Exhibit 99.l
Muzak Holdings LLC Announces Fourth Quarter Results
FORT MILL, S.C.--(BUSINESS WIRE)--March 23, 2007--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, 2006.
Music and other business services revenue for the quarter ended
December 31, 2006 was $47.9 million, a 1.8% increase, compared to
$47.1 million for the quarter ended December 31, 2005. Equipment sales
and related services revenue increased to $16.8 million in the quarter
ended December 31, 2006 as compared to $15.7 million in 2005. As a
result, total revenue for the quarter ended December 31, 2006 was
$64.7 million, a 3.0% increase, compared to $62.8 million for the
quarter ended December 31, 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
$16.7 million for the quarter ended December 31, 2006, an increase of
$0.4 million or 2.7% as compared to $16.3 million in the quarter ended
December 31, 2005. EBITDA as defined in our indentures, which excludes
non-cash items, was $17.0 million for the quarter ended December 31,
2006 as compared to $16.8 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 $0.3 million
and $0.5 million in the quarters ended December 31, 2006 and 2005,
respectively.
For the twelve months ended December 31, 2006, the Company had
music and other business services revenue of $190.3 million, total
revenue of $248.6 million and EBITDA of $61.8 million, representing
increases of 1.1%, 0.7% and 12.9%, respectively, versus the comparable
2005 period. EBITDA as defined in our indentures was $63.5 for the
twelve months ended December 31, 2006, an increase of $4.0 million or
6.6% as compared to $59.5 in the 2005 comparable period.
For the twelve months ended December 31, 2006 EBITDA reflects the
recent write off of $2.0 million for implementation and design costs
associated with the Company's decision to forego implementation of a
new enterprise resource planning ("ERP") system. This write off was
recorded in the third quarter of 2006 and is included in selling,
general and administrative expenses for the twelve months ended
December 31, 2006. For the twelve months 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.
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, 2006 was $8.3 million as compared to $9.5
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 $1.1 million and $3.0
million for the three and twelve month periods ended December 31,
2006, respectively, versus a net cash increase of $0.6 million and a
usage of $15.6 million for the three and twelve month period ended
December 31, 2005, respectively. The fourth quarter 2006 represents
the fifth consecutive quarter of positive cash flow. The cash flow
improvement on a year-over-year basis is partially attributable to
lower capital investments and the implementation of a standardized
pricing initiative, which were both key components of our revised
business plan announced on June 24, 2005. The net investment made in
new subscriber locations was $7.0 million for the quarter ended
December 31, 2006. This investment is comprised of a gross investment
of $7.8 million offset by $0.8 million of installation revenue
received. This represents a 21% reduction to the fourth quarter 2005
net investment, which was $9.0 million.
On March 16, 2007, the Company amended its existing Term Loan
Facility by extending the maturity date from April 2008 to January
2009 and reducing the applicable margin rate by 1%. This amendment
will reduce the Company's interest expense by approximately $1.0
million over the extended period.
In a company-wide communication, CEO Stephen Villa said, "this
dramatic improvement--achieved in a relatively short period of
time--could not have been accomplished without the efforts and
contributions of every department in the Company. I thank all Muzak
employees for the achievement of this milestone as well as for the
operational momentum that we continue to experience."
Muzak Holdings LLC will have a conference call on March 23, 2007
at 10:30 a.m. (Eastern Standard Time) to discuss fourth quarter
results. The call in number is 1-800-756-4697 and the access code is
8141. A replay of the call will be available for one week beginning at
10:30 a.m. on March 26, 2007. The replay number is 1-800-756-3819 and
the access code is 224270.
As the world's leading provider of business music, Muzak creates
experiences that reach more than 100 million people daily. Some of the
biggest brands in business, from Aveda to Sur La Table to Boeing, work
with Muzak to enhance their brand image. More than 80 core music
programs and an endless variety of custom programs are distributed
through a national network of sales and service locations, from
Muzak's library of approximately 2 million tracks. For more
information, visit www.muzak.com.
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," "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
personnel, 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
12/31/2006 12/31/2005 % Change 9/30/2006
----------- ----------- --------- ----------
Selected Operations Data
Revenues
Music and Other Business
Services $ 47,931 $ 47,093 1.8% $ 47,743
Equipment Sales and
Related Services 16,766 15,707 6.7% 15,218
----------- ----------- --------- ----------
Total Revenues 64,697 62,800 3.0% 62,961
----------- ----------- --------- ----------
Cost of Revenues
Music and Other Business
Services 11,277 10,929 3.2% 11,749
Equipment Sales and
Related Services 16,068 15,090 6.5% 14,928
----------- ----------- --------- ----------
Total Cost of Revenues 27,345 26,019 5.1% 26,677
----------- ----------- --------- ----------
Selling, General and
Administrative Expenses
(1) 21,011 20,576 2.1% 21,698
----------- ----------- --------- ----------
Other (income) expense (365) (57) 540.4% (270)
----------- ----------- --------- ----------
EBITDA (3) $ 16,706 $ 16,262 2.7% $ 14,856
=========== =========== ========= ==========
EBITDA Margin 25.8% 25.9% 23.6%
Other financial data
EBITDA per the
indentures $ 17,052 $ 16,796 $ 15,228
Muzak LLC Interest
Expense 11,958 11,634 11,873
Muzak Holdings LLC
Interest Expense 12,773 12,449 12,688
Muzak LLC Net Debt to
EBITDA (4) 6.19x 6.34x 6.94x
Muzak Holdings LLC Net
Debt to EBITDA (4) 6.54x 6.70x 7.34x
Balance sheet data (end
of period)
Cash Balance (5) $ 20,813 $ 17,716 $ 19,692
Muzak LLC Total Debt (6) 441,198 441,851 440,988
Muzak Holdings LLC Total
Debt (6) 465,443 466,096 465,233
Muzak Holdings LLC
Financial Highlights
- ----------------------------------------------------------------------
(unaudited, dollars in thousands)
Twelve months ended
12/31/2006 12/31/2005 % Change
----------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business
Services $ 190,338 $ 188,235 1.1%
Equipment Sales and Related
Services 58,262 58,690 -0.7%
----------- ----------- ---------
Total Revenues 248,600 246,925 0.7%
----------- ----------- ---------
Cost of Revenues
Music and Other Business
Services 45,346 41,948 8.1%
Equipment Sales and Related
Services 58,655 56,770 3.3%
----------- ----------- ---------
Total Cost of Revenues 104,001 98,718 5.4%
----------- ----------- ---------
Selling, General and
Administrative Expenses (1) 83,581 89,316 -6.4%
----------- ----------- ---------
Restructuring Charges (2) 339 1,717 -80.3%
Other (income) expense (1,149) (346) 232.1%
Loss on early extinguishment of
debt - 2,735 -
----------- ----------- ---------
EBITDA (3) $ 61,828 $ 54,785 12.9%
=========== =========== =========
EBITDA Margin 24.9% 22.2%
EBITDA per the indentures $ 63,510 $ 59,524
(1)Selling, general and administrative expenses include non-cash
amortization and impairment of capitalized commissions of $4.6
million and $4.2 million for the quarter ended December 31, 2006
and 2005, respectively and $16.9 million and $17.6 million for
the twelve months ended December 31, 2006 and 2005,
respectively.
Selling, general, and administrative expenses includes $0.3
million and $1.7 million in capitalized labor impairment charges
for the quarter and twelve months ended December 31, 2006,
respectively and includes $0.5 million and $1.7 million in
capitalized labor impairment for the quarter and twelve months
ended December 31, 2005, respectively.
Selling, general, and administrative expenses include $2.0
million write-off of ERP system for the twelve months ended
December 31, 2006.
Selling, general, and administrative expenses for the twelve
months ended December 31, 2005 includes a $1.0 million charge
for the settlement with DMX Music, Inc. and associated legal
expenses of $0.6 million, as well as a $1.7 million impairment
charge on a note receivable.
(2)Restructuring charges for the twelve months ended December 31,
2006 include $0.3 million of severance relating to
implementation of a field management reorganization implemented
in January 2006.
Restructuring charges for the twelve months ended December 31,
2005 include $0.9 million of severence relating to the
implementation of the revised business plan of June 24, 2005 and
include $0.8 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
(dollars in thousands) Q4 2006 Q4 2005 Q3 2006
--------- --------- ---------
Net Loss $(8,332) $(9,548) $(10,433)
Interest expense 12,773 12,449 12,688
Taxes (169) (114) (78)
Depreciation and amortization 12,434 13,475 12,679
--------- --------- ---------
EBITDA 16,706 16,262 14,856
--------- --------- ---------
Non-cash items 346 534 372
--------- --------- ---------
EBITDA pursuant to the Notes $17,052 $16,796 $15,228
========= ========= =========
Twelve months ended
(dollars in thousands) Q4 2006 Q4 2005
--------- ---------
Net Loss $(39,255) $(48,557)
Interest expense 50,488 48,273
Taxes (411) (209)
Depreciation and amortization 51,006 55,278
--------- ---------
EBITDA 61,828 54,785
--------- ---------
Non-cash items 1,682 4,739
--------- ---------
EBITDA pursuant to the Notes $63,510 $59,524
========= =========
(4) Reflects Total Debt described in (6) below less unrestricted cash
divided by EBITDA per the Notes on a Last Quarter Annualized
Basis.
(5) 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
Dodd Haynes - Chief Financial Officer
Marissa Ferrari - Media Relations
803-396-3000