Exhibit 99.1
Muzak Holdings LLC Announces Second Quarter Results
Operating Highlights (excludes DMX transaction related amounts):
EBITDA Increases 9.1% over Prior Year
Positive Free Cash Flow of $1.2 Million
Business Editors
FORT MILL, S.C.--(BUSINESS WIRE)--Aug. 15, 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 June 30, 2007.
Total revenue for the quarter ended June 30, 2007 was $62.8
million, a 2.1% increase, compared to $61.5 million for the quarter
ended June 30, 2006. Music and other business services revenue for the
quarter ended June 30, 2007 was $47.9 million, a 1.6% increase,
compared to $47.2 million for the quarter ended June 30, 2006.
Equipment sales and related services revenue increased to $14.9
million in the quarter ended June 30, 2007 as compared to $14.3
million for the same period in 2006.
Total revenue for the six months ended June 30, 2007 was $125.1
million, a 3.5% increase, compared to $120.9 million for the six
months ended June 30, 2006. Music and other business services revenue
for the six months ended June 30, 2007 was $95.6 million, a 1.0%
increase, compared to $94.7 million for the six months ended June 30,
2006. Equipment sales and related services revenue increased to $29.5
million for the six months ended June 30, 2007 as compared to $26.3
million for the same period in 2006.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) was $17.3 million for the quarter ended June 30, 2007
(excluding $0.8 million in expenses directly associated with the
proposed DMX transaction), an increase of $1.4 million or 9.1% as
compared to $15.9 million in the quarter ended June 30, 2006. Revenue
increases were offset by increases in cost of revenues, decreasing our
total margins on revenue to 58.2% for the quarter ended June 30, 2007
compared to 58.6% for the quarter ended June 30, 2006. Selling,
general and administrative expenses as a percentage of total revenue
fell to 32.3% for the quarter ended June 30, 2007 from 33.4% for the
quarter ended June 30, 2006.
EBITDA was $34.9 million for the six months ended June 30, 2007
(excluding $1.5 million in expenses directly associated with the
proposed DMX transaction), an increase of $4.4 million or 14.2% as
compared to $30.6 million in the six months ended June 30, 2006. Our
total margins on revenues increased to 59.5% for the six months ended
June 30, 2007 compared to 58.7% for the six months ended June 30,
2006. Selling, general and administrative expense as a percentage of
total revenue fell to 33.1% for the six months ended June 30, 2007
from 34.1% for the six months ended June 30, 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 June 30, 2007 was $7.9 million, a 15.6% decrease,
compared to $9.4 million in the prior year and was $15.9 million for
the six months ended June 30, 2007, which is a 22.6% decrease from the
$20.5 million in the prior year. EBITDA and net loss include $0.8
million and $1.5 million in non-recurring costs associated with the
potential DMX transaction for the three and six months ended June 30,
2007, respectively. See attached reconciliation from net loss to
EBITDA and to EBITDA as defined by the indentures.
The Company generated a net cash increase of $1.2 million for the
three months ended June 30, 2007 versus an increase of $0.6 million
for the three months ended June 30, 2006 and generated $3.7 million
and $1.6 million for the six months ended June 30, 2007 and 2006,
respectively (excluding 0.6 million and $0.7 million in proposed DMX
transaction expenses paid in the quarter and six months ended June 30,
2007, respectively). This represents the seventh consecutive quarter
of positive cash flow. The positive cash flow for the quarter 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 $5.6 million for the quarter ended
June 30, 2007 versus $6.2 million in 2006.
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.
On May 23, 2007, the Company received a request for additional
information and documents, (commonly referred to as a "second
request"), in connection with the Department of Justice's review of
the Company's proposed combination with DMX. The Company is currently
in the process of fulfilling such request. While a substantial amount
of data has been and continues to be provided to the Department of
Justice, we cannot state with certainty when the Department's review
will be completed. During the quarter ended June 30, 2007, the Company
expensed $0.8 million in transaction related expenditures and $1.5
million for the six months ended June 30, 2007. These expenses are
recorded in selling, general and administrative expenses. Actual cash
paid related to this transaction was $0.6 million and $0.7 million,
respectively, for the quarter and six months ended June 30, 2007.
Muzak Holdings LLC will have a conference call on August 15, 2007
at 11:00 a.m. (Eastern Standard Time) to discuss second quarter
results. The call in number is 1-800-341-3130 and the access code is
18785587. A replay of the call will be available for one week
beginning at 11:00 a.m. on August 16, 2007. The replay number is
1-888-843-8996 and the access code is 18785587.
Muzak creates experiences that reach more than 100 million people
daily. Some of the biggest brands in business 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
6/30/2007 6/30/2006 % Change 3/31/2007
----------- ----------- --------- -----------
Selected Operations Data
Revenues
Music and Other
Business Services $ 47,927 $ 47,172 1.6% $ 47,705
Equipment Sales and
Related Services 14,866 14,321 3.8% 14,636
----------- ----------- --------- -----------
Total Revenues 62,793 61,493 2.1% 62,341
----------- ----------- --------- -----------
Cost of Revenues
Music and Other
Business Services 11,588 11,251 3.0% 11,027
Equipment Sales and
Related Services 14,631 14,227 2.8% 13,454
----------- ----------- --------- -----------
Total Cost of
Revenues 26,219 25,478 2.9% 24,481
----------- ----------- --------- -----------
Selling, General and
Administrative
Expenses (1) 19,518 20,525 -4.9% 20,365
Other (income) expense (244) (372) -34.4% (163)
Transaction related
expenses (3) 775 - - 775
----------- ----------- --------- -----------
EBITDA (4) $ 16,525 $ 15,862 4.2% $ 16,883
=========== =========== ========= ===========
EBITDA Margin 26.3% 25.8% 27.1%
Other financial data
EBITDA per the
indentures (4) $ 16,915 $ 16,255 $ 17,235
Muzak LLC Interest
Expense 11,642 11,772 11,845
Muzak Holdings LLC
Interest Expense 12,457 12,587 12,660
Muzak LLC Net Debt to 6.18x 6.48x 6.08x
EBITDA (5)
Muzak Holdings LLC Net 6.54x 6.88x 6.43x
Debt to EBITDA (5)
Balance sheet data (end
of period)
Cash Balance (6) $ 23,888 $ 19,387 $ 23,237
Muzak LLC Total Debt
(7) 440,352 441,053 440,472
Muzak Holdings LLC
Total Debt (7) 464,597 465,298 464,717
Muzak Holdings LLC
Financial Highlights
- ----------------------------------------------------------------------
(unaudited, dollars in thousands)
Six months ended
6/30/2007 6/30/2006 % Change
----------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business Services $ 95,632 $ 94,664 1.0%
Equipment Sales and Related
Services 29,502 26,278 12.3%
----------- ----------- ---------
Total Revenues 125,134 120,942 3.5%
----------- ----------- ---------
Cost of Revenues
Music and Other Business Services 22,615 22,320 1.3%
Equipment Sales and Related
Services 28,085 27,659 1.5%
----------- ----------- ---------
Total Cost of Revenues 50,700 49,979 1.4%
----------- ----------- ---------
----------- ----------- ---------
Total Selling, General and
Administrative (1) 39,883 40,872 -2.4%
----------- ----------- ---------
Restructuring Charges (2) - 339 -
Other (income) expense (407) (514) -20.8%
Transaction related expenses (3) 1,550 - -
----------- ----------- ---------
EBITDA (4) $ 33,408 $ 30,266 10.4%
=========== =========== =========
EBITDA Margin 26.7% 25.0%
EBITDA per the indentures (4) $ 34,150 $ 31,230
(1)Selling, general, and administrative expenses include non-cash
amortization and impairment of capitalized commissions of $3.8
million and $4.1 million for the quarter ended June 30, 2007 and
2006, respectively and $7.7 million and $8.2 million for the six
months ended June 30, 2007 and 2006, respectively.
Selling, general, and administrative expenses include $0.4 million
capitalized labor impairment charges for the quarter ended June 30,
2007 and June 30, 2006, respectively and $0.7 million and $1.0
million for the six months ended June 30, 2007 and 2006,
respectively.
(2)Restructuring charges include $0.3 million of severance relating to
implementation of a field management reorganization implemented in
January 2006
(3)Transaction related expenses include $0.8 million and $1.5 million
of expenses directly associated with the proposed DMX transaction.
(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"). 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
Q2 2007 Q2 2006 Q1 2007
--------- --------- --------
Net Loss $ (7,924) $ (9,392) $(7,945)
Interest expense 12,457 12,587 12,660
Taxes (105) (84) (102)
Depreciation and amortization 12,097 12,751 12,270
--------- --------- --------
EBITDA 16,525 15,862 16,883
--------- --------- --------
Non-cash items 390 393 352
--------- --------- --------
EBITDA pursuant to the Notes $ 16,915 $ 16,255 $17,235
========= ========= ========
Six months ended
Q2 2007 Q2 2006
--------- ---------
Net Loss $(15,869) $(20,490)
Interest expense 25,117 25,027
Taxes (207) (164)
Depreciation and amortization 24,367 25,893
--------- ---------
EBITDA 33,408 30,266
--------- ---------
Non-cash items 742 964
--------- ---------
EBITDA pursuant to the Notes $ 34,150 $ 31,230
========= =========
(5)Reflects Total Debt described in (7) below less unrestricted cash
divided by EBITDA per the Notes on a Last Quarter Annualized Basis.
(6)Cash balance includes restricted cash of $1.7 million, which was
used to cash collateralize letters of credit
(7)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, 803-396-3000
Marissa Ferrari - Media Relations, 803-396-3000