Exhibit 99.1
Muzak LLC Announces Third Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--Nov. 6, 2003--Muzak LLC ("Muzak"
or the "Company"), the leading provider of business music services in
the United States, today announced financial results for the quarter
ended September 30, 2003.
Music and other business services revenue for the quarter ended
September 30, 2003 was $43.9 million, a 6.8% increase, compared to
$41.2 million for the quarter ended September 30, 2002. Equipment
sales and related services revenue increased 2.6%, or $0.4 million, to
$15.4 million for the quarter ended September 30, 2003 from $15.0
million in the comparable 2002 period. As a result, total revenue for
the quarter ended September 30, 2003 was $59.3 million, a 5.7%
increase, compared to $56.2 million for the quarter ended September
30, 2002.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) was $19.1 million for the quarter ended September 30,
2003, an increase of $0.4 million or 2.2%, compared to $18.7 million
in the quarter ended September 30, 2002. The Company believes that
EBITDA is a meaningful measure of the cash flows available to invest
in new client locations and to service its debt obligations. See
attached reconciliation of cash flows from operating activities to
EBITDA. Cash flow provided by operating activities was $11.8 million
for the quarter ended September 30, 2003 as compared to $6.2 million
for the 2002 period, an increase of $5.6 million.
For the nine months ended September 30, 2003, the Company had
music and other business services revenue of $130.0 million, total
revenue of $173.6 million, and EBITDA of $49.4 million, representing
increases of 7.3%, 7.7%, and 1.7%, respectively over the comparable
2002 period. Excluding a 2003 $5.0 million loss on extinguishment of
debt and 2002 charges of $3.1 million and $0.5 million relating to an
accrual for prior period licensing royalties and a postponed financing
transaction, respectively, EBITDA increased 4.3% in the nine months of
2003 as compared to the same 2002 period.
"We are pleased with our recurring revenue growth and continue to
sign new clients, while also continuing to contract with existing
clients for additional location roll-outs, including CVS Pharmacy,
Payless Shoes, and Washington Mutual. New national clients include K&G
Mens Store and Pottery Barn Kids, among others," commented Bill Boyd,
Chief Executive Officer. "Our successful sales efforts, coupled with
an emphasis on installing backlog, resulted in an 8.4% increase in
equipment revenues on a sequential quarter basis. Although we made
improvement in installation activity during the third quarter, we
experienced a slight increase in backlog towards the end of the
quarter due to the satellite failure," remarked Bill Boyd. The
satellite failure is discussed below.
"We remain focused on identifying and implementing cost savings
initiatives. Our initiative to bring in-house certain administrative
functions, previously performed by a third party, will result in
annualized cost savings of $1.0 million and has contributed to a $0.2
million reduction in other selling, general, and administrative
expenses on a sequential quarter basis. Our increase in recurring
revenues, coupled with our expense reductions, enabled us to improve
EBITDA, adjusted for the loss on early extinguishment of debt, to
$19.1 million in the third quarter of 2003 from $17.8 million in the
second quarter of 2003, a $1.3 million improvement. In addition, we
experienced a decrease in our annualized cancellation rate to 9.8% in
the first nine months of 2003 from 10.0% in the 2002 comparable
period," commented Stephen Villa, Chief Operating Officer.
As announced on September 19, 2003, Telstar 4, the satellite that
provided the signal for certain of our client locations experienced a
technical malfunction. The Company secured comparable transponder
capacity and completed the re-pointing of satellite dishes to its
client locations affected by this outage within nine days. "We have
insurance that provides $1.5 million of coverage for our re-pointing
costs. We have submitted this claim and are currently assessing the
fourth quarter financial impact for lost business revenues and costs
incurred above our insurance coverage. We expect the uninsured costs
associated with the re-pointing of dishes to be minimal," stated
Stephen Villa.
In addition, as announced on September 30, 2003, Lon Otremba
joined the Company as its President. Mr. Otremba is a highly seasoned
executive with an extensive track record of success. Most recently, he
was Executive Vice President of America Online's Interactive Marketing
Group, where he was responsible for developing and leading the short
and long-term strategy and operations for AOL's advertising and
e-commerce business turnaround. Bill Boyd has been named Chairman of
the Board and will remain the Company's Chief Executive Officer.
Muzak LLC will have a conference call on November 6, 2003 at 3:00
p.m. (Eastern Standard Time) to discuss third quarter 2003 results.
The call in number is 1-800-756-4697 and the access code is 0801. A
replay of the call will be available for one week beginning on
November 7, 2003. The replay number is 1-800-756-3819 and the access
code is 080100.
Muzak, the leading audio imaging company, enhances brands and
creates experiences with AUDIO ARCHITECTURE(TM) and MUZAK VOICE(TM).
More than 100 million people hear Muzak programs each day. We deliver
music, messaging, and sound system design through more than 200 sales
and service locations.
The above statements include forward-looking statements made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Some of these statements can be
identified by terms and phrases such as "anticipate", "believe",
"intend", "expect", "anticipate", "could", "may", "will" and similar
expressions and include references to assumptions that the Company
believes are reasonable and relate to our future prospects,
developments and business strategies. Forward-looking statements
involve risks and uncertainties, including, but not limited to those
related to the Company's substantial leverage and debt service
requirements, restrictions imposed by the terms of the Company's
indebtedness, the Company's history of net losses, the Company's
dependence on satellite delivery of its products, the Company's
ability to integrate acquisitions, future capital requirements, the
impact of competition and technological change, the availability of
cost-effective programming, the impact of legislation and regulation,
risks associated with the effect of general economic conditions and
the other factors discussed in the Company's filings with the
Securities and Exchange Commission. Actual results could differ
materially from these forward-looking statements. The Company
undertakes no obligation to update these forward-looking statements.
Muzak LLC
Financial Highlights
-------------------
(unaudited, dollars in thousands)
Quarter
Quarter Ended Ended
9/30/2003 9/30/2002 % Change 6/30/2003
----------- ---------- --------- ----------
Selected Operations Data
Revenues
Music and Other Business
Services $43,965 $41,177 6.8% $43,388
Equipment Sales and
Related Services 15,384 14,989 2.6% 14,195
----------- ---------- -------- ----------
Total Revenues 59,349 56,166 5.7% 57,583
----------- ---------- -------- ----------
Cost of Revenues
Music and Other Business
Services 8,173 7,779 5.1% 7,936
Equipment Sales and
Related Services 12,100 11,874 1.9% 11,966
----------- ---------- -------- ----------
Total Cost of
Revenues 20,273 19,653 3.2% 19,902
----------- ---------- -------- ----------
Selling, General and
Administrative
Amortization of
Commissions 4,076 3,260 25.0% 3,869
Other Selling, General
and Administrative 15,963 14,671 8.8% 16,100
----------- ---------- -------- ----------
Total Selling,
General and
Administrative 20,039 17,931 11.8% 19,969
----------- ---------- -------- ----------
Other income (28) (68) -58.8% (51)
Loss on early
extinguishment of debt(1) - - 5,078
EBITDA (2) $19,065 $18,650 2.2% $12,685
=========== ========== ==========
EBITDA Margin (2) 32.1% 33.2% 22.0%
Cash Flows from operating
activities $11,820 $6,192 $2,856
Balance sheet data (end of period)
Total Assets $475,297 $478,093 $470,538
Revolving Loan 12,700 22,800 7,500
Muzak LLC Total Debt (3) 350,865 315,677 345,555
Muzak Holdings LLC Total
Debt (3) 404,680 378,206 397,689
Other financial
data
Muzak LLC Interest
Expense $7,936 $6,829 $7,794
Muzak Holdings LLC
Interest Expense 9,680 8,865 9,852
Muzak LLC Net Debt to 4.58x 4.23x 4.87x
EBITDA (4)
Muzak Holdings LLC Net 5.28x 5.07x 5.60x
Debt to EBITDA (4)
Muzak LLC
Financial Highlights
---------------------
(unaudited, dollars in thousands)
Nine Months ended
9/30/2003 9/30/2002 % Change
-------------------- ---------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $129,995 $121,123 7.3%
Equipment Sales and Related
Services 43,627 40,075 8.9%
-------------------- ---------- ---------
Total Revenues 173,622 161,198 7.7%
-------------------- ---------- ---------
Cost of Revenues
Music and Other Business
Services (5) 23,893 26,427 -9.6%
Equipment Sales and Related
Services 35,355 32,475 8.9%
-------------------- ---------- ---------
Total Cost of Revenues 59,248 58,902 0.6%
-------------------- ---------- ---------
Selling, General and
Administrative
Amortization of Commissions 11,562 9,181 25.9%
Other Selling, General and
Administrative (6) 48,396 44,672 8.3%
-------------------- ---------- ---------
Total Selling, General
and Administrative 59,958 53,853 11.3%
-------------------- ---------- ---------
Other income (109) (159) -31.4%
Loss on early
extinguishment of debt (1) 5,078 -
EBITDA (2) $49,447 $48,602 1.7%
==================== ==========
EBITDA Margin (2) 28.5% 30.2%
Cash Flows from operating
activities $23,840 $18,768
(1) Loss on early extinguishment of debt represents the write-off
of financing fees associated with the Company's refinanced Senior
Credit Facility.
(2) Represents net income before interest, income tax benefit
(expense), depreciation and amortization. The Company evaluates
liquidity using several measures, one of them being EBITDA. EBITDA is
not intended to be a liquidity measure that should be regarded as an
alternative to, or more meaningful than, cash flow from operations as
a measure of liquidity, as determined in accordance with generally
accepted accounting principles, known as GAAP. However, management
believes that EBITDA is a meaningful measure of liquidity that is
commonly used in similar industries to analyze and compare companies
on the basis of leverage and liquidity, however it is not necessarily
comparable to similar titled amounts of other companies. The following
table provides a reconciliation of cash flows from operations to
EBITDA.
Three months ended
Q3 2003 Q3 2002 Q2 2003
-------------- -------- --------
Cash flows from continuing
operating activities $11,820 $6,192 $2,856
Loss on early extinguishment of
debt - - (5,078)
Interest expense net of
amortization 7,383 6,329 7,203
Change in working
capital (1,188) 5,437 6,182
Current taxes expense 55 - 299
Unearned installation revenue 24 316 10
Amortization of deferred
subscriber acquisition costs (4,075) (3,260) (3,869)
Deferred subscriber acquisition
costs 5,017 3,619 5,080
Gain on disposal of fixed
assets 29 17 2
-------------- -------- --------
EBITDA $19,065 $18,650 $12,685
-------------- -------- --------
Nine months ended
Q3 2003 Q3 2002
-------------- --------
Cash flows from continuing
operating activities $23,840 $18,768
Loss on early extinguishment of
debt (5,078) -
Interest expense net of
amortization 20,621 20,177
Change in working
capital 6,596 6,838
Current taxes expense 353 73
Unearned installation revenue 26 1,053
Amortization of deferred
subscriber acquisition costs (11,562) (9,182)
Deferred subscriber acquisition
costs 14,614 10,845
Gain on disposal of fixed
assets 37 30
-------------- --------
EBITDA $49,447 $48,602
-------------- --------
EBITDA margin reflects EBITDA divided by total
revenues.
(3) Total debt excludes $2.1 million of debt of a subsidiary that
is non-recourse to the Company.
(4) Reflects Total Debt described in (3) above less cash divided by
EBITDA adjusted for non-cash items on a Last Quarter Annualized
Basis. Pursuant to the Company's indentures under which it has notes
outstanding, non-cash items reducing or increasing consolidated net
income are excluded from EBITDA for purposes of calculating the
consolidated leverage ratio.
(5) Results for the nine months ended September 30, 2002 include
$3.1 million relating to an accrual for prior period licensing
royalties and related expenses.
(6) Results for the nine months ended September 30, 2002 include
$0.5 million relating to a postponed financing transaction.
CONTACT: Muzak LLC
Catherine Walsh, 803-396-3000