Spok (SPOK) 10-Q 2009 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

(Mark One)
þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the quarterly period ended March 31, 2009
or
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from          to

Commission File Number 0-51027

USA MOBILITY, INC.

(Exact name of Registrant as specified in its Charter)

DELAWARE	16-1694797
(State of incorporation)	(I.R.S. Employer Identification No.)
6677 Richmond Highway Alexandria, Virginia (Address of principal executive offices)	22306 (Zip Code)

(703) 660-6677

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 ofRegulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes o     No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o Smaller reporting company o

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).  Yes o     No þ

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.  Yes þ     No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 22,605,461 shares of the Registrant’s Common Stock ($0.0001 par value per share) were outstanding as of April 24, 2009.

USA MOBILITY, INC.

QUARTERLY REPORT ONFORM 10-Q

Index

			Page
PART I.FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Unaudited Condensed Consolidated Balance Sheets as of December 31, 2008 and March 31, 2009		2
		Unaudited Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2008 and 2009		3
		Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2008 and 2009		4
		Unaudited Notes to Condensed Consolidated Financial Statements		5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		17
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk		33
	Item 4.	Controls and Procedures		33
PART II.OTHER INFORMATION
	Item 1.	Legal Proceedings		34
	Item 1A.	Risk Factors		35
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		36
	Item 3.	Defaults upon Senior Securities		36
	Item 4.	Submission of Matters to a Vote of Security Holders		36
	Item 5.	Other Information		36
	Item 6.	Exhibits		36
EX-31.1
EX-31.2
EX-32.1
EX-32.2

1

PART I. FINANCIAL INFORMATION

Item 1.   Financial Statements

USA MOBILITY, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31,		March 31,
	2008		2009
	(In thousands)
			(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	75,032	$	65,075
Accounts receivable, net		25,118		22,601
Prepaid expenses and other		6,226		5,195
Deferred income tax assets, net		6,025		4,577
Total current assets		112,401		97,448
Property and equipment, net		57,867		55,017
Intangible assets, net		6,520		5,711
Deferred income tax assets, net		59,599		54,088
Other assets		4,973		4,393
TOTAL ASSETS	$	241,360	$	216,657
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	40,983	$	37,621
Customer deposits		1,203		1,103
Deferred revenue		9,958		9,336
Total current liabilities		52,144		48,060
Other long-term liabilities		48,478		48,974
TOTAL LIABILITIES		100,622		97,034
Stockholders’ equity:
Preferred stock		—		—
Common stock		2		2
Additional paid-in capital		140,736		119,621
Retained earnings		—		—
TOTAL STOCKHOLDERS’ EQUITY		140,738		119,623
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	241,360	$	216,657

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

USA MOBILITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	For the Three Months Ended March 31,
	2008		2009
	(In thousands, except share and per share amounts)
	(Unaudited)
Revenues:
Service, rental and maintenance, net of service credits	$	89,887	$	74,420
Product sales, net		4,871		5,271
Total revenues		94,758		79,691
Operating expenses:
Cost of products sold		1,081		1,669
Service, rental and maintenance		33,969		22,955
Selling and marketing		7,836		6,062
General and administrative		21,808		20,186
Severance and restructuring		145		190
Depreciation, amortization and accretion		12,513		11,270
Goodwill impairment		188,170		—
Total operating expenses		265,522		62,332
Operating (loss) income		(170,764)		17,359
Interest income, net		578		26
Other income, net		125		112
(Loss) income before income tax expense		(170,061)		17,497
Income tax expense		7,739		7,516
Net (loss) income	$	(177,800)	$	9,981
Basic net (loss) income per common share	$	(6.48)	$	0.43
Diluted net (loss) income per common share	$	(6.48)	$	0.43
Basic weighted average common shares outstanding		27,459,068		23,134,072
Diluted weighted average common shares outstanding		27,459,068		23,479,796

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

USA MOBILITY, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months Ended
	March 31,
	2008		2009
	(In thousands and unaudited)
Cash flows from operating activities:
Net (loss) income	$	(177,800)	$	9,981
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation, amortization and accretion		12,513		11,270
Goodwill impairment		188,170		—
Deferred income tax expense		7,735		6,954
Amortization of stock based compensation		246		727
Provisions for doubtful accounts, service credits and other		1,567		1,517
Non-cash transaction tax accrual adjustments		(946)		(1,394)
Loss on disposals of property and equipment		12		—
Changes in assets and liabilities:
Accounts receivable		76		1,000
Prepaid expenses and other		363		1,057
Intangibles and other long-term assets		477		(712)
Accounts payable and accrued liabilities		(5,766)		(2,373)
Customer deposits and deferred revenue		(613)		(722)
Net cash provided by operating activities		26,034		27,305
Cash flows from investing activities:
Purchases of property and equipment		(3,988)		(6,054)
Proceeds from disposals of property and equipment		153		7
Net cash used in investing activities		(3,835)		(6,047)
Cash flows from financing activities:
Cash distributions to stockholders		(17,763)		(28,517)
Purchase of common stock		—		(2,698)
Net cash used in financing activities		(17,763)		(31,215)
Net increase (decrease) in cash and cash equivalents		4,436		(9,957)
Cash and cash equivalents, beginning of period		64,542		75,032
Cash and cash equivalents, end of period	$	68,978	$	65,075
Supplemental disclosure:
Interest paid	$	2	$	—
Income taxes paid (state and local)	$	6	$	15

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(1) Preparation of Interim Financial Statements — The condensed consolidated financial statements of USA Mobility, Inc. (“USA Mobility” or the “Company”) have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the “SEC”). Amounts shown on the condensed consolidated statements of operations within the operating expense categories of cost of products sold; service, rental and maintenance; selling and marketing; and general and administrative are recorded exclusive of severance and restructuring; depreciation, amortization and accretion; and goodwill impairment. These items are shown separately on the condensed consolidated statements of operations within operating expenses.

The financial information included herein, other than the condensed consolidated balance sheet as of December 31, 2008, has been prepared without audit. The condensed consolidated balance sheet at December 31, 2008 has been derived from, but does not include all the disclosures contained in, the audited consolidated financial statements for the year ended December 31, 2008. In the opinion of management, these unaudited statements include all adjustments and accruals that are necessary for a fair presentation of the results of all interim periods reported herein. All adjustments are of a normal recurring nature except for the goodwill impairment in the first quarter of 2008.

These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in USA Mobility’s Annual Report onForm 10-K for the year ended December 31, 2008 (the “2008 Annual Report”). The results of operations for the interim periods presented are not necessarily indicative of the results that may be expected for a full year.

(2) Business — USA Mobility is a leading provider of wireless messaging in the United States. Currently, USA Mobility provides one-way and two-way messaging services. One-way messaging consists of numeric and alphanumeric messaging services. Numeric messaging services enable subscribers to receive messages that are composed entirely of numbers, such as a phone number, while alphanumeric messages may include numbers and letters, which enable subscribers to receive text messages. Two-way messaging services enable subscribers to send and receive messages to and from other wireless messaging devices, including pagers, personal digital assistants and personal computers. USA Mobility also offers voice mail, personalized greeting, message storage and retrieval and equipment lossand/or maintenance protection to both one-way and two-way messaging subscribers. These services are commonly referred to as wireless messaging and information services.

(3) Risks and Other Important Factors — See “Item 1A. Risk Factors” of Part II of this Quarterly Report, which describes key risks associated with USA Mobility’s operations and industry, which incorporates by reference information from the 2008 Annual Report.

Based on current and anticipated levels of operations, USA Mobility’s management believes that the Company’s net cash provided by operating activities, together with cash on hand, should be adequate to meet its cash requirements for the foreseeable future.

In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, USA Mobility may be required to reduce planned capital expenses, reduce or eliminate its cash distributions to stockholders, reduce or eliminate its common stock repurchase program, sell assets or seek additional financing. USA Mobility can provide no assurance that reductions in planned capital expenses or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that additional financing would be available or, if available, offered on acceptable terms.

USA Mobility believes that future fluctuations in its revenues and operating results may occur due to many factors, particularly the decreased demand for its messaging services. If the rate of decline for the Company’s messaging services exceeds its expectations, revenues may be negatively impacted, and such impact could be material. USA Mobility’s plan to consolidate its networks may also negatively impact revenues as customers experience a reduction in, and possible disruptions of, service in certain areas. Under these circumstances, USA Mobility may be unable to adjust spending in a timely manner to compensate for any future revenue shortfall. It is possible that, due to these fluctuations, USA Mobility’s revenue or operating results may not meet the expectations

5

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

of investors, which could reduce the value of USA Mobility’s common stock, impact the Company’s ability to pay future cash distributions to stockholders or repurchase shares of its common stock.

(4) Recent and New Accounting Pronouncements — In June 2006, the Financial Accounting Standards Board (“FASB”) issued Financial Interpretation No. 48,Accounting for Uncertainty in Income Taxes, (“FIN 48”), an interpretation of Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes, (“SFAS No. 109”). In May 2007, FASB Staff Position48-1 amended FIN 48. The disclosure requirements of FIN 48, as amended, are presented in Note 12.

In April 2009, the FASB issued three FASB Staff Positions (“FSPs”) dealing with fair value measurements, other-than-temporary impairments and interim disclosures of fair value (FSPFAS 157-4,Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Has Significantly Decreased and Identifying Transactions That Are Not Orderly; FSPFAS 115-2, and FSPFAS 124-2,Recognition and Presentation of Other-Than-Temporary Impairment; and FSPFAS 107-1 and FSP APB28-1, Interim Disclosures about Fair Value of Financial Instruments.) The FSPs are effective for interim and annual periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. None of these FSPs are applicable to the Company.

Other pronouncements issued during the first quarter of 2009 are not applicable to the Company and are not anticipated to have an effect on the Company’s financial position or results of operations.

(5) Long-Lived Assets and Other Amortizable Intangible Assets — The Company did not record any impairment of long-lived assets and amortizable intangible assets for the three months ended March 31, 2009.

Other intangible assets were recorded at fair value on the date of acquisition and amortized over periods generally ranging from one to five years. Aggregate amortization expense for other intangible assets for the three months ended March 31, 2008 and 2009 was $2.2 million and $2.1 million, respectively.

Amortizable intangible assets are comprised of the following at March 31, 2009:

	Useful Life		Gross Carrying		Accumulated
	(In Years)		Amount		Amortization		Net Balance
			(Dollars in thousands)
Purchased subscriber lists		5	$	64,661	$	(60,160)	$	4,501
Purchased Federal Communications Commission licenses		5		2,689		(2,511)		178
Other		1		1,361		(329)		1,032
Total intangible assets, net			$	68,711	$	(63,000)	$	5,711

(6) Depreciation, Amortization and Accretion — The components of depreciation, amortization and accretion expenses related to property and equipment, amortizable intangible assets, and asset retirement obligations for the three months ended March 31, 2008 and 2009, respectively, are as follows:

	For the Three Months Ended
	March 31,
	2008		2009
	(Dollars in thousands)
Depreciation	$	9,832	$	8,811
Amortization		2,245		2,101
Accretion		436		358
Total depreciation, amortization and accretion	$	12,513	$	11,270

6

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(7) Accounts Payable and Accrued Liabilities — Accounts payable and accrued liabilities consist of the following:

	December 31,		March 31,
	2008		2009
	(Dollars in thousands)
Accounts payable	$	908	$	1,470
Accrued compensation and benefits		11,046		9,311
Accrued severance and restructuring		3,673		2,801
Accrued network costs		2,980		3,023
Accrued taxes		15,136		13,482
Asset retirement obligations — short-term		3,678		3,877
Accrued other		3,562		3,657
Total accounts payable and accrued liabilities	$	40,983	$	37,621

Accrued taxes are based on the Company’s estimate of outstanding state and local taxes. This balance may be adjusted in the future as the Company settles with various taxing jurisdictions.

(8) Asset Retirement Obligations — In accordance with SFAS No. 143,Accounting for Asset Retirement Obligations,(“SFAS No. 143”), the Company recognizes liabilities and corresponding assets for future obligations associated with the retirement of assets. USA Mobility has paging equipment assets, principally transmitters, which are located on leased locations. The underlying leases generally require the removal of equipment at the end of the lease term; therefore, a future obligation exists.

At December 31, 2008, the Company had recognized cumulative asset retirement costs of $8.5 million. During the first quarter of 2009, the Company recorded a net reduction of $0.1 million in asset retirement costs and wrote-off $0.9 million in fully depreciated asset retirement costs. At March 31, 2009 cumulative asset retirement costs were $7.5 million. The asset retirement cost reductions in the first quarter of 2009 decreased paging equipment assets and are being depreciated over the related estimated lives of 9 and 57 months. The asset retirement costs, and the corresponding liabilities, that have been recorded to date generally relate to either current plans to consolidate networks or to the removal of assets at an estimated future terminal date.

The components of the changes in the asset retirement obligation liabilities are as follows:

	Short-Term		Long-Term
	Portion		Portion		Total
	(Dollars in thousands)
Balance at December 31, 2008	$	3,678	$	9,597	$	13,275
Accretion		91		267		358
Reductions		401		(468)		(67)
Reclassifications		267		(267)		—
Amounts paid		(560)		—		(560)
Balance at March 31, 2009	$	3,877	$	9,129	$	13,006

The balances above were included with accounts payable and accrued liabilities and other long-term liabilities, respectively, at March 31, 2009.

7

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(9) Other Long-Term Liabilities — Other long-term liabilities consist of the following for the periods stated.

	December 31,		March 31,
	2008		2009
	(Dollars in thousands)
Income taxes for uncertain tax positions	$	37,235	$	37,654
Asset retirement obligations — long-term		9,597		9,129
Escheat liability — long-term		1,341		1,123
Other liabilities		305		1,068
Total other long-term liabilities	$	48,478	$	48,974

(10) Stockholders’ Equity — The authorized capital stock of the Company consists of 75 million shares of common stock and 25 million shares of preferred stock, par value $0.0001 per share.

Changes in Stockholders’ Equity.  Changes in stockholders’ equity for the three months ended March 31, 2009 consisted of:

	(Dollars in thousands)
Balance at December 31, 2008	$	140,738
Net income for the three months ended March 31, 2009		9,981
Cash distributions declared		(28,953)
Common stock repurchase program		(2,698)
Purchased and retired common stock, net		(172)
Amortization of stock based compensation		727
Balance at March 31, 2009	$	119,623

General.  At December 31, 2008 and March 31, 2009, there were 22,950,784 and 22,691,060 shares of common stock outstanding, respectively, and no shares of preferred stock outstanding. In addition, at December 31, 2008 and March 31, 2009, there were 266,575 shares of common stock reserved for issuance from time to time to satisfy general unsecured claims under the Arch Wireless, Inc. and subsidiaries (“Arch”) plan of reorganization. For financial reporting purposes, the number of shares reserved for future issuance under the Arch plan of reorganization has been included in the Company’s reported outstanding share balance.

At March 31, 2009, the Company had no stock options outstanding.

In connection with and prior to the November 2004 merger of Arch and Metrocall Holdings, Inc. and subsidiaries, the Company established the USA Mobility, Inc. Equity Incentive Plan (the “Equity Plan”). Under the Equity Plan, the Company has the ability to issue up to 1,878,976 shares of its common stock to eligible employees and non-executive members of its Company’s Board of Directors in the form of shares of common stock, stock options, shares of restricted common stock (“restricted stock”), restricted stock units (“RSUs”) or stock grants. Restricted stock awarded under the Equity Plan entitles the stockholder to all rights of common stock ownership except that the restricted stock may not be sold, transferred, exchanged, or otherwise disposed of during the restriction period, which will be determined by the Compensation Committee of the Board of Directors of the Company.

8

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table summarizes the activities under the Equity Plan from inception through March 31, 2009:

	Activity
Equity securities approved		1,878,976
Less: Restricted stock issued to management
2005 Grant		(103,937)
2006 Grant(1)		(183,212)
Less: Equity securities issued to non-executive members of the Board of Directors
Restricted stock		(34,387)
Common stock(2)		(28,696)
Add: Restricted stock forfeited by management
2005 Grant		22,488
2006 Grant		21,358
Add: Restricted stock forfeited by the non-executive members of the Board of Directors		3,985
Total available at March 31, 2009		1,576,575

(1)	On November 14, 2008 the Company’s Board of Directors approved an additional grant of 7,129 shares of restricted stock under the 2006 LTIP to eligible employees. In March 2009 the Company’s Board of Directors approved an additional grant of 43,511 shares of common stock as an Additional Target Award under the 2006 LTIP to eligible employees.
(2)	19,605 existing RSUs were converted into shares of the Company’s common stock and issued to the non-executive members of the Company’s Board of Directors on March 17, 2008. In addition, 9,091 shares of common stock have been issued in lieu of cash payments to the non-executive members of the Company’s Board of Directors for services performed.

2009 Long-Term Incentive Plan (“LTIP”).  On January 6, 2009, the Company’s Board of Directors approved a long-term incentive program that includes a cash and stock component, in the form of RSUs, based upon achievement of expense reduction and earnings before interest, taxes, depreciation, amortization and accretion goals during the Company’s 2012 calendar year and continued employment with the Company. RSUs were granted under the Equity Plan pursuant to a Restricted Stock Unit Agreement based upon the closing price per share of the Company’s common stock on January 15, 2009 of $12.01. The Company’s Board of Directors awarded 329,416 RSUs to certain eligible employees and also approved that future cash distributions related to the existing RSUs will be set aside and paid in cash to each eligible employee when the RSUs are converted into shares of common stock. Existing RSUs would be converted into shares of common stock on the earlier of a change in control of the Company (as defined in the Equity Plan) or on or after the third business day following the day that the Company files its 2012 Annual Report onForm 10-K with the SEC.

Any unvested RSUs granted under the Equity Plan and the related cash distributions are forfeited if the participant terminates employment with USA Mobility.

The Company used the fair-value based method of accounting for the 2009 LTIP and is amortizing the $3.7 million to expense over the48-month vesting period. A total of $0.2 million was included in stock based compensation expense for the quarter ended March 31, 2009 in relation to the 2009 LTIP.

Also on January 6, 2009, the Company provided for long-term cash performance awards to the same certain eligible employees under the 2009 LTIP. Similar to the RSUs, the vesting period for these long-term cash performance awards is 48 months and would be paid on the earlier of a change in control of the Company (as defined in the Equity Plan); or on or after the third business day following the day that the Company files its 2012 Annual

9

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Report onForm 10-K with the SEC. The Company will ratably amortize the $3.6 million to expense over the48-month vesting period.

A total of $0.2 million was included in payroll and related expenses for the quarter ended March 31, 2009 for these long-term cash performance awards. Any unvested long-term cash performance awards are forfeited if the participant terminates employment with USA Mobility.

2006 LTIP.  On February 1, 2006 the Company’s Board of Directors established the 2006 LTIP, which consisted of a cash component and an equity component in the form of restricted stock. Of the total 2006 LTIP award, 80 percent was considered the Initial Target Award and was fully amortized and vested by December 2008. The remaining 20 percent of the total 2006 LTIP award plus the cumulative forfeitures were reserved as a discretionary award (“Additional Target Award”). In March 2009, the Company’s Board of Directors approved the Additional Target Award. The Company expensed $1.2 million and $0.4 million to payroll and related expenses for the cash award and the related equivalent cash distributions ($8.65 per share), respectively, in March 2009. The Additional Target Award was paid on March 19, 2009.

Also on March 19, 2009, 43,511 shares of common stock were issued as part of the 2006 LTIP Additional Target Award. 17,104 shares of common stock were sold back to the Company in payment of required tax withholdings at a price per share of $10.10, the Company’s closing stock price on March 9, 2009. The Company used the fair-value based method of accounting for the Additional Target Award and fully expensed $0.4 million to stock based compensation expense in March 2009. The following table reflects the impact of the one-time Additional Target Award on the various categories of expense in 2009.

	Expense Type
				Stock Based
Functional Category	Payroll and Related			Compensation		Total
		(Dollars in thousands)
Service, rental and maintenance expense		$	116	$	31	$	147
Selling and marketing expense			301		82		383
General and administrative expense			1,193		327		1,520
Total		$	1,610	$	440	$	2,050

Board of Directors Equity Compensation.  On May 3, 2006, the Company’s Board of Directors granted the non-executive directors RSUs in addition to cash compensation of $40,000 per year ($50,000 for the chair of the Audit Committee), payable quarterly. RSUs were granted quarterly under the Equity Plan pursuant to a Restricted Stock Unit Agreement, based upon the closing price per share of the Company’s common stock at the end of each quarter, such that each non-executive director would receive $40,000 per year of RSUs ($50,000 for the chair of the Audit Committee), to be issued on a quarterly basis.

By March 2008, the Company had converted 19,605 RSUs into an equivalent number of shares of common stock that were issued to the non-executive directors. In addition, the related cash distributions on the RSUs were paid.

On August 1, 2007 with an effective date of July 1, 2007 the Board of Directors approved that, in lieu of RSUs, each non-executive director will be granted in arrears on the first business day following the quarter of service, restricted stock in addition to cash compensation for their service on the Board of Directors and committees thereof. The restricted stock will vest on the earlier of a change in control of the Company (as defined in the Equity Plan) or one year from the date of grant, provided, in each case, that the non-executive director maintains continuous service on the Board of Directors. Future cash distributions related to the restricted stock will be set aside and paid in cash to each non-executive director on the date the restricted stock vests.

10

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The following table details information on the cash distributions relating to the restricted stock issued to the Company’s non-executive directors for the periods stated.

				Per Share		Total
Year	Declaration Date	Record Date	Payment Date	Amount		Amount(1)
2007	October 30	November 8	November 29	$	0.65	$	2,023
					0.65		2,023
2008	February 13	February 25	March 13		0.65		4,409
	May 2	May 19	June 19		0.25		3,535
	July 31	August 14	September 11		0.25		5,274
	October 29	November 14	December 10		0.25		5,688
					1.40		18,905
2009	March 3	March 17	March 31		1.25		29,524
					1.25		29,524
Total				$	3.30	$	50,452

⁽¹⁾ The total amount excludes forfeited cash distributions.

The following table details information on the restricted stock awarded to the Company’s non-executive directors:

				Restricted		Restricted		Restricted			Restricted Stock
		Price Per		Stock		Stock		Stock			Awarded and
Service Period	Grant Date	Share(1)		Awarded		Forfeited(2)		Vested		Vesting Date	Outstanding
3Q07	October 1, 2007	$	16.87		4,299		(1,186)		(3,113)	October 1, 2008		—
4Q07	January 2, 2008		14.30		5,068		(1,398)		(3,670)	January 2, 2009		—
1Q08	April 1, 2008		7.14		8,756		(1,401)		(7,355)	April 1, 2009		—
2Q08	July 1, 2008		7.55		6,956		—		—	July 1, 2009		6,956
3Q08	October 1, 2008		11.00		4,772		—		—	October 1, 2009		4,772
4Q08	January 2, 2009		11.57		4,536		—		—	January 2, 2010		4,536
1Q09	April 1, 2009		9.21		5,701		—		—	April 1, 2010		5,701
					40,088		(3,985)		(14,138)			21,965

(1)	The quarterly restricted stock award is based on the price per share of the Company’s common stock on the last trading day prior to the quarterly award date.
(2)	In January 2008, one of the non-executive directors voluntarily resigned from the Company’s Board of Directors and forfeited 1,292 shares of restricted stock. In May 2008, one of the non-executive directors declined to stand for re-election to the Company’s Board of Directors and forfeited 2,693 shares of restricted stock.

These grants of shares of restricted stock will reduce the number of shares eligible for future issuance under the Equity Plan.

The Company used the fair-value based method of accounting for the equity awards. A total of $0.1 million was included in stock based compensation expense for the three months ended March 31, 2009 in relation to the restricted stock issued to non-executive directors of the Company’s Board of Directors.

11

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

On April 1, 2009 7,355 shares of restricted stock vested from the grant issued to the non-executive directors on April 1, 2008 for services performed in the first quarter of 2008. In addition, the related cash distributions on the vested restricted stock were paid in April 2009.

Board of Directors Common Stock.  As of March 31, 2009, a cumulative total of 9,091 shares of common stock have been issued in lieu of cash payments to the non-executive directors for services performed. These shares of common stock reduced the number of shares eligible for future issuance under the Equity Plan.

Cash Distributions to Stockholders.  On March 3, 2009, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share of common stock and a special cash distribution of $1.00 per share of common stock, each with a record date of March 17, 2009, and a payment date of March 31, 2009. This cash distribution of approximately $28.5 million was paid from available cash on hand.

Cash distributions paid as disclosed in the statement of cash flows for the three months ended March 31, 2009 include previously declared cash distributions on shares of vested restricted stock issued in January 2008 to the non-executive directors of the Company’s Board of Directors.

Cash distributions on restricted stock and RSUs have been accrued and are paid when the applicable vesting conditions are met. Accrued cash distributions on forfeited restricted stock and RSUs are also forfeited.

Future Cash Distributions to Stockholders.  On April 29, 2009, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share of common stock, to stockholders of record on May 20, 2009 and with a payment date of June 18, 2009. This cash distribution of approximately $5.7 million is expected to be paid from available cash on hand.

Common Stock Repurchase Program.  On July 31, 2008, the Company’s Board of Directors approved a program for the Company to repurchase up to $50.0 million of its common stock in the open market during the twelve-month period commencing on or about August 5, 2008. Credit Suisse Securities (USA) LLC will administer such purchases.

On March 3, 2009, the Company’s Board of Directors approved a supplement to the common stock repurchase program. The supplement resets the repurchase authority to $25.0 million as of January 1, 2009 and extends the purchase period through December 31, 2009.

During the first quarter of 2009, the Company purchased 290,667 shares of its common stock for approximately $2.7 million (excluding commissions). Since the inception of the common stock repurchase program through March 31, 2009, the Company has repurchased a total of 4,649,005 shares of its common stock. There was approximately $22.3 million of common stock repurchase authority remaining under the program as of March 31, 2009. This repurchase authority allows the Company, at management’s discretion, to selectively repurchase shares of its common stock from time to time in the open market depending upon market price and other factors. All repurchased shares of common stock are returned to the status of authorized but unissued shares of the Company.

Repurchased shares of the Company’s common stock were accounted for as a reduction to common stock and additionalpaid-in-capital in the period in which the repurchase occurred.

Additional Paid-in Capital.  For the three months ended March 31, 2009, additional paid-in capital decreased by $17.6 million due to cash distributions to stockholders, the common stock repurchase program, repurchase of common stock awarded under the 2006 LTIP Additional Target Award; all of which were offset by the amortization of stock based compensation.

Net (Loss) Income per Common Share.  Basic net (loss) income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net (loss) income per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares including outstanding restricted stock using the “treasury stock” method plus the effect of outstanding RSUs, which are treated as contingently issuable shares. The Company acquired a total of 17,104 shares of the Company’s

12

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

common stock from the Company’s executives in payment of required tax withholdings for the common stock awarded in March 2009 related to the Additional Target Award under the 2006 LTIP. These shares of common stock acquired were retired and excluded from the Company’s reported outstanding share balance as of March 31, 2009. Also, 290,667 shares of common stock repurchased by the Company under its common stock repurchase program were retired and excluded from the Company’s reported outstanding share balance as of March 31, 2009. For the three months ended March 31, 2008, the effect of 136,023 potential dilutive common shares was not included in the calculation for diluted net (loss) income per share as the impact is anti-dilutive. The components of basic and diluted net (loss) income per common share for the three months ended March 31, 2009 were as follows:

	For the
	Three Months Ended
	March 31,
	2008		2009
	(Dollars in thousands, except share and per share amounts)
Net (loss) income	$	(177,800)	$	9,981
Weighted average shares of common stock outstanding		27,459,068		23,134,072
Dilutive effect of restricted stock and RSUs		—		345,724
Weighted average shares of common stock and common stock equivalents		27,459,068		23,479,796
Net (loss) income per common share
Basic	$	(6.48)	$	0.43
Diluted	$	(6.48)	$	0.43

(11) Stock Based Compensation — Compensation expense associated with RSUs and restricted stock was recognized in accordance with the fair value provisions of SFAS No. 123R,Share-Based Payment, over the instruments’ vesting period. The following table reflects the statements of operations line items for stock based compensation expense for the periods stated.

	For the
	Three Months Ended
	March 31,
Functional Category	2008		2009
	(Dollars in thousands)
Service, rental and maintenance expense	$	17	$	49
Selling and marketing expense		39		109
General and administrative expense		190		569
Total stock based compensation expense	$	246	$	727

Stock based compensation expense for the three months ended March 31, 2009 includes $0.4 million for the fair value of common stock issued to certain members of management as part of the Additional Target Award of the 2006 LTIP.

(12) Income Taxes— The liability for uncertain tax positions at March 31, 2009 of $37.7 million includes accrued interest expense of approximately $0.4 million for the three months ended March 31, 2009 and total accrued interest of $5.8 million. Interest expense on the liability for uncertain tax positions is charged to income tax expense. The liability for uncertain tax positions is included in other long-term liabilities (see Note 9).

13

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The Company files its tax returns as prescribed by the tax laws of the jurisdictions in which it operates. The Internal Revenue Service (the “IRS”) has completed its audits of the periods ended November 16, 2004, December 31, 2005 and 2006. The IRS accepted the returns as filed. The Company received the final no change letter on April 15, 2009. Management anticipates adjusting the liability for uncertain tax positions during the second quarter of 2009 for effectively settled tax positions. The Company expects that the adjustment of the liability for uncertain tax positions will result in a material reduction of both the liability and income tax expense of approximately $37.0 million. Also, the effective settlement of the uncertain tax positions will result in the recognition of additional deferred income tax assets that will likely be subject to a full valuation allowance based on the Company’s current forecast of future taxable income.

The Company evaluates the recoverability of its deferred income tax assets and is required to determine whether based on all available evidence, it is more likely than not that all or some portion of the Company’s deferred income tax assets will be realized in future periods. The Company’s management has concluded that, based on the requirements of SFAS No. 109 as amended, not all of its deferred income tax assets would be recoverable. As of December 31, 2008 the Company had a valuation allowance of $66.7 million, which decreased the deferred income tax assets to their estimated recoverable amounts. There was a minimal change to the valuation allowance during the first quarter of 2009.

On February 17, 2009, the President signed the American Recovery and Reinvestment Act of 2009. This new law extends the 50-percent first year bonus depreciation allowed under the 2008 Economic Stimulus Act through December 31, 2009. The 50-percent bonus depreciation is available on certain defined property placed in service after December 31, 2007 and before January 1, 2010.

The Company has not fully evaluated whether to elect the bonus depreciation provisions. This decision must be made by the filing date of the Company’s 2008 and 2009 Federal income tax returns.

The anticipated effective income tax rate is expected to continue to differ from the Federal statutory rate of 35% primarily due to the effect of state income taxes, permanent differences between book and taxable income, and discrete items, such as accrued interest on the FIN 48 liability.

(13) Related Party Transactions — Effective November 16, 2004, two members of the Company’s Board of Directors also served as directors for entities that lease transmission tower sites to the Company. In January 2008, one of these directors voluntarily resigned from the Company’s Board of Directors and, effective January 1, 2008, was no longer a related party. For the three months ended March 31, 2008 and 2009, the Company paid $3.1 million and $3.0 million, respectively, in site rent expenses that are included in service, rental and maintenance expenses to the remaining related party.

(14) Segment Reporting — USA Mobility currently has one operating segment: domestic operations.

(15) Commitments and Contingencies — USA Mobility, from time to time, is involved in lawsuits arising in the normal course of business. USA Mobility believes that these pending lawsuits will not have a material adverse impact on the Company’s financial results or operations.

The following amends and restates the description of previously reported legal contingencies in the 2008 Annual Report in which there have been material developments during the quarter ended March 31, 2009.

Stored Communications Act Litigation.  In 2003, several individuals filed claims in the U.S. District Court for the Central District of California against Arch Wireless Operating Company, Inc. (“AWOC”) (which later was merged into USA Mobility Wireless, Inc., an indirect wholly-owned subsidiary of USA Mobility, Inc.), its customer, the City of Ontario (the “City”), and certain City employees. The claims arose from AWOC’s release of transcripts of archived text messages to the City at the City’s request. The plaintiffs claimed this release infringed upon their Fourth Amendment rights and violated the Stored Communications Act (the “SCA”) as well as state law. The district court dismissed a state law claim on the pleadings, and granted summary judgment to AWOC on all remaining claims, including the SCA claim, on August 15, 2006.

14

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

The plaintiffs appealed the district court’s judgment with respect to the Fourth Amendment and SCA claims in the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit Court”). On June 18, 2008, the Ninth Circuit Court reversed the district court’s summary judgment order and issued judgment against AWOC and the City. The Ninth Circuit Court held that AWOC violated the SCA by releasing the contents of stored communications without obtaining the consent of the users who sent or received the communications. The Ninth Circuit Court remanded the case to the district court for further proceedings.

On July 9, 2008, the Company filed a petition in the Ninth Circuit Court for rehearing or rehearing en banc. The Company believed that the Ninth Circuit Court’s interpretation of the SCA was erroneous and conflicted with Ninth Circuit Court precedent, and that AWOC’s disclosure of the communications was in compliance with the law. At the Ninth Circuit’s direction, the plaintiffs in this action responded to the Company’s petition for rehearing on September 11, 2008. On January 27, 2009, the Ninth Circuit Court denied the Company’s petition for rehearing. On February 2, 2009 at the request of the City, the Ninth Circuit Court issued a stay of its mandate pending the filing of a petition for certiorari with the U.S. Supreme Court. The Company has not yet determined its next course of action but may join with the City in filing a petition for certiorari with the U.S. Supreme Court. If denied or if the Ninth Circuit Court’s ruling is not vacated by the U.S. Supreme Court, or if the stay of the Ninth Circuit’s mandate is otherwise lifted, the district court could award damages to the plaintiffs. The Company does not expect any such damage award would have a material impact on the Company’s financial condition or results of operations.

Nationwide Lawsuit.  On August 2, 2006, Nationwide Paging, Inc. (“Nationwide”) filed a two-count civil action in Massachusetts Superior Court against defendants USA Mobility, Inc., Arch Wireless Inc., AWOC, and Paging Network, Inc. (collectively “Arch”) titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc.MICV2006-02734, Middlesex County Superior Court, Massachusetts (the “2006 Superior Court Case”). Nationwide alleged that, in 2000 and 2001, Arch breached its contract with Nationwide by supplying defective pagers and by over billing Nationwide for paging services. In addition, Nationwide alleged that Arch breached the implied covenant of good faith and fair dealing and destroyed or injured Nationwide’s right to receive the fruits of its contract with Arch. Nationwide’s complaint alleges damages in the amount of $6.9 million.

Nationwide served the 2006 Superior Court Case on USA Mobility on October 27, 2006. The Company denied liability to Nationwide.

The 2006 Superior Court case has some relationship to another case pending in Massachusetts Superior Court, titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc., MICV2002-02329, Middlesex County Superior Court, Massachusetts (the “2002 Superior Court Case”). In that case, Nationwide seeks a declaration of the amount of money it owes to Arch, and also claims damages arising from alleged billing errors dating back to 1999 and 2000. Arch filed counterclaims against Nationwide, seeking more than $400,000 for unpaid invoices. Following the close of discovery in the 2002 Superior Court Case in 2003, Nationwide asserted for the first time a claim for approximately $4,000,000, allegedly suffered from business lost due to defective pagers supplied by Arch. Arch contended that those claims were barred by the discharge injunction in the Arch Bankruptcy Case. In July 2008, the United States Court of Appeals for the First Circuit declined to find that the Nationwide claims were barred by the discharge injunction.

In January 2009, the Company served a motion to dismiss the 2006 Superior Court Case on the grounds that the case cannot stand in light of the 2002 Superior Court Case. On March 12, 2009, the court granted the Company’s motion and dismissed the 2006 Superior Court Case.

The Company anticipates additional discovery will be taken in the 2002 Superior Court Case. No trial date has been set.

USA Mobility intends to defend vigorously the claims by Nationwide in the 2002 Superior Court Case. Further, the Company intends to prosecute vigorously its counterclaims against Nationwide. The Company is unable, at this time, to predict the impact, if any, on the Company’s financial condition or results of operations.

15

USA MOBILITY, INC.

UNAUDITED NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

eOn Lawsuit.  On September 29, 2008, eOn Corp. IP Holdings, LLC, a Texas limited liability company, filed a complaint in the U.S. District Court for the Eastern District of Texas against the Company and eighteen other defendants, including current or former customers of the Company or its predecessors. The complaint alleges that the Company infringes two U.S. patents both titled, “Interactive Nationwide Data Service Communication System for Stationary and Mobile Battery Operated Subscriber Units” by making, using, offering for saleand/or selling two-way communication networksand/or data systems. The Company was not served with the complaint until January 12, 2009, and answered the plaintiff’s complaint on March 2, 2009, denying its substantive allegations and counterclaiming that the asserted patents are not infringed by the Company and are invalid. The district court has set a trial date of October 12, 2010 but discovery has yet to begin. On February 25, 2009 the U.S. Patent and Trademark Office granted the Company’s request for a reexamination of the patents. Based on the limited information currently available, the Company is unable at this time to assess the impact, if any, that the plaintiff’s claims may have on the Company’s financial condition or results of operations.

16

Item 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

This quarterly report contains forward-looking statements and information relating to USA Mobility, Inc. and its subsidiaries (“USA Mobility” or the “Company”) that are based on management’s beliefs as well as assumptions made by and information currently available to management. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as “anticipate”, “believe”, “estimate”, “expect”, “intend” and similar expressions, as they relate to USA Mobility, Inc. and its subsidiaries or its management are forward-looking statements. Although these statements are based upon assumptions management considers reasonable, they are subject to certain risks, uncertainties and assumptions, including but not limited to those factors set forth below and under the captions “Business,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”),” and “Part I — Item 1A — Risk Factors” in the Company’s Annual Report onForm 10-K for the year ended December 31, 2008, filed with the United States Securities and Exchange Commission (the “SEC”) on March 4, 2009 (the “2008 Annual Report”). Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described herein as anticipated, believed, estimated, expected or intended. Investors are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their respective dates. The Company undertakes no obligation to update or revise any forward-looking statements. All subsequent written or oral forward-looking statements attributable to USA Mobility, Inc. and its subsidiaries or persons acting on their behalf are expressly qualified in their entirety by the discussion under “Item 1A — Risk Factors” section.

Overview

In preparing the discussion and analysis contained in this Item 2, the Company presumes that readers have read or have access to the discussion and analysis contained in the 2008 Annual Report. In addition, the following discussion and analysis should be read in conjunction with USA Mobility’s condensed consolidated financial statements and related notes and “Part I — Item 1A — Risk Factors”, which describe key risks associated with the Company’s operations and industry, and “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”)” section of the 2008 Annual Report.

Sales and Marketing

USA Mobility markets and distributes its services through a direct sales force and a small indirect sales force.

Direct.  The direct sales force rents or sells products and messaging services directly to customers ranging from small and medium-sized businesses to companies in the Fortune 1000, healthcare and related businesses and Federal, state and local government agencies. USA Mobility intends to continue to market to commercial enterprises utilizing its direct sales force as these commercial enterprises have typically disconnected service at a lower rate than individual consumers. USA Mobility sales personnel maintain a sales presence throughout the United States. In addition, the Company maintains several corporate sales groups focused on medical sales; Federal government accounts; large enterprises; advanced wireless services; systems sales applications; emergency/mass notification services and other product offerings.

Indirect.  Within the indirect channel the Company contracts with and invoices an intermediary for airtime services (which includes telemetry services). The intermediary or “reseller” in turn markets, sells, and provides customer service to the end user. Generally, there is no contractual relationship that exists between USA Mobility and the end subscriber. Therefore, operating costs per unit to provide these services are lower than those required in the direct distribution channel. Indirect units in service typically have lower average revenue per unit than direct units in service. The rate at which subscribers disconnect service in the indirect distribution channel has generally been higher than the rate experienced with direct customers, and USA Mobility expects this trend to continue in the foreseeable future.

17

The following table summarizes the breakdown of the Company’s direct and indirect units in service at specified dates:

	As of				As of				As of
	March 31,				December 31,				March 31,
	2008				2008				2009
Distribution Channel	Units		% of Total		Units		% of Total		Units		% of Total
	(Units in thousands)
Direct		2,939		88.2%		2,520		89.5%		2,355		90.3%
Indirect		394		11.8%		295		10.5%		252		9.7%
Total		3,333		100.0%		2,815		100.0%		2,607		100.0%

The following table sets forth information on the Company’s direct units in service by account size for the periods stated:

	As of				As of				As of
	March 31,				December 31,				March 31,
	2008				2008				2009
	Units		% of Total		Units		% of Total		Units		% of Total
	(Units in thousands)
1 to 3 Units		184		6.2%		149		5.9%		137		5.8%
4 to 10 Units		112		3.8%		89		3.5%		82		3.5%
11 to 50 Units		276		9.4%		218		8.7%		199		8.4%
51 to 100 Units		164		5.6%		133		5.3%		125		5.3%
101 to 1000 Units		784		26.7%		681		27.0%		626		26.6%
> 1000 Units		1,419		48.3%		1,250		49.6%		1,186		50.4%
Total direct units in service		2,939		100.0%		2,520		100.0%		2,355		100.0%

Customers may subscribe to one-way or two-way messaging services for a periodic (monthly, quarterly or annual) service fee which is generally based upon the type of service provided, the geographic area covered, the number of devices provided to the customer and the period of commitment. Voice mail, personalized greeting and equipment lossand/or maintenance protection may be added to either one-way or two-way messaging services, as applicable, for an additional monthly fee. Equipment loss protection allows subscribers who lease devices to limit their cost of replacement upon loss or destruction of a messaging device. Maintenance services are offered to subscribers who own their device.

A subscriber to one-way messaging services may select coverage on a local, regional or nationwide basis to best meet their messaging needs. Local coverage generally allows the subscriber to receive messages within a small geographic area, such as a city. Regional coverage allows a subscriber to receive messages in a larger area, which may include a large portion of a state or sometimes groups of states. Nationwide coverage allows a subscriber to receive messages in major markets throughout the United States. The monthly fee generally increases with coverage area. Two-way messaging is generally offered on a nationwide basis.

The following table summarizes the breakdown of the Company’s one-way and two-way units in service at specified dates:

	As of				As of				As of
	March 31,				December 31,				March 31,
	2008				2008				2009
Service Type	Units		% of Total		Units		% of Total		Units		% of Total
	(Units in thousands)
One-way messaging		3,017		90.5%		2,545		90.4%		2,359		90.5%
Two-way messaging		316		9.5%		270		9.6%		248		9.5%
Total		3,333		100.0%		2,815		100.0%		2,607		100.0%

18

The demand for one-way and two-way messaging services declined at each specified date and USA Mobility believes demand will continue to decline for the foreseeable future. Demand for the Company’s services has also been impacted by the weak United States economy and rising unemployment rates nationwide. To the extent that unemployment continues to increase through 2009 the Company anticipates an unfavorable impact on the level of subscriber cancellations.

USA Mobility provides wireless messaging services to subscribers for a periodic fee, as described above. In addition, subscribers either lease a messaging device from the Company for an additional fixed monthly fee or they own a device, having purchased it either from the Company or from another vendor. USA Mobility also sells devices to resellers who lease or resell devices to their subscribers and then sell messaging services utilizing the Company’s networks.

The following table summarizes the number of units in service owned by the Company, its subscribers and indirect customers at specified dates:

	As of				As of				As of
	March 31,				December 31,				March 31,
	2008				2008				2009
Ownership	Units		% of Total		Units		% of Total		Units		% of Total
	(Units in thousands)
Owned by the Company and leased to subscribers		2,746		82.4%		2,369		84.1%		2,214		84.9%
Owned by subscribers		193		5.8%		151		5.4%		141		5.4%
Owned by indirect customers or their subscribers		394		11.8%		295		10.5%		252		9.7%
Total		3,333		100.0%		2,815		100.0%		2,607		100.0%

USA Mobility derives the majority of its revenues from fixed monthly or other periodic fees charged to subscribers for wireless messaging services. Such fees are not generally dependent on usage. As long as a subscriber maintains service, operating results benefit from recurring payment of these fees. Revenues are generally based upon the number of units in service and the monthly charge per unit. The number of units in service changes based on subscribers added, referred to as gross placements, less subscriber cancellations, or disconnects. The net of gross placements and disconnects is commonly referred to as net gains or losses of units in service. The absolute number of gross placements as well as the number of gross placements relative to average units in service in a period, referred to as the gross placement rate, is monitored on a monthly basis. Disconnects are also monitored on a monthly basis. The ratio of units disconnected in a period to average units in service for the same period, called the disconnect rate, is an indicator of the Company’s success at retaining subscribers, which is important in order to maintain recurring revenues and to control operating expenses.

The following table sets forth the Company’s gross placements and disconnects for the periods stated:

	For the Three Months Ended
	March 31, 2008				December 31, 2008				March 31, 2009
	Gross				Gross				Gross
Distribution Channel	Placements		Disconnects		Placements		Disconnects		Placements		Disconnects
	(Units in thousands)
Direct		85		221		68		222		73		238
Indirect		33		49		14		47		12		55
Total		118		270		82		269		85		293

19

The following table sets forth information on the disconnect rate by account size for the Company’s direct customers for the periods stated:

	For the Three Months Ended
	March 31,		December 31,		March 31,
	2008		2008		2009
1 to 3 Units		(7.8%)		(6.9%)		(7.8%)
4 to 10 Units		(6.5%)		(7.8%)		(8.8%)
11 to 50 Units		(7.6%)		(7.6%)		(8.9%)
51 to 100 Units		(6.9%)		(7.2%)		(6.2%)
101 to 1000 Units		(5.2%)		(4.9%)		(8.0%)
> 1000 Units		(2.4%)		(5.5%)		(5.1%)
Total direct net unit loss%		(4.4%)		(5.8%)		(6.6%)

The other factor that contributes to revenue, in addition to the number of units in service, is the monthly charge per unit. As previously discussed, the monthly charge per unit is dependent on the subscriber’s service, extent of geographic coverage, whether the subscriber leases or owns the messaging device and the number of units the customer has in the account. The ratio of revenues for a period to the average units in service for the same period, commonly referred to as average revenue per unit (“ARPU”), is a key revenue measurement as it indicates whether charges for similar services and distribution channels are increasing or decreasing. ARPU by distribution channel and messaging service are monitored regularly.

The following table sets forth ARPU by distribution channel for the periods stated:

	ARPU For the Three Months Ended
	March 31,		December 31,		March 31,
Distribution Channel	2008		2008		2009
Direct	$	8.95	$	9.16	$	9.15
Indirect		4.97		4.93		6.19
Consolidated		8.49		8.71		8.86

While ARPU for similar services and distribution channels is indicative of changes in monthly charges and the revenue rate applicable to new subscribers, this measurement on a consolidated basis is affected by several factors, including the mix of units in service and the pricing of the various components of the Company’s services. Gross revenues decreased year over year, and the Company expects future sequential annual revenues to decline in line with recent trends. The increase in consolidated ARPU for the quarter ended March 31, 2009 from the quarter ended March 31, 2008 was due primarily to the positive impact to ARPU resulting from selected price increases implemented starting in June 2008 partially offset by the change in composition of the Company’s customer base as the percentage of units in service attributable to larger customers continues to increase. The change in ARPU in the direct distribution channel is the most significant indicator of rate-related changes in the Company’s revenues. One-time price increases that were implemented for smaller customers in certain channels and improvements in the rate of service credits positively impacted ARPU beginning in second quarter of 2008 through the first quarter of 2009. In addition in 2009 the Company implemented price increases in the indirect channel. The Company believes without further price adjustments, ARPU would trend lower for both the direct and indirect distribution channels during 2009 and that price increases could mitigate, but not completely offset, the expected declines in both ARPU and revenues.

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The following table sets forth information on direct ARPU by account size for the period stated.

	For the Three Months Ended
	March 31,		December 31,		March 31,
	2008		2008		2009
1 to 3 Units	$	14.66	$	14.68	$	14.73
4 to 10 Units		13.56		13.89		14.00
11 to 50 Units		10.99		11.35		11.41
51 to 100 Units		9.57		10.25		10.30
101 to 1000 Units		8.23		8.98		8.94
> 1000 Units		7.75		7.75		7.77
Total direct ARPU	$	8.95	$	9.16	$	9.15

Operations

USA Mobility’s operating expenses are presented in functional categories. Certain of the Company’s functional categories are especially important to overall expense control; these operating expenses are categorized as follows:

•  Service, rental and maintenance.  These are expenses associated with the operation of the Company’s networks and the provision of messaging services. Expenses consist largely of site rent expenses for transmitter locations, telecommunications expenses to deliver messages over the Company’s networks and payroll and related expenses for the Company’s engineering and pager repair functions.

•  Selling and marketing.  These are expenses associated with the Company’s direct and indirect sales forces and marketing expenses in support of those sales forces. This classification consists primarily of payroll and related expenses and commission expenses.

•  General and administrative.  These are expenses associated with customer service, inventory management, billing, collections, bad debt and other administrative functions. This classification consists primarily of payroll and related expenses, facility rent expenses, taxes, licenses and permits expenses and outside service expenses.

USA Mobility reviews the percentages of these operating expenses to revenues on a regular basis. Even though the operating expenses are classified as described above, expense controls are also performed by expense category. For the three months ended March 31, 2009, approximately 70% of the operating expenses referred to above were incurred in three expense categories: payroll and related expenses, site rent expenses, and telecommunications expenses.

Payroll and related expenses include wages, incentives, employee benefits and related taxes. USA Mobility reviews the number of employees in major functional categories such as direct sales, engineering and technical staff, customer service, collections and inventory on a monthly basis. The Company also reviews the design and physical locations of functional groups to continuously improve efficiency, to simplify organizational structures and to minimize the number of physical locations. The Company has reduced its employee base by approximately 19% from 968 full time equivalent employees (“FTEs”) at March 31, 2008 to 786 FTEs at March 31, 2009. The Company anticipates continued staffing reductions in 2009; however, the Company anticipates these staffing reductions will be less significant than the reductions in 2008.

Site rent expenses for transmitter locations are largely dependent on the Company’s paging networks. USA Mobility operates local, regional and nationwide one-way and two-way paging networks. These networks each require locations on which to place transmitters, receivers and antennae. Generally, site rent expenses are incurred for each transmitter location. Therefore, site rent expenses for transmitter locations are highly dependent on the number of transmitters, which in turn is dependent on the number of networks. In addition, these expenses generally do not vary directly with the number of subscribers or units in service, which is detrimental to the Company’s operating margin as revenues decline. In order to reduce these expenses, USA Mobility has an active program to consolidate the number of networks and thus transmitter locations, which the Company refers to as network rationalization.

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Telecommunications expenses are incurred to interconnect USA Mobility’s paging networks and to provide telephone numbers for customer use, points of contact for customer service and connectivity among the Company’s offices. These expenses are dependent on the number of units in service and the number of office and network locations the Company maintains. The dependence on units in service is related to the number of telephone numbers provided to customers and the number of telephone calls made to the Company’s call centers, though this is not always a direct dependency. For example, the number or duration of telephone calls to call centers may vary from period to period based on factors other than the number of units in service, which could cause telecommunications expenses to vary regardless of the number of units in service. In addition, certain phone numbers USA Mobility provides to its customers may have a usage component based on the number and duration of calls to the subscriber’s messaging device. Telecommunications expenses do not necessarily vary in direct relationship to units in service. Therefore, based on the factors discussed above, efforts are underway to review and reduce telephone circuit inventories and capacities and to reduce the number of transmitter and office locations from which the Company operates.

The total of USA Mobility’s cost of products sold; service, rental and maintenance; selling and marketing; general and administrative; and severance and restructuring expenses was $64.8 million and $51.1 million for the three months ended March 31, 2008 and 2009, respectively. Since the Company believes the demand for, and the Company’s revenues from, one-way and two-way messaging will continue to decline in future years, expense reductions will continue to be necessary in order for USA Mobility to mitigate the financial impact of such revenue declines on its cash from operating activities. However, there can be no assurance that the Company will be able to maintain margins or generate continuing net cash from operating activities.

Results of Operations

Comparison of the Results of Operations and Selected Operating Expenses for the Three Months Ended March 31, 2008 and 2009

	For the Three Months Ended March 31,								Change Between
	2008				2009				2008 and 2009
			% of				% of
	Amount		Revenue		Amount		Revenue		Amount		%
	(Dollars in thousands)
Revenues:
Service, rental and maintenance, net	$	89,887		94.9%	$	74,420		93.4%	$	(15,467)		(17.2%)
Product sales, net		4,871		5.1%		5,271		6.6%		400		8.2%
Total	$	94,758		100.0%	$	79,691		100.0%	$	(15,067)		(15.9%)
Selected operating expenses:
Cost of products sold	$	1,081		1.1%	$	1,669		2.1%	$	588		54.4%
Service, rental and maintenance		33,969		35.8%		22,955		28.8%		(11,014)		(32.4%)
Selling and marketing		7,836		8.3%		6,062		7.6%		(1,774)		(22.6%)
General and administrative		21,808		23.0%		20,186		25.3%		(1,622)		(7.4%)
Severance and restructuring		145		0.2%		190		0.3%		45		31.0%
Total	$	64,839		68.4%	$	51,062		64.1%	$	(13,777)		(21.2%)
FTEs		968				786				(182)		(18.8%)

Revenues

Service, rental and maintenance revenues consist primarily of recurring fees associated with the provision of messaging services and rental of leased units and is net of a provision for service credits. Product sales consist primarily of revenues associated with the sale of devices and charges for leased devices that are not returned and are net of anticipated credits. The decrease in revenues reflects the decrease in demand for the Company’s wireless services. USA Mobility’s total revenues were $94.8 million and $79.7 million for the three months ended March 31,

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2008 and 2009, respectively. The table below details total service, rental and maintenance revenues, net of service credits for the periods stated:

	For the
	Three Months Ended
	March 31,
	2008		2009
	(Dollars in thousands)
Service, rental and maintenance revenues, net:
Paging:
Direct:
One-way messaging	$	65,615	$	55,279
Two-way messaging		15,167		11,663
		80,782		66,942
Indirect:
One-way messaging		3,676		3,768
Two-way messaging		2,315		1,311
	$	5,991	$	5,079
Total paging:
One-way messaging	$	69,291	$	59,047
Two-way messaging		17,482		12,974
Total paging revenue		86,773		72,021
Non-paging revenue		3,114		2,399
Total service, rental and maintenance revenues, net	$	89,887	$	74,420

The table below sets forth units in service and service revenues, the changes in each between the three months ended March 31, 2008 and 2009 and the changes in revenues associated with differences in ARPU and the number of units in service.

							Revenues
	Units in Service						For the Three Months Ended
	As of March 31,						March 31,						Change Due To:
	2008		2009		Change		2008(1)		2009(1)		Change		ARPU		Units
	(Units in thousands)						(Dollars in thousands)
One-way messaging		3,017		2,359		(658)	$	69,291	$	59,047	$	(10,244)	$	4,124	$	(14,368)
Two-way messaging		316		248		(68)		17,482		12,974		(4,508)		(1,382)		(3,126)
Total		3,333		2,607		(726)	$	86,773	$	72,021	$	(14,752)	$	2,742	$	(17,494)

⁽¹⁾ Amounts shown exclude non-paging and product sales revenues.

As previously discussed, demand for messaging services has declined over the past several years and the Company anticipates that it will continue to decline for the foreseeable future, which would result in reductions in service, rental and maintenance revenues due to the lower number of subscribers and related units in service. The selected price increases implemented in 2008 and 2009 mitigated, but did not completely offset, the expected declines in both ARPU and revenues.

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Operating Expenses

Cost of Products Sold.  Cost of products sold consists primarily of the cost basis of devices sold to or lost by USA Mobility’s customers and costs associated with system sales. The $0.6 million increase in 2009 was due primarily to an increase in sales of management systems to customers.

Service, Rental and Maintenance.  Service, rental and maintenance expenses consist primarily of the following significant items:

	For the Three Months Ended March 31,								Change Between
	2008				2009				2008 and 2009
			% of				% of
	Amount		Revenue		Amount		Revenue		Amount		%
	(Dollars in thousands)
Site rent	$	17,792		18.8%	$	11,218		14.1%	$	(6,574)		(36.9%)
Telecommunications		6,204		6.5%		4,485		5.6%		(1,719)		(27.7%)
Payroll and related		6,683		7.0%		5,631		7.1%		(1,052)		(15.7%)
Stock based compensation		17		0.0%		49		0.0%		32		188.2%
Other		3,273		3.5%		1,572		2.0%		(1,701)		(52.0%)
Total service, rental and maintenance	$	33,969		35.8%	$	22,955		28.8%	$	(11,014)		(32.4%)
FTEs		320				260				(60)		(18.8%)

As illustrated in the table above, service, rental and maintenance expenses for the three months ended March 31, 2009 decreased $11.0 million, or 32.4%, from the same period in 2008. The percentage of expense to revenue also decreased primarily due to the following significant variances:

•  Site rent —The decrease of $6.6 million in site rent expenses is primarily due to the rationalization of the Company’s networks which has decreased the number of transmitters required to provide service to the Company’s customers which, in turn, has reduced the number of lease locations. In addition, the expiration of a master lease agreement (“MLA”) has resulted in the Company paying at the lower default rent per site in 2009, which has favorably impacted site rent expenses.

•  Telecommunications —The decrease of $1.7 million in telecommunications expenses is due to the consolidation of the Company’s networks. The Company believes continued reductions in these expenses will occur as the Company’s networks continue to be consolidated as anticipated throughout 2009.

•  Payroll and related —Payroll and related expenses are incurred largely for field technicians, their managers and in-house repair personnel. The field technical staff does not vary as closely to direct units in service as other work groups since these individuals are a function of the number of networks the Company operates rather than the number of units in service on its networks. The decrease in payroll and related expenses of $1.1 million is due primarily to a reduction in headcount for the three months ended March 31, 2009 compared to the same period in 2008. While total FTEs declined by 60 FTEs from 320 FTEs at March 31, 2008 to 260 FTEs at March 31, 2009, payroll and related expenses as a percentage of revenue increased slightly during the period due to the use of the Company’s employees to repair paging devices as opposed to use of a third party vendor and the one-time payment of the Additional Target Award under the 2006 Long-Term Incentive Plan (“LTIP”). The Company believes it is cost beneficial to perform the repair functions in-house. Payroll and related expenses for the three months ended March 31, 2009 also reflects $0.1 million related to the one-time payment of the 2006 LTIP Additional Target Award that increased payroll and related expenses as a percentage of revenue by 0.2%.

•  Stock based compensation —Stock based compensation expenses consist primarily of amortization of compensation expense associated with restricted stock units (“RSUs”), shares of common stock and shares of restricted common stock (“restricted stock”) issued to certain eligible employees under the USA Mobility, Inc. Equity Incentive Plan (the “Equity Plan”). The reduction recognized for the three months ended March 31, 2009 is primarily due to no compensation expense associated with the Initial Target Award under

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the 2006 LTIP during the period since the Initial Target Award was fully amortized by December 31, 2008; partially offset by compensation expenses related to the one-time Additional Target Award under the 2006 LTIP and the amortization of compensation expense for the 2009 LTIP.

•  Other —The decrease of $1.7 million in other expenses consist primarily of a decrease in repairs and maintenance expenses of $0.9 million due to lower contractor costs as repairs are now performed by Company employees, a decrease in outside services expenses of $0.4 million due to a reduction of third party services used in negotiating site lease cost reductions and a decrease of $0.4 million in travel and entertainment expenses and various other expenses, net.

Selling and Marketing.  Selling and marketing expenses consist of the following major items:

	For the Three Months Ended March 31,								Change Between
	2008				2009				2008 and 2009
			% of				% of
	Amount		Revenue		Amount		Revenue		Amount		%
	(Dollars in thousands)
Payroll and related	$	5,164		5.5%	$	4,175		5.3%	$	(989)		(19.2%)
Commissions		1,724		1.8%		1,201		1.5%		(523)		(30.3%)
Stock based compensation		39		0.0%		109		0.1%		70		179.5%
Other		909		1.0%		577		0.7%		(332)		(36.5%)
Total selling and marketing	$	7,836		8.3%	$	6,062		7.6%	$	(1,774)		(22.6%)
FTEs		268				206				(62)		(23.1%)

As indicated in the table above, selling and marketing expenses consist primarily of payroll and related expenses which decreased $1.0 million or 19.2% for the three months ended March 31, 2009 compared to the same period in 2008. While total FTEs declined by 62 from 268 FTEs at March 31, 2008 to 206 FTEs at March 31, 2009, the Company has continued a major initiative to reposition the Company and refocus its marketing goals. The sales and marketing staff are all involved in selling the Company’s paging products and services on a nationwide basis as well as reselling other wireless products and services such as cellular phones ande-mail devices under authorized agent agreements. These expenses support the Company’s efforts to maintain gross placements of units in service, which mitigate the impact of disconnects on the Company’s revenue base. The Company has reduced the overall cost of its selling and marketing activities by focusing on the most productive sales and marketing employees. This has allowed for a reduction in both FTEs and expenses as a percentage of revenue. Payroll and related expenses for the three months ended March 31, 2009 also reflects $0.3 million related to the one-time payment of the 2006 LTIP Additional Target Award that increased payroll and related expenses as a percentage of revenues by 0.4%.

Stock based compensation expenses increased for the three months ended March 31, 2009 compared to the same period in 2008 due primarily to compensation expenses related to the one-time Additional Target Award under the 2006 LTIP of $0.1 million and the amortization of compensation expense for the 2009 LTIP; partially offset by no compensation expense associated with the Initial Target Award under the 2006 LTIP during the period since the Initial Target Award was fully amortized by December 31, 2008. Commissions expense decreased $0.5 million or 30.3% for the three months ended March 31, 2009 compared to the same period in 2008, which is in line with the decrease in gross placements. The significant decrease of $0.3 million in other expenses consists primarily of decreases in travel and entertainment expenses, outside service expenses, office expenses and rewards and recognition expenses, all of which resulted from continued headcount and office reductions.

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General and Administrative.  General and administrative expenses consist of the following significant items:

	For the Three Months Ended March 31,								Change Between
	2008				2009				2008 and 2009
			% of				% of
	Amount		Revenue		Amount		Revenue		Amount		%
	(Dollars in thousands)
Payroll and related	$	8,682		9.2%	$	9,075		11.4%	$	393		4.5%
Stock based compensation		190		0.2%		569		0.7%		379		199.5%
Bad debt		711		0.7%		850		1.0%		139		19.5%
Facility rent		2,073		2.2%		1,628		2.0%		(445)		(21.5%)
Telecommunications		1,048		1.1%		771		1.0%		(277)		(26.4%)
Outside services		5,359		5.6%		4,514		5.7%		(845)		(15.8%)
Taxes, licenses and permits		1,958		2.1%		1,101		1.4%		(857)		(43.8%)
Other		1,787		1.9%		1,678		2.1%		(109)		(6.1%)
Total general and administrative	$	21,808		23.0%	$	20,186		25.3%	$	(1,622)		(7.4%)
FTEs		380				320				(60)		(15.8%)

As illustrated in the table above, general and administrative expenses for the three months ended March 31, 2009 decreased $1.6 million, or 7.4%, from the same period in 2008 due primarily to lower outside service expenses, lower taxes, licenses and permits expenses and office closures; partially offset by higher payroll and related expenses and stock based compensation expenses related to the 2006 LTIP Additional Target Award. The percentage of expense to revenue increased during the three months ended March 31, 2009 due to the following significant variances:

•  Payroll and related —Payroll and related expenses are incurred mainly for employees in customer service, inventory, collections, finance and other support functions as well as executive management. While total FTEs declined by 60 from 380 at March 31, 2008 to 320 FTEs at March 31, 2009, payroll and related expenses as a percentage of revenue increased during the period due to a change in the composition of the Company’s workforce to a more experienced and long tenured base of employees and due to the one-time 2006 LTIP Additional Target Award. Payroll and related expenses for the three months ended March 31, 2009 reflects $1.2 million related to the one-time payment of the 2006 LTIP Additional Target Award that increased payroll and related expenses as a percentage of revenue by 1.5%.

•  Stock based compensation —Stock based compensation expenses consist primarily of amortization of compensation expense associated with RSUs, common stock and restricted stock issued to certain eligible employees and equity compensation to non-executive members of the Company’s Board of Directors under the Equity Plan. Stock based compensation expenses increased by $0.4 million and as a percentage of revenue during the period. The increase for the three months ended March 31, 2009 is due primarily to compensation expenses related to the one-time Additional Target Award under the 2006 LTIP of $0.3 million and the amortization of compensation expense for 2009 LTIP; partially offset by no compensation expense associated with the Initial Target Award under the 2006 LTIP during the period since the Initial Target Award was fully amortized by December 31, 2008.

•  Bad debt —The increase of $0.1 million in bad debt expenses and as a percentage of expense to revenue reflects the Company’s bad debt experience resulting from the overall economic downturn impacting the Company’s customers.

•  Facility rent —The decrease of $0.4 million in facility rent expenses is primarily due to the closure of office facilities as part of the Company’s continued rationalization of its operating requirements to meet lower revenue and customer demand.

•  Telecommunications —The decrease of $0.3 million in telecommunications expenses reflects continued office and staffing reductions as the Company continues to streamline its operations and reduce its telecommunication requirements.

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•  Outside services —Outside services expenses consist primarily of costs associated with printing and mailing invoices, outsourced customer service, temporary help and various professional fees. The decrease of $0.8 million in outside services expenses was due primarily to a reduction in outsourced customer service of $0.3 million, reduction in audit-related fees and legal fees of $0.2 million and other expenses, net of $0.3 million; partially offset by higher fees for outsourced tax services during the period which resulted in the increase as a percentage of revenue.

•  Taxes, licenses and permits —Taxes, licenses and permits expenses consist of property, franchise, gross receipts and transactional taxes. The decrease in taxes, licenses and permits expenses of $0.9 million is mainly due to settlement of various state and local tax audits at amounts lower than the originally estimated liability and lower gross receipts taxes, transactional and property taxes. These taxes are based on the lower revenue and property base resulting from the Company’s operations.

•  Other —The decrease of $0.1 million in other expenses is due primarily to a decrease of $0.3 million in office expenses, $0.2 million in lower insurance expenses, $0.1 million in lower travel and entertainment expenses, $0.1 million in lower recruiting and relocation expenses, and $0.1 million decrease in various other expenses, net; partially offset by lower refunds and credits received of $0.7 million for the three months ended March 31, 2009 than during the same period in 2008. This resulted in a slight increase to expense as a percentage of revenue for the period.

Severance and Restructuring.  Severance and restructuring expenses increased from $0.1 million for the three months ended March 31, 2008 to $0.2 million for the three months ended March 31, 2009. The $0.2 million consists of $0.1 million for severance charges recorded in accordance with SFAS No. 112,Employers’ Accounting for Post-employment Benefits, (“SFAS No. 112”), for planned staffing reductions and $0.1 million for restructuring costs associated with the terminations of certain lease agreements for transmitter locations. The provisions of SFAS No. 112 require the Company to accrue post-employment benefits if certain specified criteria are met. Post-employment benefits include salary continuation, severance benefits and continuation of health insurance benefits.

Depreciation, Amortization and Accretion.  Depreciation, amortization and accretion expenses decreased from $12.5 million for the three months ended March 31, 2008 to $11.3 million for the three months ended March 31, 2009. The decrease was primarily due to $0.9 million in lower depreciation for the period from fully depreciated paging infrastructure, $0.1 million in lower depreciation expense on paging devices resulting from fewer purchases of paging devices and from fully depreciated paging devices, $0.1 million in lower amortization expense and $0.1 million in lower accretion expense.

Impairments.  The Company did not record any impairment of long-lived assets and intangible assets subject to amortization during the three months ended March 31, 2008 and 2009.

Based on the requirements of SFAS No. 142,Goodwill and Other Intangible Assets, the Company determined that all of its goodwill was impaired and recorded an impairment charge of $188.2 million in the first quarter of 2008.

Interest Income, Net and Income Tax Expense

Interest Income, Net.  Net interest income decreased from $0.6 million for the three months ended March 31, 2008 to less than $0.1 million for the three months ended March 31, 2009. This significant decrease was primarily due to less interest income earned on investment of available cash in short-term interest bearing accounts for the three months ended March 31, 2009 reflecting lower prevailing interest rates during the first quarter of 2009.

Income Tax Expense.  Income tax expense decreased from $7.7 million for the three months ended March 31, 2008 to $7.5 million for the three months ended March 31, 2009. Income tax expense for the three months ended March 31, 2008 and 2009 includes $0.4 million for interest on the liability for uncertain tax positions. The effective income tax rate for the three months ended March 31, 2009 of 42.96% is comparable to the effective income tax rate of 42.74% for the same period in 2008 (after exclusion of the goodwill impairment of $188.2 million) and reflects no other unusual or significant items.

In April 2009, the Company was informed that the IRS had accepted its 2005 and 2006 Federal income tax returns with no changes. The Company anticipates adjusting its liability for uncertain tax positions in the second

27

quarter of 2009 for effectively settled tax positions. The Company expects that the adjustment of the liability for uncertain tax positions will result in a material reduction of both the liability and income tax expense of approximately $37.0 million. Also, the effective settlement of the uncertain tax positions will result in the recognition of additional deferred income tax assets that will likely be subject to a full valuation allowance based on the Company’s current forecast of future taxable income.

On February 17, 2009, the President signed the American Recovery and Reinvestment Act of 2009. This new law extends the 50-percent first year bonus depreciation allowed under the 2008 Economic Stimulus Act through December 31, 2009. The 50-percent bonus depreciation is available on certain defined property placed in service after December 31, 2007 and before January 1, 2010.

The Company has not fully evaluated whether to elect the bonus depreciation provisions. This decision must be made by the filing date of the Company’s 2008 and 2009 Federal income tax returns.

Liquidity and Capital Resources

Cash and Cash Equivalents

At March 31, 2009, the Company had cash and cash equivalents of $65.1 million. This available cash and cash equivalents are held in accounts managed by third party financial institutions and consist of invested cash and cash in the Company’s operating accounts. The invested cash is invested in interest bearing funds managed by third party financial institutions. These funds invest in direct obligations of the government of the United States. To date, the Company has experienced no loss or lack of access to its invested cash or cash equivalents; however, the Company can provide no assurance that access to its invested cash and cash equivalents will not be impacted by adverse conditions in the financial markets.

At any point in time, the Company also has approximately $6.0 to $7.0 million in its non-interest bearing operating accounts that are with third party financial institutions. While the Company monitors daily the cash balances in its operating accounts and adjusts the cash balances as appropriate, these cash balances could be impacted if the underlying financial institutions fail or are subject to other adverse conditions in the financial markets. To date, the Company has experienced no loss or lack of access to cash in its operating accounts.

On October 14, 2008, the Federal Deposit Insurance Corporation (“FDIC”) announced the Transaction Account Guarantee Program (the “Program”). The Program permits financial institutions to provide separate unlimited FDIC coverage on the full balance of all non-interest bearing accounts. The Company has been notified that its operating accounts are with third party financial institutions that are participating in this Program.

Overview

Based on current and anticipated levels of operations, USA Mobility anticipates net cash provided by operating activities, together with the available cash on hand at March 31, 2009, should be adequate to meet anticipated cash requirements for the foreseeable future.

In the event that net cash provided by operating activities and cash on hand are not sufficient to meet future cash requirements, the Company may be required to reduce planned capital expenses, reduce or eliminate its cash distributions to stockholders, reduce or eliminate its common stock repurchase program, sell assets or seek additional financing. USA Mobility can provide no assurance that reductions in planned capital expenses or proceeds from asset sales would be sufficient to cover shortfalls in available cash or that additional financing would be available on acceptable terms.

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The following table sets forth information on the Company’s net cash flows from operating, investing and financing activities for the periods stated:

	For the
	Three Months Ended						Change
	March 31,						Between
	2008			2009			2008 and 2009
	(Dollars in thousands)
Net cash provided by operating activities	$	26,034		$	27,305		$	1,271
Net cash used in investing activities		(3,835	)		(6,047	)		2,212
Net cash used in financing activities		(17,763	)		(31,215	)		13,452

Net Cash Provided by Operating Activities.  As discussed above, USA Mobility is dependent on cash flows from operating activities to meet its cash requirements. Cash from operations varies depending on changes in various working capital items including deferred revenues, accounts payable, accounts receivable, prepaid expenses and various accrued expenses. The following table includes the significant cash receipt and expenditure components of the Company’s cash flows from operating activities for the periods indicated, and sets forth the change between the indicated periods:

	For the
	Three Months Ended				Change
	March 31,				Between
	2008		2009		2008 and 2009
	(Dollars in thousands)
Cash received from customers	$	94,868	$	81,449	$	(13,419)
Cash paid for —
Payroll and related costs		25,652		22,723		(2,929)
Site rent costs		16,404		10,491		(5,913)
Telecommunications costs		6,559		4,468		(2,091)
Interest costs		2		—		(2)
Other operating costs		20,217		16,462		(3,755)
		68,834		54,144		(14,690)
Net cash provided by operating activities	$	26,034	$	27,305	$	1,271

Net cash provided by operating activities increased $1.3 million for the three months ended March 31, 2009 compared to the three months ended March 31, 2008. Cash received from customers decreased $13.4 million for the three months ended March 31, 2009 from the same period in 2008. This measure consists of revenues and direct taxes billed to customers adjusted for changes in accounts receivable, deferred revenue and tax withholding amounts. The decrease was due primarily to a revenue decrease of $15.1 million offset primarily by changes in accounts receivable of $1.7 million.

The decline in cash received from customers was substantially offset by the following reductions in cash paid for operating activities:

•  Cash payments for payroll and related costs decreased $2.9 million due primarily to a reduction in headcount. Cash paid during the three months ended March 31, 2009 for payroll and related costs includes payment of the cash portion of the one-time Additional Target Award under the 2006 LTIP and the related equivalent cash distributions on March 19, 2009. The lower payroll and related expenses resulted from the Company’s consolidation and expense reduction activities.

•  Cash payments for site rent costs decreased $5.9 million. This decrease was due primarily to lower site rent expenses for leased locations as the Company rationalized its network and incurred lower payments under its MLA and other lease agreements.

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•  Cash payments for telecommunications costs decreased $2.1 million. This decrease was due primarily to the consolidation of the Company’s networks and reflects continued office and staffing reduction to support its smaller customer base.

•  Cash payments for other operating costs decreased $3.8 million. The decrease in these payments was primarily due to reduction in outside services costs of $1.3 million, decrease in taxes, licenses and permits costs of $0.9 million, reduction in repairs and maintenance costs of $0.8 million, lower facility rent expenses of $0.4 million, and reductions in various other costs of $0.4 million net for the three months ended March 31, 2009. Overall, the Company has reduced costs to match its declining subscriber and revenue base.

Net Cash Used In Investing Activities.  Net cash used in investing activities increased $2.2 million for the three months ended March 31, 2009 compared to the same period in 2008 primarily due to higher capital expenses. USA Mobility’s business requires funds to finance capital expenses, which primarily include the purchase of messaging devices, system and transmission equipment and information systems. Capital expenses for the three months ended March 31, 2009 consisted primarily of the purchase of messaging devices and other equipment, offset by the net proceeds from the sale of assets. Capital expenses in 2009 also include $0.2 million for the purchase of a new two-way device exclusively licensed to the Company. The amount of capital USA Mobility will require in the future will depend on a number of factors, including the number of existing subscriber devices to be replaced, the number of gross placements, technological developments, total competitive conditions and the nature and timing of the Company’s strategy to integrate and consolidate its networks. USA Mobility anticipates its total capital expenses for 2009 to be between $19.0 and $21.0 million, and expects to fund such requirements from net cash provided by operating activities.

Net Cash Used In Financing Activities.  Net cash used in financing activities increased $13.4 million for the three months ended March 31, 2009 from the same period in 2008 primarily due to higher cash distributions paid to stockholders during the three months ended March 31, 2009 plus cash used for the Company’s common stock repurchase program. For the three months ended March 31, 2008, the Company paid a total of $0.65 per share of common stock in cash distributions as compared to $1.25 per share of common stock in cash distributions for the same period in 2009.

Cash Distributions to Stockholders.  On March 3, 2009, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share of common stock and a special cash distribution of $1.00 per share of common stock, each with a record date of March 17, 2009, and a payment date of March 31, 2009. This cash distribution of approximately $28.5 million was paid from available cash on hand.

Cash distributions paid as disclosed in the statement of cash flows for the three months ended March 31, 2009 include previously declared cash distributions on shares of vested restricted stock issued in January 2008 to the non-executive directors of the Company’s Board of Directors.

Cash distributions on restricted stock and RSUs have been accrued and are paid when the applicable vesting conditions are met. Accrued cash distributions on forfeited restricted stock and RSUs are also forfeited.

Future Cash Distributions to Stockholders.  On April 29, 2009, the Company’s Board of Directors declared a regular quarterly cash distribution of $0.25 per share of common stock, to stockholders of record on May 20, 2009 and with a payment date of June 18, 2009. This cash distribution of approximately $5.7 million is expected to be paid from available cash on hand.

Common Stock Repurchase Program.  On July 31, 2008, the Company’s Board of Directors approved a program for the Company to repurchase up to $50.0 million of its common stock in the open market during the twelve-month period commencing on or about August 5, 2008. Credit Suisse Securities (USA) LLC will administer such purchases. The Company expects to use available cash on hand and net cash provided by operating activities to fund the common stock repurchase program.

On March 3, 2009, the Company’s Board of Directors approved a supplement to the common stock repurchase program. The supplement resets the repurchase authority to $25.0 million as of January 1, 2009 and extends the purchase period through December 31, 2009.

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During the first quarter of 2009, the Company purchased 290,667 shares of its common stock for approximately $2.7 million (excluding commissions). Since the inception of the common stock repurchase program, the Company has repurchased a total of 4,649,005 shares of its common stock. There was approximately $22.3 million of common stock repurchase authority remaining under the program as of March 31, 2009. This repurchase authority allows the Company, at management’s discretion, to selectively repurchase shares of its common stock from time to time in the open market depending upon market price and other factors. All repurchased shares of common stock are returned to the status of authorized but unissued shares of the Company.

Repurchased shares of the Company’s common stock were accounted for as a reduction to common stock and additionalpaid-in-capital in the period in which the repurchase occurred.

Borrowings.  At March 31, 2009, the Company had no borrowings or associated debt service requirements.

Commitments and Contingencies

Operating Leases.  USA Mobility has operating leases for office and transmitter locations. Substantially all of these leases have lease terms ranging from one month to five years. USA Mobility continues to review its office and transmitter locations, and intends to replace, reduce or consolidate leases, where possible. Total rent expense under operating leases for the three months ended March 31, 2008 and 2009 was approximately $19.3 million and $12.3 million, respectively.

Other Commitments.  USA Mobility also has various Letters of Credit (“LOCs”) outstanding with multiple state agencies. The LOCs typically have one to three-year contract requirements and contain automatic renewal terms. The deposits related to the LOCs are included within other assets on the condensed consolidated balance sheets.

Off-Balance Sheet Arrangements.  USA Mobility does not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As such, the Company is not exposed to any financing, liquidity, market or credit risk that could arise if it had engaged in such relationships.

Contingencies.  USA Mobility, from time to time, is involved in lawsuits arising in the normal course of business. USA Mobility believes that these pending lawsuits will not have a material adverse impact on the Company’s financial results or operations.

The following amends and restates the description of previously reported legal contingencies in the 2008 Annual Report in which there have been material developments during the quarter ended March 31, 2009.

Stored Communications Act Litigation.  In 2003, several individuals filed claims in the U.S. District Court for the Central District of California against Arch Wireless Operating Company, Inc. (“AWOC”) (which later was merged into USA Mobility Wireless, Inc., an indirect wholly-owned subsidiary of USA Mobility, Inc.), its customer, the City of Ontario (the “City”), and certain City employees. The claims arose from AWOC’s release of transcripts of archived text messages to the City at the City’s request. The plaintiffs claimed this release infringed upon their Fourth Amendment rights and violated the Stored Communications Act (the “SCA”) as well as state law. The district court dismissed a state law claim on the pleadings, and granted summary judgment to AWOC on all remaining claims, including the SCA claim, on August 15, 2006.

The plaintiffs appealed the district court’s judgment with respect to the Fourth Amendment and SCA claims in the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit Court”). On June 18, 2008, the Ninth Circuit Court reversed the district court’s summary judgment order and issued judgment against AWOC and the City. The Ninth Circuit Court held that AWOC violated the SCA by releasing the contents of stored communications without obtaining the consent of the users who sent or received the communications. The Ninth Circuit Court remanded the case to the district court for further proceedings.

On July 9, 2008, the Company filed a petition in the Ninth Circuit Court for rehearing or rehearing en banc. The Company believed that the Ninth Circuit Court’s interpretation of the SCA was erroneous and conflicted with Ninth Circuit Court precedent, and that AWOC’s disclosure of the communications was in compliance with the law. At the

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Ninth Circuit’s direction, the plaintiffs in this action responded to the Company’s petition for rehearing on September 11, 2008. On January 27, 2009, the Ninth Circuit Court denied the Company’s petition for rehearing. On February 2, 2009 at the request of the City, the Ninth Circuit Court issued a stay of its mandate pending the filing of a petition for certiorari with the U.S. Supreme Court. The Company has not yet determined its next course of action but may join with the City in filing a petition for certiorari with the U.S. Supreme Court. If denied or if the Ninth Circuit Court’s ruling is not vacated by the U.S. Supreme Court, or if the stay of the Ninth Circuit’s mandate is otherwise lifted, the district court could award damages to the plaintiffs. The Company does not expect any such damage award would have a material impact on the Company’s financial condition or results of operations.

Nationwide Lawsuit.  On August 2, 2006, Nationwide Paging, Inc. (“Nationwide”) filed a two-count civil action in Massachusetts Superior Court against defendants USA Mobility, Inc., Arch Wireless Inc., AWOC, and Paging Network, Inc. (collectively “Arch”) titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc.MICV2006-02734, Middlesex County Superior Court, Massachusetts (the “2006 Superior Court Case”). Nationwide alleged that, in 2000 and 2001, Arch breached its contract with Nationwide by supplying defective pagers and by over billing Nationwide for paging services. In addition, Nationwide alleged that Arch breached the implied covenant of good faith and fair dealing and destroyed or injured Nationwide’s right to receive the fruits of its contract with Arch. Nationwide’s complaint alleges damages in the amount of $6.9 million.

Nationwide served the 2006 Superior Court Case on USA Mobility on October 27, 2006. The Company denied liability to Nationwide.

The 2006 Superior Court case has some relationship to another case pending in Massachusetts Superior Court, titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc., MICV2002-02329, Middlesex County Superior Court, Massachusetts (the “2002 Superior Court Case”). In that case, Nationwide seeks a declaration of the amount of money it owes to Arch, and also claims damages arising from alleged billing errors dating back to 1999 and 2000. Arch filed counterclaims against Nationwide, seeking more than $400,000 for unpaid invoices. Following the close of discovery in the 2002 Superior Court Case in 2003, Nationwide asserted for the first time a claim for approximately $4,000,000, allegedly suffered from business lost due to defective pagers supplied by Arch. Arch contended that those claims were barred by the discharge injunction in the Arch Bankruptcy Case. In July 2008, the United States Court of Appeals for the First Circuit declined to find that the Nationwide claims were barred by the discharge injunction.

In January 2009, the Company served a motion to dismiss the 2006 Superior Court Case on the grounds that the case cannot stand in light of the 2002 Superior Court Case. On March 12, 2009, the court granted the Company’s motion and dismissed the 2006 Superior Court Case.

The Company anticipates additional discovery will be taken in the 2002 Superior Court Case. No trial date has been set.

USA Mobility intends to defend vigorously the claims by Nationwide in the 2002 Superior Court Case. Further, the Company intends to prosecute vigorously its counterclaims against Nationwide. The Company is unable, at this time, to predict the impact, if any, on the Company’s financial condition or results of operations.

eOn Lawsuit.  On September 29, 2008, eOn Corp. IP Holdings, LLC, a Texas limited liability company, filed a complaint in the U.S. District Court for the Eastern District of Texas against the Company and eighteen other defendants, including current or former customers of the Company or its predecessors. The complaint alleges that the Company infringes two U.S. patents both titled, “Interactive Nationwide Data Service Communication System for Stationary and Mobile Battery Operated Subscriber Units” by making, using, offering for saleand/or selling two-way communication networksand/or data systems. The Company was not served with the complaint until January 12, 2009, and answered the plaintiff’s complaint on March 2, 2009, denying its substantive allegations and counterclaiming that the asserted patents are not infringed by the Company and are invalid. The district court has set a trial date of October 12, 2010 but discovery has yet to begin. On February 25, 2009 the U.S. Patent and Trademark Office granted the Company’s request for a reexamination of the patents. Based on the limited information currently available, the Company is unable at this time to assess the impact, if any, that the plaintiff’s claims may have on the Company’s financial condition or results of operations.

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Related Party Transactions

Effective November 16, 2004, two members of the Company’s Board of Directors also served as directors for entities that lease transmission tower sites to the Company. In January 2008, one of these directors voluntarily resigned from the Company’s Board of Directors and, effective January 1, 2008, was no longer a related party. For the three months ended March 31, 2008 and 2009, the Company paid $3.1 million and $3.0 million, respectively, in site rent expenses that are included in service, rental and maintenance expenses to the remaining related party.

Application of Critical Accounting Policies

The preceding discussion and analysis of financial condition and results of operations are based on USA Mobility’s condensed consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. The preparation of these condensed consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures. On an on-going basis, the Company evaluates estimates and assumptions, including but not limited to those related to the impairment of long-lived assets and intangible assets subject to amortization, accounts receivable allowances, revenue recognition, depreciation expense, asset retirement obligations, severance and restructuring and income taxes. USA Mobility bases its estimates on historical experience and various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Item 3.   Quantitative and Qualitative Disclosures about Market Risk

At March 31, 2009, the Company had no outstanding debt financing.

Item 4.   Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s management carried out an evaluation, as required byRule 13a-15(b) of the Securities Exchange Act of 1934 (the “Exchange Act”), with the participation of its Chief Executive Officer (“CEO”) and Chief Operating Officer and Chief Financial Officer (“COO/CFO”), the Company’s principal financial officer, of the effectiveness of the Company’s disclosure controls and procedures, as of the end of the Company’s last fiscal quarter. Based upon this evaluation, the CEO and the COO/CFO concluded that the Company’s disclosure controls and procedures were effective as of the end of the period covered by this Quarterly Report onForm 10-Q, such that the information relating to the Company required to be disclosed in its Exchange Act reports filed with the SEC (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Company’s management, including the CEO and COO/CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

In addition, the Company’s management carried out an evaluation, as required byRule 13a-15(d) of the Exchange Act, with the participation of the CEO and COO/CFO, of changes in the Company’s internal control over financial reporting. Based on this evaluation, the CEO and COO/CFO concluded that there were no changes in the Company’s internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1.   Legal Proceedings

USA Mobility, from time to time is involved in lawsuits arising in the normal course of business. USA Mobility believes that these pending lawsuits will not have a material adverse impact on the Company’s financial results or operations.

Information regarding reportable legal proceedings is contained in “Part I — Item 3 — Legal Proceedings” in the 2008 Annual Report. The following amends and restates the description of previously reported legal proceedings in which there have been material developments during the quarter ended March 31, 2009.

Settled Lawsuits.  USA Mobility was named as a defendant in a breach of contract suit filed in the Judicial District Court; Parish of East Baton Rouge, Louisiana,Commerce Limited Partnership #9406(“Commerce”) v. Metrocall, Inc., alleging that the Company owed Commerce, a prior lessor, monetary damages. In January 2009 the matter was settled to the mutual satisfaction of the parties and did not have a material impact on the Company’s financial condition or results of operations.

Stored Communications Act Litigation.  In 2003, several individuals filed claims in the U.S. District Court for the Central District of California against Arch Wireless Operating Company, Inc. (“AWOC”) (which later was merged into USA Mobility Wireless, Inc., an indirect wholly-owned subsidiary of USA Mobility, Inc.), its customer, the City of Ontario (the “City”), and certain City employees. The claims arose from AWOC’s release of transcripts of archived text messages to the City at the City’s request. The plaintiffs claimed this release infringed upon their Fourth Amendment rights and violated the Stored Communications Act (the “SCA”) as well as state law. The district court dismissed a state law claim on the pleadings, and granted summary judgment to AWOC on all remaining claims, including the SCA claim, on August 15, 2006.

The plaintiffs appealed the district court’s judgment with respect to the Fourth Amendment and SCA claims in the United States Court of Appeals for the Ninth Circuit (the “Ninth Circuit Court”). On June 18, 2008, the Ninth Circuit Court reversed the district court’s summary judgment order and issued judgment against AWOC and the City. The Ninth Circuit Court held that AWOC violated the SCA by releasing the contents of stored communications without obtaining the consent of the users who sent or received the communications. The Ninth Circuit Court remanded the case to the district court for further proceedings.

On July 9, 2008, the Company filed a petition in the Ninth Circuit Court for rehearing or rehearing en banc. The Company believed that the Ninth Circuit Court’s interpretation of the SCA was erroneous and conflicted with Ninth Circuit Court precedent, and that AWOC’s disclosure of the communications was in compliance with the law. At the Ninth Circuit’s direction, the plaintiffs in this action responded to the Company’s petition for rehearing on September 11, 2008. On January 27, 2009, the Ninth Circuit Court denied the Company’s petition for rehearing. On February 2, 2009 at the request of the City, the Ninth Circuit Court issued a stay of its mandate pending the filing of a petition for certiorari with the U.S. Supreme Court. The Company has not yet determined its next course of action but may join with the City in filing a petition for certiorari with the U.S. Supreme Court. If denied or if the Ninth Circuit Court’s ruling is not vacated by the U.S. Supreme Court, or if the stay of the Ninth Circuit’s mandate is otherwise lifted, the district court could award damages to the plaintiffs. The Company does not expect any such damage award would have a material impact on the Company’s financial condition or results of operations.

Nationwide Lawsuit.  On August 2, 2006, Nationwide Paging, Inc. (“Nationwide”) filed a two-count civil action in Massachusetts Superior Court against defendants USA Mobility, Inc., Arch Wireless Inc., AWOC, and Paging Network, Inc. (collectively “Arch”) titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc.MICV2006-02734, Middlesex County Superior Court, Massachusetts (the “2006 Superior Court Case”). Nationwide alleged that, in 2000 and 2001, Arch breached its contract with Nationwide by supplying defective pagers and by over billing Nationwide for paging services. In addition, Nationwide alleged that Arch breached the implied covenant of good faith and fair dealing and destroyed or injured Nationwide’s right to receive the fruits of its contract with Arch. Nationwide’s complaint alleges damages in the amount of $6.9 million.

Nationwide served the 2006 Superior Court Case on USA Mobility on October 27, 2006. The Company denied liability to Nationwide.

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The 2006 Superior Court case has some relationship to another case pending in Massachusetts Superior Court, titledNationwide Paging, Inc. v. Arch Wireless, Inc. and Paging Network, Inc., MICV2002-02329, Middlesex County Superior Court, Massachusetts (the “2002 Superior Court Case”). In that case, Nationwide seeks a declaration of the amount of money it owes to Arch, and also claims damages arising from alleged billing errors dating back to 1999 and 2000. Arch filed counterclaims against Nationwide, seeking more than $400,000 for unpaid invoices. Following the close of discovery in the 2002 Superior Court Case in 2003, Nationwide asserted for the first time a claim for approximately $4,000,000, allegedly suffered from business lost due to defective pagers supplied by Arch. Arch contended that those claims were barred by the discharge injunction in the Arch Bankruptcy Case. In July 2008, the United States Court of Appeals for the First Circuit declined to find that the Nationwide claims were barred by the discharge injunction.

In January 2009, the Company served a motion to dismiss the 2006 Superior Court Case on the grounds that the case cannot stand in light of the 2002 Superior Court Case. On March 12, 2009, the court granted the Company’s motion and dismissed the 2006 Superior Court Case.

The Company anticipates additional discovery will be taken in the 2002 Superior Court Case. No trial date has been set.

USA Mobility intends to defend vigorously the claims by Nationwide in the 2002 Superior Court Case. Further, the Company intends to prosecute vigorously its counterclaims against Nationwide. The Company is unable, at this time, to predict the impact, if any, on the Company’s financial condition or results of operations.

eOn Lawsuit.  On September 29, 2008, eOn Corp. IP Holdings, LLC, a Texas limited liability company, filed a complaint in the U.S. District Court for the Eastern District of Texas against the Company and eighteen other defendants, including current or former customers of the Company or its predecessors. The complaint alleges that the Company infringes two U.S. patents both titled, “Interactive Nationwide Data Service Communication System for Stationary and Mobile Battery Operated Subscriber Units” by making, using, offering for saleand/or selling two-way communication networksand/or data systems. The Company was not served with the complaint until January 12, 2009, and answered the plaintiff’s complaint on March 2, 2009, denying its substantive allegations and counterclaiming that the asserted patents are not infringed by the Company and are invalid. The district court has set a trial date of October 12, 2010 but discovery has yet to begin. On February 25, 2009 the U.S. Patent and Trademark Office granted the Company’s request for a reexamination of the patents. Based on the limited information currently available, the Company is unable at this time to assess the impact, if any, that the plaintiff’s claims may have on the Company’s financial condition or results of operations.

Item 1A.   Risk Factors

The risk factors included in “Part I — Item 1A — Risk Factors” of the 2008 Annual Report have not materially changed.

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Item 2.   Unregistered Sales of Equity Securities and Use of Proceeds

The following table presents information with respect to purchases made by the Company of its common stock during the three months ended March 31, 2009:

							Approximate
					Total Number of		Dollar Value of
					Shares Purchased		Shares That May
					as Part of a		Yet Be Purchased
	Total Number of		Average Price		Publicly		Under the Publicly
	Shares		Paid Per		Announced Plan		Announced Plan or
Period	Purchased(1)		Share(2)		or Program		Program(3)
							(Dollars in
							thousands)
Beginning Balance							$	25,000
January 1 through January 31, 2009		—	$	—		—	$	25,000
February 1 through February 28, 2009		139,303		9.41		139,303	$	23,689
March 1 through March 31, 2009		168,468		9.19		151,364	$	22,314
Total		307,771	$	9.29		290,667

(1)	The total number of shares purchased includes (i) shares purchased pursuant to the common stock repurchase program described in footnote 3 below and (ii) 17,104 shares purchased from the Company’s executives in payment of required tax withholdings for the common stock awarded in March 2009 related to the Additional Target Award under the 2006 LTIP.
(2)	Average price paid per share excludes commissions.
(3)	On July 31, 2008, the Company’s Board of Directors approved a program for the Company to repurchase up to $50.0 million of its common stock in the open market during the twelve month period commencing on or about August 5, 2008. On March 3, 2009, the Company’s Board of Directors approved a supplement which resets the repurchase authority to $25.0 million as of January 1, 2009 and extends the purchase period through December 31, 2009.

Item 3.   Defaults upon Senior Securities

None.

Item 4.   Submission of Matters to a Vote of Security Holders

None.

Item 5.   Other Information

None.

Item 6.   Exhibits

The exhibits listed in the accompanying Exhibit Index are filed as part of this Quarterly Report onForm 10-Q and such Exhibit Index is incorporated herein by reference.

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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 thereunto duly authorized.

USA MOBILITY, INC.

/s/  Thomas L. Schilling

Thomas L. Schilling

Chief Operating Officer and

Chief Financial Officer

Dated: April 30, 2009

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EXHIBIT INDEX

Exhibit No.			Description
	31	.1	Certification of Chief Executive Officer pursuant toRule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, dated April 30, 2009(1)
	31	.2	Certification of Chief Operating Officer and Chief Financial Officer pursuant toRule 13a-14(a)/Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended, dated April 30, 2009(1)
	32	.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350 dated April 30, 2009(1)
	32	.2	Certification of Chief Operating Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350 dated April 30, 2009(1)

⁽¹⁾ Filed herewith.

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