Exhibit 99.1
Muzak Holdings LLC Announces Third Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--November 10, 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 September 30, 2005.
Music and other business services revenue for the quarter ended
September 30, 2005 was $47.4 million, a 2.4% increase, compared to
$46.3 million for the quarter ended September 30, 2004. Equipment
sales and related services revenue declined to $15.0 million in the
quarter ended September 30, 2005 as compared to $16.3 million in 2004.
As a result, total revenue for the quarter ended September 30, 2005
was $62.3 million, a 0.3% decrease, compared to $62.5 million for the
quarter ended September 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
$14.7 million for the quarter ended September 30, 2005, a decrease of
$1.4 million or 8.3% as compared to $16.1 million in the quarter ended
September 30, 2004. EBITDA as defined in our indentures, which
excludes non-cash items, was $15.5 million, a decrease of $1.3 million
or 7.7% as compared to $16.8 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 $0.1 million in the quarters ended September 30, 2005 and 2004,
respectively, and $0.3 million reserve estimate for capital
investments at subscriber locations that were lost or destroyed as a
result of hurricane Katrina in the quarter ended September 30, 2005.
Additionally, both EBITDA measures include $0.3 million of
restructuring charges relating to the implementation of our previously
announced revised business plan and $0.4 million of charges related to
hurricane Katrina in the quarter ended September 30, 2005. Hurricane
Katrina charges of $0.1 million are included in music and other
business services and the $0.3 million reserve estimate described in
the previous paragraph are included in selling, general, and
administrative expenses in the quarter ended September 30, 2005. The
September 30, 2004 quarter results include $0.9 million of
restructuring charges relating to centralization and reorganization in
the quarter ended September 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 September 30, 2005 was $11.3 million as compared to $9.8
million in the prior year. See attached reconciliation from net loss
to EBITDA and to EBITDA as defined by the indentures.
For the nine months ended September 30, 2005, the Company had
music and other business services revenue of $141.1 million, total
revenue of $184.1 million, and EBITDA of $38.5 million, representing
increases (decreases) of 2.7%, 1.0%, and (20.3%), respectively, versus
the comparable 2004 period. EBITDA as defined in our indentures was
$42.7 million for the nine months ended September 30, 2005, a decrease
of $8.1 million or 15.9% as compared to $50.8 million in the 2004
comparable period. In addition to the items noted above in the quarter
ended September 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 nine
months ended September 30, 2005.
Consistent with the revised business plan implemented on June 24,
2005, capital investments made in new subscriber locations was $8.6
million for the quarter ended September 30, 2005, which represents a
$2.8 million or 25% reduction to the quarterly average investment for
the first half of 2005. The Company's net cash use for the three
months ended September 30, 2005 was $6.6 million and included vendor
payments in the quarter which reduced the accounts payable balance by
$4.4 million.
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.
Muzak Holdings LLC will have a conference call on November 10,
2005 at 11:00 a.m. (Eastern Standard Time) to discuss third 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
1:00 p.m. on November 11, 2005. The replay number is 1-800-756-3819
and the access code is 197029.
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 %
9/30/2005 9/30/2004(1) Change 6/30/2005
--------- ---------- ------ ---------
Selected Operations Data
Revenues
Music and Other Business
Services $47,363 $46,253 2.4% $46,948
Equipment Sales and
Related Services 14,974 16,262 -7.9% 13,916
-------- -------- ------ --------
Total Revenues 62,337 62,515 -0.3% 60,864
-------- -------- ------ --------
Cost of Revenues
Music and Other Business
Services 10,552 9,387 12.4% 10,388
Equipment Sales and
Related Services 14,654 14,903 -1.7% 13,450
-------- -------- ------ --------
Total Cost of Revenues 25,206 24,290 3.8% 23,838
-------- -------- ------ --------
Selling, General and Administrative
Amortization of Commissions 4,364 4,144 5.3% 4,432
Other Selling, General and
Administrative(2) 17,836 17,106 4.3% 19,087
-------- -------- ------ --------
Total Selling, General
and Administrative 22,200 21,250 4.5% 23,519
-------- -------- ------ --------
Restructuring Charges(3) 373 937 -60.2% 1,344
Other (income) expense (179) (38) 371% (122)
Loss on early extinguishment
of debt - - - 2,735
-------- -------- ------ --------
EBITDA(4) $14,737 $16,076 -8.3% $9,550
======== ======== ====== ========
EBITDA Margin 23.6% 25.7% 15.7%
Other financial data
EBITDA per the indentures $15,478 $16,778 $12,807
Muzak LLC Interest Expense 11,475 10,158 11,319
Muzak Holdings LLC Interest
Expense 12,288 10,974 12,136
Muzak LLC Net Debt to EBITDA(5) 6.90x 6.01x 8.22x
Muzak Holdings LLC Net Debt to
EBITDA(5) 7.29x 6.37x 8.69x
Balance sheet data (end of period)
Cash Balance(6) $17,297 $1,261 $23,870
Revolving Loan - 30,000 -
Muzak LLC Total Debt(7) 442,556 404,277 443,097
Muzak Holdings LLC Total
Debt(7) 466,771 428,522 467,342
Muzak Holdings LLC
Financial Highlights
--------------------------------------------
(unaudited, dollars in thousands)
Nine Months Ended
9/30/2005 9/30/2004(1) % Change
---------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $141,142 $137,468 2.7%
Equipment Sales and Related
Services 42,983 44,792 -4.0%
---------- ------------- ---------
Total Revenues 184,125 182,260 1.0%
---------- ------------- ---------
Cost of Revenues
Music and Other Business
Services 31,019 26,547 16.8%
Equipment Sales and Related
Services 41,680 40,848 2.0%
---------- ------------- ---------
Total Cost of Revenues 72,699 67,395 7.9%
---------- ------------- ---------
Selling, General and Administrative
Amortization of Commissions 13,339 11,467 16.3%
Other Selling, General and
Administrative(2) 55,401 51,837 6.9%
---------- ------------- ---------
Total Selling, General
and Administrative 68,740 63,304 8.6%
---------- ------------- ---------
Restructuring Charges(3) 1,717 1,631 5.3%
Other (income) (289) (40) 622.5%
Loss on early extinguishment
of debt 2,735 1,663 64.5%
---------- ------------- ---------
EBITDA(4) $38,523 $48,307 -20.3%
========== ============= =========
EBITDA Margin 20.9% 26.5%
EBITDA per the indentures $42,728 $50,814
(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 Sept. 30,2004
As reported Adjustment As restated
----------- ---------- -----------
Statement of Operations
Music and other business
services revenue 46,365 (112) 46,253
Equipment revenue 15,341 921 16,262
Costs of equipment revenues 14,457 446 14,903
Amortization of commissions 4,226 (82) 4,144
Other Selling, general, and
administrative expenses 16,955 151 17,106
EBITDA 15,779 297 16,076
Depreciation and amortization 15,182 (239) 14,943
Net loss (10,318) 533 (9,785)
Nine Months Ended Sept. 30,2004
As Reported Adjustment As Restated
------------ ---------- -----------
Statement of Operations
Music and other business
services revenue 137,604 (136) 137,468
Equipment revenue 44,345 447 44,792
Costs of equipment revenues 39,815 1,033 40,848
Amortization of commissions 12,904 (1,437) 11,467
Other Selling, general, and
administrative expenses 50,141 1,696 51,837
EBITDA 49,276 (969) 48,307
Depreciation and amortization 46,376 (842) 45,534
Net loss (29,878) (139) (30,017)
(2) Selling, general, and administrative expenses include $0.5
million and $1.2 million capitalized labor impairment charges for the
quarter and nine months ended September 30, 2005, respectively and
include $0.1 million and $1.2 million capitalized labor impairment
charges for the quarter and nine months ended September 30, 2004,
respectively.
Selling, general, and administrative expenses for the quarter and
nine months ended September 30, 2005 include a $0.4 million charge for
hurricane Katrina. The charge includes a $0.3 million reserve estimate
for capital investments lost or damaged at subscriber locations and a
$0.1 million AR reserve for accounts impacted by hurricane Katrina.
Selling, general, and administrative expenses include $1.7 million
impairment charges on notes receivable for the nine months ended
September 30, 2005.
Selling, general, and administrative expenses for the nine months
ended September 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 $0.4 million and $0.7 million of
severance relating to implementation of the revised business plan on
June 24, 2005 for the three and nine ended September 30, 2005,
respectively and include $0.7 million impairment of lease obligations
due to excess capacity in certain field office locations for the nine
months ended September 30, 2005.
(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
Q3 2005 Q3 2004 Q2 2005
------- ------- -------
Net Loss $(11,287) $(9,785) $(16,279)
Interest expense 12,288 10,974 12,136
Taxes (27) (56) (16)
Depreciation and
amortization 13,763 14,943 13,709
------- ------- -------
EBITDA 14,737 16,076 9,550
------- ------- -------
Non-cash items 741 702 3,257
------- ------- -------
EBITDA pursuant to the
Notes $15,478 $16,778 $12,807
======= ======= =======
Nine months ended
Q3 2005 Q3 2004
------- -------
Net Loss $(39,009) $(30,017)
Interest expense 35,824 32,920
Taxes (95) (130)
Depreciation and amortization 41,803 45,534
------- ------
EBITDA 38,523 48,307
------- ------
Non-cash items 4,205 2,507
------- ------
EBITDA pursuant to the Notes $42,728 $50,814
======= ======
(5) Reflects Total Debt described in (7) below less unrestricted
cash divided by EBITDA per the notes on a Last Quarter Annualized
Basis.
(6) September 30, 2005 cash balance includes restricted cash of
$1.9 million, which was used to cash collateralize letters of credit
(7) Total Debt excludes $1.9 million of debt of a subsidiary that
is non-recourse to the Company.
CONTACT: Muzak Holdings LLC
Steve Villa, 803-396-3000