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 24, 2006, USA Mobility, Inc. announced final operating results for the fourth quarter and year ended December 31, 2005. The Company had announced preliminary and unaudited 2005 operating results on April 3, 2006, pending filing of its 2005 Form 10-K and financial restatements for the years ended 2002, 2003 and 2004 and interim periods of 2004 and 2005. 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 24, 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 25, 2006   By:    /s/ Thomas L. Schilling    
    Name:    Thomas L. Schilling    
    Title:    Chief Financial Officer    

 

 

Exhibit 99.1
(USAMOBILITY LOGO)
(NEW RELEASE)
     
For Immediate Release
  Contact:  Bob Lougee (703) 721-3080
Wednesday, May 24, 2006
   
USA Mobility Reports 2005 Operating Results
Filing of Financial Restatements and 10-K Completed,
Date for First Quarter Earnings Release and Conference Call Scheduled
Alexandria, VA (May 24, 2006) — USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced final operating results for the fourth quarter and year ended December 31, 2005. The company had announced preliminary and unaudited 2005 operating results on April 3, 2006, pending filing of its 2005 Form 10-K and financial restatements for the years ended 2002, 2003 and 2004 and interim periods of 2004 and 2005. USA Mobility completed those filings today.
Reported revenue for 2005, the first full year of operations following the merger between Arch Wireless, Inc. and Metrocall Holdings, Inc. on November 16, 2004, totaled $618.6 million, compared to $788.7 million in 2004 on a pro forma basis. EBITDA (Earning before interest, tax, and depreciation, amortization and accretion) for 2005 was $158.5 million, or 25.6 percent of revenue, while operating income was $27.1 million. Net income for 2005 was $12.9 million, or $0.47 per fully diluted share.
The company announced earlier in the year that it would file an amended Form 10-K/A for the year ended December 31, 2004 and amended Form 10-Q/A’s for the three interim quarterly periods of 2004 and 2005. The purpose of the amended filings was to amend and restate financial statements and other financial information for the years 2002, 2003 and 2004 and first three quarters of 2004 and 2005 to reflect certain corrections and adjustments, including restatement of income taxes and deferred tax assets for those periods. The errors, which occurred in certain earlier reporting periods, were identified by the company’s internal accounting staff in the process of preparing its year-end 2005 operating results. The errors did not impact revenue, cash, or cash flow from operations.

 


 

The 2005 annual and fourth quarter results reported today vary from the preliminary results contained in USA Mobility’s April 3, 2006 news release as follows:
    In the fourth quarter of 2005, the company recognized a reduction of service, repair and maintenance (SRM) expense of $1.2 million. Of that total, $0.9 million represents a gain due to the difference between the company’s estimated deconstruction obligations under the company’s Asset Retirement Obligation (“ARO”) and the actual expenses incurred during that period. The remaining $0.3 million corresponds to the reclassification of accretion expense from SRM expense into depreciation, amortization and accretion. In the past, the company had included accretion expense as a component of SRM expense.
 
    The company’s fourth quarter results also reflect a net reduction of depreciation, amortization and accretion of $12.2 million, as compared to the preliminary 2005 operating results announced on April 3. A total of $12.5 million of the reduction represents an adjustment to the depreciable life of the paging infrastructure assets, while accretion increased by $0.3 million, reflecting the reclassification of accretion from SRM expense as discussed above.
 
    For the year-ended 2005, the company recognized a reduction of SRM expense of $2.6 million. Of that total, $1.5 million represents a gain due to the difference between the company’s estimated deconstruction obligations under the ARO and the actual expenses incurred during that period. The remaining $1.0 million corresponds to the reclassification of accretion expense from SRM expense into depreciation, amortization and accretion.
 
    The company’s 2005 year-end results also reflect a reduction of depreciation, amortization and accretion of $22.1 million, as compared to preliminary 2005 operating results. A total of $23.1 million of the reduction represents an adjustment to the depreciable life of the paging infrastructure assets, with accretion increasing by $1.0 million, reflecting the reclassification of accretion from SRM expense as discussed above.
The cumulative effect of the restatements on the 40-month period affected (June 2002 – September 2005) is as follows:
    The income statement reflects an increase to depreciation, amortization and accretion expense of $14.8 million, and a decrease to all other operating expenses of $5.8 million resulting in a decrease in operating income of $9.0 million, and a decrease to net income of $2.5 million.
 
    The assets on the balance sheet as of September 30, 2005 reflect a decrease to property, plant and equipment of $10.4 million, and decrease to the deferred tax asset of $4.4 million, a decrease to accounts receivable of $0.7 million, and an increase to goodwill of $2.8 million, for an overall reduction to assets of $12.7 million.

 


 

    Liabilities and equity on the balance sheet as of September 30, 2005 reflect an increase of $8.1 million in liabilities, primarily a result of the asset retirement obligation, and a reduction to equity of $20.8 million.
The company said its integration of Arch and Metrocall was substantially completed in 2005, leading to significant improvements in overall operating results. Among them was a steady improvement in the year-over-year rate of subscriber and revenue decline. Other major accomplishments during the year included: successfully consolidating to a single customer service and billing platform; decommissioning Arch’s two-way paging network; beginning the rationalization the one-way paging networks; reducing total operating expenses, excluding depreciation, amortization and accretion by 18.9% on a pro forma basis; repaying $140 million in bank debt incurred at the time of the merger; paying a special dividend representing a $41 million return of capital to investors; negotiating long-term contract with its largest site landlord representing substantial future cost savings; and strengthening the company’s operational structure and management team.
“Our first year of operation was a very successful one,” said Vincent D. Kelly, president and chief executive officer. “We achieved our principal goals of integrating the nation’s two largest paging carriers and generating significant costs savings. In meeting those objectives, we also became debt free, returned capital to our shareholders, laid the foundation for continued operational efficiencies in the future and began to explore potential alternative sources of revenue. As we move through 2006,” Kelly added, “we expect to make additional improvements to our operations and expand our selling and marketing initiatives as we continue to serve the needs of our nationwide customer base while remaining focused on our cash flow strategy.”
Thomas L. Schilling, chief financial officer, said: “While the process of amending our financial statements was time-consuming, the adjustments and restatements were necessary under generally accepted accounting principles because they had a material impact on our income statement. However,” Schilling added, “I would also note that restated items had no impact on the fundamentals of our business – that is, the company’s previously reported revenue, cash positions, or cash flow from operating activities.”
The company announced that it will report first quarter 2006 operating results on Thursday, May 25, at approximately 4:00 p.m. Eastern Time and will hold 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 for the investor call 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, 2004     December 31, 2005  
    (Restated)          
ASSETS
               
Current assets:
               
Cash and cash equivalents
  $ 46,995     $ 37,547  
Accounts receivable, net
    40,078       38,177  
Deposits
    117       1,687  
Prepaid rent, expenses and other
    15,343       8,973  
Deferred income tax assets
    25,525       18,895  
 
           
Total current assets
  $ 128,058     $ 105,279  
Property and equipment, net
    220,028       127,802  
Goodwill
    154,369       149,478  
Intangible assets, net
    67,129       40,654  
Deferred income tax assets
    207,046       207,150  
Other assets
    5,517       3,430  
 
           
TOTAL ASSETS
  $ 782,147     $ 633,793  
 
           
 
               
LIABILITIES AND STOCKHOLDERS’ EQUITY
               
Current liabilities:
               
Current maturities of long-term debt
  $ 47,558     $ 13  
Accounts payable and other accrued liabilities
    86,478       65,719  
Customer deposits
    4,316       3,104  
Deferred revenue
    23,623       17,924  
 
           
Total current liabilities
  $ 161,975     $ 86,760  
Long-term debt, less current maturities
    47,500        
Other long-term liabilities
    16,632       14,040  
 
           
TOTAL LIABILITIES
  $ 226,107     $ 100,800  
 
           
Stockholders’ equity:
               
Preferred stock
           
Common stock
    3       3  
Additional paid-in capital
    536,252       521,298  
Retained earnings
    19,785       11,692  
 
           
TOTAL STOCKHOLDERS’ EQUITY
    556,040       532,993  
 
           
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $ 782,147     $ 633,793  
 
           

 


 

USA MOBILITY, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS

(in thousands, except share and per share amounts)
                 
    Year Ended December 31,  
    2004     2005  
    (Restated)          
Revenue:
               
Service, rental and maintenance, net of service credits
  $ 470,751     $ 592,690  
Product sales
    19,409       25,882  
 
           
Total revenue
    490,160       618,572  
 
           
 
               
Operating expenses:
               
Cost of products sold
    4,347       4,483  
Service, rental and maintenance
    160,144       215,588  
Selling and marketing
    36,085       43,145  
General and administrative
    130,046       177,438  
Depreciation, amortization and accretion
    107,629       131,328  
Stock based compensation
    4,863       2,832  
Severance and related termination costs
    11,938       16,609  
 
           
Total operating expenses
    455,052       591,423  
 
           
Operating income
    35,108       27,149  
 
           
 
               
Interest expense
    (6,365 )     (2,412 )
Interest income
    451       1,089  
Loss on extinguishment of long-term debt
    (1,031 )     (1,338 )
Other income, net
    814       (1,004 )
 
           
Income before income tax expense
    28,977       23,484  
Income tax expense
    (16,810 )     (10,577 )
 
           
Net income
  $ 12,167     $ 12,907  
 
           
 
               
Basic net income per common share
  $ 0.58     $ 0.47  
 
           
Diluted net income per common share
  $ 0.58     $ 0.47  
 
           
 
               
Basic weighted average common shares outstanding
    20,839,959       27,275,040  
 
           
Diluted weighted average common shares outstanding
    20,966,405       27,427,120  
 
           
 
               
Reconciliation of operating income to EBITDA:
               
Operating income
  $ 35,108     $ 27,149  
Addback:
               
Depreciation, amortization and accretion
    107,629       131,328  
 
           
EBITDA (a)
  $ 142,737     $ 158,477  
 
           
 
(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

(in thousands)
                 
    Year Ended December 31,  
    2004     2005  
    (Restated)          
Cash flows from operating activities:
               
Net income
  $ 12,167     $ 12,907  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation, amortization and accretion
    107,629       131,328  
Deferred income tax expense
    17,766       7,461  
Loss on extinguishment of long-term debt
    1,036       1,338  
Accretion of long-term debt and other non-cash interest expense
    372       714  
Deferred stock compensation
    4,863       2,832  
Provisions for doubtful accounts, service credits and other
    13,565       25,055  
Gain on disposals of property and equipment
    (93 )     1,287  
Changes in assets and liabilities:
               
Accounts receivable
    (2,158 )     (23,439 )
Prepaid expenses and other
    4,745       5,109  
Intangibles and other long-term assets
    (4,962 )     7,978  
Accounts payable and accrued expenses
    (28,451 )     (21,276 )
Customer deposits and deferred revenue
    (8,790 )     (6,911 )
Other long-term liabilities
    (3,424 )     (5,129 )
 
           
Net cash provided by operating activities
  $ 114,265     $ 139,254  
 
           
 
               
Cash flows from investing activities:
               
Purchases of property and equipment
    (19,232 )     (13,499 )
Proceeds from disposals of property and equipment
    2,998       168  
Receipts from note receivable
    271       285  
Merger of companies, net of cash acquired
    (117,759 )      
 
           
Net cash used for investing activities
  $ (133,722 )   $ (13,046 )
 
           
 
               
Cash flows from financing activities:
               
Issuance of long-term debt
    140,000        
Repayment of long-term debt
    (105,017 )     (95,045 )
Dividends paid
          (40,691 )
Purchase of common stock
    (3,113 )      
Proceeds from exercise of options
          80  
 
           
Net cash used for financing activities
  $ 31,870     $ (135,656 )
 
           
 
               
Net decrease in cash and cash equivalents
  $ 12,413     $ (9,448 )
Cash and cash equivalents, beginning of period
    34,582       46,995  
 
           
Cash and cash equivalents, end of period
  $ 46,995     $ 37,547  
 
           
Supplemental disclosure:
               
Interest paid
  $ 6,966     $ 2,245  
 
           
State income taxes paid
  $ 1,729     $ 562  
 
           

 


 

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  
Direct One-Way:
                                                               
Beginning units in service
    5,329       5,100       4,909       4,690       4,464       4,273       4,114       3,977  
Gross placements
    226       181       182       166       141       134       125       126  
Disconnects
    (455 )     (372 )     (401 )     (392 )     (332 )     (293 )     (262 )     (268 )
 
                                               
Ending units in service
    5,100       4,909       4,690       4,464       4,273       4,114       3,977       3,835  
 
                                               
 
                                                               
Two-Way:
                                                               
Beginning units in service
    506       483       462       449       422       397       382       365  
Gross placements
    40       32       35       29       22       29       17       18  
Disconnects
    (63 )     (53 )     (48 )     (56 )     (47 )     (44 )     (34 )     (36 )
 
                                               
Ending units in service
    483       462       449       422       397       382       365       347  
 
                                               
 
                                                               
Indirect One-Way:
                                                               
Beginning units in service
    1,716       1,474       1,253       1,101       987       859       762       685  
Gross placements
    157       145       160       143       107       92       26       26  
Disconnects
    (399 )     (366 )     (312 )     (257 )     (235 )     (189 )     (103 )     (107 )
 
                                               
Ending units in service
    1,474       1,253       1,101       987       859       762       685       604  
 
                                               
 
                                                               
Two-Way:
                                                               
Beginning units in service
    131       123       121       115       94       91       90       89  
Gross placements
    20       16       20       7       7       7       3       18  
Disconnects
    (28 )     (18 )     (26 )     (28 )     (10 )     (8 )     (4 )     (7 )
 
                                               
Ending units in service
    123       121       115       94       91       90       89       100  
 
                                               
 
                                                               
Total
                                                               
Beginning units in service
    7,682       7,180       6,745       6,355       5,967       5,620       5,348       5,116  
Gross placements
    443       374       397       345       277       262       171       188  
Disconnects
    (945 )     (809 )     (787 )     (733 )     (624 )     (534 )     (403 )     (418 )
 
                                               
Ending units in service
    7,180       6,745       6,355       5,967       5,620       5,348       5,116       4,886  
 
                                               
 
                                                               
Adjusted Proforma ARPU
                                                               
Direct One-Way
  $ 9.10     $ 8.96     $ 8.89     $ 8.75     $ 8.65     $ 8.61     $ 8.48     $ 8.27  
Direct Two-Way
  $ 25.15     $ 24.68     $ 24.22     $ 23.93     $ 23.98     $ 23.65     $ 24.28     $ 23.76  
Indirect One-Way
  $ 4.06     $ 4.26     $ 4.12     $ 4.26     $ 4.07     $ 4.11     $ 4.36     $ 4.66  
Indirect Two-Way
  $ 12.89     $ 12.07     $ 11.30     $ 10.41     $ 9.16     $ 8.71     $ 8.42     $ 7.80  
     
Total
  $ 9.15     $ 9.16     $ 9.14     $ 9.09     $ 9.01     $ 9.02     $ 9.04     $ 8.90  
     
 
(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.

 


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)

(unaudited and in thousands)
                 
    For the year ended December 31,  
    2004        
    Proforma     2005  
Revenues:
               
Service, rental and maintenance, net of service credits
  $ 754,696     $ 592,690  
Product sales
    34,009       25,882  
 
           
Total revenue
    788,705       618,572  
 
               
Operating expenses:
               
Cost of products sold
    8,475       4,483  
Service, rental and maintenance
    256,382       215,588  
Selling and marketing
    65,847       43,145  
General and administrative
    216,317       177,438  
Depreciation, amortization and accretion
    145,328       131,328  
Stock based compensation
    6,401       2,832  
Severance and restructuring
    13,622       16,609  
 
           
Total operating expenses
    712,372       591,423  
 
               
 
           
Operating income
    76,333       27,149  
 
           
 
               
Interest expense
    (7,360 )     (2,412 )
Interest income
    451       1,089  
Loss on extinguishment of long-term debt
          (1,338 )
Other income, net
    163       (1,004 )
 
           
Income before income tax expense
    69,587       23,484  
Income tax expense
    (33,006 )     (10,577 )
 
           
Net income
  $ 36,581     $ 12,907  
 
           
 
               
Basic net income per common share
  $ 1.36     $ 0.47  
 
           
Diluted net income per common share
  $ 1.34     $ 0.47  
 
           
 
               
Basic weighted average common shares outstanding
    26,938,871       27,275,040  
 
           
Diluted weighted average common shares outstanding
    27,313,706       27,427,120  
 
           
 
               
Reconciliation of operating income to EBITDA:
               
Operating income
  $ 76,333     $ 27,149  
Addback:
               
Depreciation, amortization and accretion
    145,328       131,328  
 
           
EBITDA (b)
  $ 221,661     $ 158,477  
 
           
 
(a)   Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.
 
(b)   EBITDA or Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is presented for analytical purposes only.

 


 

USA MOBILITY, INC.
SUMMARY OF CONSOLIDATED OPERATING RESULTS

(unaudited and in thousands)
                                                                 
    For the three months ended  
    March 31,     June 30,     September 30,     December 31,     March 31,     June 30,     September 30,     December 31,  
    2004     2004     2004     2004     2005     2005     2005     2005  
Revenues:
                                                               
Service, rental and maintenance, net of service credits
  $ 119,546     $ 111,174     $ 104,785     $ 135,246     $ 159,150     $ 151,483     $ 145,014     $ 137,043  
Product sales
    4,113       4,623       4,632       6,041       6,527       6,054       6,940       6,361  
 
                                               
Total revenue
    123,659       115,797       109,417       141,287       165,677       157,537       151,954       143,404  
 
                                                               
Operating expenses:
                                                               
Cost of products sold
    938       856       691       1,862       1,279       929       945       1,330  
Service, rental and maintenance
    38,790       36,739       36,653       47,962       56,353       56,104       53,739       49,392  
Selling and marketing
    9,068       8,757       7,862       10,398       10,402       11,156       11,276       10,311  
General and administrative
    31,304       29,150       27,615       41,977       48,427       46,491       43,261       39,259  
Depreciation, amortization and accretion
    26,353       28,327       21,867       31,082       40,595       35,224       28,876       26,633  
Stock based compensation
    2,267       1,908       1,865       (1,177 )     1,385       597       271       579  
Severance and restructuring
    3,689       602       1,228       6,419       5,137       9,904       855       713  
 
                                               
Total operating expenses
    112,409       106,339       97,781       138,523       163,578       160,405       139,223       128,217  
 
                                                               
 
                                               
Operating income (loss)
    11,250       9,458       11,636       2,764       2,099       (2,868 )     12,731       15,187  
 
                                               
 
                                                               
Interest expense
    (3,400 )     (1,770 )     (18 )     (1,177 )     (1,411 )     (734 )     (232 )     (35 )
Interest income
    71       70       89       221       197       235       214       443  
Loss on extinguishment of long-term debt
                      (1,031 )     (594 )     (432 )     (312 )      
Other income, net
    168       177       66       403       137       (73 )     76       (1,144 )
 
                                               
Income (loss) before income tax expense
    8,089       7,935       11,773       1,180       428       (3,872 )     12,477       14,451  
Income tax expense
    (3,256 )     (1,690 )     (9,369 )     (2,495 )     (291 )     61       (3,750 )     (6,597 )
 
                                               
Net income (loss)
  $ 4,833     $ 6,245     $ 2,404     $ (1,315 )   $ 137     $ (3,811 )   $ 8,727     $ 7,854  
 
                                               
 
                                                               
Basic net income (loss) per common share
  $ 0.24     $ 0.31     $ 0.12     $ (0.06 )   $ 0.01     $ (0.14 )   $ 0.32     $ 0.29  
 
                                               
Diluted net income (loss) per common share
  $ 0.24     $ 0.31     $ 0.12     $ (0.06 )   $ 0.01     $ (0.14 )   $ 0.32     $ 0.29  
 
                                               
 
                                                               
Basic weighted average common shares outstanding
    20,000,000       19,965,076       19,914,099       23,461,642       27,108,034       27,226,076       27,365,701       27,396,187  
 
                                               
Diluted weighted average common shares outstanding
    20,078,213       20,109,191       20,041,555       23,461,642       27,320,212       27,226,076       27,465,990       27,459,261  
 
                                               
 
                                                               
Reconciliation of operating income to EBITDA:
                                                               
Operating income (loss)
  $ 11,250     $ 9,458     $ 11,636     $ 2,764     $ 2,099     $ (2,868 )   $ 12,731     $ 15,187  
Addback:
                                                               
Depreciation, amortization and accretion
    26,353       28,327       21,867       31,082       40,595       35,224       28,876       26,633  
 
                                               
EBITDA (a)
  $ 37,603     $ 37,785     $ 33,503     $ 33,846     $ 42,694     $ 32,356     $ 41,607     $ 41,820  
 
                                               
 
(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.
SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)

(unaudited and in thousands)
                                                                 
    For the three months ended  
    March 31,     June 30,     September 30,     December 31,                          
    2004     2004     2004     2004     March 31,     June 30,     September 30,     December 31,  
    Pro forma     Pro forma     Pro forma     Pro forma     2005     2005     2005     2005  
Revenues:
                                                               
Service, rental and maintenance, net of service credits
  $ 206,356     $ 193,917     $ 182,452     $ 171,971     $ 159,150     $ 151,483     $ 145,014     $ 137,043  
Product sales
    8,016       8,997       9,027       7,969       6,527       6,054       6,940       6,361  
 
                                               
Total revenue
    214,372       202,914       191,479       179,940       165,677       157,537       151,954       143,404  
 
                                                               
Operating expenses:
                                                               
Cost of products sold
    1,878       2,199       2,124       2,274       1,279       929       945       1,330  
Service, rental and maintenance
    67,121       64,167       62,365       62,729       56,353       56,104       53,739       49,392  
Selling and marketing
    18,299       17,475       15,667       14,406       10,402       11,156       11,276       10,311  
General and administrative
    53,707       51,181       50,289       61,140       48,427       46,491       43,261       39,259  
Depreciation, amortization and accretion
    38,238       39,550       32,496       35,045       40,595       35,224       28,876       26,633  
Stock based compensation
    5,966       2,810       2,093       (2,784 )     1,385       597       271       579  
Severance and restructuring
    3,689       602       1,228       6,419       5,137       9,904       855       713  
 
                                               
Total operating expenses
    188,898       177,984       166,262       179,229       163,578       160,405       139,223       128,217  
 
                                                               
 
                                               
Operating income (loss)
    25,474       24,930       25,217       711       2,099       (2,868 )     12,731       15,187  
 
                                               
 
Interest expense
    (2,188 )     (1,971 )     (1,753 )     (1,448 )     (1,411 )     (734 )     (232 )     (35 )
Interest income
                      451       197       235       214       443  
Loss on extinguishment of long-term debt
                            (594 )     (432 )     (312 )      
Other income, net
    110       201       17       (165 )     137       (73 )     76       (1,144 )
 
                                               
Income (loss) before income tax expense
    23,396       23,160       23,481       (451 )     428       (3,872 )     12,477       14,451  
Income tax expense
    (9,410 )     (7,810 )     (14,077 )     (1,709 )     (291 )     61       (3,750 )     (6,597 )
 
                                               
Net income (loss)
  $ 13,986     $ 15,350     $ 9,404     $ (2,160 )   $ 137     $ (3,811 )   $ 8,727     $ 7,854  
 
                                               
 
                                                               
Basic net income (loss) per common share
  $ 0.52     $ 0.57     $ 0.35     $ (0.08 )   $ 0.01     $ (0.14 )   $ 0.32     $ 0.29  
 
                                               
Diluted net income (loss) per common share
  $ 0.51     $ 0.56     $ 0.34     $ (0.08 )   $ 0.01     $ (0.14 )   $ 0.32     $ 0.29  
 
                                               
 
                                                               
Basic weighted average common shares outstanding
    26,961,046       26,926,122       26,875,145       26,992,900       27,108,034       27,226,076       27,365,701       27,396,187  
 
                                               
Diluted weighted average common shares outstanding
    27,324,881       27,355,859       27,288,223       26,992,900       27,320,212       27,226,076       27,465,990       27,459,261  
 
                                               
 
                                                               
Reconciliation of operating income to EBITDA:
                                                               
Operating income (loss)
  $ 25,474     $ 24,930     $ 25,217     $ 711     $ 2,099     $ (2,868 )   $ 12,731     $ 15,187  
Addback:
                                                               
Depreciation, amortization and accretion
    38,238       39,550       32,496       35,045       40,595       35,224       28,876       26,633  
 
                                               
EBITDA (b)
  $ 63,712     $ 64,480     $ 57,713     $ 35,756     $ 42,694     $ 32,356     $ 41,607     $ 41,820  
 
                                               
 
(a)   Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.
 
(b)   EBITDA or Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is presented for analytical purposes only.

 


 

USA MOBILITY, INC.
Cumulative Summary of Adjustments to Assets and Liabilities

(In thousands)
                                                           
      December 31,       Quarter ended    
      2002       2003       2004       3/31/05     6/30/05     9/30/05    
Assets
                                                         
Increase (decrease) in:
                                                         
Accounts receivable, net
    $       $       $ (740 )     $ (740 )   $ (740 )   $ (740 )  
Other receivables
                                          (2 )  
Property and equipment, net
      4,710         (5,367 )       3,520         2,172       551       (10,358 )  
Goodwill
                      2,578         2,578       2,561       2,847    
Deferred income tax assets
              (11,883 )       (19,588 )       (17,326 )     (19,415 )     (4,412 )  
                                 
Total impact on Assets
    $ 4,710       $ (17,250 )     $ (14,230 )     $ (13,316 )   $ (17,043 )   $ (12,665 )  
                                 
Total Assets, as restated
    $ 442,634       $ 495,495       $ 782,147       $ 736,121     $ 702,661     $ 688,893    
                                 
 
                                                         
Liabilities
                                                         
Increase (decrease) in:
                                                         
Accrued taxes
    $ 536       $ 1,317       $ 2,235       $ 2,405     $ 1,498     $ (24 )  
Accrued restructuring
                      856         856       856       856    
Accrued other
      2,939         780         951         762       874       (2,964 )  
Other long-term liabilities
      5,404         9,012         9,025         10,889       8,920       10,242    
                                 
Total impact on Liabilities
    $ 8,879       $ 11,109       $ 13,067       $ 14,912     $ 12,148     $ 8,110    
                                 
Total Liabilities, as restated
    $ 328,410       $ 169,231       $ 226,107       $ 178,309     $ 146,401     $ 123,380    
                                 
 
                                                         
Equity
                                                         
Increase (decrease) in:
                                                         
Additional paid-in capital
    $       $ (21,070 )     $ (18,694 )     $ (18,470 )   $ (18,271 )   $ (18,227 )  
Retained earnings
      (4,169 )       (7,289 )       (8,603 )       (9,758 )     (10,920 )     (2,548 )  
                                 
Total impact on Equity
    $ (4,169 )     $ (28,359 )     $ (27,297 )     $ (28,228 )   $ (29,191 )   $ (20,775 )  
                                 
 
                                                         
Total Equity, as restated
    $ 114,224       $ 326,264       $ 556,040       $ 557,812     $ 556,260     $ 565,513    
                                 
 
                                                         
Total impact on Liabilities and Equity
    $ 4,710       $ (17,250 )     $ (14,230 )     $ (13,316 )   $ (17,043 )   $ (12,665 )  
                                 
 
                                                         
Total Liabilities and Equity, as restated
    $ 442,634       $ 495,495       $ 782,147       $ 736,121     $ 702,661     $ 688,893    
                                 

 


 

USA Mobility, Inc.
Summary of Adjustments to
Operating Income, Net Income, and Earnings per Share

(In thousands except per share amounts)
                                                           
      Seven Months                    
      Ended       Year Ended            
      December 31,       December 31,       Quarter ended    
      2002       2003       2004       3/31/05   6/30/05   9/30/05    
Operating income (loss) — as previously reported
    $ 25,326       $ 46,115       $ 29,046       $ 3,869     $ (1,601 )   $ 11,890    
 
                                                         
Increase (decrease) due to:
                                                         
Service, rental and maintenance expense
      2,684         2,549         504         44       73       605    
General and administrative expense
      (536 )       (781 )       (747 )       (5 )     742       1,522    
Depreciation and amortization
      (6,317 )       (10,421 )       7,161         (1,809 )     (2,082 )     (1,286 )  
Severance and related termination costs
                      (856 )                      
 
                                                         
                                 
Operating income (loss) — as restated
    $ 21,157       $ 37,462       $ 35,108       $ 2,099     $ (2,868 )   $ 12,731    
                                 
 
                                                         
Net income (loss) — as previously reported
    $ 827       $ 16,128       $ 13,481       $ 1,292     $ (2,649 )   $ 355    
 
                                                         
Adjustments to operating income (loss), net
      (4,169 )       (8,653 )       6,062         (1,770 )     (1,267 )     841    
 
                                                         
Other income, net — increase (decrease)
                      156         (156 )              
Income tax expense — (increase) decrease
              5,533         (7,532 )       771       105       7,531    
 
                                                         
                                 
Net income (loss) — as restated
    $ (3,342 )     $ 13,008       $ 12,167       $ 137     $ (3,811 )   $ 8,727    
                                 
                                                           
      Seven Months                    
      Ended       Year Ended            
      December 31,       December 31,       Quarter ended    
      2002       2003       2004       3/31/05   6/30/05   9/30/05    
Diluted net income per common share — as previously reported
    $ 0.04       $ 0.81       $ 0.64       $ 0.05     $ (0.10 )   $ 0.01    
 
                                                         
Effect of adjustments to income
      (0.21 )       (0.16 )       (0.06 )       (0.04 )     (0.04 )     0.31    
 
                                                         
                                 
Diluted net income per common share — as restated
    $ (0.17 )     $ 0.65       $ 0.58       $ 0.01     $ (0.14 )   $ 0.32    
                                 

 


 

USA MOBILITY, INC.
SUMMARY OF RESTATEMENT ADJUSTMENT IMPACTS
(in thousands)
                                                 
    For the quarter ended December 31, 2005     For the year ended December 31, 2005  
    Previously                     Previously              
    reported     Restatement             reported     Restatement        
    April 3, 2006     adjustments     Final     April 3, 2006     adjustments     Final  
    (unaudited)     (unaudited)     (unaudited)     (unaudited)     (unaudited)     (audited)  
Revenues:
                                               
Service, rental and maintenance, net of service credits
  $ 137,043     $     $ 137,043     $ 592,690     $     $ 592,690  
Product sales
    6,361             6,361       25,882             25,882  
 
                                   
Total revenue
    143,404             143,404       618,572             618,572  
 
                                               
Operating expenses:
                                               
Cost of products sold
    1,330             1,330       4,483             4,483  
Service, rental and maintenance (a)
    50,593       (1,201 )     49,392       218,160       (2,572 )     215,588  
Selling and marketing
    10,311             10,311       43,145             43,145  
General and administrative
    39,260       (1 )     39,259       177,438             177,438  
Depreciation, amortization and accretion (a)
    38,809       (12,176 )     26,633       153,403       (22,075 )     131,328  
Stock based compensation
    579             579       2,832             2,832  
Severance and restructuring
    714       (1 )     713       16,609             16,609  
 
                                   
Total operating expenses
    141,596       (13,379 )     128,217       616,070       (24,647 )     591,423  
 
                                   
 
                                               
Operating income
    1,808       13,379       15,187       2,502       24,647       27,149  
 
                                   
 
                                               
Interest expense
    (35 )           (35 )     (2,412 )           (2,412 )
Interest income
    443             443       1,089             1,089  
Loss on extinguishment of long-term debt
                      (1,338 )           (1,338 )
Other income, net
    (1,144 )           (1,144 )     (1,004 )           (1,004 )
 
                                   
Income before income tax expense
  $ 1,072     $ 13,379     $ 14,451     $ (1,163 )   $ 24,647     $ 23,484  
 
                                   
Income tax expense
                    (6,597 )                     (10,577 )
 
                                           
Net income
                  $ 7,854                     $ 12,907  
 
                                           
 
                                               
Reconciliation of operating income to EBITDA:
                                               
Operating income
  $ 1,808     $ 13,379     $ 15,187     $ 2,502     $ 24,647     $ 27,149  
Addback:
                                               
Depreciation, amortization and accretion
    38,809       (12,176 )     26,633       153,403       (22,075 )     131,328  
 
                                   
EBITDA (b)
  $ 40,617     $ 1,203     $ 41,820     $ 155,905     $ 2,572     $ 158,477  
 
                                   
 
(a)   Previously (as reported April 3, 2006), USA Mobility included accretion expense in service, rental and maintenance expense; final figures reflect accretion expense as part of depreciation, amortization and accretion.
 
(b)   EBITDA or Earnings before interest, taxes, depreciation and amortization is a non-GAAP measure and is presented for analytical purposes only.