Exhibit 99.1
Muzak Holdings LLC Announces First Quarter Results
Business Editors
FORT MILL, S.C.--(BUSINESS WIRE)--May 13, 2004--Muzak Holdings LLC
("Muzak" or the "Company"), the leading provider of business music
services in the United States, today announced financial results for
the quarter ended March 31, 2004.
Music and other business services revenue for the quarter ended
March 31, 2004 was $45.3 million, a 6.2% increase, compared to $42.6
million for the quarter ended March 31, 2003. Equipment sales and
related services revenue increased 5.4%, or $0.8 million, to $14.8
million for the quarter ended March 31, 2004 from $14.0 million in the
comparable 2003 period. As a result, total revenue for the quarter
ended March 31, 2004 was $60.1 million, a 6.0% increase, compared to
$56.7 million for the quarter ended March 31, 2003.
EBITDA (Earnings Before Interest, Taxes, Depreciation, and
Amortization) was $17.9 million for the quarter ended March 31, 2004,
an increase of $0.2 million or 1.2%, compared to $17.7 million in the
quarter ended March 31, 2003. 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 March 31, 2004 as compared to $9.2 million for the 2003
period, an increase of $2.6 million.
During the first quarter of 2004, the Company signed several new
national clients including Bank One, Lenscrafters, and Naturalizer
Shoes. In addition, the Company was successful in re-contracting
several national clients including, Gap, CompUSA, and True Value. "We
have recently added Scott Wolf to serve as Senior Vice President of
National Account Sales. Scott's previous experience as Executive Vice
President of Sales for Vivendi/Universal's online music properties
makes him an ideal candidate for this position," commented Lon
Otremba, Chief Executive Officer.
"Our first quarter cancellation rate of 10.4% was slightly higher
than the 10.2% rate experienced during 2003 primarily due to certain
national cancellations. We are focused on being client centric in
every aspect commencing with the sales cycle, delivery and
installation of a high quality product, addressing our clients'
evolving needs, and providing timely service. We have several
initiatives underway to ensure we are aligned to meet all of our
client's expectations in the most efficient manner," commented
Otremba.
"Our emphasis on expense reduction has resulted in a decline in
other selling, general, and administrative expenses as a percentage of
revenues from 28.8% in the first quarter of 2003 to 27.6% in the first
quarter of 2004. This reduction was achieved despite an increase in
insurance rates, our investment in sales automation tools, and costs
associated with our sales catalogs mailed to potential and existing
drive-thru clients in the quick service restaurant industry. In
addition, we generated sufficient cash flows from operations to fund
organic growth and all debt service payments without utilizing the
revolving credit facility during the first quarter," commented Stephen
Villa, Chief Operating Officer.
As previously disclosed, on March 1, 2004, the Company sold its
closed circuit television systems inventory and recurring customer
contracts to a third party for approximately $2.0 million in notes
receivable. This transaction was recorded during the first quarter of
2004 and did not have a material financial impact on the Company's
consolidated results of operations.
On April 19, 2004, the Company announced that Lon Otremba has been
named Chief Executive Officer. Otremba joined Muzak in September of
2003 as President and will continue to serve in this capacity in
addition to his new role as Chief Executive Officer.
On May 7, 2004, the Company amended its existing Senior Credit
Facility to include a $35.0 million term loan facility. The proceeds
of the term loan were used to repurchase $32.5 million in aggregate
outstanding principal amount of the Company's 13% Senior Discount
Notes due 2010 and to pay associated expenses. "This transaction
reduces our overall interest costs by approximately $2.0 million per
annum," remarked Villa.
Muzak Holdings LLC will have a conference call on May 13, 2004 at
1:00 p.m. (Eastern Standard Time) to discuss first quarter 2004
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
May 14, 2004. 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 Holdings LLC
Financial Highlights
------------------------
(unaudited, dollars in thousands)
Quarter Quarter
Ended Ended
March 31, March 31, Dec. 31,
2004 2003 %Change 2003
Selected Operations Data
Revenues (1)
Music and Other Business
Services $45,268 $42,642 6.2% $45,054
Equipment Sales and Related
Services 14,805 14,048 5.4% 16,560
----------- --------- ------- ---------
Total Revenues 60,073 56,690 6.0% 61,614
----------- --------- ------- ---------
Cost of Revenues (1)
Music and Other Business
Services 8,449 7,784 8.5% 8,392
Equipment Sales and Related
Services 12,605 11,289 11.7% 14,754
----------- --------- ------- ---------
Total Cost of Revenues 21,054 19,073 10.4% 23,146
----------- --------- ------- ---------
Selling, General and Administrative
Amortization of Commissions 4,546 3,617 25.7% 4,013
Other Selling, General and
Administrative (2) 16,554 16,333 1.4% 16,646
----------- --------- ------- ---------
Total Selling, General
and Administrative 21,100 19,950 5.8% 20,659
----------- --------- ------- ---------
Other expense (income) (3) 4 (30) -113.3% (61)
----------- --------- ------- ---------
EBITDA (1) (4) $17,915 $17,697 1.2% $17,870
=========== ========= =========
EBITDA Margin 29.8% 31.2% 29.0%
Cash Flows from Operating
Activities $11,764 $9,164 $4,025
Balance sheet data (end of period)
Total Assets $469,426 $468,876 $475,232
Revolving Loan 20,000 26,300 20,000
Muzak LLC Total Debt (5) 359,092 314,829 359,194
Muzak Holdings LLC Total
Debt (5) 416,042 381,267 414,690
Other financial data
Muzak LLC Interest Expense $8,782 $6,576 $9,744
Muzak Holdings LLC Interest
expense 10,606 8,612 11,488
Muzak LLC Net Debt to
EBITDA (6) 4.97x 4.45x 5.01x
Muzak Holdings LLC Net Debt
to EBITDA (6) 5.76x 5.39x 5.79x
(1) The Fourth quarter of 2003 includes a $0.9 million financial
impact of lost revenues and additional costs to perform installations
and perform service calls following the TelStar IV satellite
disruption.
(2) Other selling, general, and administrative expenses for the
fourth quarter of 2003 include a charge of $0.5 million to increase
legal reserves.
(3) Other expense (income) consists of non-cash items. Pursuant to
the indenture, non-cash items reducing or increasing consolidated net
income are excluded from EBITDA for purposes of calculating the
consolidate total leverage ratio.
(4) 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.
Q1 2004 Q1 2003 Q4 2003
------- ------- -------
Cash flows from continuing
operating activities $11,764 $9,164 $4,025
Interest expense less amortization 8,472 6,035 9,125
Change in working capital (2,363) 1,546 2,967
Current taxes payable 41 54 (114)
Unearned installation revenue 42 (8) 118
Amortization of deferred
subscriber acquisition costs (4,546) (3,617) (4,013)
Deferred subscriber acquisition costs 4,478 4,517 5,759
Gain on disposal of fixed assets 27 6 3
-----------------------
EBITDA $17,915 $17,697 $17,870
EBITDA margin reflects EBITDA divided by total revenues.
(5) Total debt excludes $2.1 million of debt of a subsidiary that
is non-recourse to the Company.
(6) Reflects Total Debt described in (5) 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.
CONTACT: Muzak Holdings LLC
Catherine Walsh, 803-396-3000