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USA Mobility Reports Fourth Quarter and 2010 Operating Results; Announces Regular Quarterly Dividend
Subscriber and Revenue Trends Improve; Operating Expenses Decline;$44.2 Million in Capital Returned to Stockholders in 2010

SPRINGFIELD, Va., Feb 23, 2011 (BUSINESS WIRE) -- USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the fourth quarter and year ended December 31, 2010.

In addition, the Company's Board of Directors declared a regular quarterly dividend distribution of $0.25 per share. The dividend distribution will be paid on March 31, 2011 to stockholders of record on March 17, 2011.

For the fourth quarter, total revenues were $54.6 million, compared to $56.7 million in the third quarter of 2010 and $65.4 million in the fourth quarter of 2009. EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) was $16.9 million in the fourth quarter of 2010, compared to $21.0 million in the year-earlier quarter. Fourth quarter operating income was $12.7 million, compared to $12.2 million in the fourth quarter of 2009. Fourth quarter results were negatively impacted by a one-time litigation settlement expense of $2.1 million in connection with breach of contract claims and by $1.7 million in severance expenses for planned headcount reductions in 2011. Absent the one-time litigation settlement and severance expenses, operating income would have been $16.5 million and EBITDA $20.7 million.

Net income for the fourth quarter of 2010 was $40.5 million, or $1.82 per fully diluted share, compared to $3.6 million, or $0.16 per fully diluted share, in the year-earlier quarter. The significant increase in net income in the fourth quarter was largely the result of a $32.9 million decrease in the deferred income tax asset valuation allowance, which adjusted the balance of deferred income tax assets to their estimated realizable amounts. This resulted in an offsetting benefit to income tax expense. Excluding the income tax benefit, the one-time litigation settlement and severance expenses, net income in the fourth quarter would have been $10.0 million, or $0.45 per fully diluted share.

For the full-year 2010, revenues totaled $233.3 million, compared to $289.7 million in 2009, while EBITDA was $81.3 million, or 34.9 percent of revenue, compared to $99.3 million, or 34.3 percent of revenue, in the prior year. The Company reported net income for 2010 of $77.9 million, or $3.45 per fully diluted share, compared to a net income of $67.6 million, or $2.90 per fully diluted share, for 2009.

Key results and highlights for the fourth quarter and 2010 included:

  • Net unit losses were 61,000 in the fourth quarter, compared to 77,000 in the third quarter and 115,000 in the year-earlier quarter, while the quarterly rate of unit erosion improved to 3.2 percent from 3.8 percent in the third quarter and 5.0 percent in the fourth quarter of 2009. The annual rate of unit erosion was 13.4 percent in 2010, compared to 22.5 percent in 2009. Net unit losses were 293,000 in 2010 versus 633,000 in 2009. Units in service at year-end 2010 totaled 1,889,000, compared to 2,182,000 a year earlier.
  • The quarterly rate of revenue erosion improved to 3.6 percent in the fourth quarter from 4.1 percent in the third quarter. The annual rate of revenue erosion was 16.4 percent, compared to 18.4 percent in the third quarter and 22.4 percent in the year-earlier quarter. The year-over-year rate of revenue decline was 19.5 percent in 2010 compared to 19.4 percent in 2009.
  • Operating expenses (excluding depreciation, amortization and accretion) were $37.8 million for the fourth quarter, a reduction of 14.9 percent from $44.4 million in the year-earlier quarter. Fourth quarter 2010 operating expenses included a one-time litigation settlement expense of $2.1 million and severance expenses of $1.7 million. For 2010, operating expenses declined 20.2 percent to $151.9 million from $190.4 million in 2009. Expense reduction during the year was largely the result of continued network rationalization, staff reductions and implementation of other company-wide cost efficiencies.
  • Average revenue per unit (ARPU) was $8.74 for the fourth quarter, compared to $8.85 in the third quarter and $8.88 in the fourth quarter of 2009. For the year, ARPU totaled $8.84, compared to $8.77 in 2009.
  • EBITDA as a percentage of revenue (EBITDA margin) was 30.9 percent in the fourth quarter, compared to 32.2 percent the year-earlier quarter. Absent the severance and litigation settlement expenses, EBITDA margin would have been 37.8 percent in the fourth quarter of 2010.
  • Capital expenses were $4.7 million in the fourth quarter versus $5.0 million in the year-earlier quarter. For 2010, capital expenses totaled $8.7 million, compared to $17.2 million in 2009.
  • The Company generated $72.8 million in cash during the year from operating and investing activities and had an ending cash balance of $129.2 million at December 31, 2010.
  • The number of full-time equivalent employees declined from 672 at the beginning of the year to 540 at year-end as a result of various consolidation and expense control initiatives.

"Despite a still recovering economy, we made excellent progress in the fourth quarter and throughout 2010," said Vincent D. Kelly, president and chief executive officer. "We continued to operate the Company profitably while meeting our primary performance goals, including improved rates of subscriber and revenue erosion, significant expense reduction, solid ARPU, strong operating margins and enhanced organizational efficiencies. We also continued to focus sales and marketing initiatives around our core market segments, especially Healthcare. In addition, we again met our goal of generating sufficient cash flow to return significant capital to stockholders."

Kelly said subscriber and revenue trends, after deteriorating for much of 2008 and 2009, began to improve in the fourth quarter of 2009 and improved steadily throughout 2010 as the overall economy stabilized. "We were pleased to see marked improvement in the pace of subscriber and revenue erosion over the past year as our net loss rates reached their lowest level in more than five years. Healthcare continued to be our best performing market segment, contributing 73.8 percent of our direct gross placements in the fourth quarter, while a net churn of 1.1 percent among Healthcare accounts remained significantly lower than all other subscriber segments." He added that the Healthcare market segment represented 62.9 percent of the Company's direct subscriber base at year-end as well as 57.0 percent of direct paging revenue in the fourth quarter.

Kelly said USA Mobility paid cash distributions to stockholders totaling $2.00 per share during 2010, including regular quarterly cash distributions of $0.25 per share and a special cash distribution of $1.00 per share in the fourth quarter. The distributions represented a return of capital to stockholders of $1.90 per share, and cash dividends of $0.10 per share. "We were delighted to be able to return capital to stockholders during the year, consistent with our capital allocation strategy, as well as distribute a portion of cash as dividends. Over the past six years we have now returned $366.6 million to our stockholders. In addition," he noted, "we repurchased $8.9 million of our common stock during 2010, and have now repurchased a total of $51.7 million since the inception of our stock buy-back program in 2008."

Shawn E. Endsley, chief financial officer, said: "Overall, we were pleased with our 2010 operating results, which met or exceeded our expectations. Although we continued to operate in a challenging environment, we were able to again reduce operating expenses at a faster pace than our revenue decline and thus maintain strong EBITDA margins throughout the year. At the same time, ARPU remained strong and capital expenses declined, allowing us to generate net operating cash flow after investing activities of $72.8 million."

Endsley added: "For the year, operating expenses (excluding depreciation, amortization and accretion) declined 20.2 percent from 2009, outpacing the 19.5 percent year-over-year decline in revenues. In fact, our costs declined faster than revenues in 2010 for the fifth straight year. Expense savings were largely the result of significant progress in our network rationalization program, including lower site rents, combined with staff reductions and various cost savings efforts made throughout the Company."

Endsley said the non-recurring expense items in the fourth quarter included a reduction to the deferred income tax asset valuation allowance of $32.9 million which resulted in a benefit to income tax expense, partially offset by $2.1 million in litigation settlement expense involving breach of contract claims and by $1.7 million in severance expenses for our 2011 headcount reduction plans. He added: "Excluding the one-time items, fourth quarter net income would have been $10.0 million, or $0.45 per fully diluted share."

Commenting on the Company's financial guidance, Endsley said: "We are pleased that once again our annual results were either within or better than the financial guidance we provided. Total revenue of $233.3 million was within our guidance range of $230 million to $235 million; operating expenses (excluding depreciation, amortization and accretion) of $151.9 million were below the guidance range of $156 million to $159 million; and capital expenses of $8.7 million were within the guidance range of $7 million to $9 million. With respect to wireless company guidance for 2011, the Company expects revenue to be in a range from $182 million to $192 million, operating expenses (excluding depreciation, amortization and accretion) to be in a range from $132 million to $136 million, and capital expenses in a range from $5 million to $7 million."

* * * * * * * * *

USA Mobility plans to host a conference call for investors on its fourth quarter and 2010 results at 10:00 a.m. Eastern Time on Thursday, February 24, 2011. Dial-in numbers for the call are 719-325-2105 or 888-539-3686. The pass code for the call is 1716214. A replay of the call will be available from 2:00 p.m. ET on February 24 until 11:59 p.m. on Thursday, March 10. Replay numbers are 719-457-0820 or 888-203-1112. The pass code for the replay is 1716214.

* * * * * * * * *

About USA Mobility

USA Mobility, Inc., headquartered in Springfield, Virginia, is a comprehensive provider of reliable and affordable wireless communications solutions to the healthcare, government, large enterprise and emergency response sectors. As a single-source provider, USA Mobility's focus is on the business-to-business marketplace and supplying wireless connectivity solutions to organizations nationwide. The Company operates the largest one-way paging and advanced two-way paging networks in the United States. In addition, USA Mobility offers mobile voice and data services through Sprint Nextel and T-Mobile, including BlackBerry(R) smartphones and GPS location applications. The Company's product offerings include customized wireless connectivity systems for the healthcare, government and other campus environments. USA Mobility also offers M2M (machine-to-machine) telemetry solutions for numerous applications that include asset tracking, utility meter reading and other remote device monitoring applications on a national scale. For further information visit http://www.usamobility.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act: Statements contained herein or in prior press releases which are not historical fact, such as statements regarding USA Mobility's future operating and financial performance, are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve risks and uncertainties that may cause USA Mobility's actual results to be materially different from the future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those expectations include, but are not limited to, declining demand for paging products and services, the ability to continue to reduce operating expenses, future capital needs, competitive pricing pressures, competition from both traditional paging services and other wireless communications services, government regulation, reliance upon third-party providers for certain equipment and services, as well as other risks described from time to time in periodic reports and registration statements filed with the Securities and Exchange Commission. Although USA Mobility believes the expectations reflected in the forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. USA Mobility disclaims any intent or obligation to update any forward-looking statements.

USA MOBILITY, INC.
CONDENSED CONSOLIDATED RESULTS OF OPERATIONS (a)
(unaudited and in thousands, except share and per share amounts)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10
Revenues:
Paging service $ 72,021 $ 67,972 $ 63,308 $ 59,657 $ 57,832 $ 54,875 $ 52,778 $ 50,319
Cellular 991 775 980 795 708 624 532 499
Product sales 5,271 5,269 4,354 3,927 3,358 2,732 2,805 2,784
Other 1,408 1,129 856 993 886 881 595 1,046
Total revenues 79,691 75,145 69,498 65,372 62,784 59,112 56,710 54,648
Operating expenses:
Cost of products sold 1,669 1,421 1,593 1,513 1,209 1,134 819 1,051
Service, rental and maintenance 22,955 21,290 20,950 20,115 18,941 17,175 16,821 16,221
Selling and marketing 6,062 5,600 5,198 4,955 4,557 4,394 4,060 3,915
General and administrative 20,186 22,801 16,050 15,289 15,812 15,924 12,907 14,829
Severance and restructuring 190 52 15 2,480 314 41 86 1,738
Depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899 4,226
Total operating expenses 62,332 62,338 54,495 53,133 48,137 45,366 40,592 41,980
% of total revenues 78.2 % 83.0 % 78.4 % 81.3 % 76.7 % 76.7 % 71.6 % 76.8 %
Operating income 17,359 12,807 15,003 12,239 14,647 13,746 16,118 12,668
% of total revenues 21.8 % 17.0 % 21.6 % 18.7 % 23.3 % 23.3 % 28.4 % 23.2 %
Interest income (expense), net 26 28 16 (1 ) 3 4 6 3
Other income (expense), net 112 (42 ) 185 275 78 180 2,320 227
Income before income tax expense (benefit) 17,497 12,793 15,204 12,513 14,728 13,930 18,444 12,898
Income tax expense (benefit) 7,516 (31,953 ) 6,003 8,883 5,843 841 3,060 (27,642 )
Net income $ 9,981 $ 44,746 $ 9,201 $ 3,630 $ 8,885 $ 13,089 $ 15,384 $ 40,540
Basic net income per common share $ 0.43 $ 1.96 $ 0.40 $ 0.16 $ 0.39 $ 0.59 $ 0.70 $ 1.84
Diluted net income per common share $ 0.43 $ 1.93 $ 0.40 $ 0.16 $ 0.39 $ 0.58 $ 0.69 $ 1.82
Basic weighted average common shares outstanding 23,134,072 22,858,573 22,856,951 22,830,040 22,654,240 22,307,488 22,060,636 22,050,512
Diluted weighted average common shares outstanding 23,479,796 23,200,736 23,194,360 23,167,729 22,967,192 22,620,707 22,372,786 22,323,551
Reconciliation of operating income to EBITDA (b):
Operating income $ 17,359 $ 12,807 $ 15,003 $ 12,239 $ 14,647 $ 13,746 $ 16,118 $ 12,668
Add back: depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899 4,226
EBITDA $ 28,629 $ 23,981 $ 25,692 $ 21,020 $ 21,951 $ 20,444 $ 22,017 $ 16,894
% of total revenues 35.9 % 31.9 % 37.0 % 32.2 % 35.0 % 34.6 % 38.8 % 30.9 %
(a) Slight variations in totals are due to rounding.
(b) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.
USA MOBILITY, INC.
UNITS IN SERVICE ACTIVITY (a)
(unaudited and in thousands)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10

Units in service

Beginning units in service
Direct one-way 2,349 2,198 2,079 1,969 1,881 1,804 1,749 1,692
Direct two-way 171 157 147 141 133 126 121 109
Total direct 2,520 2,355 2,226 2,110 2,014 1,930 1,870 1,801
Indirect one-way 196 161 139 116 101 90 82 75
Indirect two-way 99 91 84 71 67 79 75 74
Total indirect 295 252 223 187 168 169 157 149
Total beginning units in service 2,815 2,607 2,449 2,297 2,182 2,099 2,027 1,950
Gross placements
Direct one-way 67 74 64 55 53 62 58 45
Direct two-way 6 7 9 5 5 6 4 6
Total direct 73 81 73 60 58 68 62 51
Indirect one-way 8 9 7 6 3 3 3 2
Indirect two-way 4 2 1 2 15 1 1 1
Total indirect 12 11 8 8 18 4 4 3
Total gross placements 85 92 81 68 76 72 66 54
Gross disconnects
Direct one-way (218 ) (193 ) (174 ) (143 ) (130 ) (117 ) (115 ) (92 )
Direct two-way (20 ) (17 ) (15 ) (13 ) (12 ) (11 ) (16 ) (9 )
Total direct (238 ) (210 ) (189 ) (156 ) (142 ) (128 ) (131 ) (101 )
Indirect one-way (43 ) (31 ) (30 ) (21 ) (14 ) (11 ) (10 ) (9 )
Indirect two-way (12 ) (9 ) (14 ) (6 ) (3 ) (5 ) (2 ) (5 )
Total indirect (55 ) (40 ) (44 ) (27 ) (17 ) (16 ) (12 ) (14 )
Total gross disconnects (293 ) (250 ) (233 ) (183 ) (159 ) (144 ) (143 ) (115 )
Net gain (loss)
Direct one-way (151 ) (119 ) (110 ) (88 ) (77 ) (55 ) (57 ) (47 )
Direct two-way (14 ) (10 ) (6 ) (8 ) (7 ) (5 ) (12 ) (3 )
Total direct (165 ) (129 ) (116 ) (96 ) (84 ) (60 ) (69 ) (50 )
Indirect one-way (35 ) (22 ) (23 ) (15 ) (11 ) (8 ) (7 ) (7 )
Indirect two-way (8 ) (7 ) (13 ) (4 ) 12 (4 ) (1 ) (4 )
Total indirect (43 ) (29 ) (36 ) (19 ) 1 (12 ) (8 ) (11 )
Total net change (208 ) (158 ) (152 ) (115 ) (83 ) (72 ) (77 ) (61 )
Ending units in service
Direct one-way 2,198 2,079 1,969 1,881 1,804 1,749 1,692 1,645
Direct two-way 157 147 141 133 126 121 109 106
Total direct 2,355 2,226 2,110 2,014 1,930 1,870 1,801 1,751
Indirect one-way 161 139 116 101 90 82 75 68
Indirect two-way 91 84 71 67 79 75 74 70
Total indirect 252 223 187 168 169 157 149 138
Total ending units in service 2,607 2,449 2,297 2,182 2,099 2,027 1,950 1,889
(a) Slight variations in totals are due to rounding.

USA MOBILITY, INC.

AVERAGE REVENUE PER UNIT (ARPU) AND CHURN (a)
(unaudited)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10

ARPU

Direct one-way $ 8.11 $ 8.18 $ 8.08 $ 8.04 $ 8.16 $ 8.05 $ 8.07 $ 8.05
Direct two-way 23.68 23.62 23.42 23.59 23.61 23.55 23.11 22.57
Total direct 9.15 9.21 9.10 9.06 9.17 9.06 9.01 8.92
Indirect one-way 7.05 7.43 7.51 7.77 8.78 8.87 9.60 9.13
Indirect two-way 4.58 5.19 5.49 5.14 4.84 4.25 4.09 3.98
Total indirect 6.19 6.60 6.74 6.73 7.04 6.65 6.86 6.48
Total one-way 8.03 8.14 8.05 8.02 8.19 8.09 8.14 8.09
Total two-way 16.66 16.86 17.09 17.32 16.76 16.06 15.54 14.96
Total paging ARPU $ 8.86 $ 8.96 $ 8.89 $ 8.88 $ 9.00 $ 8.87 $ 8.85 $ 8.74

Gross disconnect rate (b)

Direct one-way -9.3 % -8.8 % -8.4 % -7.2 % -6.9 % -6.5 % -6.6 % -5.5 %
Direct two-way -11.8 % -11.0 % -10.2 % -8.9 % -9.1 % -8.5 % -13.0 % -8.5 %
Total direct -9.5 % -8.9 % -8.5 % -7.3 % -7.1 % -6.6 % -7.0 % -5.7 %
Indirect one-way -22.0 % -19.4 % -21.9 % -18.9 % -13.7 % -12.8 % -12.5 % -12.1 %
Indirect two-way -11.6 % -9.1 % -16.4 % -8.5 % -4.9 % -6.8 % -2.6 % -5.8 %
Total indirect -18.5 % -15.6 % -19.8 % -14.9 % -10.1 % -9.9 % -7.7 % -8.9 %
Total one-way -10.3 % -9.5 % -9.2 % -7.9 % -7.3 % -6.8 % -6.8 % -5.7 %
Total two-way -11.7 % -10.3 % -12.5 % -8.8 % -7.7 % -7.9 % -9.0 % -7.4 %
Total paging gross disconnect rate -10.4 % -9.6 % -9.5 % -8.0 % -7.3 % -6.9 % -7.0 % -5.9 %

Net gain / loss rate (c)

Direct one-way -6.4 % -5.4 % -5.3 % -4.4 % -4.1 % -3.1 % -3.2 % -2.7 %
Direct two-way -8.5 % -6.4 % -4.4 % -5.5 % -5.0 % -4.2 % -9.5 % -4.6 %
Total direct -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 % -2.8 %
Indirect one-way -17.8 % -13.7 % -16.9 % -13.6 % -10.5 % -9.8 % -9.2 % -9.8 %
Indirect two-way -8.2 % -7.2 % -14.9 % -5.2 % 17.1 % -4.7 % -0.9 % -4.6 %
Total indirect -14.6 % -11.3 % -16.1 % -10.4 % 0.7 % -7.4 % -5.1 % -7.2 %
Total one-way -7.3 % -6.0 % -6.0 % -5.0 % -4.4 % -3.4 % -3.5 % -3.0 %
Total two-way -8.4 % -6.7 % -8.2 % -5.4 % 2.5 % -4.4 % -6.1 % -4.6 %
Total paging net gain / loss rate -7.4 % -6.0 % -6.2 % -5.0 % -3.8 % -3.5 % -3.8 % -3.2 %
(a) Slight variations in totals are due to rounding.
(b) Gross disconnect rate is current period disconnected units divided by prior period ending units in service.
(c) Net gain / loss rate is net current period placements and disconnected units in service divided by prior period ending units in service.
USA MOBILITY, INC.
SUPPLEMENTAL INFORMATION BY MARKET SEGMENT (a)
(unaudited)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10
Gross placement rate (b)
Healthcare 3.7 % 4.4 % 3.8 % 3.4 % 3.5 % 4.4 % 3.9 % 3.4 %
Government 1.7 % 2.4 % 2.4 % 1.9 % 1.8 % 1.9 % 3.1 % 1.5 %
Large enterprise 2.4 % 2.2 % 3.3 % 2.2 % 2.1 % 2.6 % 1.9 % 2.2 %
Other 2.4 % 2.5 % 2.3 % 2.2 % 2.4 % 2.0 % 2.5 % 2.3 %
Total direct 2.9 % 3.4 % 3.3 % 2.8 % 2.9 % 3.5 % 3.4 % 2.8 %
Total indirect 3.9 % 4.3 % 3.7 % 4.5 % 10.9 % 2.5 % 2.6 % 1.7 %
Total 3.0 % 3.5 % 3.3 % 3.0 % 3.5 % 3.4 % 3.3 % 2.7 %
Gross disconnect rate (b)
Healthcare -6.8 % -6.2 % -6.7 % -5.5 % -4.9 % -5.2 % -5.7 % -4.4 %
Government -9.9 % -10.7 % -10.7 % -9.4 % -9.1 % -8.3 % -8.3 % -7.3 %
Large enterprise -13.3 % -13.0 % -10.7 % -9.4 % -10.3 % -8.3 % -9.7 % -7.0 %
Other -13.0 % -12.4 % -10.6 % -10.1 % -11.0 % -9.6 % -9.3 % -8.6 %
Total direct -9.5 % -8.9 % -8.5 % -7.3 % -7.1 % -6.6 % -7.0 % -5.7 %
Total indirect -18.5 % -15.6 % -19.8 % -14.9 % -10.1 % -9.9 % -7.7 % -8.9 %
Total -10.4 % -9.6 % -9.5 % -8.0 % -7.3 % -6.9 % -7.0 % -5.9 %
Net loss rate (b)
Healthcare -3.1 % -1.8 % -2.9 % -2.1 % -1.4 % -0.8 % -1.8 % -1.1 %
Government -8.2 % -8.4 % -8.3 % -7.5 % -7.4 % -6.4 % -5.2 % -5.9 %
Large enterprise -10.9 % -10.9 % -7.4 % -7.2 % -8.1 % -5.7 % -7.8 % -4.8 %
Other -10.6 % -10.0 % -8.3 % -7.9 % -8.6 % -7.6 % -6.8 % -6.3 %
Total direct -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 % -2.8 %
Total indirect -14.6 % -11.3 % -16.1 % -10.4 % 0.7 % -7.4 % -5.1 % -7.2 %
Total -7.4 % -6.0 % -6.2 % -5.0 % -3.8 % -3.5 % -3.8 % -3.2 %
End of period units in service % of total (b)
Healthcare 44.9 % 49.8 % 51.5 % 53.2 % 54.5 % 56.1 % 57.1 % 58.3 %
Government 17.2 % 15.6 % 15.3 % 14.9 % 14.4 % 14.1 % 13.9 % 13.5 %
Large enterprise 12.0 % 11.8 % 11.8 % 11.4 % 10.9 % 10.7 % 10.2 % 10.1 %
Other 16.2 % 13.7 % 13.2 % 12.8 % 12.1 % 11.4 % 11.2 % 10.8 %
Total direct 90.3 % 90.9 % 91.8 % 92.3 % 91.9 % 92.3 % 92.4 % 92.7 %
Total indirect 9.7 % 9.1 % 8.2 % 7.7 % 8.1 % 7.7 % 7.6 % 7.3 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
(a) Slight variations in totals are due to rounding.

(b) Changes in the classification of units in service are reflected in the quarter when such changes are identified. Such changes are then appropriately reflected in calculating the gross placement, gross disconnect and net loss rates.

USA MOBILITY, INC.
SUPPLEMENTAL INFORMATION - DIRECT UNITS IN SERVICE AND CELLULAR ACTIVATIONS (a)
(unaudited)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10
Account size ending units in service (000's)
1 to 3 units 137 126 118 109 101 95 88 84
4 to 10 units 82 75 70 66 62 58 54 52
11 to 50 units 199 183 168 158 149 140 130 123
51 to 100 units 125 112 104 97 92 86 79 76
101 to 1,000 units 626 580 546 519 499 483 456 436
>1,000 units 1,186 1,150 1,104 1,065 1,027 1,008 994 980
Total 2,355 2,226 2,110 2,014 1,930 1,870 1,801 1,751
End of period units in service % of total direct
1 to 3 units 5.8 % 5.7 % 5.6 % 5.4 % 5.2 % 5.1 % 4.9 % 4.8 %
4 to 10 units 3.5 % 3.4 % 3.3 % 3.3 % 3.2 % 3.1 % 3.0 % 2.9 %
11 to 50 units 8.4 % 8.2 % 8.0 % 7.8 % 7.7 % 7.5 % 7.2 % 7.0 %
51 to 100 units 5.3 % 5.0 % 4.9 % 4.8 % 4.8 % 4.6 % 4.4 % 4.4 %
101 to 1,000 units 26.6 % 26.0 % 25.9 % 25.8 % 25.9 % 25.8 % 25.3 % 24.9 %
>1,000 units 50.4 % 51.7 % 52.3 % 52.9 % 53.2 % 53.9 % 55.2 % 56.0 %
Total 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 % 100.0 %
Account size net loss rate
1 to 3 units -7.8 % -7.9 % -6.9 % -7.4 % -7.6 % -5.8 % -7.0 % -4.8 %
4 to 10 units -8.8 % -7.9 % -6.7 % -6.1 % -5.3 % -6.0 % -7.5 % -5.0 %
11 to 50 units -8.9 % -8.2 % -7.7 % -5.9 % -5.8 % -6.1 % -7.3 % -5.1 %
51 to 100 units -6.2 % -10.1 % -7.6 % -6.8 % -4.4 % -6.5 % -7.9 % -4.2 %
101 to 1,000 units -8.0 % -7.4 % -5.9 % -4.9 % -3.7 % -3.3 % -5.6 % -4.2 %
>1,000 units -5.1 % -3.1 % -4.0 % -3.5 % -3.7 % -1.9 % -1.3 % -1.5 %
Total -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 % -2.8 %
Account size ARPU
1 to 3 units $ 14.73 $ 15.07 $ 14.98 $ 15.03 $ 15.28 $ 15.37 $ 15.48 $ 15.57
4 to 10 units 14.00 14.30 14.24 14.21 14.37 14.35 14.51 14.56
11 to 50 units 11.41 11.65 11.54 11.45 11.86 12.01 12.18 12.26
51 to 100 units 10.30 10.13 10.06 10.06 10.67 10.76 10.69 10.72
101 to 1,000 units 8.94 9.04 8.89 8.82 9.00 8.93 8.82 9.00
>1,000 units 7.77 7.80 7.76 7.79 7.80 7.63 7.64 7.43
Total $ 9.15 $ 9.21 $ 9.10 $ 9.06 $ 9.17 $ 9.06 $ 9.01 $ 8.92
Cellular revenue
Number of activations 2,389 2,207 2,633 2,253 2,354 1,885 1,885 1,990
Revenue from cellular services (000's) $ 991 $ 775 $ 980 $ 795 $ 708 $ 624 $ 532 $ 499
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONSOLIDATED OPERATING EXPENSES SUPPLEMENTAL INFORMATION (a)
(unaudited and in thousands)
For the three months ended
3/31/09 6/30/09 9/30/09 12/31/09 3/31/10 6/30/10 9/30/10 12/31/10
Cost of products sold $ 1,669 $ 1,421 $ 1,593 $ 1,513 $ 1,209 $ 1,134 $ 819 $ 1,051
Service, rental and maintenance
Site rent 11,218 10,223 10,422 9,871 9,079 8,283 8,042 7,629
Telecommunications 4,485 4,284 3,945 3,885 3,831 3,467 3,341 3,066
Payroll and related 5,631 5,286 4,988 4,725 4,586 4,444 4,199 4,319
Stock based compensation 49 7 13 12 6 7 5 6
Other 1,572 1,490 1,582 1,622 1,439 974 1,234 1,201
Total service, rental and maintenance 22,955 21,290 20,950 20,115 18,941 17,175 16,821 16,221
Selling and marketing
Payroll and related 4,175 3,711 3,366 3,199 2,964 2,814 2,659 2,627
Commissions 1,201 1,422 1,328 1,131 1,164 1,367 1,163 1,007
Stock based compensation 109 26 26 26 17 22 17 17
Other 577 441 478 599 412 191 221 264
Total selling and marketing 6,062 5,600 5,198 4,955 4,557 4,394 4,060 3,915
General and administrative
Payroll and related 9,075 7,754 7,213 7,089 6,912 6,621 5,719 6,118
Stock based compensation 569 241 241 241 240 242 15 223
Bad debt 850 750 699 654 713 594 571 547
Facility rent 1,628 1,446 1,457 1,411 1,354 1,326 992 856
Telecommunications 771 721 720 702 657 603 518 480
Outside services 4,514 4,063 3,269 3,051 3,267 3,185 2,463 2,385
Taxes, licenses and permits 1,101 1,695 (680 ) 660 1,591 1,836 1,276 1,097
Other 1,678 6,131 3,131 1,481 1,078 1,517 1,353 3,123
Total general and administrative 20,186 22,801 16,050 15,289 15,812 15,924 12,907 14,829
Severance and restructuring 190 52 15 2,480 314 41 86 1,738
Depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899 4,226
Operating expenses $ 62,332 $ 62,338 $ 54,495 $ 53,133 $ 48,137 $ 45,366 $ 40,592 $ 41,980
Capital expenditures $ 6,054 $ 4,355 $ 1,806 $ 5,014 $ 1,725 $ 563 $ 1,730 $ 4,720
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(in thousands)
12/31/09 12/31/10
Assets
Current assets:
Cash and cash equivalents $ 109,591 $ 129,220
Accounts receivable, net 19,051 13,419
Prepaid expenses and other 3,016 2,798
Tax receivables 5,117 5,004
Deferred income tax assets, net 1,068 3,915
Total current assets 137,843 154,356
Property and equipment, net 41,295 27,135
Intangible assets, net 226 511
Tax receivables - 191
Deferred income tax assets, net 32,123 47,390
Other assets 2,061 1,075
Total assets $ 213,548 $ 230,658
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 35,214 $ 27,495
Customer deposits 888 718
Deferred revenue 7,422 6,268
Total current liabilities 43,524 34,481
Other long-term liabilities 11,228 11,787
Total liabilities 54,752 46,268
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 2 2
Additional paid-in capital 137,378 129,696
Retained earnings 21,416 54,692
Total stockholders' equity 158,796 184,390
Total liabilities and stockholders' equity $ 213,548 $ 230,658
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(in thousands)
For the twelve months ended
12/31/09 12/31/10
Cash flows from operating activities:
Net income $ 67,558 $ 77,898
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 41,914 24,127
Deferred income tax expense 32,433 (18,115 )
Amortization of stock based compensation 1,560 817
Provisions for doubtful accounts, service credits and other 4,515 4,416
Non-cash transaction tax accrual adjustments (7,218 ) (1,402 )
Loss (gain) on disposals of property and equipment 2 (12 )
Changes in assets and liabilities:
Accounts receivable 1,553 1,216
Prepaid expenses, intangible assets and other assets (434 ) (164 )
Accounts payable and accrued liabilities 482 (6,038 )
Customer deposits and deferred revenue (2,851 ) (1,324 )
Other long-term liabilities (37,654 ) -
Net cash provided by operating activities 101,860 81,419
Cash flows from investing activities:
Purchases of property and equipment (17,229 ) (8,738 )
Proceeds from disposals of property and equipment 168 75
Net cash used in investing activities (17,061 ) (8,663 )
Cash flows from financing activities:
Cash distributions to stockholders (45,502 ) (44,234 )
Purchase of common stock (4,738 ) (8,893 )
Net cash used in financing activities (50,240 ) (53,127 )
Net increase in cash and cash equivalents 34,559 19,629
Cash and cash equivalents, beginning of period 75,032 109,591
Cash and cash equivalents, end of period $ 109,591 $ 129,220
Supplemental disclosure:
Interest paid $ 2 $ -
Income taxes paid (state and local) $ 447 $ 434
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (a)
(in thousands, except share and per share amounts)
For the year ended December 31,
2009 2010
Revenue:
Paging service $ 262,958 $ 215,804
Cellular 3,541 2,363
Product sales 18,821 11,679
Other 4,386 3,408
Total revenue 289,706 233,254
Operating expenses:
Cost of products sold 6,196 4,213
Service, rental and maintenance 85,310 69,158
Selling and marketing 21,815 16,926
General and administrative 74,326 59,472
Severance and restructuring 2,737 2,179
Depreciation, amortization and accretion 41,914 24,127
Total operating expenses 232,298 176,075
% of total revenue 80.2 % 75.5 %
Operating income 57,408 57,179
% of total revenue 19.8 % 24.5 %
Interest income, net 69 16
Other income, net 530 2,805
Income before income tax benefit 58,007 60,000
Income tax benefit (9,551 ) (17,898 )
Net income $ 67,558 $ 77,898
Basic net income per common share (b) $ 2.95 $ 3.50
Diluted net income per common share (b) $ 2.90 $ 3.45
Basic weighted average common shares outstanding 22,918,904 22,265,961
Diluted weighted average common shares outstanding 23,260,431 22,567,030
Reconciliation of operating income to EBITDA (c):
Operating income $ 57,408 $ 57,179
Add back: depreciation, amortization and accretion 41,914 24,127
EBITDA $ 99,322 $ 81,306
% of total revenue 34.3 % 34.9 %
(a) Slight variations in totals are due to rounding.
(b) Basic and diluted net income per common share is computed independently for each period presented. As a result, the sum of the quarterly basic and diluted net income per common share for the years ended December 31, 2009 and 2010 may not equal the total computed for the year.
(c) EBITDA or earnings before interest, taxes, depreciation, amortization and accretion is a non-GAAP measure and is presented for analytical purposes only.

SOURCE: USA Mobility, Inc.

USA Mobility
Bob Lougee, 800-611-8488
bob.lougee@usamobility.com