EXHIBIT 99.1
Muzak Holdings LLC Announces First Quarter Results
Highlights:
EBITDA increases 17.2% over prior year
Positive free cash flow of $2.4 million
Business Editors/Entertainment Editors/Retail Writers
FORT MILL, S.C.--(BUSINESS WIRE)--May 10, 2007--Muzak Holdings LLC
("Muzak" or the "Company"), a leading provider of business music
services in the United States, today announced financial results for
the quarter ended March 31, 2007.
Total revenue for the quarter ended March 31, 2007 was $62.3
million, a 4.9% increase, compared to $59.4 million for the quarter
ended March 31, 2006. Music and other business services revenue for
the quarter ended March 31, 2007 was $47.7 million, a 0.4% increase,
compared to $47.5 million for the quarter ended March 31, 2006.
Equipment sales and related services revenue increased to $14.6
million in the quarter ended March 31, 2007 as compared to $12.0
million for the same period in 2006.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortizations) was $16.9 million for the quarter ended March 31, 2007,
an increase of $2.5 million or 17.2% as compared to $14.4 million in
the quarter ended March 31, 2006. Revenue increases discussed and the
slight decrease in cost of revenues increased our total margins on
revenue to 60.7% for the quarter ended March 31, 2007 compared to
58.8% for the quarter ended March 31, 2006. Selling, general and
administrative expenses as a percentage of total revenue fell to 32.7%
for the quarter ended March 31, 2007 from 34.2% for the quarter ended
March 31, 2006.
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 March 31, 2007 was $7.9 million, a 28.4% decrease,
compared to $11.1 million in the prior year. EBITDA and net loss
include $0.8 million in non-recurring costs associated the potential
DMX transaction for the three months ended March 31, 2007. See
attached reconciliation from net loss to EBITDA and to EBITDA as
defined by the indentures.
The Company generated a net cash increase of $2.4 million for the
three months ended March 31, 2007 versus an increase of $0.9 million
for the three months ended March 31, 2006. This represents the sixth
consecutive quarter of positive cash flow. This $1.5 million cash flow
improvement in the first quarter, on a year-over-year basis, is
primarily attributable to more efficient subscriber additions through
the continued implementation of the Company's standardized pricing
initiative and other operational efficiencies. The net investment made
in new subscriber locations was $6.0 million for the quarter ended
March 31, 2007 versus $6.9 million in 2006. This 13% reduction was
achieved while adding approximately the same number of subscribers in
both years. Reductions in both accounts receivable and inventory
balances also contributed to this cash flow improvement.
On April 12, 2007, the Company announced that it is contemplating
a future consolidation or combination with DMX, Inc. This combination
would be contingent on a sale of the combined entity to a undetermined
third party buyer following clearance by federal regulators.
Accordingly, the parties have submitted a Hart-Scott-Rodino filing
seeking clearance for such a transaction. In the interim, Muzak and
DMX will remain independent companies and continue to compete and to
provide, without disruption, the highest-quality products and services
to their respective clients.
Muzak Holdings LLC will have a conference call on May 10, 2007 at
10:00 a.m. (Eastern Standard Time) to discuss first 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 11:00
a.m. on May 11, 2007. The replay number is 1-800-756-3819 and the
access code is 228017.
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
3/31/2007 3/31/2006 % Change 12/31/2006
----------- ----------- --------- ------------
Selected Operations
Data
Revenues
Music and Other
Business Services $ 47,705 $ 47,492 0.4% $ 47,931
Equipment Sales and
Related Services 14,636 11,957 22.4% 16,766
----------- ----------- --------- ------------
Total Revenues 62,341 59,449 4.9% 64,697
----------- ----------- --------- ------------
Cost of Revenues
Music and Other
Business Services 11,027 11,069 -0.4% 11,277
Equipment Sales and
Related Services 13,454 13,432 0.2% 16,068
----------- ----------- --------- ------------
Total Cost of
Revenues 24,481 24,501 -0.1% 27,345
----------- ----------- --------- ------------
Selling, General and
Administrative
Expenses (1) 20,365 20,347 0.1% 21,011
Restructuring Charges
(2) - 339 - -
Other (income) expense (163) (142) 14.8% (365)
Merger related
expenses 775 - - -
----------- ----------- --------- ------------
EBITDA (3) $ 16,883 $ 14,404 17.2% $ 16,706
=========== =========== ========= ============
EBITDA Margin 27.1% 24.2% 25.8%
Other financial data
EBITDA per the
indentures (3) $ 17,235 $ 14,975 $ 17,052
Muzak LLC Interest
Expense 11,845 11,625 11,958
Muzak Holdings LLC
Interest Expense 12,660 12,440 12,773
Muzak LLC Net Debt to 6.08x 7.08x 6.19x
EBITDA (4)
Muzak Holdings LLC Net 6.43x 7.49x 6.54x
Debt to EBITDA (4)
Balance sheet data (end
of period)
Cash Balance (5) $ 23,237 $ 18,703 $ 20,813
Muzak LLC Total Debt
(6) 440,472 441,231 441,198
Muzak Holdings LLC
Total Debt (6) 464,717 465,476 465,443
(1) Selling, general, and administrative expenses include non-cash
amortization and impairment of capitalized commissions of $3.9
million and $4.1 million for the quarter ended March 31, 2007 and
2006, respectively
Selling, general, and administrative expenses include $0.4 million and
$0.6 million capitalized labor impairment charges for the quarter
ended March 31, 2007 and March 31, 2006, respectively.
(2) Restructuring charges include $0.3 million of severance relating
to implementation of a field management reorganization implemented in
January 2006
(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"). The primary difference between
EBITDA and EBITDA per indentures is the exclusion of non-cash items.
Non-cash items excluded are comprised of the write-off of capitalized
labor upon client terminations. 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
Q1 2007 Q1 2006 Q4 2006
-------- --------- --------
Net Loss $(7,945) $(11,098) $(8,332)
Interest expense 12,660 12,440 12,773
Taxes (102) (80) (169)
Depreciation and amortization 12,270 13,142 12,434
-------- --------- --------
EBITDA 16,883 14,404 16,706
-------- --------- --------
Non-cash items 352 571 346
-------- --------- --------
EBITDA pursuant to the Notes $17,235 $14,975 $17,052
======== ========= ========
(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 $1.7 million of debt of a subsidiary that is
non-recourse to the Company.
CONTACT: Muzak Holdings LLC
Dodd Haynes - Chief Financial Officer
or
Marissa Ferrari - Media Relations
803-396-3000