Investor Relations -Press Release

<< Back
USA Mobility Reports Preliminary 2005 Operating Results
First Year Marked by Successful Merger Integration, Repayment of Debt and Return of Capital to Shareholders

ALEXANDRIA, Va., April 3, 2006 /PRNewswire-FirstCall via COMTEX News Network/ -- USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging services, today announced preliminary and unaudited operating results for the fourth quarter and year ended December 31, 2005, its first full year of operations following the merger between Arch Wireless, Inc. and Metrocall Holdings, Inc. on November 16, 2004.

The company announced on March 31, 2006 that it delayed the filing of its 2005 Form 10-K and its amended Form 10-K/A for the year ended December 31, 2004, and amended Form 10-Q/A's for the three interim quarterly periods for 2004 and 2005. The delay was the result of unforeseen time requirements in connection with completing its restatements of income taxes and deferred tax assets for the years 2003 and 2004, and interim periods of 2004 and 2005. The company is working diligently on completing this work and intends to file these statements as soon as practicable.

Upon completion of the audit and related filings, USA Mobility expects to report the following results: revenue of $618.6 million for 2005, with EBITDA of $155.9 million, or 25 percent of revenue; and operating income for 2005 of $2.5 million, as the company accelerated depreciation of the former Arch two-way paging system. Decommissioning of the system was completed in the fourth quarter of 2005. Additionally, the company recorded operating expenses in 2005 of $16.6 million for severance and contract termination costs associated with the integration of Arch and Metrocall.

The company said the merger integration, which is substantially complete, was the catalyst for significant improvements in 2005 operating results for the combined company.

Highlights of 2005 included:

    * The company completed a new long-term contract with its largest tower
      landlord.  In addition, subsequent to year end and effective January 1,
      2006, the company completed a long-term contract with its second
      largest landlord.  These contracts are expected to provide substantial
      cost savings compared to its previous site rent expense.

    * In the fourth quarter of 2005, the company completed its planned
      decommissioning of the former Arch two-way paging system.  The process
      included the decommissioning of more than 2,100 transmitters and will
      ultimately result in $21 million of annual savings by 2009 when all
      lease commitments expire.

    * The company made substantial progress in rationalizing its one-way
      paging systems, decommissioning approximately 1,200 one-way
      transmitters during the year.

    * Through new landlord contracts and network rationalization the company
      expects to reduce its total annual site rent expense $87 million, or 70
      percent, by 2010.

    * Integration and consolidation efforts reduced the number of employees
      from more than 2,800 at the time of the merger to 1,617 at December 31,
      2005.  This 43 percent reduction in workforce unlocked significant
      improvement in revenue per employee, which had been decreasing for both
      Arch and Metrocall over the four quarters leading up to the merger.
      Since the merger, revenue per employee has increased 40 percent and
      reached $343,000 of annualized revenue per employee as of the fourth
      quarter of 2005.

    * The company streamlined its sales organization from three divisions,
      which included 15 regions, to a single nationwide sales organization
      with 11 regions.  The consolidation included a significant reduction in
      management overhead.

    * In total, all integration and cost consolidation efforts reduced the
      company's operating expense, excluding depreciation and amortization,
      by $41.6 million per quarter, from $144.4 million on a pro-forma basis
      in the fourth quarter of 2004, to $102.8 million in the fourth quarter
      of 2005.

    * The company repaid $140 million in debt, which it incurred to consummate
      the merger, within the first nine months of operations.

    * The company paid a $1.50 per share dividend in December 2005,
      representing a $41 million return of capital to its investors.

    * The company began exploring alternative revenue sources, including the
      execution of an agreement with Advanced Metering Data Systems (AMDS) in
      which USA Mobility would share revenue derived from its narrowband PCS
      meter reading network.

    * USA Mobility strengthened and enhanced its executive management team,
      including the recruitment of its chief financial officer, general
      counsel and executive vice president for marketing, as well as filled
      the positions of chief operating officer and executive vice president
      of sales through internal promotions.

In addition to the benefits of the merger and subsequent integration, the company also experienced improved revenue and subscriber trends during 2005.

* The rate of revenue erosion continued to show improvement.  In all four
      quarters since the merger the year-over-year rate of revenue decline
      improved on a pro-forma basis from 22.7 percent in first quarter, 22.4
      percent in second quarter, 20.6 percent third quarter and finally to
      20.3 percent in the fourth quarter.

    * The quarterly loss in subscribers slowed significantly from over 500,000
      in the first quarter of 2004 on a pro-forma basis to 230,000 in the
      fourth quarter of 2005.  More importantly, the quarterly rate of
      erosion declined from 6.5 percent to 4.5 percent during the same
      period.

"We made excellent progress in our first year following the merger," said Vincent D. Kelly, president and chief executive officer. "We substantially integrated the nation's two largest paging carriers, achieving significant synergies and operational costs savings." Kelly added: "In addition, while the paging and wireless messaging sector remains challenging, we were encouraged by the improvement in subscriber erosion during the year as well as the improving trends in the pace of revenue decline. As we move forward to complete the integration process and implement new sales and marketing initiatives in 2006, we anticipate even further financial and operational improvements that will allow us to better meet the needs of our customers nationwide."

Thomas L. Schilling, chief financial officer, said: "We continued to strengthen our financial position since the merger. We significantly reduced our operating costs, paid off $140 million in debt, paid out $41 million in dividends and ended the year with $37.5 million in cash, and expect to end first quarter of 2006 with a cash balance of approximately $73 million." Schilling also outlined the company's guidance for 2006, stating: "In 2006 the company expects revenue to be in a range from $480 million to $500 million, operating expenses, excluding depreciation and amortization, are expected to be in a range from $370 million to $380 million, and capital expenses in a range from $15 million to $20 million."

Additional information on USA Mobility's historical subscriber trends and operating efficiency is available at: http://media.corporate-ir.net/media_files/priv/usmo/USAM_Chart_Art_3.pdf.

USA Mobility plans to host a conference call for investors on its fourth quarter and year-end results at 11:00 a.m. Eastern Time on Tuesday, April 4, 2006. The call-in number is 800-262-1292 (toll-free) or 719-457-2680 (toll). The pass code for the call is 4879478. A replay of the call will be available from 3:00 p.m. on April 4 until 11:59 p.m. on Tuesday, April 18, 2006. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4879478.

About USA Mobility

USA Mobility, Inc., headquartered in Alexandria, Virginia, is a leading provider of paging products and other wireless services to the business, government, healthcare and emergency response sectors. USA Mobility offers traditional one-way and advanced two-way paging via its nationwide networks covering more than 90% of the U.S. population. In addition, the company offers mobile voice and data services through Sprint Nextel and Cingular Wireless, including BlackBerry and GPS location applications. The company's product offerings include wireless connectivity systems for medical, business, government and other campus environments. USA Mobility focuses on the business-to-business marketplace and supplies mobile connectivity solutions to over two-thirds of the Fortune 1000 companies. 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 expectations for 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.

Contact:  Bob Lougee  (703) 721-3080

    Tables to Follow

                             Transmitter metrics

                        2005      2006    2007     2008      2009   2010

    Total End of
     Year Active
     Transmitters     15,521    14,245  11,645    8,950     8,450   7,995

    Average Active
     Transmitters     17,019    14,883  12,945   10,298     8,700   8,223

    Average Cost
     Per Transmitter    $611      $588    $515     $445      $402    $385

    Rate of Decline
     in Average Cost      --       -4%    -12%     -14%      -10%     -4%

    Expected
     Total Cost
     ($ in millions)  $124.8    $105.0   $80.0    $55.0     $42.0   $38.0

    Rate of Decline
     in Expected
     Total Cost           --      -16%    -24%     -31%      -24%    -10%

Note: The transmitter metrics presented above represent projections by USA Mobility and are forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

USA MOBILITY, INC.
                    SUMMARY OF CONSOLIDATED OPERATING RESULTS
                          (unaudited and in thousands)

                                               For the year ended December 31,
                                                   2004              2005

    Revenues:
     Service, rental and maintenance, net
      of service credits                          $470,751          $592,690
     Product sales                                  19,409            25,882
      Total revenue                                490,160           618,572

    Operating expenses:
     Cost of products sold                           4,347             4,483
     Service, rental and maintenance               161,071           218,160
     Selling and marketing                          36,085            43,145
     General and administrative                    130,046           177,438
     Depreciation and amortization                 113,000           153,403
     Stock based compensation                        4,863             2,832
     Severance and restructuring                    11,938            16,609
     Total operating expenses                      461,350           616,070

    Operating income (loss)                         28,810             2,502

    Interest expense                                (6,365)           (2,412)
    Interest income                                    451             1,089
    Loss on extinguishment of long-term
     debt                                           (1,031)           (1,338)
    Other income, net                                  814            (1,004)

    Income (loss) before income tax
     expense                                       $22,679           $(1,163)


    Reconciliation of operating income to
     EBITDA:
    Operating income (loss)                        $28,810            $2,502
    Addback:
     Depreciation and amortization                 113,000           153,403
    EBITDA                                        $141,810          $155,905

EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results.

USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business.

EBITDA should not be considered in isolation or as a substitute for net
income.


                                USA MOBILITY, INC.
                        SUMMARY OF CONSOLIDATED CASH FLOWS
                           (unaudited and in thousands)

                                                     Year Ended December 31,
                                                     2004              2005


       Net cash provided by operating
        activities                                 $114,265          $139,254

       Net cash used in investing
        activities                                $(133,722)         $(13,046)

       Net cash (used in) provided by
        financing activities                        $31,870         $(135,656)


       Net increase (decrease) in cash and
        cash equivalents                            $12,413           $(9,448)
       Cash and cash equivalents,
        beginning of period                          34,582            46,995
       Cash and cash equivalents, end of
        period                                      $46,995           $37,547



                               USA MOBILITY, INC.
                  SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)
                          (unaudited and in thousands)

                                               For the year ended December 31,
                                                    2004              2005
                                                  Proforma

    Revenues:
     Service, rental and maintenance, net
      of service credits                          $754,696          $592,690
     Product sales                                  34,009            25,882
      Total revenue                                788,705           618,572

    Operating expenses:
     Cost of products sold                           8,475             4,483
     Service, rental and maintenance               257,687           218,160
     Selling and marketing                          65,847            43,145
     General and administrative                    216,317           177,438
     Depreciation and amortization                 150,321           153,403
     Stock based compensation                        6,401             2,832
     Severance and restructuring                    13,622            16,609
     Total operating expenses                      718,670           616,070

    Operating income (loss)                         70,035             2,502

    Interest expense                                (7,360)           (2,412)
    Interest income                                    451             1,089
    Loss on extinguishment of long-term
     debt                                              -              (1,338)
    Other income, net                                  163            (1,004)

    Income (loss) before income tax
     expense                                       $63,289           $(1,163)


    Reconciliation of operating income to
     EBITDA:
    Operating income (loss)                        $70,035            $2,502
    Addback:
      Depreciation and amortization                150,321           153,403
    EBITDA                                        $220,356          $155,905

(a) Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.

EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results.

USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business.

EBITDA should not be considered in isolation or as a substitute for net
income.


                              USA MOBILITY, INC.
                  SUMMARY OF CONSOLIDATED OPERATING RESULTS
                         (unaudited and in thousands)


                                      For the three months ended
                           March 31,   June 30,   September 30,   December 31,
                             2004       2004          2004            2004

    Revenues:
     Service, rental and
      maintenance, net of
      service credits      $119,546   $111,174      $104,785        $135,246
     Product sales            4,113      4,623         4,632           6,041
      Total revenue         123,659    115,797       109,417         141,287

    Operating expenses:
     Cost of products sold      938        856           691           1,862
     Service, rental and
      maintenance            38,988     36,988        36,904          48,191
     Selling and marketing    9,068      8,757         7,862          10,398
     General and
      administrative         31,304     29,150        27,615          41,977
     Depreciation and
      amortization           26,309     31,071        22,302          33,318
     Stock based compensation 2,267      1,908         1,865          (1,177)
     Severance and
      restructuring           3,689        602         1,228           6,419
     Total operating
      expenses              112,563    109,332        98,467         140,988

    Operating income (loss)  11,096      6,465        10,950             299

    Interest expense         (3,400)    (1,770)          (18)         (1,177)
    Interest income              71         70            89             221
    Loss on extinguishment
     of long-term debt            -          -             -          (1,031)
    Other income, net           168        177            66             403

    Income (loss) before
     income tax expense     $ 7,935    $ 4,942       $11,087         $(1,285)

    Reconciliation of
     operating income to
     EBITDA:

    Operating income
     (loss)                $ 11,096     $6,465       $10,950            $299
    Addback:
     Depreciation and
      amortization           26,309     31,071        22,302          33,318
    EBITDA                  $37,405    $37,536       $33,252         $33,617


                                      For the three months ended
                           March 31,   June 30,   September 30,   December 31,
                             2005       2005          2005            2005

    Revenues:
     Service, rental and
      maintenance, net of
      service credits      $159,150   $151,483      $145,014        $137,043
     Product sales            6,527      6,054         6,940          6,3611
      Total revenue         165,677    157,537       151,954         143,404

    Operating expenses:
     Cost of products sold    1,279        929           945           1,330
     Service, rental and
      maintenance            56,648     56,429        54,490          50,593
     Selling and marketing   10,402     11,156        11,276          10,311
     General and
      administrative         48,427     46,491        43,260          39,260
     Depreciation and
      amortization           42,312     39,005        33,277          38,809
     Stock based
      compensation            1,385        597           271             579
     Severance and
      restructuring           5,136      9,904           855             714
     Total operating
      expenses              165,589    164,511       144,374         141,596

    Operating income (loss)      88     (6,974)        7,580           1,808

    Interest expense         (1,411)      (734)         (232)            (35)
    Interest income             197        235           214             443
    Loss on extinguishment
     of long-term debt         (594)      (432)         (312)              -
    Other income, net           137        (73)           76          (1,144)

    Income (loss) before
     income tax expense     $(1,583)   $(7,978)       $7,326          $1,072

    Reconciliation of
     operating income to
     EBITDA:

    Operating income
     (loss)                    $ 88   $ (6,974)       $7,580          $1,808
    Addback:
     Depreciation and
      amortization           42,312     39,005        33,277          38,809
    EBITDA                  $42,400    $32,031       $40,857         $40,617

EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results.

USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business.

EBITDA should not be considered in isolation or as a substitute for net
income.


                              USA MOBILITY, INC.
                SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)
                         (unaudited and in thousands)


                                      For the three months ended
                           March 31,   June 30,   September 30,   December 31,
                             2004       2004          2004            2004
                          Pro forma   Pro forma     Pro forma      Pro forma

    Revenues:
     Service, rental and
      maintenance, net of
      service credits      $206,356   $193,917      $182,452        $171,971
     Product sales            8,016      8,997         9,027           7,969
      Total revenue         214,372    202,914       191,479         179,940

    Operating expenses:
     Cost of products sold    1,878      2,199         2,124           2,274
     Service, rental and
      maintenance            67,441     64,542        62,746          62,958
     Selling and marketing   18,299     17,475        15,667          14,406
     General and
      administrative         53,707     51,181        50,289          61,140
     Depreciation and
      amortization           38,072     42,168        32,801          37,281
     Stock based compensation 5,966      2,810         2,093          (2,784)
     Severance and
      restructuring           3,689        602         1,228           6,419
     Total operating
      expenses              189,052    180,977       166,948         181,694

    Operating income (loss)  25,320     21,937        24,531          (1,754)

    Interest expense        (2,188)     (1,971)       (1,753)         (1,448)
    Interest income              -           -             -             451
    Loss on extinguishment
     of long-term debt           -           -             -               -

    Other income, net          110         201            17            (165)

    Income (loss) before
     income tax expense    $23,242     $20,167       $22,795         $(2,916)

    Reconciliation of
     operating income
     to EBITDA:

    Operating income
     (loss)               $ 25,320    $ 21,937       $24,531         $(1,754)
    Addback:
     Depreciation and
      amortization          38,072      42,168        32,801          37,281
    EBITDA                 $63,392     $64,105       $57,332         $35,527


                                        For the three months ended
                           March 31,   June 30,   September 30,   December 31,
                             2005       2005          2005            2005

    Revenues:
     Service, rental and
      maintenance, net of
      service credits      $159,150   $151,483      $145,014        $137,043
     Product sales            6,527      6,054         6,940          6,3611
      Total revenue         165,677    157,537       151,954         143,404

    Operating expenses:
     Cost of products sold    1,279        929           945           1,330
     Service, rental and
      maintenance            56,648     56,429        54,490          50,593
     Selling and marketing   10,402     11,156        11,276          10,311
     General and
      administrative         48,427     46,491        43,260          39,260
     Depreciation and
      amortization           42,312     39,005        33,277          38,809
     Stock based
      compensation            1,385        597           271             579
     Severance and
      restructuring           5,136      9,904           855             714
     Total operating
      expenses              165,589    164,511       144,374         141,596

    Operating income (loss)      88     (6,974)        7,580           1,808

    Interest expense         (1,411)      (734)         (232)            (35)
    Interest income             197        235           214             443
    Loss on extinguishment
     of long-term debt         (594)      (432)         (312)              -
    Other income, net           137        (73)           76          (1,144)

    Income (loss) before
     income tax expense     $(1,583)   $(7,978)       $7,326          $1,072

    Reconciliation of
     operating income to
     EBITDA:

    Operating income
     (loss)                    $ 88   $ (6,974)       $7,580          $1,808
    Addback:
     Depreciation and
      amortization           42,312     39,005        33,277          38,809
    EBITDA                  $42,400    $32,031       $40,857         $40,617

(a) Pro forma amounts assume the merger of Arch Wireless, Inc. and Metrocall Holdings, Inc. as of January 1, 2004.

EBITDA (Earnings before interest, taxes, and depreciation and amortization) is a non-GAAP financial measure that USA Mobility currently

calculates according to the schedule above, using GAAP amounts from the Summary of Consolidated Operating Results.

USA Mobility believes that EBITDA provides useful information regarding the potential cash generation of its ongoing business.

EBITDA should not be considered in isolation or as a substitute for net
income.


                              USA MOBILITY, INC.
                SUMMARY OF CONSOLIDATED OPERATING RESULTS (a)
                         (unaudited and in thousands)

                                       Three Months Ended

                        March 2004    June 2004   Sept. 2004    Dec. 2004

    Direct    One-Way:
      Beginning units
       in service            5,329        5,100        4,909        4,690
      Gross placements         226          181          182          166
      Disconnects            (455)        (372)        (401)        (392)
      Ending units in
       service               5,100        4,909        4,690        4,464

              Two-Way:
      Beginning units
       in service              506          483          462          449
      Gross placements          40           32           35           29
      Disconnects             (63)         (53)         (48)         (56)
      Ending units in service  483          462          449          422

    Indirect  One-Way:
      Beginning units in
       service               1,716        1,474        1,253        1,101
      Gross placements         157          145          160          143
      Disconnects            (399)        (366)        (312)        (257)
      Ending units in
       service               1,474        1,253        1,101          987

               Two-Way:
      Beginning units in
       service                 131          123          121          115
      Gross placements          20           16           20            7
      Disconnects             (28)         (18)         (26)         (28)
      Ending units in service  123          121          115           94

    Total
      Beginning units
       in service            7,682        7,180        6,745        6,355
      Gross placements         443          374          397          345
      Disconnects            (945)        (809)        (787)        (733)
      Ending units in
       service               7,180        6,745        6,355        5,967

    Adjusted Proforma ARPU
      Direct One-Way         $9.10        $8.96        $8.89        $8.75
      Direct Two-Way        $25.15       $24.68       $24.22       $23.93
      Indirect One-Way       $4.06        $4.26        $4.12        $4.26
      Indirect Two-Way      $12.89       $12.07       $11.30       $10.41
      Total                  $9.15        $9.16        $9.14        $9.09


                        March 2005    June 2005   Sept. 2005    Dec. 2005

    Direct    One-Way:
      Beginning units
       in service            4,464        4,273        4,114        3,977
      Gross placements         141          134          125          126
      Disconnects            (332)        (293)        (262)        (268)
      Ending units in
       service               4,273        4,114        3,977        3,835

              Two-Way:
      Beginning units
       in service              422          397          382          365
      Gross placements
                                22           29           17           18

      Disconnects             (47)         (44)         (34)         (36)
      Ending units in service  397          382          365          347

    Indirect  One-Way:
      Beginning units in
       service                 987          859          762          685
      Gross placements         107           92           26           26
      Disconnects            (235)        (189)        (103)        (107)
      Ending units in
       service                 859          762          685          604

              Two-Way:
      Beginning units in
       service                  94           91           90           89
      Gross placements           7            7            3           18
      Disconnects             (10)          (8)          (4)          (7)
      Ending units in service   91           90           89          100

    Total
      Beginning units
       in service            5,967        5,620        5,348        5,116
      Gross placements         277          262          171          188
      Disconnects            (624)        (534)        (403)        (418)
      Ending units in
       service               5,620        5,348        5,116        4,886


    Adjusted Proforma ARPU
      Direct One-Way         $8.65        $8.61        $8.48        $8.27
      Direct Two-Way        $23.98       $23.65       $24.28       $23.76
      Indirect One-Way       $4.07        $4.11        $4.36        $4.66
      Indirect Two-Way       $9.16        $8.71        $8.42        $7.80
      Total                  $9.01        $9.02        $9.04        $8.90


    (a) Assumes Arch and Metrocall combined as of January 1, 2004.
   (b) Amounts have been adjusted for rounding.

SOURCE USA Mobility, Inc.

Bob Lougee of USA Mobility, 1-703-721-3080