News
USA Mobility Reports First Quarter Operating Results, Board Declares Quarterly Cash Distribution
ALEXANDRIA, Va.-(Business Wire)-May 6, 2008 - USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the first quarter ended March 31, 2008.
Total revenue for the first quarter was $94.8 million, compared to $100.2 in the fourth quarter of 2007 and $111.5 million in the year-earlier quarter. EBITDA (earnings before interest, taxes, depreciation, amortization, accretion and goodwill impairment) in the first quarter totaled $29.9 million, compared to $24.5 million in the fourth quarter of 2007 and $35.1 million in the first quarter of 2007. First quarter net loss was $177.8 million, or $6.48 per fully diluted share, compared to net income of $13.0 million, or $0.47 per fully diluted share, in the first quarter of 2007. The loss resulted from a goodwill impairment for which the Company incurred a $188.2 million non-cash expense to write-off its entire goodwill balance. Absent the goodwill write-down, net income in the first quarter would have been $10.4 million, or $0.38 per fully diluted share.
First quarter results included:
— EBITDA margin (or EBITDA as a percentage of revenue) increased to 31.6 percent in the first quarter, compared to 24.5 percent in the fourth quarter of 2007. This represents the highest EBITDA margin since the Company was formed in late 2004 by the merger of Arch Wireless, Inc. and subsidiaries and Metrocall Holdings, Inc. and subsidiaries.
— The annual rate of subscriber erosion improved to 14.8 percent from 15.1 percent in the fourth quarter of 2007 and 15.6 percent in the year-earlier quarter. The quarterly rate of subscriber loss improved to 4.4 percent in the first quarter, historically the quarter with the highest net churn, compared to 4.7 percent in the first quarter of 2007.
— Net unit loss was 152,000 in the first quarter, compared to 193,000 in the first quarter of 2007. Units in service totaled 3,333,000 at March 31, 2008, compared to 3,485,000 at December 31, 2007.
— The annual rate of revenue erosion improved to 15.0 percent from 17.3 percent in the first quarter of 2007.
— Operating expenses, excluding depreciation, amortization, accretion and goodwill impairment, totaled $64.8 million in the first quarter, a reduction of $10.8 million, or 14.3 percent, from $75.7 million in the fourth quarter of 2007. Quarterly operating expenses declined 15.2 percent from the first quarter 2007, and, in both dollars and as a percentage of revenue, are at their lowest level in nearly four years.
— Total paging ARPU (average revenue per unit) decreased to $8.49 in the first quarter from $8.62 in the fourth quarter of 2007 and $8.65 in the year-earlier quarter.
— Capital expenses were $4.0 million, compared to $5.2 million in the fourth quarter of 2007.
— The Company's cash balance at March 31, 2008 was $69.0 million.
"USA Mobility reported another solid operating performance in the first quarter," said Vincent D. Kelly, president and chief executive officer, "meeting or exceeding a majority of the performance objectives contained in our business plan and consistent with the financial guidance we provided earlier this year. Our rate of annual subscriber and revenue erosion showed further improvement during the quarter as we continued to concentrate our sales and marketing efforts on our core market segments of Healthcare, Government and Large Enterprise. In addition, despite ongoing business risks, we continued to generate substantial free cash flow while successfully managing the business profitably with a low-cost operating structure."
Kelly added, "During the quarter we gained sales traction on several new products we launched last year for Healthcare accounts, including ReadyCall, our wide-area network coaster pager that hospitals and doctors use to eliminate congestion in waiting rooms, and our Private Medical Messaging Network, a dedicated paging and communications system that manages messaging traffic within a single hospital or multiple hospital campus network. In addition, we are very enthused about the initial response we have received to our new product PageSync, which allows our paging customers to receive their pages on a BlackBerry(R) or SMS handset. We believe this product solves a critical need by giving our customers a solution that unifies paging with voice and e-mail in data-centric handsets, like BlackBerrys, providing the unique benefits of both solutions on one device. While our sales force is just beginning to acquaint customers with the benefits of this innovative product, the feedback they have received to date has been very positive."
Kelly said the Company again returned capital to stockholders in the first quarter consistent with its stated goal, paying a regular quarterly cash distribution of $0.65 per share, or an aggregate amount of approximately $17.8 million, on March 13, 2008. In addition, the Board of Directors on May 2, 2008 declared a regular quarterly cash distribution of $0.25 per share, payable on June 19, 2008 to stockholders of record on May 19, 2008. The Company expects the cash distribution, a total of approximately $6.8 million, to be paid as a return of capital. "As previously discussed," Kelly stated, "the Board of Directors and management set the revised cash distribution rate at a level that is sustainable on a longer term basis over the next several years. The decision to re-set the rate was made to strengthen our financial position while maintaining a respectable yield on our stock, and was not the result of a sudden weakening in our near-term outlook. In fact, our first quarter cash flow performance and record EBITDA margin of 31.6 percent reflect our ability to generate significant cash flow notwithstanding the many challenges we face. Our commitment to return the cash we generate to our stockholders has not changed. Since the merger, which formed USA Mobility, Inc. in late 2004, and prior to today's announcement, we have already returned $9.40 per share, representing $255.6 million, to our stockholders. Our current cash balance is approximately $2.50 per share and we expect to generate significant cash over the remainder of this year. We are currently awaiting the result of our challenge to the Federal Communications Commission (FCC) on the Back-Up Power Order appeal and we anticipate resolution by the end of the summer, at which point we may be in a position to return additional cash above the level of our recurring quarterly distributions to our stockholders either in the form of a stock repurchase program, special distributions as we have done in the past or a combination of both."
Thomas L. Schilling, chief operating officer and chief financial officer, said the Company's expenses declined significantly during the first quarter as a result of ongoing cost control initiatives. "Operating expenses (excluding depreciation, amortization, accretion and goodwill impairment) decreased 15.2 percent from the year-earlier quarter," he said, "outpacing the year-over-year decline in revenue of 15.0 percent. In addition," Schilling noted, "operating expense as a percentage of revenue was 68.4 percent in the first quarter, the lowest level in almost four years."
Schilling added, "The combination of lower expenses and improving revenue trends contributed to an increase in first quarter EBITDA and EBITDA margin compared to the prior quarter. While we are pleased and encouraged by these financial trends, we are maintaining our previous financial guidance for 2008 of revenues between $345 million to $355 million, operating expenses - excluding depreciation, amortization, accretion and goodwill impairment - between $250 million to $255 million, and capital expenses between $18 million to $20 million."
Commenting on the Company's decision to write-off goodwill, Schilling said, "The significant change in our market capitalization at March 31, 2008, compared to December 31, 2007, necessitated a goodwill impairment analysis to be performed earlier than our normal annual test. Based on the lower market value and the accounting rules related to goodwill, we recorded a $188.2 million non-cash expense in the first quarter to write-off our entire goodwill balance. This expense has no impact on our underlying operations or cash flows."
USA Mobility plans to host a conference call for investors on its first quarter results at 10:00 a.m. Eastern Time on Wednesday, May 7, 2008. The dial-in number for the call is 877-419-6603 (toll-free) or 719-325-4903 (toll). The pass code for the call is 4055284. A replay of the call will be available from 4:00 p.m. ET on May 7 until 11:59 p.m. on Wednesday, May 21. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4055284.
USA Mobility's Annual Meeting of Stockholders will be held at 10:00 a.m. Eastern Time on Wednesday, May 14, 2008 in Alexandria, VA.
About USA Mobility
USA Mobility, Inc., headquartered in Alexandria, Virginia, is a comprehensive provider of reliable and affordable wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. As a single-source provider, USA Mobility's focus is on the business-to-business marketplace and supplying wireless connectivity solutions to 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(R) 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. -0- *T 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 ———————————————————————— (restated) Revenues: Paging service $ 104,003 $ 98,248 $ 95,393 $ 91,825 Cellular 2,087 2,497 2,035 1,705 Product sales 4,400 5,335 6,851 5,618 Other 1,052 1,390 1,145 1,040 ———————————————————————— Total revenues 111,542 107,470 105,424 100,188 ———————————————————————— Operating expenses: Cost of products sold 687 1,508 2,435 1,603 Service, rental and maintenance 39,033 39,356 36,746 36,795 Selling and marketing 10,242 9,975 9,891 8,720 General and administrative 26,448 23,297 23,606 23,316 Severance and restructuring 17 - 1,177 5,235 Depreciation, amortization and accretion 13,318 12,450 12,048 10,872 Goodwill impairment - - - - ———————————————————————— Total operating expenses 89,745 86,586 85,903 86,541 ———————————————————————— % of total revenues 80.5% 80.6% 81.5% 86.4% ———————————————————————— Operating income (loss) 21,797 20,884 19,521 13,647 ———————————————————————— % of total revenues 19.5% 19.4% 18.5% 13.6% Interest income, net 951 932 856 709 Other (expense) income, net (516) 826 1,038 802 ———————————————————————— Income (loss) before income tax expense 22,232 22,642 21,415 15,158 Income tax expense 9,206 9,676 5,947 61,816 ———————————————————————— Net income (loss) $ 13,026 $ 12,966 $ 15,468 $ (46,658) ================================================ Basic net income (loss) per common share $ 0.47 $ 0.47 $ 0.56 $ (1.70) ================================================ Diluted net income (loss) per common share $ 0.47 $ 0.47 $ 0.56 $ (1.70) ================================================ Basic weighted average common shares outstanding 27,434,418 27,440,094 27,445,028 27,450,035 ================================================ Diluted weighted average common shares outstanding 27,578,066 27,570,346 27,594,513 27,450,035 ================================================ Reconciliation of operating income (loss) to EBITDA (b): Operating income (loss) $ 21,797 $ 20,884 $ 19,521 $ 13,647 Add back: depreciation, amortization and accretion 13,318 12,450 12,048 10,872 Add back: goodwill impairment - - - - ———————————————————————— EBITDA $ 35,115 $ 33,334 $ 31,569 $ 24,519 ================================================ % of total revenues 31.5% 31.0% 29.9% 24.5% 3/31/08 —————— Revenues: Paging service $ 86,773 Cellular 1,859 Product sales 4,871 Other 1,255 —————— Total revenues 94,758 —————— Operating expenses: Cost of products sold 1,081 Service, rental and maintenance 33,969 Selling and marketing 7,836 General and administrative 21,808 Severance and restructuring 145 Depreciation, amortization and accretion 12,513 Goodwill impairment 188,170 —————— Total operating expenses 265,522 —————— % of total revenues 280.2% —————— Operating income (loss) (170,764) —————— % of total revenues -180.2% Interest income, net 578 Other (expense) income, net 125 —————— Income (loss) before income tax expense (170,061) Income tax expense 7,739 —————— Net income (loss) $ (177,800) ============ Basic net income (loss) per common share $ (6.48) ============ Diluted net income (loss) per common share $ (6.48) ============ Basic weighted average common shares outstanding 27,459,068 ============ Diluted weighted average common shares outstanding 27,459,068 ============ Reconciliation of operating income (loss) to EBITDA (b): Operating income (loss) $ (170,764) Add back: depreciation, amortization and accretion 12,513 Add back: goodwill impairment 188,170 —————— EBITDA $ 29,919 ============ % of total revenues 31.6% —————— (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. *T -0- *T USA MOBILITY, INC. UNITS IN SERVICE ACTIVITY (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 ————————————————- ———— Units in service —————————————- Beginning units in service Direct one-way 3,318 3,179 3,071 2,961 2,854 Direct two-way 280 263 245 232 221 ————————————————- ———— Total direct 3,598 3,442 3,316 3,193 3,075 ————————————————- ———— Indirect one-way 417 378 346 330 312 Indirect two-way 90 92 95 97 98 ————————————————- ———— Total indirect 507 470 441 427 410 ————————————————- ———— Total beginning units in service 4,105 3,912 3,757 3,620 3,485 ================================= ======== Gross placements Direct one-way 91 112 107 81 77 Direct two-way 12 14 13 10 8 ————————————————- ———— Total direct 103 126 120 91 85 ————————————————- ———— Indirect one-way 19 25 35 29 17 Indirect two-way 8 8 7 7 16 ————————————————- ———— Total indirect 27 33 42 36 33 ————————————————- ———— Total gross placements 130 159 162 127 118 ================================= ======== Gross disconnects Direct one-way (230) (220) (217) (188) (199) Direct two-way (29) (32) (26) (21) (22) ————————————————- ———— Total direct (259) (252) (243) (209) (221) ————————————————- ———— Indirect one-way (58) (57) (51) (47) (44) Indirect two-way (6) (5) (5) (6) (5) ————————————————- ———— Total indirect (64) (62) (56) (53) (49) ————————————————- ———— Total gross disconnects (323) (314) (299) (262) (270) ================================= ======== Net gain (loss) Direct one-way (139) (108) (110) (107) (122) Direct two-way (17) (18) (13) (11) (14) ————————————————- ———— Total direct (156) (126) (123) (118) (136) ————————————————- ———— Indirect one-way (39) (32) (16) (18) (27) Indirect two-way 2 3 2 1 11 ————————————————- ———— Total indirect (37) (29) (14) (17) (16) ————————————————- ———— Total net change (193) (155) (137) (135) (152) ================================= ======== Ending units in service Direct one-way 3,179 3,071 2,961 2,854 2,732 Direct two-way 263 245 232 221 207 ————————————————- ———— Total direct 3,442 3,316 3,193 3,075 2,939 ————————————————- ———— Indirect one-way 378 346 330 312 285 Indirect two-way 92 95 97 98 109 ————————————————- ———— Total indirect 470 441 427 410 394 ————————————————- ———— Total ending units in service 3,912 3,757 3,620 3,485 3,333 ================================= ======== (a) Slight variations in totals are due to rounding. *T -0- *T 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 ——————————————————- ————- ARPU ——————————— Direct one-way $ 7.96 $ 7.87 $ 7.98 $ 7.93 $ 7.83 Direct two-way 23.91 24.02 24.17 24.06 23.68 ——————————————————- ————- Total direct 9.18 9.08 9.16 9.09 8.95 Indirect one-way 4.45 4.12 4.35 4.11 4.10 Indirect two-way 6.30 6.10 5.30 8.20 7.52 ——————————————————- ————- Total indirect 4.79 4.53 4.56 5.06 4.97 Total one-way 7.57 7.48 7.61 7.55 7.47 Total two-way 19.46 19.18 18.74 19.30 18.44 ——————————————————- ————- Total paging ARPU $ 8.65 $ 8.54 $ 8.62 $ 8.62 $ 8.49 ——————————————————- ————- Gross disconnect rate (b) ——————————— Direct one-way -6.9% -6.9% -7.1% -6.4% -7.0% Direct two-way -10.4% -12.2% -10.5% -9.1% -10.2% ——————————————————- ————- Total direct -7.2% -7.3% -7.3% -6.6% -7.2% Indirect one-way -14.0% -15.0% -14.7% -14.1% -13.9% Indirect two-way -6.2% -5.9% -5.7% -6.7% -5.3% ——————————————————- ————- Total indirect -12.6% -13.2% -12.8% -12.5% -11.8% Total one-way -7.7% -7.8% -7.8% -7.1% -7.7% Total two-way -9.4% -10.4% -9.2% -8.4% -8.7% ——————————————————- ————- Total paging gross disconnect rate -7.9% -8.0% -8.0% -7.2% -7.7% ——————————————————- ————- Net gain (loss) rate (c) ——————————— Direct one-way -4.2% -3.4% -3.6% -3.6% -4.3% Direct two-way -5.9% -6.9% -5.3% -4.6% -6.4% ——————————————————- ————- Total direct -4.3% -3.6% -3.7% -3.7% -4.4% Indirect one-way -9.5% -8.5% -4.6% -5.4% -8.5% Indirect two-way 2.5% 3.2% 2.1% 0.8% 11.0% ——————————————————- ————- Total indirect -7.3% -6.2% -3.2% -4.0% -3.9% Total one-way -4.8% -3.9% -3.7% -3.8% -4.7% Total two-way -3.9% -4.2% -3.3% -3.0% -1.1% ——————————————————- ————- Total paging net gain (loss) rate -4.7% -4.0% -3.7% -3.7% -4.4% ——————————————————- ————- (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. *T -0- *T USA MOBILITY, INC. SUPPLEMENTAL INFORMATION BY CUSTOMER SEGMENT (a) (unaudited) For the three months ended ——————————————————- 3/31/076/30/079/30/0712/31/07 3/31/08 ——————————————- ———- Gross placement rate (b) Healthcare 3.6% 4.8% 4.5% 3.6% 3.3% Government 2.2% 2.5% 2.5% 2.0% 2.2% Large enterprise 2.7% 3.0% 2.9% 2.7% 2.4% Other 2.6% 3.2% 3.4% 2.4% 2.5% ——————————————- ———- Total direct 2.9% 3.7% 3.6% 2.8% 2.8% Total indirect 5.3% 6.9% 9.6% 8.5% 8.0% ——————————————- ———- Total 3.2% 4.1% 4.3% 3.5% 3.4% ============================= ======= Gross disconnect rate (b) Healthcare -4.6% -5.0% -5.6% -5.0% -5.1% Government -5.8% -6.4% -6.8% -6.0% -6.7% Large enterprise -8.4% -9.3% -7.6% -6.9% -8.6% Other -10.9% -10.5% -10.5% -9.5% -10.7% ——————————————- ———- Total direct -7.2% -7.3% -7.3% -6.6% -7.2% Total indirect -12.6% -13.2% -12.8% -12.5% -11.8% ——————————————- ———- Total -7.9% -8.0% -8.0% -7.2% -7.7% ============================= ======= Net loss rate (b) Healthcare -1.1% -0.2% -1.0% -1.3% -1.7% Government -3.6% -3.8% -4.3% -4.0% -4.5% Large enterprise -5.7% -6.2% -4.6% -4.3% -6.2% Other -8.3% -7.2% -7.2% -7.1% -8.2% ——————————————- ———- Total direct -4.3% -3.6% -3.7% -3.7% -4.4% Total indirect -7.3% -6.2% -3.2% -4.0% -3.9% ——————————————- ———- Total -4.7% -4.0% -3.7% -3.7% -4.4% ============================= ======= End of period units in service % of total (b) Healthcare 33.6% 35.0% 36.2% 37.1% 38.3% Government 17.9% 18.0% 17.8% 17.8% 17.9% Large enterprise 13.8% 13.6% 13.5% 13.5% 13.1% Other 22.6% 21.7% 20.7% 19.8% 18.9% ——————————————- ———- Total direct 88.0% 88.3% 88.2% 88.2% 88.2% Total indirect 12.0% 11.7% 11.8% 11.8% 11.8% ——————————————- ———- Total 100.0% 100.0% 100.0% 100.0% 100.0% ============================= ======= (a) Slight variations in totals are due to rounding. (b) Changes in the classification of units in service are reflected in the quarter when such changes are identified. Such changes are then appropriately reflected in calculating the gross placement, gross disconnet and net loss rates. *T -0- *T 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 ——————————————————- ————- Account size ending units in service (000's) 1 to 3 units 251 232 216 200 184 4 to 10 units 150 139 129 120 112 11 to 50 units 368 344 319 298 276 51 to 100 units 215 200 189 176 164 101 to 1,000 units 924 898 856 827 784 (greater than)1,000 units 1,534 1,503 1,483 1,454 1,419 ——————————————————- ————- Total 3,442 3,316 3,193 3,075 2,939 ===================================== ========= End of period units in service % of total direct 1 to 3 units 7.2% 7.0% 6.7% 6.5% 6.2% 4 to 10 units 4.4% 4.2% 4.1% 3.9% 3.8% 11 to 50 units 10.7% 10.4% 10.0% 9.7% 9.4% 51 to 100 units 6.2% 6.0% 5.9% 5.7% 5.6% 101 to 1,000 units 26.9% 27.1% 26.8% 26.9% 26.7% (greater than)1,000 units 44.6% 45.3% 46.5% 47.3% 48.3% ——————————————————- ————- Total 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% 4 to 10 units -7.9% -7.6% -7.0% -7.5% -6.5% 11 to 50 units -7.5% -6.4% -7.3% -6.6% -7.6% 51 to 100 units -4.9% -6.9% -5.7% -6.4% -6.9% 101 to 1,000 units -4.4% -2.8% -4.7% -3.3% -5.2% (greater than)1,000 units -2.2% -2.0% -1.3% -2.0% -2.4% ——————————————————- ————- Total -4.3% -3.6% -3.7% -3.7% -4.4% ===================================== ========= Account size ARPU 1 to 3 units $ 14.68 $ 14.67 $ 14.90 $ 14.83 $ 14.66 4 to 10 units 13.41 13.40 13.68 13.62 13.56 11 to 50 units 10.95 10.93 11.15 11.07 10.99 51 to 100 units 9.44 9.48 9.74 9.74 9.57 101 to 1,000 units 8.24 8.24 8.35 8.38 8.23 (greater than)1,000 units 7.93 7.80 7.86 7.81 7.75 ——————————————————- ————- Total $ 9.18 $ 9.08 $ 9.16 $ 9.09 $ 8.95 ===================================== ========= Cellular revenue Number of activations 5,450 8,046 5,579 5,070 4,509 ===================================== ========= Revenue from cellular services (000's) $ 2,087 $ 2,497 $ 2,035 $ 1,705 $ 1,859 ===================================== ========= (a) Slight variations in totals are due to rounding. *T -0- *T 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 ————————————————— ———— Cost of products sold $ 687$ 1,508 $ 2,435$ 1,603 $ 1,081 ————————————————— ———— Service, rental and maintenance Site rent 22,284 22,115 20,705 19,602 17,792 Telecommunications 7,058 6,622 5,289 6,356 6,204 Payroll and related 6,488 6,657 6,871 6,878 6,683 Stock based compensation 31 30 26 25 17 Other 3,172 3,932 3,855 3,934 3,273 ————————————————— ———— Total service, rental and maintenance 39,033 39,356 36,746 36,795 33,969 ————————————————— ———— Selling and marketing Payroll and related 6,740 6,259 5,984 5,517 5,164 Commissions 2,170 2,386 2,140 2,056 1,724 Stock based compensation 93 91 67 52 39 Other 1,239 1,239 1,700 1,095 909 ————————————————— ———— Total selling and marketing 10,242 9,975 9,891 8,720 7,836 ————————————————— ———— General and administrative Payroll and related 9,560 9,343 9,487 8,744 8,682 Stock based compensation 304 299 214 180 190 Bad debt 1,402 1,075 854 1,015 711 Facility rent 2,947 3,066 2,614 2,177 2,073 Telecommunications 1,764 1,526 1,402 1,366 1,048 Outside services 5,504 5,222 5,136 4,854 5,359 Taxes, licenses and permits 2,316 (20) 1,815 2,218 1,958 Other 2,651 2,786 2,084 2,762 1,787 ————————————————— ———— Total general and administrative 26,448 23,297 23,606 23,316 21,808 ————————————————— ———— Severance and restructuring 17 - 1,177 5,235 145 Depreciation, amortization and accretion 13,318 12,450 12,048 10,872 12,513 Goodwill impairment - - - - 188,170 ————————————————— ———— Operating expenses $ 89,745$ 86,586 $ 85,903$ 86,541 $265,522 ================================== ======== Capital expenditures $ 5,086$ 3,525 $ 4,528$ 5,184 $ 3,988 ———— (a) Slight variations in totals are due to rounding. *T -0- *T USA MOBILITY, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (a) (in thousands) 12/31/07 3/31/08 ————- —————- (unaudited) Assets Current assets: Cash and cash equivalents $ 64,542 $ 68,978 Accounts receivable, net 28,044 26,401 Prepaid expenses and other 8,608 8,392 Deferred income tax assets, net 8,267 7,170 ————- —————- Total current assets 109,461 110,941 Property and equipment, net 75,669 69,649 Goodwill 188,170 - Intangible assets, net 16,929 14,683 Deferred income tax assets, net 86,219 79,581 Other assets 7,634 7,157 ————- —————- Total assets $ 484,082 $ 282,011 ========= =========== Liabilities and stockholders' equity Current liabilities: Accounts payable and accrued liabilities $ 53,418 $ 48,523 Distributions payable 93 1,033 Customer deposits 1,592 1,516 Deferred revenue 12,059 11,523 ————- —————- Total current liabilities 67,162 62,595 Other long-term liabilities 43,352 41,188 ————- —————- Total liabilities 110,514 103,783 ————- —————- Stockholders' equity: Preferred stock - - Common stock 3 3 Additional paid-in capital 373,565 356,025 Accumulated deficit - (177,800) ————- —————- Total stockholders' equity 373,568 178,228 ————- —————- Total liabilities and stockholders' equity $ 484,082 $ 282,011 ========= =========== (a) Slight variations in totals are due to rounding. *T -0- *T USA MOBILITY, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a) (unaudited and in thousands) For the three months ended ————————————— 3/31/07 3/31/08 —————— ——————- Cash flows from operating activities: Net income (loss) $ 13,026 $ (177,800) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation, amortization and accretion 13,318 12,513 Goodwill impairment - 188,170 Deferred income tax expense 8,052 7,735 Amortization of stock based compensation 428 246 Provisions for doubtful accounts, service credits and other 3,327 1,567 Non-cash transaction tax accrual adjustments (1,530) (946) Loss on disposals of property and equipment 648 12 Changes in assets and liabilities: Accounts receivable (2,435) 76 Prepaid expenses and other 2,121 363 Intangibles and other long-term assets 493 477 Accounts payable and accrued liabilities (1,634) (5,766) Customer deposits and deferred revenue 3 (613) Other long-term liabilities 919 - —————— ——————- Net cash provided by operating activities 36,736 26,034 —————— ——————- Cash flows from investing activities: Purchases of property and equipment (5,086) (3,988) Proceeds from disposals of property and equipment 79 153 —————— ——————- Net cash used in investing activities (5,007) (3,835) —————— ——————- Cash flows from financing activities: Cash distributions to stockholders (17,944) (17,763) —————— ——————- Net cash used in financing activities (17,944) (17,763) —————— ——————- Net increase in cash and cash equivalents 13,785 4,436 Cash and cash equivalents, beginning of period 66,507 64,542 —————— ——————- Cash and cash equivalents, end of period $ 80,292 $ 68,978 ============ ============= Supplemental disclosure: Interest paid $ 2 $ 2 ============ ============= Income taxes paid (state and local) $ 14 $ 6 ============ ============= (a) Slight variations in totals are due to rounding. *T
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