Spok (SPOK) 8-K USA Mobility Reports First Quarter Operating Results

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.