Exhibit 99.1
Muzak Holdings LLC Announces Fourth Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--April 4, 2006--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, 2005.
Music and other business services revenue for the quarter ended
December 31, 2005 was $47.1 million, a 0.3% increase, compared to
$46.9 million for the quarter ended December 31, 2004. Equipment sales
and related services revenue declined to $15.7 million in the quarter
ended December 31, 2005 as compared to $16.7 million in 2004. As a
result, total revenue for the quarter ended December 31, 2005 was
$62.8 million, a 1.3% decrease, compared to $63.6 million for the
quarter ended December 31, 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
$16.3 million for the quarter ended December 31, 2005, an increase of
$6.7 million or 69.6% as compared to $9.6 million in the quarter ended
December 31, 2004. EBITDA as defined in our indentures, which excludes
non-cash items, was $16.8 million, an increase of $0.8 million or 5.1%
as compared to $16.0 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 December 31, 2005 and 2004,
respectively, and a $6.0 million impairment charge for deferred
production cost in the quarter ended December 31, 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 December 31, 2005 was $9.5 million as compared to $16.1
million in the prior year. See attached reconciliation from net loss
to EBITDA and to EBITDA as defined by the indentures.
For the twelve months ended December 31, 2005, the Company had
music and other business services revenue of $188.2 million, total
revenue of $246.9 million, and EBITDA of $54.8 million, representing
increases (decreases) of 2.1%, 0.4%, and (5.4%), respectively, versus
the comparable 2004 period. EBITDA as defined in our indentures was
$59.5 million for the twelve months ended December 31, 2005, a
decrease of $5.9 million or 9.0% as compared to $65.4 million in the
2004 comparable period. In addition to the items noted above in the
quarter ended December 31, 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
twelve months ended December 31, 2005.
The Company generated a net cash increase of $0.4 million for the
three months ended December 31, 2005 versus a net borrowing of $4.0
million for the three months ended December 31, 2004. This $4.4
million cash flow improvement in the fourth quarter, on a
year-over-year basis, is primarily attributable to lower capital
investments and the implementation of a standardized pricing
initiative, which were both key components of our revised business
plan implemented on June 24, 2005. The capital investments made in new
subscriber locations were $9.7 million for the quarter ended December
31, 2005. The quarterly average investment in the second half of 2005
was $9.2 million, which represents a 20% reduction to the quarterly
average investment for the first half of 2005. Reductions in both
accounts receivable and inventory balances also contributed to this
cash flow improvement.
Muzak Holdings LLC will have a conference call on April 4, 2006 at
12:00 p.m. (Eastern Standard Time) to discuss fourth quarter results.
The call in number is 1-800-756-4697 and the access code is 8563. A
replay of the call will be available for one week beginning at 1:00
p.m. on April 5, 2006. The replay number is 1-800-756-3819 and the
access code is 205057.
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, our history of net losses, our lack of readily available
funds to borrow, our dependence on satellite delivery of our products,
our dependence on third parties to license music rights, possible
disruption poised by new business strategies and initiatives, the
impact of natural disasters on our client locations and our support
facilities, future capital requirements, the impact of competition and
technological change, the availability of cost-effective programming,
the impact of legislation and regulation, our dependence on the
contributions of key personal, the ability to control or impact client
cancellations, potential conflicts poised by the significant ownership
stake of our controlling equity holder, 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
12/31/2005 12/31/2004 % Change 9/30/2005
----------- ----------- --------- ----------
Selected Operations Data
Revenues
Music and Other
Business Services $ 47,093 $ 46,929 0.3% $ 47,363
Equipment Sales
and Related
Services 15,707 16,673 -5.8% 14,974
----------- ----------- --------- ----------
Total Revenues 62,800 63,602 -1.3% 62,337
----------- ----------- --------- ----------
Cost of Revenues
Music and Other
Business Services 10,929 8,311 31.5% 10,552
Equipment Sales
and Related
Services 15,090 16,086 -6.2% 14,654
----------- ----------- --------- ----------
Total Cost of
Revenues 26,019 24,397 6.6% 25,206
----------- ----------- --------- ----------
Selling, General and Administrative
Amortization of
Commissions 4,246 4,328 -1.9% 4,364
Other Selling,
General and
Administrative (1) 16,330 18,600 -12.2% 17,836
----------- ----------- --------- ----------
Total Selling,
General and
Administrative 20,576 22,928 -10.3% 22,200
----------- ----------- --------- ----------
Restructuring
Charges (2) - 145 - 373
Other (income)
expense (57) (217) -73.7% (179)
Impairment of
deferred production
costs - 6,578 -100% -
Loss on early
extinguishment of
debt - 183 - -
----------- ----------- --------- ----------
EBITDA (3) $ 16,262 $ 9,588 69.6% $ 14,737
=========== =========== ========= ==========
EBITDA Margin 25.9% 15.1% 23.6%
Other financial data
EBITDA per the
indentures $ 16,796 $ 15,976 $ 15,478
Muzak LLC Interest
Expense 11,634 10,413 11,475
Muzak Holdings LLC
Interest Expense 12,449 11,227 12,288
Muzak LLC Net Debt 6.34x 6.38x 6.90x
to EBITDA (4)
Muzak Holdings LLC 6.70x 6.76x 7.29x
Net Debt to EBITDA
(4)
Balance sheet data (end of period)
Cash Balance (5) $ 17,716 $ - $ 17,297
Revolving Loan - 34,000 -
Muzak LLC Total Debt
(6) 441,851 408,064 442,556
Muzak Holdings LLC
Total Debt (6) 466,096 432,309 466,801
Muzak Holdings LLC
Financial Highlights
---------------------------------
(unaudited, dollars in thousands)
Twelve months ended
12/31/2005 12/31/2004 % Change
----------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $ 188,235 $ 184,397 2.1%
Equipment Sales and Related
Services 58,690 61,465 -4.5%
----------- ----------- ---------
Total Revenues 246,925 245,862 0.4%
----------- ----------- ---------
Cost of Revenues
Music and Other Business
Services 41,948 34,858 20.3%
Equipment Sales and Related
Services 56,769 56,935 -0.3%
----------- ----------- ---------
Total Cost of
Revenues 98,717 91,793 7.5%
----------- ----------- ---------
Selling, General and Administrative
Amortization of Commissions 17,585 15,776 11.5%
Other Selling, General and
Administrative (1) 71,732 70,456 1.8%
----------- ----------- ---------
Total Selling,
General and
Administrative 89,317 86,232 3.6%
----------- ----------- ---------
Restructuring Charges (2) 1,717 1,776 -3.3%
Other (income) (346) (257) 34.6%
Impairment of deferred
production costs - 6,578 -
Loss on early extinguishment of
debt 2,735 1,846 48.2%
----------- ----------- ---------
EBITDA (3) $ 54,785 $ 57,894 -5.4%
=========== =========== =========
EBITDA Margin 22.2% 23.5%
EBITDA per the indentures $ 59,524 $ 65,387
(1) Selling, general, and administrative expenses include $0.5 million
and $1.7 million capitalized labor impairment charges for the
quarter and twelve months ended December 31, 2005, respectively
and include $0.2 million and $1.4 million capitalized labor
impairment charges for the quarter and twelve months ended
December 31, 2004, respectively.
Selling, general, and administrative expenses include $0.2 million
and $0.6 million charge for hurricane Katrina for the quarter
and twelve months ended December 31, 2005. The charge includes a
$0.3 million reserve estimate for capital investments lost
or damaged at subscriber locations and a $0.3 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 twelve months ended
December 31, 2005.
Selling, general, and administrative expenses for the twelve
months ended December 31, 2005 include a $1.0 million charge for
the settlement with DMX Music, Inc and associated legal expenses
of $0.6 million.
(2) Restructuring charges include $0.9 million of severance relating
to implementation of the revised business plan on June 24, 2005
and $0.8 million impairment of lease obligations due to excess
capacity in certain field locations for the twelve months ended
December 31, 2005. Restructuring charges include $1.8 million
relating to the centralization project for the twelve months ended
December 31, 2004.
(3) 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 2005 Q4 2004 Q3 2005
--------- --------- ---------
Net Loss $(9,548) $(16,111) $(11,287)
Interest expense 12,449 11,227 12,288
Taxes (114) (38) (27)
Depreciation and amortization 13,475 14,510 13,763
--------- --------- ---------
EBITDA 16,262 9,588 14,737
--------- --------- ---------
Non-cash items 534 6,388 741
--------- --------- ---------
EBITDA pursuant to the Notes $16,796 $15,976 $15,478
========= ========= =========
Twelve months ended
Q4 2005 Q4 2004
--------- ---------
Net Loss $(48,557) $(46,129)
Interest expense 48,273 44,148
Taxes (209) (168)
Depreciation and amortization 55,278 60,043
--------- ---------
EBITDA 54,785 57,894
--------- ---------
Non-cash items 4,739 7,493
--------- ---------
EBITDA pursuant to the Notes $59,524 $65,387
========= =========
(4) Reflects Total Debt described in (6) below less unrestricted cash
divided by EBITDA per the Notes on a Last Quarter Annualized
Basis.
(5) December 31, 2005 cash balance includes restricted cash of $1.7
million, which was used to cash collateralize letters of credit
(6) Total Debt excludes $1.9 million of debt of a subsidiary that is
non-recourse to the Company.
CONTACT: Muzak Holdings LLC
Chris Boulware, 803-396-3000