Muzak LLC Announces Third Quarter Results

Business Wire, Nov 6, 2001

Business Editors/Entertainment Writers

FORT MILL, S.C.--(BUSINESS WIRE)--Nov. 6, 2001

Muzak LLC ("Muzak" or the "Company"), the leading provider of business music services in the United States, today announced financial results for the quarter ended September 30, 2001.

Music and other business services revenue for the quarter ended September 30, 2001 was $37.9 million, an 8.6% increase, compared to $34.9 million during the quarter ended September 30, 2000. Equipment sales and related services decreased 15.5% for the comparable period. As a result, total revenue for the quarter ended September 30, 2001 was $50.5 million, a 1.3% increase, compared to $49.9 million during the quarter ended September 30, 2000. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) adjusted for certain non-cash charges was $16.2 million for the quarter ended September 30, 2001, an increase of $0.4 million or 2.3%, compared to the quarter ended September 30, 2000. On a pro-forma, like period basis that excludes the impact of acquisitions and other non-recurring items, music and other business services revenue increased 7.5% and total revenues and adjusted EBITDA remained relatively flat in the third quarter of 2001, as compared to the third quarter of 2000.

For the nine months ended September 30, 2001, the Company had music and other business services revenue, total revenue, and EBITDA of $111.8 million, $151.2 million, and $48.6 million, respectively, an increase of 9.6%, 6.8%, and 13.9%, respectively over the nine months ended September 30, 2000. On a pro-forma, like period basis, music and other business services revenue, total revenue, and EBITDA increased 8.5%, 5.0%, and 7.3%, respectively for the nine months ended September 30, 2001 as compared to the nine months ended September 30, 2000.

"Given the current economic conditions, we are pleased with our ability to continue to grow our business services revenue both at the local and national level," commented Bill Boyd, Chief Executive Officer of Muzak. "During the third quarter, we entered into music and other business services agreements with new national clients including JCrew, Cingular Wireless, Burlington Coat Factory, Equity Residential, and Seattle's Best Coffee, among others."

Equipment and related services revenue decreased from the comparable prior year quarter primarily due to less capital spending associated with a reduction in new location store build outs within the retail sector. In addition, decreased equipment and related services revenues, coupled with disruptions in our technician work force's ability to install new client locations in the days following September 11, 2001, resulted in lower margins in the third quarter of 2001 as compared to the third quarter of 2000. Equipment and related services revenue and margins were flat for the nine month period ended September 30, 2001 as compared to the nine month period ended September 30, 2000. Other selling, general, and administrative expenses as a percentage of revenues have decreased from 28.9% in the third quarter of 2000 to 27.6% in the comparable 2001 period. "This continued decrease is the result of management's committed focus on controlling expenses," remarked Stephen Villa, Chief Operating Officer.

As separately announced on October 10, 2001, Stephen Villa has been named Chief Operating Officer. In addition, he will serve as a Class B Director of Muzak Holdings LLC. He joined Muzak in September 2000 as Chief Financial Officer and will continue to serve in such capacity in addition to his role as Chief Operating Officer.

Muzak LLC will have a conference call on November 6, 2001 at 3:00 p.m. (Eastern Standard Time) to discuss third quarter results. The call in number is 1-800-553-0351. A replay of the call will be available for 72 hours beginning at 8:00 p.m. on November 6, 2001. The replay number is 1-800-475-6701 and the access code is 610427.

Muzak creates experiences with Audio Architecture, the art of capturing the emotional power of music and putting it to work for clients seeking to enhance their brand image. The Company serves approximately 335,000 client locations in the United States and 14 foreign countries. More than 100 million people hear Muzak programs each day. The Company delivers music, messaging, and sound system design through more than 200 sales and service locations.

The above statements regarding future financial position, strategy, and plans and objectives are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve risks and uncertainties, including, but not limited to those related to the Company's substantial leverage and debt service requirements, the restrictions imposed by the terms of the Company's debt agreement, the Company's history of net losses, the Company's dependence on satellite delivery of its products, the terms of the Company's agreements, the Company's ability to integrate acquisitions, the ability of the Company to obtain future financings to fund internal growth, the effects of competition and technological change, the availability of cost-effective programming, the impact of legislation and regulation, risks related to 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.