UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): May 25, 2006
USA Mobility, Inc.
 
(Exact name of registrant as specified in its charter)
         
Delaware   000-51027   16-1694797
         
         
(State or other jurisdiction   (Commission   (I.R.S. Employer
of incorporation)   File Number)   Identification No.)
         
6677 Richmond Highway, Alexandria,       22306
Virginia        
         
         
(Address of principal executive offices)       (Zip Code)
     
Registrant’s telephone number, including area code: (703) 660-6677
Not Applicable
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o   Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
o   Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
o   Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
o   Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4{c))
 
 

 


 

Item 8.01 Other Events.
On May 25, 2006, USA Mobility, Inc. announced operating results for the quarter ended March 31, 2006. The full text of the press release issued in connection with the announcement is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated into this Item 8.01 by reference.
The information in this Item 8.01 of this Form 8-K and the Exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(c)Exhibit 99.1
Description of Exhibit - Press Release dated May 25, 2006 (furnished pursuant to Item 8.01; not “filed” for purposes of Section 18 of the Exchange Act)

 


 

SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  USA Mobility, Inc.
 
 
May 26, 2006   By:    /s/ Thomas L. Schilling    
    Name:    Thomas L. Schilling    
    Title:    Chief Financial Officer    

 

 

(USA MOBILITY LOGO)
News Release
 
 
 
     
For Immediate Release   Contact :   Bob Lougee  (703) 721-3080
Thursday, May 25, 2006    
USA Mobility Reports First Quarter Operating Results
Improvement in Annual Trends and Operating Margin Cited
Alexandria, VA (May 25, 2006) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced operating results for the quarter ended March 31, 2006. Reported revenue for the first quarter was $134.9 million, with EBITDA (Earnings before interest, tax, depreciation, amortization and accretion) of $38.6 million or 28.6 percent of revenue. Reported operating income was $19.8 million, and net income was $12.3 million, or $0.45 per share.
Key results in the first quarter included:
    The annual rate of revenue erosion continued to show modest, but consistent improvement at 18.6 percent in the first quarter compared to 22.7 percent and 20.3 percent in the first and fourth quarter of 2005 on a pro forma basis, respectively.
 
    The annual rate of subscriber erosion improved to 17.6 percent from 18.1 percent in fourth quarter and 21.7 percent in first quarter 2005, on a pro forma basis. Net subscriber unit loss in first quarter was 252,000 compared to 347,000 and 230,000 in first quarter and fourth quarter of 2005, respectively.
 
    Average revenue per unit was $8.80, compared to $9.01 and $8.90 in the first quarter and fourth quarter of 2005, respectively.
 
    Operating expenses, excluding depreciation, amortization, and accretion were $96.2 million in first quarter, a reduction of $26.7 million or 21.7 percent from the first quarter of 2005, and $5.3 million or 5.3 percent reduction from fourth quarter 2005.
 
    Capital expense was $4.4 million in the first quarter, an increase of about 6% over fourth quarter 2005, and in line with expectations.

 


 

Vincent D. Kelly, president and chief executive officer, said: “USA Mobility took important steps during the quarter to underscore our strengths as a provider of mission-critical wireless services. Among them, we provided testimony to a Federal Communications Commission panel on the superior performance of paging networks during such disasters as Hurricane Katrina, we joined the American Association of Paging Carriers to help promote the advantages of paging, we recruited a wireless industry veteran to oversee our marketing initiatives, and we launched a corporate branding program under the tagline ‘One Source for Wireless’ to emphasize the breadth of our service offerings and engineering capabilities.”
Thomas L. Schilling, chief financial officer, said: “As expected net unit losses in the first quarter increased from the fourth quarter, along with the rate of revenue decline, due to seasonally higher cancellations. However, our first quarter results are on track with our expectations and objectives for 2006, including targets for gross subscriber placements and company-wide cost reductions.” Schilling added “We continued to strengthen our financial position during the first quarter with strong cost reductions which allowed us to increase our cash balance in the quarter from $37.5 million at year end 2005 to $76.3 million at March 31, 2006.
* * * * * * * * *
USA Mobility plans to host a conference call for investors on its first quarter results at 11:00 a.m. Eastern Time on Friday, May 26, 2006. The call-in number is 888-802-2275 (toll-free) or 913-312-1267 (toll). The pass code for the call is 1643835 (followed by the # sign). A replay of the call will be available from 3:00 p.m. ET on May 26 until 11:59 p.m. on Friday, June 9. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 1643835 (followed by the # sign).
* * * * * * * * *
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 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.
Tables to Follow

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)
                 
    December 31, 2005     March 31, 2006  
    (audited)     (unaudited)  
 
               
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 37,547     $ 76,292  
Accounts receivable, net
    38,177       33,558  
Prepaid rent, expenses and other
    10,660       12,123  
Deferred income tax assets
    18,895       18,565  
 
           
Total current assets
  $ 105,279     $ 140,538  
Property and equipment, net
    127,802       117,966  
Goodwill
    149,478       149,478  
Intangible assets, net
    40,654       36,450  
Deferred income tax assets
    207,150       206,015  
Other assets
    3,430       3,275  
 
           
TOTAL ASSETS
  $ 633,793     $ 653,722  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
               
Current maturities of long-term debt
  $ 13     $ 1  
Accounts payable and other accrued liabilities
    65,719       63,373  
Customer deposits
    3,104       2,905  
Deferred revenue
    17,924       19,088  
 
           
Total current liabilities
  $ 86,760     $ 85,367  
Long-term debt, less current maturities
           
Other long-term liabilities
    14,040       22,439  
 
           
TOTAL LIABILITIES
  $ 100,800     $ 107,806  
 
           
Stockholders’ equity:
               
Preferred stock
           
Common stock
    3       3  
Additional paid-in capital
    521,298       521,956  
Retained earnings
    11,692       23,957  
 
           
TOTAL STOCKHOLDERS’ EQUITY
    532,993       545,916  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 633,793     $ 653,722  
 
           

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(unaudited and in thousands, except share and per share amounts)
                 
    For the Three Months Ended March 31,  
    2005     2006  
Revenue:
               
Service, rental and maintenance, net of service credits
  $ 159,150     $ 128,761  
Product sales
    6,527       6,131  
 
           
Total revenue
    165,677       134,892  
 
           
 
               
Operating expenses:
               
Cost of products sold
    1,279       786  
Service, rental and maintenance
    56,353       48,011  
Selling and marketing
    10,402       10,888  
General and administrative
    48,427       35,711  
Depreciation, amortization and accretion
    40,595       18,794  
Stock based compensation
    1,385       683  
Severance and related termination costs
    5,137       170  
 
           
Total operating expenses
    163,578       115,043  
 
           
 
               
 
           
Operating income
    2,099       19,849  
 
           
 
               
Interest expense, net
    (1,214 )     549  
Loss on extinguishment of long-term debt
    (594 )      
Other income, net
    137       62  
 
           
Income before income tax expense
    428       20,460  
Income tax expense
    (291 )     (8,195 )
 
           
Net income
  $ 137     $ 12,265  
 
           
 
               
Basic net income per common share
  $ 0.01     $ 0.45  
 
           
Diluted net income per common share
  $ 0.01     $ 0.45  
 
           
 
               
Basic weighted average common shares outstanding
    27,108,034       27,397,307  
 
           
Diluted weighted average common shares outstanding
    27,320,212       27,503,230  
 
           
 
               
Reconciliation of operating income to EBITDA:
               
Operating income
    2,099       19,849  
Addback:
               
Depreciation and amortization
    40,595       18,794  
 
           
EBITDA (a)
  $ 42,694     $ 38,643  
 
           
(a) EBITDA or Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is presented for analytical purposes only.

 


 

USA MOBILITY, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)
                 
    For the Three Months Ended March 31,  
    2005     2006  
Cash flows from operating activities:
               
Net income
  $ 137     $ 12,265  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation, amortization and accretion
    40,595       18,794  
Deferred income tax expense
    (1,391 )     1,464  
Loss on extinguishment of long-term debt
    594        
Accretion of long-term debt and other non-cash interest expense
    505        
Deferred stock compensation
    1,385       683  
Provisions for doubtful accounts, service credits and other
    7,005       5,046  
Gain on disposals of property and equipment
    (26 )     37  
Changes in assets and liabilities:
               
Accounts receivable
    (3,084 )     (507 )
Prepaid expenses and other
    (4,861 )     (1,033 )
Intangibles and other long-term assets
    (46 )     104  
Accounts payable and accrued expenses
    (9,704 )     (2,483 )
Customer deposits and deferred revenue
    (1,494 )     965  
Other long-term liabilities
    1,464       7,734  
 
           
Net cash provided by operating activities
  $ 31,079     $ 43,069  
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (2,564 )     (4,424 )
Proceeds from disposals of property and equipment
    25       32  
Receipts from note receivable
    102       80  
 
           
Net cash used for investing activities
  $ (2,437 )   $ (4,312 )
 
           
 
               
Cash flows from financing activities:
               
Repayment of long-term debt
    (38,526 )     (12 )
 
           
Net cash used for financing activities
  $ (38,526 )   $ (12 )
 
           
 
               
Net decrease in cash and cash equivalents
  $ (9,884 )   $ 38,745  
Cash and cash equivalents, beginning of period
    46,995       37,547  
 
           
Cash and cash equivalents, end of period
  $ 37,111     $ 76,292  
 
           
Supplemental disclosure:
               
 
           
Interest paid
  $ 1,367     $  
 
           
State income taxes paid
  $     $  
 
           

 


 

USA MOBILITY, INC.
PRO FORMA UNITS IN SERVICE ACTIVITY (a) (b)

units in thousands (unaudited)
                                                                         
    Three Months Ended  
    March 2004     June 2004     September 2004     December 2004     March 2005     June 2005     September 2005     December 2005     March 2006  
Direct   One-Way:
                                                                       
Beginning units in service
    5,329       5,100       4,909       4,690       4,464       4,273       4,114       3,977       3,835  
Gross placements
    226       181       182       166       141       134       125       126       108  
Disconnects
    (455 )     (372 )     (401 )     (392 )     (332 )     (293 )     (262 )     (268 )     (265 )
 
                                                     
Ending units in service
    5,100       4,909       4,690       4,464       4,273       4,114       3,977       3,835       3,678  
 
                                                     
 
                                                                       
  Two-Way:
                                                                       
Beginning units in service
    506       483       462       449       422       397       382       365       347  
Gross placements
    40       32       35       29       22       29       17       18       15  
Disconnects
    (63 )     (53 )     (48 )     (56 )     (47 )     (44 )     (34 )     (36 )     (38 )
 
                                                     
Ending units in service
    483       462       449       422       397       382       365       347       324  
 
                                                     
 
                                                                       
Indirect   One-Way:
                                                                       
Beginning units in service
    1,716       1,474       1,253       1,101       987       859       762       685       604  
Gross placements
    157       145       160       143       107       92       26       26       24  
Disconnects
    (399 )     (366 )     (312 )     (257 )     (235 )     (189 )     (103 )     (107 )     (93 )
 
                                                     
Ending units in service
    1,474       1,253       1,101       987       859       762       685       604       535  
 
                                                     
 
                                                                       
  Two-Way:
                                                                       
Beginning units in service
    131       123       121       115       94       91       90       89       100  
Gross placements
    20       16       20       7       7       7       3       18       4  
Disconnects
    (28 )     (18 )     (26 )     (28 )     (10 )     (8 )     (4 )     (7 )     (7 )
 
                                                     
Ending units in service
    123       121       115       94       91       90       89       100       97  
 
                                                     
 
                                                                       
Total
                                                                       
Beginning units in service
    7,682       7,180       6,745       6,355       5,967       5,620       5,348       5,116       4,886  
Gross placements
    443       374       397       345       277       262       171       188       151  
Disconnects
    (945 )     (809 )     (787 )     (733 )     (624 )     (534 )     (403 )     (418 )     (403 )
 
                                                     
Ending units in service
    7,180       6,745       6,355       5,967       5,620       5,348       5,116       4,886       4,634  
 
                                                     
 
 
                                                                       
Adjusted Proforma ARPU
                                                                       
Direct One-Way
  $ 9.10     $ 8.96     $ 8.89     $ 8.75     $ 8.65     $ 8.61     $ 8.48     $ 8.27     $ 8.17  
Direct Two-Way
  $ 25.15     $ 24.68     $ 24.22     $ 23.93     $ 23.98     $ 23.65     $ 24.28     $ 23.76     $ 23.61  
Indirect One-Way
  $ 4.06     $ 4.26     $ 4.12     $ 4.26     $ 4.07     $ 4.11     $ 4.36     $ 4.66     $ 4.53  
Indirect Two-Way
  $ 12.89     $ 12.07     $ 11.30     $ 10.41     $ 9.16     $ 8.71     $ 8.42     $ 7.80     $ 6.93  
 
   
Total
  $ 9.15     $ 9.16     $ 9.14     $ 9.09     $ 9.01     $ 9.02     $ 9.04     $ 8.90     $ 8.80  
 
   
(a)   Assumes Arch and Metrocall combined as of January 1, 2004 and the unit in service adjustment reflected in March 2004.
 
(b)   Amounts have been adjusted for rounding.