleased with our 2010 operating results, which met or exceeded our expectations. Although we continued to operate in a challenging environment, we were able to again reduce operating expenses at a faster pace than our revenue decline and thus maintain strong EBITDA margins throughout the year. At the same time, ARPU remained strong and capital expenses declined, allowing us to generate net operating cash flow after investing activities of $72.8 million.”
Endsley added: “For the year, operating expenses (excluding depreciation, amortization and accretion) declined 20.2 percent from 2009, outpacing the 19.5 percent year-over-year decline in revenues. In fact, our costs declined faster than revenues in 2010 for the fifth straight year. Expense savings were largely the result of significant progress in our network rationalization program, including lower site rents, combined with staff reductions and various cost savings efforts made throughout the Company.”
Endsley said the non-recurring expense items in the fourth quarter included a reduction to the deferred income tax asset valuation allowance of $32.9 million which resulted in a benefit to income tax expense, partially offset by $2.1 million in litigation settlement expense involving breach of contract claims and by $1.7 million in severance expenses for our 2011 headcount reduction plans. He added: “Excluding the one-time items, fourth quarter net income would have been $10.0 million, or $0.45 per fully diluted share.”
Commenting on the Company’s financial guidance, Endsley said: “We are pleased that once again our annual results were either within or better than the financial guidance we provided. Total revenue of $233.3 million was within our guidance range of $230 million to $235 million; operating expenses (excluding depreciation, amortization and accretion) of $151.9 million were below the guidance range of $156 million to $159 million; and capital expenses of $8.7 million were within the guidance range of $7 million to $9 million. With respect to wireless company guidance for 2011, the Company expects revenue to be in a range from $182 million to $192 million, operating expenses (excluding depreciation, amortization and accretion) to be in a range from $132 million to $136 million, and capital expenses in a range from $5 million to $7 million.”
* * * * * * * * *

 


 

USA Mobility plans to host a conference call for investors on its fourth quarter and 2010 results at 10:00 a.m. Eastern Time on Thursday, February 24, 2011. Dial-in numbers for the call are 719-325-2105 or 888-539-3686. The pass code for the call is 1716214. A replay of the call will be available from 2:00 p.m. ET on February 24 until 11:59 p.m. on Thursday, March 10. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 1716214.
* * * * * * * * *
About USA Mobility
USA Mobility, Inc., headquartered in Springfield, 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 organizations nationwide. The Company operates the largest one-way paging and advanced two-way paging networks in the United States. In addition, USA Mobility offers mobile voice and data services through Sprint Nextel and T-Mobile, 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.
Tables to Follow

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS (a)
(unaudited and in thousands, except share and per share amounts)
 
    For the three months ended
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
Revenues:
                                                               
Paging service
  $ 72,021     $ 67,972     $ 63,308     $ 59,657     $ 57,832     $ 54,875     $ 52,778     $ 50,319  
Cellular
    991       775       980       795       708       624       532       499  
Product sales
    5,271       5,269       4,354       3,927       3,358       2,732       2,805       2,784  
Other
    1,408       1,129       856       993       886       881       595       1,046  
     
Total revenues
    79,691       75,145       69,498       65,372       62,784       59,112       56,710       54,648  
     
 
                                                               
Operating expenses:
                                                               
Cost of products sold
    1,669       1,421       1,593       1,513       1,209       1,134       819       1,051  
Service, rental and maintenance
    22,955       21,290       20,950       20,115       18,941       17,175       16,821       16,221  
Selling and marketing
    6,062       5,600       5,198       4,955       4,557       4,394       4,060       3,915  
General and administrative
    20,186       22,801       16,050       15,289       15,812       15,924       12,907       14,829  
Severance and restructuring
    190       52       15       2,480       314       41       86       1,738  
Depreciation, amortization and accretion
    11,270       11,174       10,689       8,781       7,304       6,698       5,899       4,226  
     
Total operating expenses
    62,332       62,338       54,495       53,133       48,137       45,366       40,592       41,980  
     
% of total revenues
    78.2 %     83.0 %     78.4 %     81.3 %     76.7 %     76.7 %     71.6 %     76.8 %
     
 
                                                               
Operating income
    17,359       12,807       15,003       12,239       14,647       13,746       16,118       12,668  
     
% of total revenues
    21.8 %     17.0 %     21.6 %     18.7 %     23.3 %     23.3 %     28.4 %     23.2 %
 
                                                               
Interest income (expense), net
    26       28       16       (1 )     3       4       6       3  
Other income (expense), net
    112       (42 )     185       275       78       180       2,320       227  
     
Income before income tax expense (benefit)
    17,497       12,793       15,204       12,513       14,728       13,930       18,444       12,898  
Income tax expense (benefit)
    7,516       (31,953 )     6,003       8,883       5,843       841       3,060       (27,642 )
     
Net income
  $ 9,981     $ 44,746     $ 9,201     $ 3,630     $ 8,885     $ 13,089     $ 15,384     $ 40,540  
     
 
                                                               
Basic net income per common share
  $ 0.43     $ 1.96     $ 0.40     $ 0.16     $ 0.39     $ 0.59     $ 0.70     $ 1.84  
     
Diluted net income per common share
  $ 0.43     $ 1.93     $ 0.40     $ 0.16     $ 0.39     $ 0.58     $ 0.69     $ 1.82  
     
 
                                                               
Basic weighted average common shares outstanding
    23,134,072       22,858,573       22,856,951       22,830,040       22,654,240       22,307,488       22,060,636       22,050,512  
     
Diluted weighted average common shares outstanding
    23,479,796       23,200,736       23,194,360       23,167,729       22,967,192       22,620,707       22,372,786       22,323,551  
     
 
                                                               
Reconciliation of operating income to EBITDA (b):
                                                               
Operating income
  $ 17,359     $ 12,807     $ 15,003     $ 12,239     $ 14,647     $ 13,746     $ 16,118     $ 12,668  
Add back: depreciation, amortization and accretion
    11,270       11,174       10,689       8,781       7,304       6,698       5,899     4,226  
     
EBITDA
  $ 28,629     $ 23,981     $ 25,692     $ 21,020     $ 21,951     $ 20,444     $ 22,017     $ 16,894  
     
% of total revenues
    35.9 %     31.9 %     37.0 %     32.2 %     35.0 %     34.6 %     38.8 %     30.9 %
           
 
(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.


 

USA MOBILITY, INC.
UNITS IN SERVICE ACTIVITY (a)
(unaudited and in thousands)
 
    For the three months ended
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
Units in service
                                                               
Beginning units in service
                                                               
Direct one-way
    2,349       2,198       2,079       1,969       1,881       1,804       1,749       1,692  
Direct two-way
    171       157       147       141       133       126       121       109  
     
Total direct
    2,520       2,355       2,226       2,110       2,014       1,930       1,870       1,801  
     
Indirect one-way
    196       161       139       116       101       90       82       75  
Indirect two-way
    99       91       84       71       67       79       75       74  
     
Total indirect
    295       252       223       187       168       169       157       149  
     
Total beginning units in service
    2,815       2,607       2,449       2,297       2,182       2,099       2,027       1,950  
     
Gross placements
                                                               
Direct one-way
    67       74       64       55       53       62       58       45  
Direct two-way
    6       7       9       5       5       6       4       6  
     
Total direct
    73       81       73       60       58       68       62       51  
     
Indirect one-way
    8       9       7       6       3       3       3       2  
Indirect two-way
    4       2       1       2       15       1       1       1  
     
Total indirect
    12       11       8       8       18       4       4       3  
     
Total gross placements
    85       92       81       68       76       72       66       54  
     
 
                                                               
Gross disconnects
                                                               
Direct one-way
    (218 )     (193 )     (174 )     (143 )     (130 )     (117 )     (115 )     (92 )
Direct two-way
    (20 )     (17 )     (15 )     (13 )     (12 )     (11 )     (16 )     (9 )
     
Total direct
    (238 )     (210 )     (189 )     (156 )     (142 )     (128 )     (131 )     (101 )
     
Indirect one-way
    (43 )     (31 )     (30 )     (21 )     (14 )     (11 )     (10 )     (9 )
Indirect two-way
    (12 )     (9 )     (14 )     (6 )     (3 )     (5 )     (2 )     (5 )
     
Total indirect
    (55 )     (40 )     (44 )     (27 )     (17 )     (16 )     (12 )     (14 )
     
Total gross disconnects
    (293 )     (250 )     (233 )     (183 )     (159 )     (144 )     (143 )     (115 )
     
 
                                                               
Net gain (loss)
                                                               
Direct one-way
    (151 )     (119 )     (110 )     (88 )     (77 )     (55 )     (57 )     (47 )
Direct two-way
    (14 )     (10 )     (6 )     (8 )     (7 )     (5 )     (12 )     (3 )
     
Total direct
    (165 )     (129 )     (116 )     (96 )     (84 )     (60 )     (69 )     (50 )
     
Indirect one-way
    (35 )     (22 )     (23 )     (15 )     (11 )     (8 )     (7 )     (7 )
Indirect two-way
    (8 )     (7 )     (13 )     (4 )     12       (4 )     (1 )     (4 )
     
Total indirect
    (43 )     (29 )     (36 )     (19 )     1       (12 )     (8 )     (11 )
     
Total net change
    (208 )     (158 )     (152 )     (115 )     (83 )     (72 )     (77 )     (61 )
     
 
                                                               
Ending units in service
                                                               
Direct one-way
    2,198       2,079       1,969       1,881       1,804       1,749       1,692       1,645  
Direct two-way
    157       147       141       133       126       121       109       106  
     
Total direct
    2,355       2,226       2,110       2,014       1,930       1,870       1,801       1,751  
     
Indirect one-way
    161       139       116       101       90       82       75       68  
Indirect two-way
    91       84       71       67       79       75       74       70  
     
Total indirect
    252       223       187       168       169       157       149       138  
     
Total ending units in service
    2,607       2,449       2,297       2,182       2,099       2,027       1,950       1,889  
     
 
(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
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
ARPU
                                                               
Direct one-way
  $ 8.11     $ 8.18     $ 8.08     $ 8.04     $ 8.16     $ 8.05     $ 8.07     $ 8.05  
Direct two-way
    23.68       23.62       23.42       23.59       23.61       23.55       23.11       22.57  
     
Total direct
    9.15       9.21       9.10       9.06       9.17       9.06       9.01       8.92  
 
                                                               
Indirect one-way
    7.05       7.43       7.51       7.77       8.78       8.87       9.60       9.13  
Indirect two-way
    4.58       5.19       5.49       5.14       4.84       4.25       4.09       3.98  
     
Total indirect
    6.19       6.60       6.74       6.73       7.04       6.65       6.86       6.48  
 
                                                               
Total one-way
    8.03       8.14       8.05       8.02       8.19       8.09       8.14       8.09  
Total two-way
    16.66       16.86       17.09       17.32       16.76       16.06       15.54       14.96  
     
Total paging ARPU
  $ 8.86     $ 8.96     $ 8.89     $ 8.88     $ 9.00     $ 8.87     $ 8.85     $ 8.74  
     
 
                                                               
Gross disconnect rate (b)
                                                               
Direct one-way
    -9.3 %     -8.8 %     -8.4 %     -7.2 %     -6.9 %     -6.5 %     -6.6 %     -5.5 %
Direct two-way
    -11.8 %     -11.0 %     -10.2 %     -8.9 %     -9.1 %     -8.5 %     -13.0 %     -8.5 %
     
Total direct
    -9.5 %     -8.9 %     -8.5 %     -7.3 %     -7.1 %     -6.6 %     -7.0 %     -5.7 %
 
                                                               
Indirect one-way
    -22.0 %     -19.4 %     -21.9 %     -18.9 %     -13.7 %     -12.8 %     -12.5 %     -12.1 %
Indirect two-way
    -11.6 %     -9.1 %     -16.4 %     -8.5 %     -4.9 %     -6.8 %     -2.6 %     -5.8 %
     
Total indirect
    -18.5 %     -15.6 %     -19.8 %     -14.9 %     -10.1 %     -9.9 %     -7.7 %     -8.9 %
 
                                                               
Total one-way
    -10.3 %     -9.5 %     -9.2 %     -7.9 %     -7.3 %     -6.8 %     -6.8 %     -5.7 %
Total two-way
    -11.7 %     -10.3 %     -12.5 %     -8.8 %     -7.7 %     -7.9 %     -9.0 %     -7.4 %
     
Total paging gross disconnect rate
    -10.4 %     -9.6 %     -9.5 %     -8.0 %     -7.3 %     -6.9 %     -7.0 %     -5.9 %
     
 
                                                               
Net gain / loss rate (c)
                                                               
Direct one-way
    -6.4 %     -5.4 %     -5.3 %     -4.4 %     -4.1 %     -3.1 %     -3.2 %     -2.7 %
Direct two-way
    -8.5 %     -6.4 %     -4.4 %     -5.5 %     -5.0 %     -4.2 %     -9.5 %     -4.6 %
     
Total direct
    -6.6 %     -5.5 %     -5.2 %     -4.5 %     -4.2 %     -3.1 %     -3.6 %     -2.8 %
 
                                                               
Indirect one-way
    -17.8 %     -13.7 %     -16.9 %     -13.6 %     -10.5 %     -9.8 %     -9.2 %     -9.8 %
Indirect two-way
    -8.2 %     -7.2 %     -14.9 %     -5.2 %     17.1 %     -4.7 %     -0.9 %     -4.6 %
     
Total indirect
    -14.6 %     -11.3 %     -16.1 %     -10.4 %     0.7 %     -7.4 %     -5.1 %     -7.2 %
 
                                                               
Total one-way
    -7.3 %     -6.0 %     -6.0 %     -5.0 %     -4.4 %     -3.4 %     -3.5 %     -3.0 %
Total two-way
    -8.4 %     -6.7 %     -8.2 %     -5.4 %     2.5 %     -4.4 %     -6.1 %     -4.6 %
     
Total paging net gain / loss rate
    -7.4 %     -6.0 %     -6.2 %     -5.0 %     -3.8 %     -3.5 %     -3.8 %     -3.2 %
     
 
(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
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
Gross placement rate (b)
                                                               
Healthcare
    3.7 %     4.4 %     3.8 %     3.4 %     3.5 %     4.4 %     3.9 %     3.4 %
Government
    1.7 %     2.4 %     2.4 %     1.9 %     1.8 %     1.9 %     3.1 %     1.5 %
Large enterprise
    2.4 %     2.2 %     3.3 %     2.2 %     2.1 %     2.6 %     1.9 %     2.2 %
Other
    2.4 %     2.5 %     2.3 %     2.2 %     2.4 %     2.0 %     2.5 %     2.3 %
     
Total direct
    2.9 %     3.4 %     3.3 %     2.8 %     2.9 %     3.5 %     3.4 %     2.8 %
Total indirect
    3.9 %     4.3 %     3.7 %     4.5 %     10.9 %     2.5 %     2.6 %     1.7 %
     
Total
    3.0 %     3.5 %     3.3 %     3.0 %     3.5 %     3.4 %     3.3 %     2.7 %
     
 
                                                               
Gross disconnect rate (b)
                                                               
Healthcare
    -6.8 %     -6.2 %     -6.7 %     -5.5 %     -4.9 %     -5.2 %     -5.7 %     -4.4 %
Government
    -9.9 %     -10.7 %     -10.7 %     -9.4 %     -9.1 %     -8.3 %     -8.3 %     -7.3 %
Large enterprise
    -13.3 %     -13.0 %     -10.7 %     -9.4 %     -10.3 %     -8.3 %     -9.7 %     -7.0 %
Other
    -13.0 %     -12.4 %     -10.6 %     -10.1 %     -11.0 %     -9.6 %     -9.3 %     -8.6 %
     
Total direct
    -9.5 %     -8.9 %     -8.5 %     -7.3 %     -7.1 %     -6.6 %     -7.0 %     -5.7 %
Total indirect
    -18.5 %     -15.6 %     -19.8 %     -14.9 %     -10.1 %     -9.9 %     -7.7 %     -8.9 %
     
Total
    -10.4 %     -9.6 %     -9.5 %     -8.0 %     -7.3 %     -6.9 %     -7.0 %     -5.9 %
     
 
                                                               
Net loss rate (b)
                                                               
Healthcare
    -3.1 %     -1.8 %     -2.9 %     -2.1 %     -1.4 %     -0.8 %     -1.8 %     -1.1 %
Government
    -8.2 %     -8.4 %     -8.3 %     -7.5 %     -7.4 %     -6.4 %     -5.2 %     -5.9 %
Large enterprise
    -10.9 %     -10.9 %     -7.4 %     -7.2 %     -8.1 %     -5.7 %     -7.8 %     -4.8 %
Other
    -10.6 %     -10.0 %     -8.3 %     -7.9 %     -8.6 %     -7.6 %     -6.8 %     -6.3 %
     
Total direct
    -6.6 %     -5.5 %     -5.2 %     -4.5 %     -4.2 %     -3.1 %     -3.6 %     -2.8 %
Total indirect
    -14.6 %     -11.3 %     -16.1 %     -10.4 %     0.7 %     -7.4 %     -5.1 %     -7.2 %
     
Total
    -7.4 %     -6.0 %     -6.2 %     -5.0 %     -3.8 %     -3.5 %     -3.8 %     -3.2 %
     
 
                                                               
End of period units in service % of total (b)
                                                               
Healthcare
    44.9 %     49.8 %     51.5 %     53.2 %     54.5 %     56.1 %     57.1 %     58.3 %
Government
    17.2 %     15.6 %     15.3 %     14.9 %     14.4 %     14.1 %     13.9 %     13.5 %
Large enterprise
    12.0 %     11.8 %     11.8 %     11.4 %     10.9 %     10.7 %     10.2 %     10.1 %
Other
    16.2 %     13.7 %     13.2 %     12.8 %     12.1 %     11.4 %     11.2 %     10.8 %
     
Total direct
    90.3 %     90.9 %     91.8 %     92.3 %     91.9 %     92.3 %     92.4 %     92.7 %
Total indirect
    9.7 %     9.1 %     8.2 %     7.7 %     8.1 %     7.7 %     7.6 %     7.3 %
     
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 disconnect and net loss rates.

 


 

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

(unaudited)
                                                                 
    For the three months ended
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
Account size ending units in service (000’s)
                                                               
1 to 3 units
    137       126       118       109       101       95       88       84  
4 to 10 units
    82       75       70       66       62       58       54       52  
11 to 50 units
    199       183       168       158       149       140       130       123  
51 to 100 units
    125       112       104       97       92       86       79       76  
101 to 1,000 units
    626       580       546       519       499       483       456       436  
>1,000 units
    1,186       1,150       1,104       1,065       1,027       1,008       994       980  
     
Total
    2,355       2,226       2,110       2,014       1,930       1,870       1,801       1,751  
     
End of period units in service % of total direct
                                                               
1 to 3 units
    5.8 %     5.7 %     5.6 %     5.4 %     5.2 %     5.1 %     4.9 %     4.8 %
4 to 10 units
    3.5 %     3.4 %     3.3 %     3.3 %     3.2 %     3.1 %     3.0 %     2.9 %
11 to 50 units
    8.4 %     8.2 %     8.0 %     7.8 %     7.7 %     7.5 %     7.2 %     7.0 %
51 to 100 units
    5.3 %     5.0 %     4.9 %     4.8 %     4.8 %     4.6 %     4.4 %     4.4 %
101 to 1,000 units
    26.6 %     26.0 %     25.9 %     25.8 %     25.9 %     25.8 %     25.3 %     24.9 %
>1,000 units
    50.4 %     51.7 %     52.3 %     52.9 %     53.2 %     53.9 %     55.2 %     56.0 %
     
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 %     -7.9 %     -6.9 %     -7.4 %     -7.6 %     -5.8 %     -7.0 %     -4.8 %
4 to 10 units
    -8.8 %     -7.9 %     -6.7 %     -6.1 %     -5.3 %     -6.0 %     -7.5 %     -5.0 %
11 to 50 units
    -8.9 %     -8.2 %     -7.7 %     -5.9 %     -5.8 %     -6.1 %     -7.3 %     -5.1 %
51 to 100 units
    -6.2 %     -10.1 %     -7.6 %     -6.8 %     -4.4 %     -6.5 %     -7.9 %     -4.2 %
101 to 1,000 units
    -8.0 %     -7.4 %     -5.9 %     -4.9 %     -3.7 %     -3.3 %     -5.6 %     -4.2 %
>1,000 units
    -5.1 %     -3.1 %     -4.0 %     -3.5 %     -3.7 %     -1.9 %     -1.3 %     -1.5 %
     
Total
    -6.6 %     -5.5 %     -5.2 %     -4.5 %     -4.2 %     -3.1 %     -3.6 %     -2.8 %
     
Account size ARPU
                                                               
1 to 3 units
  $ 14.73     $ 15.07     $ 14.98     $ 15.03     $ 15.28     $ 15.37     $ 15.48     $ 15.57  
4 to 10 units
    14.00       14.30       14.24       14.21       14.37       14.35       14.51       14.56  
11 to 50 units
    11.41       11.65       11.54       11.45       11.86       12.01       12.18       12.26  
51 to 100 units
    10.30       10.13       10.06       10.06       10.67       10.76       10.69       10.72  
101 to 1,000 units
    8.94       9.04       8.89       8.82       9.00       8.93       8.82       9.00  
>1,000 units
    7.77       7.80       7.76       7.79       7.80       7.63       7.64       7.43  
     
Total
  $ 9.15     $ 9.21     $ 9.10     $ 9.06     $ 9.17     $ 9.06     $ 9.01     $ 8.92  
     
Cellular revenue
                                                               
Number of activations
    2,389       2,207       2,633       2,253       2,354       1,885       1,885       1,990  
     
Revenue from cellular services (000’s)
  $ 991     $ 775     $ 980     $ 795     $ 708     $ 624     $ 532     $ 499  
     
 
(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  
    3/31/09     6/30/09     9/30/09     12/31/09     3/31/10     6/30/10     9/30/10     12/31/10  
Cost of products sold
  $ 1,669     $ 1,421     $ 1,593     $ 1,513     $ 1,209     $ 1,134     $ 819     $ 1,051  
     
 
                                                               
Service, rental and maintenance
                                                               
Site rent
    11,218       10,223       10,422       9,871       9,079       8,283       8,042       7,629  
Telecommunications
    4,485       4,284       3,945       3,885       3,831       3,467       3,341       3,066  
Payroll and related
    5,631       5,286       4,988       4,725       4,586       4,444       4,199       4,319  
Stock based compensation
    49       7       13       12       6       7       5       6  
Other
    1,572       1,490       1,582       1,622       1,439       974       1,234       1,201  
     
Total service, rental and maintenance
    22,955       21,290       20,950       20,115       18,941       17,175       16,821       16,221  
     
 
                                                               
Selling and marketing
                                                               
Payroll and related
    4,175       3,711       3,366       3,199       2,964       2,814       2,659       2,627  
Commissions
    1,201       1,422       1,328       1,131       1,164       1,367       1,163       1,007  
Stock based compensation
    109       26       26       26       17       22       17       17  
Other
    577       441       478       599       412       191       221       264  
     
Total selling and marketing
    6,062       5,600       5,198       4,955       4,557       4,394       4,060       3,915  
     
 
                                                               
General and administrative
                                                               
Payroll and related
    9,075       7,754       7,213       7,089       6,912       6,621       5,719       6,118  
Stock based compensation
    569       241       241       241       240       242       15       223  
Bad debt
    850       750       699       654       713       594       571       547  
Facility rent
    1,628       1,446       1,457       1,411       1,354       1,326       992       856  
Telecommunications
    771       721       720       702       657       603       518       480  
Outside services
    4,514       4,063       3,269       3,051       3,267       3,185       2,463       2,385  
Taxes, licenses and permits
    1,101       1,695       (680 )     660       1,591       1,836       1,276       1,097  
Other
    1,678       6,131       3,131       1,481       1,078       1,517       1,353       3,123  
     
Total general and administrative
    20,186       22,801       16,050       15,289       15,812       15,924       12,907       14,829  
     
 
                                                               
Severance and restructuring
    190       52       15       2,480       314       41       86       1,738  
Depreciation, amortization and accretion
    11,270       11,174       10,689       8,781       7,304       6,698       5,899       4,226  
 
                                                               
     
Operating expenses
  $ 62,332     $ 62,338     $ 54,495     $ 53,133     $ 48,137     $ 45,366     $ 40,592     $ 41,980  
     
 
                                                               
Capital expenditures
  $ 6,054     $ 4,355     $ 1,806     $ 5,014     $ 1,725     $ 563     $ 1,730     $ 4,720  
 
(a)   Slight variations in totals are due to rounding.

 


 

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

(in thousands)
                 
    12/31/09     12/31/10  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 109,591     $ 129,220  
Accounts receivable, net
    19,051       13,419  
Prepaid expenses and other
    3,016       2,798  
Tax receivables
    5,117       5,004  
Deferred income tax assets, net
    1,068       3,915  
 
           
Total current assets
    137,843       154,356  
Property and equipment, net
    41,295       27,135  
Intangible assets, net
    226       511  
Tax receivables
          191  
Deferred income tax assets, net
    32,123       47,390  
Other assets
    2,061       1,075  
 
           
Total assets
  $ 213,548     $ 230,658  
 
           
 
               
Liabilities and stockholders’ equity
               
Current liabilities:
               
Accounts payable and accrued liabilities
  $ 35,214     $ 27,495  
Customer deposits
    888       718  
Deferred revenue
    7,422       6,268  
 
           
Total current liabilities
    43,524       34,481  
Other long-term liabilities
    11,228       11,787  
 
           
Total liabilities
    54,752       46,268  
 
           
Commitments and contingencies
               
Stockholders’ equity:
               
Preferred stock
           
Common stock
    2       2  
Additional paid-in capital
    137,378       129,696  
Retained earnings
    21,416       54,692  
 
           
Total stockholders’ equity
    158,796       184,390  
 
           
Total liabilities and stockholders’ equity
  $ 213,548     $ 230,658  
 
           
 
(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  
    12/31/09     12/31/10  
Cash flows from operating activities:
               
Net income
  $ 67,558     $ 77,898  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation, amortization and accretion
    41,914       24,127  
Deferred income tax expense
    32,433       (18,115 )
Amortization of stock based compensation
    1,560       817  
Provisions for doubtful accounts, service credits and other
    4,515       4,416  
Non-cash transaction tax accrual adjustments
    (7,218 )     (1,402 )
Loss (gain) on disposals of property and equipment
    2       (12 )
Changes in assets and liabilities:
               
Accounts receivable
    1,553       1,216  
Prepaid expenses, intangible assets and other assets
    (434 )     (164 )
Accounts payable and accrued liabilities
    482       (6,038 )
Customer deposits and deferred revenue
    (2,851 )     (1,324 )
Other long-term liabilities
    (37,654 )      
 
           
Net cash provided by operating activities
    101,860       81,419  
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (17,229 )     (8,738 )
Proceeds from disposals of property and equipment
    168       75  
 
           
Net cash used in investing activities
    (17,061 )     (8,663 )
 
           
 
               
Cash flows from financing activities:
               
Cash distributions to stockholders
    (45,502 )     (44,234 )
Purchase of common stock
    (4,738 )     (8,893 )
 
           
Net cash used in financing activities
    (50,240 )     (53,127 )
 
           
 
               
Net increase in cash and cash equivalents
    34,559       19,629  
Cash and cash equivalents, beginning of period
    75,032       109,591  
 
           
Cash and cash equivalents, end of period
  $ 109,591     $ 129,220  
 
           
 
               
Supplemental disclosure:
               
Interest paid
  $ 2     $  
 
           
Income taxes paid (state and local)
  $ 447     $ 434  
 
           
 
(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,  
    2009     2010  
Revenue:
               
Paging service
  $ 262,958     $ 215,804  
Cellular
    3,541       2,363  
Product sales
    18,821       11,679  
Other
    4,386       3,408  
 
           
Total revenue
    289,706       233,254  
 
           
 
               
Operating expenses:
               
Cost of products sold
    6,196       4,213  
Service, rental and maintenance
    85,310       69,158  
Selling and marketing
    21,815       16,926  
General and administrative
    74,326       59,472  
Severance and restructuring
    2,737       2,179  
Depreciation, amortization and accretion
    41,914       24,127  
 
           
Total operating expenses
    232,298       176,075  
 
           
% of total revenue
    80.2 %     75.5 %
 
               
 
           
Operating income
    57,408       57,179  
 
           
% of total revenue
    19.8 %     24.5 %
 
               
Interest income, net
    69       16  
Other income, net
    530       2,805  
 
           
Income before income tax benefit
    58,007       60,000  
 
           
Income tax benefit
    (9,551 )     (17,898 )
Net income
  $ 67,558     $ 77,898  
 
           
 
               
Basic net income per common share (b)
  $ 2.95     $ 3.50  
 
           
Diluted net income per common share (b)
  $ 2.90     $ 3.45  
 
           
 
               
Basic weighted average common shares outstanding
    22,918,904       22,265,961  
 
           
Diluted weighted average common shares outstanding
    23,260,431       22,567,030  
 
           
 
               
Reconciliation of operating income to EBITDA (c):
               
Operating income
  $ 57,408     $ 57,179  
Add back: depreciation, amortization and accretion
    41,914       24,127  
 
           
EBITDA
  $ 99,322     $ 81,306  
 
           
% of total revenue
    34.3 %     34.9 %
 
(a)   Slight variations in totals are due to rounding.
 
(b)   Basic and diluted net income per common share is computed independently for each period presented. As a result, the sum of the quarterly basic and
 
    diluted net income per common share for the years ended December 31, 2009 and 2010 may not equal the total computed for the year.
 
(c)   EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.