Exhibit 99.1
Muzak Holdings LLC Announces Third Quarter
Results
Operating Highlights (excludes DMX transaction related amounts):
EBITDA increases 9.5% over prior year
Positive free cash flow of $0.6 million
FORT MILL, S.C.--(BUSINESS WIRE)--Nov. 14, 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 September 30, 2007.
Total revenue for the quarter ended September 30, 2007 was $62.1
million, a 1.4% decrease, compared to $63.0 million for the quarter
ended September 30, 2006. Music and other business services revenue
for the quarter ended September 30, 2007 was $47.0 million, a 1.7%
decrease, compared to $47.7 million for the quarter ended September
30, 2006. Equipment sales and related services revenue was $15.1
million in the quarter ended September 30, 2007 as compared to $15.2
million for the same period in 2006.
Total revenue for the nine months ended September 30, 2007 was
$187.2 million, a 1.8% increase, compared to $183.9 million for the
nine months ended September 30, 2006. Music and other business
services revenue for the nine months ended September 30, 2007 was
$142.6 million, a 0.1% increase, compared to $142.4 million for the
nine months ended September 30, 2006. Equipment sales and related
services revenue increased to $44.6 million for the nine months ended
September 30, 2007 as compared to $41.5 million for the same period in
2006.
EBITDA (Earnings Before Interest, Taxes, Depreciation and
Amortization) was $17.3 million for the quarter ended September 30,
2007 (excluding $1.1 million in expenses directly associated with the
proposed DMX transaction), an increase of $0.5 million or 3.0% as
compared to $16.8 million in the quarter ended September 30, 2006
(excluding $2.0 million in ERP impairment). Revenue decreases were
offset by decreases in cost of revenues, increasing our total margins
on revenue to 58.1% for the quarter ended September 30, 2007 compared
to 57.6% for the quarter ended September 30, 2006. Selling, general
and administrative expenses as a percentage of total revenue fell to
30.8% for the quarter ended September 30, 2007 from 31.4% for the
quarter ended September 30, 2006 (excluding $2.0 million in ERP
impairment).
EBITDA was $52.3 million for the nine months ended September 30,
2007 (excluding $2.6 million in expenses directly associated with the
proposed DMX transaction), an increase of $5.2 million or 11.0% as
compared to $47.1 million in the nine months ended September 30, 2006
(excluding $2.0 million in ERP impairment). Our total margins on
revenues increased to 59.0% for the nine months ended September 30,
2007 compared to 58.3% for the nine months ended September 30, 2006.
Selling, general and administrative expense as a percentage of total
revenue fell to 31.5% for the nine months ended September 30, 2007
from 33.0% for the nine months ended September 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 September 30, 2007 was $8.1 million, a 22.6% decrease,
compared to $10.4 million in the prior year and was $23.9 million for
the nine months ended September 30, 2007, which is a 22.6% decrease
from the $30.9 million in the prior year. EBITDA and net loss include
$1.1 million and $2.6 million in non-recurring costs associated with
the potential DMX transaction for the three and nine months ended
September 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 $1.4 million for the
three months ended September 30, 2007 versus an increase of $0.3
million for the three months ended September 30, 2006 and generated
$5.1 million and $1.9 million for the nine months ended September 30,
2007 and 2006, respectively (excluding $0.8 million and $1.5 million
in proposed DMX transaction expenses paid in the quarter and nine
months ended September 30, 2007, respectively). This represents the
eighth 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
$6.1 million for the quarter ended September 30, 2007 versus $6.2
million in 2006.
The Company previously 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. The Company is currently in the process of
fulfilling 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. While a substantial amount of data has been provided to the
Department of Justice, we cannot state with certainty when the
Department's review will be completed and to the ultimate outcome.
During the quarter ended September 30, 2007, the Company expensed $1.1
million in transaction related expenditures and $2.6 million for the
nine months ended September 30, 2007. These expenses are recorded in
selling, general and administrative expenses in the Company's form
10Q. Actual cash paid related to this transaction was $0.8 million and
$1.5 million, respectively, for the quarter and nine months ended
September 30, 2007.
Muzak Holdings LLC will have a conference call on November 14,
2007 at 10:00 a.m. (Eastern Standard Time) to discuss third quarter
results. The call in number is 1-800-341-3130 and the access code is
19788974. A replay of the call will be available for one week
beginning at 11:00 a.m. on November 15, 2007. The replay number is
1-888-843-8996 and the access code is 19788974#.
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
9/30/2007 9/30/2006 % Change
----------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business Services $ 46,955 $ 47,743 -1.7%
Equipment Sales and Related
Services 15,109 15,218 -0.7%
----------- ----------- ---------
Total Revenues 62,064 62,961 -1.4%
----------- ----------- ---------
Cost of Revenues
Music and Other Business Services 11,589 11,749 -1.4%
Equipment Sales and Related
Services 14,389 14,928 -3.6%
----------- ----------- ---------
Total Cost of Revenues 25,978 26,677 -2.6%
----------- ----------- ---------
Selling, General and Administrative
Expenses (1) 19,093 21,698 -12.0%
Other (income) expense (321) (270) 18.9%
Transaction related expenses (2) 1,050 - -
----------- ----------- ---------
EBITDA (3) $ 16,264 $ 14,856 9.5%
=========== =========== =========
EBITDA Margin 26.2% 23.6%
Other financial data
EBITDA per the indentures (3) $ 16,611 $ 15,228
Muzak LLC Interest Expense 11,642 11,873
Muzak Holdings LLC Interest Expense 12,458 12,688
Muzak LLC Net Debt to EBITDA (4) 6.30x 6.94x
Muzak Holdings LLC Net Debt to 6.67x 7.34x
EBITDA (4)
Balance sheet data (end of period)
Cash Balance (5) $ 24,482 $ 19,692
Muzak LLC Total Debt (6) 441,220 440,988
Muzak Holdings LLC Total Debt (6) 465,465 465,233
Muzak Holdings LLC
Financial Highlights
- ----------------------------------------------------------------------
(unaudited, dollars in thousands)
Nine months ended
9/30/2007 9/30/2006 % Change
----------- ----------- ---------
Selected Operations Data
Revenues
Music and Other Business Services $ 142,587 $ 142,407 0.1%
Equipment Sales and Related
Services 44,611 41,496 7.5%
----------- ----------- ---------
Total Revenues 187,198 183,903 1.8%
----------- ----------- ---------
Cost of Revenues
Music and Other Business Services 34,204 34,069 0.4%
Equipment Sales and Related
Services 42,475 42,587 -0.3%
----------- ----------- ---------
Total Cost of Revenues 76,679 76,656 0.0%
----------- ----------- ---------
Total Selling, General and
Administrative (1) 58,976 62,570 -5.7%
Restructuring Charges (7) - 339 -
Other (income) expense (728) (784) -7.1%
Transaction related expenses (2) 2,600 - -
----------- ----------- ---------
EBITDA (3) $ 49,671 $ 45,122 10.1%
=========== =========== =========
EBITDA Margin 26.5% 24.5%
EBITDA per the indentures (3) $ 50,761 $ 46,458
(1) Selling, general, and administrative expenses include non-cash
amortization and impairment of capitalized commissions of $3.8
million and $4.0 million for the quarter ended September 30, 2007 and
2006, respectively and $11.5 million and $12.3 million for the nine
months ended September 30, 2007 and 2006, respectively.
Selling, general, and administrative expenses include $0.3 million and
$0.4 million of capitalized labor impairment charges for the quarter
ended September 30, 2007 and 2006, respectively and $1.1 million and
$1.3 million for the nine months ended September 30, 2007 and 2006,
respectively.
Selling, general, and administrative expenses include $2.0 million
write-off of ERP system for the quarter and nine months ended
September 30, 2006.
(2) Transaction related expenses include $1.1 million and $2.6 million
of expenses directly associated with the proposed DMX transaction.
(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
Q3 2007 Q3 2006
--------- ---------
Net Loss $ (8,072) $(10,433)
Interest expense 12,458 12,688
Taxes (99) (78)
Depreciation and amortization 11,977 12,679
--------- ---------
EBITDA 16,264 14,856
--------- ---------
Non-cash items 347 372
--------- ---------
EBITDA pursuant to the Notes $ 16,611 $ 15,228
========= =========
Nine months ended
Q3 2007 Q3 2006
--------- ---------
Net Loss $(23,941) $(30,923)
Interest expense 37,575 37,715
Taxes (306) (242)
Depreciation and amortization 36,344 38,572
--------- ---------
EBITDA 49,672 45,122
--------- ---------
Non-cash items 1,089 1,336
--------- ---------
EBITDA pursuant to the Notes $ 50,761 $ 46,458
========= =========
(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.
(7) Restructuring charges include $0.3 million of severance relating
to implementation of a field management reorganization implemented in
January 2006
CONTACT: Muzak Holdings LLC
Dodd Haynes, Chief Financial Officer or
Marissa Ferrari, Media Relations, 803-396-3000