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USA Mobility Reports Third Quarter Operating
Results; Board Declares Regular Quarterly and Special Cash Distribution
Subscriber and Revenue Trends Improve; Operating Expenses Again Reduced; Cash Flow Margins Remain High

SPRINGFIELD, Va., Oct 27, 2010 (BUSINESS WIRE) --

USA Mobility, Inc. (Nasdaq: USMO), a leading provider of wireless messaging and communications services, today announced operating results for the third quarter ended September 30, 2010.

In addition, the Company's Board of Directors declared a regular quarterly cash distribution of $0.25 per share and a special cash distribution of $1.00 per share. The cash distributions will be paid on December 10, 2010 to stockholders of record on November 18, 2010. Of the $0.25 cash distribution, the Company expects $0.24 will be a return of capital and $0.01 will be a dividend distribution. With respect to the special cash distribution, the Company expects $0.97 will be a return of capital and $0.03 will be a dividend distribution.

Total revenue for the third quarter was $56.7 million, compared to $59.1 million in the second quarter of 2010 and $69.5 million in the year-earlier quarter. Third quarter EBITDA (earnings before interest, taxes, depreciation, amortization and accretion) totaled $22.0 million, compared to $20.4 million in the second quarter and $25.7 million in the third quarter of 2009.

Net income for the third quarter was $15.4 million, or $0.69 per fully diluted share, compared to $13.9 million, or $0.58 per fully diluted share, in the second quarter, and $9.2 million, or $0.40 per fully diluted share, in the year-earlier quarter. Net income for the third quarter of 2010 included a one-time benefit of $0.8 million to operating expenses associated with the departure of the Company's former chief operating officer and chief financial officer (COO/CFO) and the one-time receipt of $2.0 million for the completion of the sale of a narrowband personal communications service license. Excluding these one-time items, net income for the third quarter of 2010 would have been $13.2 million, or $0.59 per fully diluted share.

Third quarter results included:

  • EBITDA margin (or EBITDA as a percentage of revenue) increased to 38.8 percent from 34.6 percent in the prior quarter and 37.0 percent in the third quarter of 2009. These results included a one-time benefit of $0.8 million to operating expenses associated with the departure of the Company's former COO/CFO. Absent the one-time benefit, EBITDA margin would have been approximately 37.4 percent.
  • The quarterly rate of revenue erosion improved to 4.1 percent in the third quarter, compared to 5.8 percent in the prior quarter, and 7.5 percent in the third quarter of 2009. The annual rate of revenue erosion was 18.4 percent, compared to 21.3 percent in both the second quarter and year-earlier quarter.
  • Total paging ARPU (average revenue per unit) was $8.85 in the third quarter, compared to $8.87 in the second quarter and $8.89 in the year-earlier quarter.
  • Net unit losses were 77,000 in the third quarter, compared to 72,000 in the prior quarter and 152,000 in the third quarter of 2009. Units in service totaled 1,950,000 at September 30, 2010, compared to 2,297,000 a year earlier.
  • The quarterly rate of subscriber loss was 3.8 percent, compared to 3.5 percent in the second quarter and 6.2 percent in the third quarter of 2009. The annual rate of subscriber erosion improved to 15.1 percent in the quarter from 17.2 percent in the prior quarter and 23.5 percent in the year-earlier quarter.
  • Operating expenses (excluding depreciation, amortization and accretion) totaled $34.7 million in the third quarter, a reduction of $9.1 million, or 20.8 percent, from $43.8 million in the third quarter of 2009. Operating expenses declined 10.3 percent from the prior quarter.
  • Capital expenses were $1.7 million in the quarter, compared to $1.8 million in the year-earlier quarter.
  • The Company repurchased 156,522 shares of common stock during the quarter under its buy back program, and approximately $16.1 million remains available for purchases under the currently approved plan which runs through December 31st of this year.
  • The Company's cash balance at September 30, 2010 was $141.8 million.

"USA Mobility reported another quarter of outstanding operating results, continuing the positive trends we experienced in the first half of 2010," said Vincent D. Kelly, president and chief executive officer. "During the quarter we met or exceeded the majority of our key performance targets, including continued improvement in subscriber and revenue trends. In addition, both cash flow margins and ARPU levels remained strong and cost management efforts continued on track, all consistent with the financial guidance we provided earlier this year. As a result, we again were able to generate sufficient cash flow to return significant capital to stockholders in the form of cash distributions and share repurchases."

Shawn E. Endsley, chief financial officer, said the Company continued to make steady progress in reducing operating expenses during the quarter. "Excluding depreciation, amortization and accretion, operating expenses decreased 10.3 percent from the second quarter and 20.8 percent over the past 12 months," he noted, "with significant reductions in payroll and related expenses and site rent expenses." Endsley added: "Operating expense as a percentage of revenue was 61.2 percent in the quarter, the lowest level in the Company's history, compared to 63.0 percent in the year-earlier quarter, while lower expenses contributed to an EBITDA margin of 38.8 percent versus 37.0 percent in the same quarter of 2009. After excluding the one-time benefit associated with the departure of the Company's former COO/CFO, operating expenses would have been 62.6 percent of revenue and the EBITDA margin would have been 37.4 percent."

Based on current trends, the Company maintained its previous financial guidance for 2010, with revenues expected to be between $230 million and $235 million, operating expenses (excluding depreciation, amortization and accretion) between $156 million and $159 million, and capital expenses between $7 million and $9 million.

USA Mobility plans to host a conference call for investors on its third quarter results at 10:00 a.m. Eastern Time on Thursday, October 28, 2010. The dial-in number for the call is 888-204-4517 (toll-free) or 913-312-0979 (toll). The pass code for the call is 4774094. A replay of the call will be available from 2:00 p.m. ET on October 28 until 11:59 p.m. on Thursday, November 11. The replay number is 888-203-1112 (toll-free) or 719-457-0820 (toll). The pass code for the replay is 4774094.

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 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.

Tables to Follow

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

Revenues:
Paging service $ 72,021 $ 67,972 $ 63,308 $ 59,657 $ 57,832 $ 54,875 $ 52,778
Cellular 991 775 980 795 708 624 532
Product sales 5,271 5,269 4,354 3,927 3,358 2,732 2,805
Other 1,408 1,129 856 993 886 881 595
Total revenues 79,691 75,145 69,498 65,372 62,784 59,112 56,710
Operating expenses:
Cost of products sold 1,669 1,421 1,593 1,513 1,209 1,134 819
Service, rental and maintenance 22,955 21,290 20,950 20,115 18,941 17,175 16,821
Selling and marketing 6,062 5,600 5,198 4,955 4,557 4,394 4,060
General and administrative 20,186 22,801 16,050 15,289 15,812 15,924 12,907
Severance and restructuring 190 52 15 2,480 314 41 86
Depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899
Total operating expenses 62,332 62,338 54,495 53,133 48,137 45,366 40,592
% of total revenues 78.2 % 83.0 % 78.4 % 81.3 % 76.7 % 76.7 % 71.6 %
Operating income 17,359 12,807 15,003 12,239 14,647 13,746 16,118
% of total revenues 21.8 % 17.0 % 21.6 % 18.7 % 23.3 % 23.3 % 28.4 %
Interest income (expense), net 26 28 16 (1 ) 3 4 6
Other income (expense), net 112 (42 ) 185 275 78 180 2,320
Income before income tax expense (benefit) 17,497 12,793 15,204 12,513 14,728 13,930 18,444
Income tax expense (benefit) 7,516 (31,953 ) 6,003 8,883 5,843 841 3,060
Net income $ 9,981 $ 44,746 $ 9,201 $ 3,630 $ 8,885 $ 13,089 $ 15,384
Basic net income per common share $ 0.43 $ 1.96 $ 0.40 $ 0.16 $ 0.39 $ 0.59 $ 0.70
Diluted net income per common share $ 0.43 $ 1.93 $ 0.40 $ 0.16 $ 0.39 $ 0.58 $ 0.69
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
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
Reconciliation of operating income to EBITDA (b):
Operating income $ 17,359 $ 12,807 $ 15,003 $ 12,239 $ 14,647 $ 13,746 $ 16,118
Add back: depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899
EBITDA $ 28,629 $ 23,981 $ 25,692 $ 21,020 $ 21,951 $ 20,444 $ 22,017
% of total revenues 35.9 % 31.9 % 37.0 % 32.2 % 35.0 % 34.6 % 38.8 %
(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

Units in service

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

ARPU

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

Gross disconnect rate (b)

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

Net gain / loss rate (c)

Direct one-way -6.4 % -5.4 % -5.3 % -4.4 % -4.1 % -3.1 % -3.2 %
Direct two-way -8.5 % -6.4 % -4.4 % -5.5 % -5.0 % -4.2 % -9.5 %
Total direct -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 %
Indirect one-way -17.8 % -13.7 % -16.9 % -13.6 % -10.5 % -9.8 % -9.2 %
Indirect two-way -8.2 % -7.2 % -14.9 % -5.2 % 17.1 % -4.7 % -0.9 %
Total indirect -14.6 % -11.3 % -16.1 % -10.4 % 0.7 % -7.4 % -5.1 %
Total one-way -7.3 % -6.0 % -6.0 % -5.0 % -4.4 % -3.4 % -3.5 %
Total two-way -8.4 % -6.7 % -8.2 % -5.4 % 2.5 % -4.4 % -6.1 %
Total paging net gain / loss rate -7.4 % -6.0 % -6.2 % -5.0 % -3.8 % -3.5 % -3.8 %
(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

Gross placement rate (b)
Healthcare 3.7 % 4.4 % 3.8 % 3.4 % 3.5 % 4.4 % 3.9 %
Government 1.7 % 2.4 % 2.4 % 1.9 % 1.8 % 1.9 % 3.1 %
Large enterprise 2.4 % 2.2 % 3.3 % 2.2 % 2.1 % 2.6 % 1.9 %
Other 2.4 % 2.5 % 2.3 % 2.2 % 2.4 % 2.0 % 2.5 %
Total direct 2.9 % 3.4 % 3.3 % 2.8 % 2.9 % 3.5 % 3.4 %
Total indirect 3.9 % 4.3 % 3.7 % 4.5 % 10.9 % 2.5 % 2.6 %
Total 3.0 % 3.5 % 3.3 % 3.0 % 3.5 % 3.4 % 3.3 %
Gross disconnect rate (b)
Healthcare -6.8 % -6.2 % -6.7 % -5.5 % -4.9 % -5.2 % -5.7 %
Government -9.9 % -10.7 % -10.7 % -9.4 % -9.1 % -8.3 % -8.3 %
Large enterprise -13.3 % -13.0 % -10.7 % -9.4 % -10.3 % -8.3 % -9.7 %
Other -13.0 % -12.4 % -10.6 % -10.1 % -11.0 % -9.6 % -9.3 %
Total direct -9.5 % -8.9 % -8.5 % -7.3 % -7.1 % -6.6 % -7.0 %
Total indirect -18.5 % -15.6 % -19.8 % -14.9 % -10.1 % -9.9 % -7.7 %
Total -10.4 % -9.6 % -9.5 % -8.0 % -7.3 % -6.9 % -7.0 %
Net loss rate (b)
Healthcare -3.1 % -1.8 % -2.9 % -2.1 % -1.4 % -0.8 % -1.8 %
Government -8.2 % -8.4 % -8.3 % -7.5 % -7.4 % -6.4 % -5.2 %
Large enterprise -10.9 % -10.9 % -7.4 % -7.2 % -8.1 % -5.7 % -7.8 %
Other -10.6 % -10.0 % -8.3 % -7.9 % -8.6 % -7.6 % -6.8 %
Total direct -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 %
Total indirect -14.6 % -11.3 % -16.1 % -10.4 % 0.7 % -7.4 % -5.1 %
Total -7.4 % -6.0 % -6.2 % -5.0 % -3.8 % -3.5 % -3.8 %
End of period units in service % of total (b)
Healthcare 44.9 % 49.8 % 51.5 % 53.2 % 54.5 % 56.1 % 57.1 %
Government 17.2 % 15.6 % 15.3 % 14.9 % 14.4 % 14.1 % 13.9 %
Large enterprise 12.0 % 11.8 % 11.8 % 11.4 % 10.9 % 10.7 % 10.2 %
Other 16.2 % 13.7 % 13.2 % 12.8 % 12.1 % 11.4 % 11.2 %
Total direct 90.3 % 90.9 % 91.8 % 92.3 % 91.9 % 92.3 % 92.4 %
Total indirect 9.7 % 9.1 % 8.2 % 7.7 % 8.1 % 7.7 % 7.6 %
Total 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

Account size ending units in service (000's)
1 to 3 units 137 126 118 109 101 95 88
4 to 10 units 82 75 70 66 62 58 54
11 to 50 units 199 183 168 158 149 140 130
51 to 100 units 125 112 104 97 92 86 79
101 to 1,000 units 626 580 546 519 499 483 456
>1,000 units 1,186 1,150 1,104 1,065 1,027 1,008 994
Total 2,355 2,226 2,110 2,014 1,930 1,870 1,801
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 to 10 units 3.5 % 3.4 % 3.3 % 3.3 % 3.2 % 3.1 % 3.0 %
11 to 50 units 8.4 % 8.2 % 8.0 % 7.8 % 7.7 % 7.5 % 7.2 %
51 to 100 units 5.3 % 5.0 % 4.9 % 4.8 % 4.8 % 4.6 % 4.4 %
101 to 1,000 units 26.6 % 26.0 % 25.9 % 25.8 % 25.9 % 25.8 % 25.3 %
>1,000 units 50.4 % 51.7 % 52.3 % 52.9 % 53.2 % 53.9 % 55.2 %
Total 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 to 10 units -8.8 % -7.9 % -6.7 % -6.1 % -5.3 % -6.0 % -7.5 %
11 to 50 units -8.9 % -8.2 % -7.7 % -5.9 % -5.8 % -6.1 % -7.3 %
51 to 100 units -6.2 % -10.1 % -7.6 % -6.8 % -4.4 % -6.5 % -7.9 %
101 to 1,000 units -8.0 % -7.4 % -5.9 % -4.9 % -3.7 % -3.3 % -5.6 %
>1,000 units -5.1 % -3.1 % -4.0 % -3.5 % -3.7 % -1.9 % -1.3 %
Total -6.6 % -5.5 % -5.2 % -4.5 % -4.2 % -3.1 % -3.6 %
Account size ARPU
1 to 3 units $ 14.73 $ 15.07 $ 14.98 $ 15.03 $ 15.28 $ 15.37 $ 15.48
4 to 10 units 14.00 14.30 14.24 14.21 14.37 14.35 14.51
11 to 50 units 11.41 11.65 11.54 11.45 11.86 12.01 12.18
51 to 100 units 10.30 10.13 10.06 10.06 10.67 10.76 10.69
101 to 1,000 units 8.94 9.04 8.89 8.82 9.00 8.93 8.82
>1,000 units 7.77 7.80 7.76 7.79 7.80 7.63 7.64
Total $ 9.15 $ 9.21 $ 9.10 $ 9.06 $ 9.17 $ 9.06 $ 9.01
Cellular revenue
Number of activations 2,389 2,207 2,633 2,253 2,354 1,885 1,885
Revenue from cellular services (000's) $ 991 $ 775 $ 980 $ 795 $ 708 $ 624 $ 532
(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

Cost of products sold $ 1,669 $ 1,421 $ 1,593 $ 1,513 $ 1,209 $ 1,134 $ 819
Service, rental and maintenance
Site rent 11,218 10,223 10,422 9,871 9,079 8,283 8,042
Telecommunications 4,485 4,284 3,945 3,885 3,831 3,467 3,341
Payroll and related 5,631 5,286 4,988 4,725 4,586 4,444 4,199
Stock based compensation 49 7 13 12 6 7 5
Other 1,572 1,490 1,582 1,622 1,439 974 1,234
Total service, rental and maintenance 22,955 21,290 20,950 20,115 18,941 17,175 16,821
Selling and marketing
Payroll and related 4,175 3,711 3,366 3,199 2,964 2,814 2,659
Commissions 1,201 1,422 1,328 1,131 1,164 1,367 1,163
Stock based compensation 109 26 26 26 17 22 17
Other 577 441 478 599 412 191 221
Total selling and marketing 6,062 5,600 5,198 4,955 4,557 4,394 4,060
General and administrative
Payroll and related 9,075 7,754 7,213 7,089 6,912 6,621 5,719
Stock based compensation 569 241 241 241 240 242 15
Bad debt 850 750 699 654 713 594 571
Facility rent 1,628 1,446 1,457 1,411 1,354 1,326 992
Telecommunications 771 721 720 702 657 603 518
Outside services 4,514 4,063 3,269 3,051 3,267 3,185 2,463
Taxes, licenses and permits 1,101 1,695 (680 ) 660 1,591 1,836 1,276
Other 1,678 6,131 3,131 1,481 1,078 1,517 1,353
Total general and administrative 20,186 22,801 16,050 15,289 15,812 15,924 12,907
Severance and restructuring 190 52 15 2,480 314 41 86
Depreciation, amortization and accretion 11,270 11,174 10,689 8,781 7,304 6,698 5,899
Operating expenses $ 62,332 $ 62,338 $ 54,495 $ 53,133 $ 48,137 $ 45,366 $ 40,592
Capital expenditures $ 6,054 $ 4,355 $ 1,806 $ 5,014 $ 1,725 $ 563 $ 1,730
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (a)
(in thousands)

12/31/09

9/30/10

(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 109,591 $ 141,813
Accounts receivable, net 19,051 14,282
Prepaid expenses and other 3,016 2,890
Tax receivables 5,117 -
Deferred income tax assets, net 1,068 831
Total current assets 137,843 159,816
Property and equipment, net 41,295 26,550
Intangible assets, net 226 443
Tax receivables - 5,175
Deferred income tax assets, net 32,123 22,738
Other assets 2,061 402
Total assets $ 213,548 $ 215,124
Liabilities and stockholders' equity
Current liabilities:
Accounts payable and accrued liabilities $ 35,214 $ 23,131
Customer deposits 888 753
Deferred revenue 7,422 7,095
Total current liabilities 43,524 30,979
Other long-term liabilities 11,228 12,631
Total liabilities 54,752 43,610
Commitments and contingencies
Stockholders' equity:
Preferred stock - -
Common stock 2 2
Additional paid-in capital 137,378 129,451
Retained earnings 21,416 42,061
Total stockholders' equity 158,796 171,514
Total liabilities and stockholders' equity $ 213,548 $ 215,124
(a) Slight variations in totals are due to rounding.
USA MOBILITY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (a)
(unaudited and in thousands)
For the nine months ended

9/30/09

9/30/10

Cash flows from operating activities:
Net income $ 63,928 $ 37,358
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and accretion 33,133 19,901
Deferred income tax expense 22,889 9,622
Amortization of stock based compensation 1,281 571
Provisions for doubtful accounts, service credits and other 3,559 3,504
Non-cash transaction tax accrual adjustments (4,879 ) (927 )
Loss (gain) on disposals of property and equipment 138 (3 )
Changes in assets and liabilities:
Accounts receivable 1,203 1,265
Prepaid expenses, intangible assets and other assets (913 ) 643
Accounts payable and accrued liabilities (4,403 ) (9,744 )
Customer deposits and deferred revenue (2,057 ) (462 )
Other long-term liabilities (37,654 ) -
Net cash provided by operating activities $ 76,225 $ 61,728
Cash flows from investing activities:
Purchases of property and equipment (12,215 ) (4,018 )
Proceeds from disposals of property and equipment 30 72
Net cash used in investing activities $ (12,185 ) $ (3,946 )
Cash flows from financing activities:
Cash distributions to stockholders (39,843 ) (16,667 )
Purchase of common stock (3,537 ) (8,893 )
Net cash used in financing activities $ (43,380 ) $ (25,560 )
Net increase in cash and cash equivalents 20,660 32,222
Cash and cash equivalents, beginning of period 75,032 109,591
Cash and cash equivalents, end of period $ 95,692 $ 141,813
Supplemental disclosure:
Interest paid 1 $ -
Income taxes paid (state and local) $ 437 $ 340
(a) Slight variations in totals are due to rounding.

SOURCE: USA Mobility, Inc.

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