Exhibit 99.1
Muzak Holdings LLC Announces Second Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--Aug. 14, 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 ended June 30, 2006.
Music and other business services revenue for the quarter ended
June 30, 2006 was $47.2 million, a 0.5% increase, compared to $46.9
million for the quarter ended June 30, 2005. Equipment sales and
related services revenue increased to $14.3 million in the quarter
ended June 30, 2006 as compared to $13.9 million in 2005. As a result,
total revenue for the quarter ended June 30, 2006 was $61.5 million, a
1.0% increase, compared to $60.9 million for the quarter ended June
30, 2005.
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
$15.9 million for the quarter ended June 30, 2006, an increase of $6.3
million or 66.1% as compared to $9.6 million in the quarter ended June
30, 2005. EBITDA as defined in our indentures, which excludes non-cash
items, was $16.3 million, an increase of $3.5 million or 26.9% as
compared to $12.8 million in the 2005 period. The non-cash items
excluded were comprised of the write-off of capitalized installation
labor upon client contract terminations of $0.4 million and $0.5
million in the quarters ended June 30, 2006 and 2005, respectively,
and a loss on extinguishment of debt of $2.7 million for the quarter
and six months ended June 30, 2005.
Additionally, both EBITDA measures include restructuring charges
of $0.3 million and $1.3 million for the quarter and six months ended
June 30, 2006 and 2005, respectively, and a $1.7 million note
receivable impairment charge for the quarter and six months ended June
30, 2005. The note receivable impairment charge is included in
selling, general, and administrative expenses.
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, 2006 was $9.4 million as compared to $16.3
million in the prior year. See attached reconciliation from net loss
to EBITDA and to EBITDA as defined by the indentures.
The Company generated a net cash increase of $0.7 million for the
three months ended June 30, 2006 versus a net cash usage of $3.9
million for the three months ended June 30, 2005. This represents the
third consecutive quarter of positive cash flow. This $4.5 million
cash flow improvement in the second 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 net investment made in new subscriber locations was $6.2
million for the quarter ended June 30, 2006. This investment is
comprised of a gross investment of $7.1 million offset by $0.9 million
of installation revenue received. This represents a 44.0% reduction to
the second quarter 2005 net investment, which was $11.0 million.
The Company recently announced the promotion of Stephen Villa to
Chief Executive Officer. Mr. Villa had been serving in an interim
capacity prior to such announcement and had been serving as the Chief
Operating Officer since October 2001. The role of Chief Financial
Officer continues to be filled by Mr. Villa, while the Company
undertakes a search for a qualified financial executive.
The Company also recently announced the promotion of Thomas
Gantert to Chief Operating Officer. Mr. Gantert has more than 20 years
of Muzak experience and has served the company in a variety of key
management roles and critical functions. "We are fortunate to have a
leader with such a broad scope of Muzak experience and such a deep
passion for our company ", commented Stephen Villa. "Under Mr.
Gantert's leadership, we will focus on the alignment of our sales,
client relations, administrative and field operations efforts for both
Local and National Clients in order to create valuable strategies and
synergies that will strengthen our company."
Muzak Holdings LLC will have a conference call on August 15, 2006
at 2:00 p.m. (Eastern Standard Time) to discuss second quarter
results. The call in number is 1-800-756-4697 and the access code is
9651. A replay of the call will be available for one week beginning at
3:00 p.m. on August 16, 2006. The replay number is 1-800-756-3819 and
the access code is 211489.
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
6/30/2006 6/30/2005 % Change 3/31/2005
---------- ---------- ---------- ---------
Selected Operations Data
Revenues
Music and Other
Business Services $47,172 $46,948 0.5% $47,492
Equipment Sales and
Related Services 14,321 13,916 2.9% 11,957
---------- ---------- --------------------
Total Revenues 61,493 60,864 1.0% 59,449
---------- ---------- --------------------
Cost of Revenues
Music and Other
Business Services 11,251 10,388 8.3% 11,069
Equipment Sales and
Related Services 14,227 13,450 5.8% 13,432
---------- ---------- --------------------
Total Cost of
Revenues 25,478 23,838 6.9% 24,501
---------- ---------- --------------------
Selling, General and
Administrative
Amortization of
Commissions 4,145 4,432 -6.5% 4,081
Other Selling, General
and Administrative (1) 16,380 19,087 -14.2% 16,266
---------- ---------- --------------------
Total Selling,
General and
Administrative 20,525 23,519 -12.7% 20,347
---------- ---------- --------------------
Restructuring Charges (2) - 1,344 - 339
Other (income) expense (372) (122) 204.9% (142)
Loss on early
extinguishment of debt - 2,735 - -
---------- ---------- --------------------
EBITDA (3) $15,862 $9,550 66.1% $14,404
========== ========== ========== =========
EBITDA Margin 25.8% 15.7% 24.2%
Other financial data
EBITDA per the indentures $16,255 $12,807 $14,975
Muzak LLC Interest
Expense 11,772 11,319 11,625
Muzak Holdings LLC
Interest Expense 12,587 12,136 12,440
Muzak LLC Net Debt to 6.48x 8.22x 7.08x
EBITDA (4)
Muzak Holdings LLC Net 6.88x 8.69x 7.49x
Debt to EBITDA (4)
Balance sheet data (end of
period)
Cash Balance (5) $ 19,387 $ 23,870 $ 18,703
Muzak LLC Total Debt (6) 441,053 443,097 441,231
Muzak Holdings LLC Total
Debt (6) 465,298 467,342 465,476
Muzak Holdings LLC
Financial Highlights
(unaudited, dollars in thousands)
Six months ended
6/30/2006 6/30/2005 % Change
-------------------------------
Selected Operations Data
Revenues
Music and Other Business Services $ 94,664 $ 93,779 0.9%
Equipment Sales and Related Services 26,278 28,009 -6.2%
-------------------------------
Total Revenues 120,942 121,788 -0.7%
-------------------------------
Cost of Revenues
Music and Other Business Services 22,320 20,467 9.1%
Equipment Sales and Related Services 27,659 27,026 2.3%
-------------------------------
Total Cost of Revenues 49,979 47,493 5.2%
-------------------------------
Selling, General and Administrative
Amortization of Commissions 8,226 8,975 -8.3%
Other Selling, General and
Administrative (1) 32,646 37,565 -13.1%
-------------------------------
Total Selling, General and
Administrative 40,872 46,540 -12.2%
-------------------------------
Restructuring Charges (2) 339 1,344 -
Other (income) expense (514) (110) 367.3%
Loss on early extinguishment of debt - 2,735 -
-------------------------------
EBITDA (3) $ 30,266 23,786 27.2%
===============================
EBITDA Margin 25.0% 19.5%
EBITDA per the indentures $ 31,230 $ 27,250
(1) Selling, general, and administrative expenses include $0.4
million and $1.0 million capitalized labor impairment charges for
the quarter and six months ended June 30, 2006, respectively and
includes $0.5 million and $0.7 million capitalized labor
impairment for the quarter and six months ended June 30, 2005,
respectively.
Selling, general, and administrative expenses for the six months
ended June 30, 2005 includes a $1.0 million charge for the
settlement with DMX Music, Inc and associated legal expenses of
$0.6 million.
Selling, general, and administrative expenses include $1.7 million
impairment charge on note receivable for the quarter and six
months ended June 30, 2005.
(2) Restructuring charges for the six months ended June 30, 2006
include $0.3 million of severance relating to implementation of a
field management reorganization implemented in January 2006.
Restructuring charges for the quarter and six months ended June
30, 2005 include $0.6 million of severence relating to the
implementation of the revised business plan of June 24, 2005 and
include $0.7 million impairment of lease obligations due to excess
capacity in certain field office locations
(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
Q2 2006 Q2 2005 Q1 2006
--------- --------- ---------
Net Loss $(9,392) $(16,279) $(11,098)
Interest expense 12,587 12,136 12,440
Taxes (84) (16) (80)
Depreciation and amortization 12,751 13,709 13,142
--------- --------- ---------
EBITDA 15,862 9,550 14,404
--------- --------- ---------
Non-cash items 393 3,257 571
--------- --------- ---------
EBITDA pursuant to the Notes $16,255 $12,807 $14,975
========= ========= =========
Six months ended
Q2 2006 Q2 2005
--------- ---------
Net Loss $(20,490) $(27,722)
Interest expense 25,027 23,536
Taxes (164) (68)
Depreciation and amortization 25,893 28,040
--------- ---------
EBITDA 30,266 23,786
--------- ---------
Non-cash items 964 3,464
--------- ---------
EBITDA pursuant to the Notes $31,230 $27,250
========= =========
(4) Reflects Total Debt described in (6) below less unrestricted
cash divided by EBITDA per the Notes on a Last Quarter Annualized
Basis.
(5) June 30, 2006 cash balance includes restricted cash of $1.7
million, which was used to cash collateralize letters of credit
(6) Total Debt excludes $1.8 million of debt of a subsidiary that
is non-recourse to the Company.
CONTACT: Muzak Holdings LLC
Alex Brenner, 803-396-3000