Exhibit 99.1
Muzak Holdings LLC Announces Fourth Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--April 15, 2005--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 and year ended December 31, 2004.
Music and other business services revenue for the quarter ended
December 31, 2004 was $46.9 million, a 4.2% increase, compared to
$45.1 million for the quarter ended December 31, 2003. Equipment sales
and related services revenue remained flat at $16.7 million during
2004. As a result, total revenue for the quarter ended December 31,
2004 was $63.6 million, a 3.1% increase, compared to $61.7 million for
the quarter ended December 31, 2003.
The Company evaluates its operating performance using several
measures, two of them being EBITDA (Earnings Before Interest, Taxes,
Depreciation, and Amortization) and EBITDA as defined in our
indentures, of which the primary difference is the exclusion of
non-cash items. Since EBITDA as defined in the indentures is used to
determine our ability to incur additional indebtedness, the Company
believes it provides useful information to our investors. EBITDA was
$9.6 million for the quarter ended December 31, 2004 as compared to
$17.9 million in the quarter ended December 31, 2003. EBITDA as
defined in our indentures, which excludes non-cash items, was $16.0
million, a decrease of $1.9 million or 10.7% as compared to $17.9
million in the 2003 period. EBITDA is not intended to be a performance
measure that should be regarded as an alternative to, or more
meaningful than, net income as a measure of performance, as determined
in accordance with generally accepted accounting principles, known as
GAAP. Net loss for the quarter ended December 31, 2004 was $16.1
million as compared to $9.0 million in the prior year.
The non-cash items excluded from EBITDA, as defined by our
indentures, were comprised primarily of a $6.0 million impairment
charge for deferred production costs. Historically, the Company
incurred deferred production costs to create music programs for future
distribution to clients. As a result of recent technological
enhancements in the Company's processes for creating and distributing
many of its core music programs, the use of master recordings in the
music creation and delivery process has been substantially eliminated.
For the year ended December 31, 2004, the Company had music and
other business services revenue of $184.4 million, total revenue of
$245.9 million, EBITDA of $57.9 million, and EBITDA as defined in the
indentures of $65.4 million, representing increases (decreases) of
5.4%, 4.6%, (15.5%), and (9.5%), respectively over the comparable 2003
period. Net loss increased to $46.1 million in 2004 from $34.8 million
in 2003. See attached reconciliation from net loss to EBITDA and to
EBITDA as defined by the indentures.
"2004 has been a year of change for the Company. We rolled out
numerous initiatives, reorganized from a decentralized geographical
reporting structure to a functional reporting structure, and
centralized the administrative and certain operational functions at
headquarters. We are continuing to work through the challenges
associated with our reorganization," commented Lon Otremba, Chief
Executive Officer.
The Company finalized a new five year license agreement with
Broadcast Music, Inc. ("BMI") on December 31, 2004. The term of the
agreement is effective as of July 1, 2004 and provides for an annual
license fee of $6.0 million per annum. BMI and the Company have deemed
the interim license rates for all periods prior to July 1, 2004 to be
final, and not subject to retroactive adjustments. The fourth quarter
and year ended December 31, 2004 include $0.8 million and $1.6 million
incremental costs, as compared to the prior year, due to the new BMI
agreement.
In addition, during the fourth quarter of 2004, the Company and
the American Society of Composers, Authors, and Publishers ("ASCAP")
advanced their conversations toward reaching a new five year music
license agreement. The culmination of such efforts has resulted in a
recent agreement in principle that will result in more favorable ASCAP
license fees. The Company anticipates that a final license agreement
will be executed during the second quarter of 2005.
"We are pleased with our recent developments with the licensing
societies and these developments will eliminate future significant
legal fees in connection with rate court proceedings. We also recently
renegotiated an equipment purchase commitment which will enable us to
improve working capital balances during 2005," commented Stephen
Villa, Chief Operating Officer.
On April 15, 2005, the Company refinanced its existing Senior
Credit Facility with a $105.0 million term loan ("New Senior Credit
Facility"). A portion of the proceeds from the New Senior Credit
Facility was used to repay in full the outstanding term and revolving
loans and associated interest and to collateralize outstanding letters
of credit under the Company's then existing Senior Credit Facility,
and to pay related fees and expenses. Total cash available, after
giving effect to this refinancing and to existing cash balances, is
approximately $27.2 million. "The availability resulting from the
transaction, coupled with cash flows generated from operations,
provides us with adequate liquidity and flexibility to fund operations
for the foreseeable future," remarked Villa.
Muzak Holdings LLC will have a conference call on April 18, 2005
at 11:00 a.m. (Eastern Standard Time) to discuss fourth quarter and
full year 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 at 9:00 a.m on April 19, 2005. 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 Ended
(1) (1)
12/31/2004 12/31/2003 % Change 9/30/2004
----------- -------------- --------- -----------
Selected
Operations Data
Revenues
Music and Other
Business
Services $46,929 $45,047 4.2% $46,253
Equipment Sales and
Related Services 16,673 16,635 0.2% 16,262
----------- -------------- --------- --------
Total Revenues 63,602 61,682 3.1% 62,515
----------- -------------- --------- --------
Cost of Revenues
Music and Other
Business
Services 8,311 8,392 -1.0% 9,387
Equipment Sales
and Related
Services 16,086 14,806 8.6% 14,903
----------- -------------- --------- --------
Total Cost of
Revenues 24,397 23,198 5.2% 24,290
----------- -------------- --------- --------
Selling, General and
Administrative
Amortization of
Commissions 4,328 4,013 7.8% 4,144
Other Selling, General
and Administrative 18,745 16,646 12.6% 18,044
----------- -------------- --------- --------
Total Selling,
General and
Administrative 23,073 20,659 11.7% 22,188
----------- -------------- --------- --------
Impairment of deferred
production costs 6,578 - -
Other income (217) (70) 210.0% (39)
Loss on early
extinguishment
of debt 183 - -
----------- -------------- --------- --------
EBITDA(2) $9,588 $17,895 -46.4% $16,076
=========== ============== ========= ========
EBITDA Margin 15.1% 29.0% 25.7%
Other financial
data
EBITDA per the
indentures $15,976 $17,895 $16,778
Muzak LLC Interest
Expense 10,413 9,744 10,158
Muzak Holdings LLC
Interest Expense 11,227 11,487 10,974
Muzak LLC Net Debt
to EBITDA (3) 6.38x 4.99x 6.01x
Muzak Holdings LLC Net
Debt to EBITDA (3) 6.76x 5.76x 6.37x
Balance sheet data
(end of period)
Revolving Loan $34,000 $20,000 $30,000
Muzak LLC Total
Debt (4) 408,064 359,194 404,277
Muzak Holdings LLC
Total Debt (4) 432,309 414,690 428,522
Muzak Holdings LLC
Financial Highlights
--------------------
(dollars in thousands)
Year Ended
12/31/2004 12/31/2003 (1) % Change
----------- -------------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $ 184,397 $ 174,945 5.4%
Equipment Sales and
Related Services 61,465 60,069 2.3%
----------- -------------- ---------
Total Revenues 245,862 235,014 4.6%
----------- -------------- ---------
Cost of Revenues
Music and Other Business
Services 34,858 32,285 8.0%
Equipment Sales and
Related Services 56,935 50,082 13.7%
----------- -------------- ---------
Total Cost of
Revenues 91,793 82,367 11.4%
----------- -------------- ---------
Selling, General and
Administrative
Amortization of
Commissions 15,776 15,574 1.3%
Other Selling, General and
Administrative 72,232 65,043 11.1%
----------- -------------- ---------
Total Selling,
General and
Administrative 88,008 80,617 9.2%
----------- -------------- ---------
Impairment of deferred
production costs 6,578 -
Other income (257) (201) 27.9%
Loss on early
extinguishment of debt 1,846 3,694 50.0%
----------- -------------- ---------
EBITDA (2) $ 57,894 $ 68,537 -15.5%
=========== ============== =========
EBITDA Margin 23.5% 29.2%
(1)As previously disclosed, the Company discovered an error
pertaining to revenue and accounts receivable cutoff procedures dating
back to the time of the merger of Audio Communications Network and
Muzak Limited Partnership in March 1999. In addition, the Company has
restated its 2004 quarterly information to reflect year end
adjustments. The financial statement impact of this error and 2004
year end adjustments for periods included within this press release
are as follows (in thousands):
Quarter ended September 30, Quarter ended December 31,
2004 2003
-----------------------------------------------------------
As As As As
reported Adjustment restated reported Adjustment restated
-----------------------------------------------------------
Statement of
Operations
Music and
other
business
services
revenue 46,365 (112) 46,253 45,054 (7) 45,047
Equipment
revenue 15,341 921 16,262 16,560 75 16,635
Costs of
equipment
revenues 14,457 446 14,903 14,754 52 14,806
Net loss (10,318) 533 (9,785) (8,982) 16 (8,966)
Year ended December 31, 2003
As reported Adjustment As restated
------------------------------------
Statement of Operations
Music and other business services
revenue 175,049 (104) 174,945
Equipment revenue 60,187 (118) 60,069
Costs of revenues 50,109 (27) 50,082
Net loss (34,617) (195) (34,812)
(2)Represents net income before interest, income tax benefit
(expense), depreciation and amortization. The Company evaluates
performance using several measures, one of them being EBITDA as
defined by our Senior Discount Notes, Senior Subordinated Notes, and
Senior Notes indentures (the "Notes"). EBITDA is not intended to be a
performance measure that should be regarded as an alternative to, or
more meaningful than, net income as a measure of performance, as
determined in accordance with generally accepted accounting
principles, known as GAAP. However, management believes that EBITDA
provides useful information because EBITDA as defined by our Notes
indentures is used to determine our ability to incur additional
indebtedness. The following tables provides a reconciliation from net
income to EBITDA and to EBITDA as defined in the Notes.
Three months ended
Q4 2004 (a) Q4 2003 Q3 2004
----------------------------------------
Net Loss $(16,111) $(8,966) $(9,785)
Interest expense 11,227 11,487 10,974
Taxes (38) (571) (56)
Depreciation and amortization 14,510 15,945 14,943
----------------------------------------
EBITDA 9,588 17,895 16,076
----------------------------------------
Non-cash items 6,388 - 702
----------------------------------------
EBITDA pursuant to the Notes $15,976 $17,895 $16,778
========================================
Twelve months ended
Q4 2004 (a) Q4 2003
-------------------------------
Net Loss $(46,129) $(34,812)
Interest expense 44,148 40,253
Taxes (168) (625)
Depreciation and amortization 60,043 63,721
-------------------------------
EBITDA 57,894 68,537
-------------------------------
Non-cash items 7,493 3,694
-------------------------------
EBITDA pursuant to the Notes $65,387 $72,231
===============================
(a) The fourth quarter and year ended December 31, 2004 include $0.1
million and $1.8 million, respectively, of charges associated with
severance and other termination benefits, relocation costs, duplicate
salaries, and temporary facility requirements. These charges were
incurred in connection with the Company's centralization of
administrative and certain operational functions during the third
quarter of 2004.
(3) Reflects Total Debt described in (4) below less cash divided by
EBITDA per the Notes on a Last Quarter Annualized Basis.
(4) Total Debt excludes $2.0 million of debt of a subsidiary that is
non-recourse to the Company.
CONTACT: Muzak
Catherine Walsh, 803-396-3000