Exhibit 99.1
Muzak Holdings LLC Announces Second Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--Aug. 11, 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 ended June 30, 2005.
Music and other business services revenue for the quarter ended
June 30, 2005 was $46.9 million, a 2.4% increase, compared to $45.8
million for the quarter ended June 30, 2004. Equipment sales and
related services revenue declined to $13.9 million in the quarter
ended June 30, 2005 as compared to $14.1 million in 2004. As a result,
total revenue for the quarter ended June 30, 2005 was $60.9 million, a
1.5% increase, compared to $60.0 million for the quarter ended June
30, 2004.
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 June 30, 2005 as compared to $15.3
million in the quarter ended June 30, 2004. EBITDA as defined in our
indentures, which excludes non-cash items, was $12.8 million, a
decrease of $3.3 million or 20.7% as compared to $16.1 million in the
2004 period. The non-cash items excluded were comprised of the
write-off of capitalized installation labor upon client contract
terminations of $0.5 million and $0.2 million in the quarters ended
June 30, 2005 and 2004, respectively, and loss on extinguishment of
debt of $2.7 million and $0.6 million in 2005 and 2004, respectively.
Additionally, both EBITDA measures include $1.3 million of
restructuring charges relating to the implementation of our previously
announced revised business plan and $1.7 million of notes receivable
impairment charges in the quarter ended June 30, 2005. The notes
receivable impairment charges are included in selling, general, and
administrative expenses in the quarter ended June 30, 2005. The June
30, 2004 quarter results include $0.7 million of restructuring charges
relating to centralization and reorganization in the quarter ended
June 30, 2004.
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 June 30, 2005 was $16.3 million as compared to $10.8
million in the prior year. See attached reconciliation from net loss
to EBITDA and to EBITDA as defined by the indentures.
For the six months ended June 30, 2005, the Company had music and
other business services revenue of $93.8 million, total revenue of
$121.8 million, and EBITDA of $23.8 million, representing increases
(decreases) of 2.8%, 1.7%, and (26.2%), respectively, over the
comparable 2004 period. EBITDA as defined in our indentures was $27.3
million for the six months ended June 30, 2005, a decrease of $6.8
million or 19.9% as compared to $34.0 million in the 2004 comparable
period. In addition to the items noted above in the quarter ended June
30, 2005, EBITDA and EBITDA as defined in our indentures include a
$1.0 million settlement charge relating to the DMX lawsuit and
associated legal expenses of $0.6 million in the six months ended June
30, 2005.
Greg Rayburn joined Muzak on July 12, 2005 as Chief Executive
Officer, replacing Lon Otremba who resigned to pursue other business
interests. Mr. Rayburn is the Senior Managing Director and Practice
Leader of FTI Palladium Partners, a division of FTI Consulting, Inc
("FTI"). He joins Muzak through an agreement between the Company and
FTI. "We are pleased to have Greg on board as our new CEO and believe
his past experiences are highly relevant to the challenges and
significant opportunities he faces as he begins to lead Muzak,"
commented Royce Yudkoff, Managing Partner of ABRY Partners, the
Company's majority owner.
On June 24, 2005, the Company implemented a revised business plan
in order to achieve more moderate growth levels, thereby reducing the
number of annual new client location additions and the associated
capital investments. This revised business plan should enable the
Company to generate free cash flow after debt service obligations. In
addition, the revised business plan provides a platform to accelerate
current and future process improvement initiatives. In conjunction
with the revised business plan, the Company recorded restructuring
charges of $1.3 million in the second quarter of 2005 and expects
annualized selling, general, and administrative workforce reduction
savings of approximately $4.0 million. Following installation of the
current backlog of new client locations, the Company expects to reduce
its annual capital investment in new client locations by approximately
$14.0 million.
Muzak Holdings LLC will have a conference call on August 11, 2005
at 3:00 p.m. (Eastern Standard Time) to discuss second quarter
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
3:00 p.m on August 12, 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
6/30/2005 6/30/2004 (1) % Change 3/31/2005
---------- ------------- --------- ----------
Selected Operations Data
Revenues
Music and Other
Business Services $ 46,948 $ 45,832 2.4% $ 46,831
Equipment Sales and
Related Services 13,916 14,123 -1.5% 14,093
---------- ------------- --------- ----------
Total Revenues 60,864 59,955 1.5% 60,924
---------- ------------- --------- ----------
Cost of Revenues
Music and Other
Business Services 10,388 8,711 19.3% 10,079
Equipment Sales and
Related Services 13,450 12,561 7.1% 13,576
---------- ------------- --------- ----------
Total Cost of
Revenues 23,838 21,272 12.1% 23,655
---------- ------------- --------- ----------
Selling, General and
Administrative
Amortization of
Commissions 4,432 4,067 9.0% 4,543
Other Selling, General
and Administrative
(2) 19,087 16,997 12.3% 18,478
---------- ------------- --------- ----------
Total Selling,
General and
Administrative 23,519 21,064 11.7% 23,021
---------- ------------- --------- ----------
Restructuring Charges
(3) 1,344 694 93.7% -
Other (income) expense (122) 1 -12300% 12
Loss on early
extinguishment of debt 2,735 1,663 64.5% -
---------- ------------- --------- ----------
EBITDA (4) $ 9,550 $ 15,261 -37.4% $ 14,236
========== ============= ========= ==========
EBITDA Margin 15.7% 25.5% 23.4%
Other financial data
EBITDA per the
indentures $ 12,807 $ 16,144 $ 14,443
Muzak LLC Interest
Expense 11,319 10,036 10,586
Muzak Holdings LLC
Interest Expense 12,136 11,341 11,400
Muzak LLC Net Debt to 8.22x 6.16x 7.15x
EBITDA (5)
Muzak Holdings LLC Net 8.69x 6.54x 7.57x
Debt to EBITDA (5)
Balance sheet data (end
of period)
Cash Balance (6) $ 23,870 $ 215 $ 2,826
Revolving Loan - 24,000 42,500
Muzak LLC Total Debt
(7) 443,097 398,114 415,928
Muzak Holdings LLC
Total Debt (7) 467,342 422,359 440,173
Muzak Holdings LLC
Financial Highlights
- ---------------------------------------------------------------------
(unaudited, dollars in thousands)
Six months ended
6/30/2005 6/30/2004 (1) % Change
---------- ------------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $ 93,779 $ 91,215 2.8%
Equipment Sales and Related
Services 28,009 28,530 -1.8%
---------- ------------- ---------
Total Revenues 121,788 119,745 1.7%
---------- ------------- ---------
Cost of Revenues
Music and Other Business
Services 20,467 17,160 19.3%
Equipment Sales and Related
Services 27,026 25,945 4.2%
---------- ------------- ---------
Total Cost of Revenues 47,493 43,105 10.2%
---------- ------------- ---------
Selling, General and
Administrative
Amortization of Commissions 8,975 7,323 22.6%
Other Selling, General and
Administrative (2) 37,565 34,731 8.2%
---------- ------------- ---------
Total Selling, General
and Administrative 46,540 42,054 10.7%
---------- ------------- ---------
Restructuring Charges (3) 1,344 694 93.7%
Other (income) (110) (2) 5400.0%
Loss on early extinguishment of
debt 2,735 1,663 64.5%
---------- ------------- ---------
EBITDA (4) $ 23,786 $ 32,231 -26.2%
========== ============= =========
EBITDA Margin 19.5% 26.9%
EBITDA per the indentures $ 27,250 $ 34,036
(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 June 30 ,2004
As reported Adjustment As restated
------------ ------------- -----------
Statement of Operations
Music and other business
services revenue 45,971 (139) 45,832
Equipment revenue 14,199 (76) 14,123
Costs of equipment revenues 12,752 (191) 12,561
Amortization of commissions 4,132 (65) 4,067
Other Selling, general, and
administrative expenses 16,632 365 16,997
EBITDA 15,582 (321) 15,261
Depreciation and amortization 15,054 (243) 14,811
Net loss (10,759) (81) (10,840)
Six Months ended June 30 ,2004
As reported Adjustment As restated
------------ ------------- -----------
Statement of Operations
Music and other business
services revenue 91,239 (24) 91,215
Equipment revenue 29,004 (474) 28,530
Costs of equipment revenues 25,357 588 25,945
Amortization of commissions 8,678 (1,355) 7,323
Other Selling, general, and
administrative expenses 33,186 1,545 34,731
EBITDA 33,497 (1,266) 32,231
Depreciation and amortization 31,194 (603) 30,591
Net loss (19,560) (672) (20,232)
(2)Selling, general, and administrative expenses include $1.7 million
impairment charges on notes receivable for the quarter and six
months ended June 30, 2005.
Selling, general, and administrative expenses include $0.5 million
and $0.7 million capitalized labor impairment charges for the
quarter and six months ended June 30, 2005, respectively and include
$0.2 million and $1.1 million capitalized labor impairment charges
for the quarter and six months ended June 30, 2004, respectively.
Selling, general, and administrative expenses for the six months
ended June 30, 2005 include a $1.0 million charge for the settlement
with DMX Music, Inc and associated legal expenses of $0.6 million.
(3)Restructuring charges include $0.6 million of severance relating to
implementation of the revised business plan on June 24, 2005 and
include $0.7 million impairment of lease obligations due to excess
capacity in certain field office locations.
(4)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
Q2 2005 Q2 2004 Q1 2005
------------- ------------ -----------
Net Loss $ (16,279) $ (10,840) $ (11,443)
Interest expense 12,136 11,341 11,400
Taxes (16) (51) (52)
Depreciation and amortization 13,709 14,811 14,331
------------- ------------ -----------
EBITDA 9,550 15,261 14,236
------------- ------------ -----------
Non-cash items 3,257 883 207
------------- ------------ -----------
EBITDA pursuant to the Notes $ 12,807 $ 16,144 $ 14,443
============= ============ ===========
Six months ended
Q2 2005 Q2 2004
------------- ------------
Net Loss $ (27,722) $ (20,232)
Interest expense 23,536 21,946
Taxes (68) (74)
Depreciation and amortization 28,040 30,591
------------- ------------
EBITDA 23,786 32,231
------------- ------------
Non-cash items 3,464 1,805
------------- ------------
EBITDA pursuant to the Notes $ 27,250 $ 34,036
============= ============
(5)Reflects Total Debt described in (7) below less unrestricted cash
divided by EBITDA per the Notes on a Last Quarter Annualized
Basis.
(6)June 30, 2005 cash balance includes restricted cash of $1.8
million, which was used to cash collateralize letters of credit
(7)Total Debt excludes $2.0 million of debt of a subsidiary that is
non-recourse to the Company.
CONTACT: Muzak Holdings LLC
Catherine Walsh, 803-396-3000