Business Services Industry
Muzak LLC Announces Third Quarter Results
Business Wire, Nov 6, 2002
Business Editors
FORT MILL, S.C.--(BUSINESS WIRE)--Nov. 6, 2002
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, 2002.
Music and other business services revenue for the quarter ended September 30, 2002 was $41.2 million, an 8.8% increase, compared to $37.9 million during the quarter ended September 30, 2001. Equipment sales and related services revenue increased 18.3%, or $2.3 million, to $15.0 million during the quarter ended September 30, 2002 from $12.7 million in the comparable 2001 period. As a result, total revenue for the quarter ended September 30, 2002 was $56.2 million, an 11.2% increase, compared to $50.5 million during the quarter ended September 30, 2001. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) adjusted for certain non-cash income was $18.6 million for the quarter ended September 30, 2002, an increase of $2.4 million or 14.6%, compared to the quarter ended September 30, 2001.
For the nine months ended September 30, 2002, the Company had music and other business services revenue of $121.1 million, total revenue of $161.2 million and EBITDA adjusted for non-cash and one-time charges of $52.1 million, representing increases of 8.4%, 6.6%, and 6.7%, respectively over the nine months ended September 30, 2001.
"We continue to achieve consistent 8% music and other business services revenue growth due to our focus on signing and installing new client locations and on reducing our subscriber churn rate. Our annualized churn rate was 10.0% for the nine months ended September 2002, compared to 11.8% for the 2001 comparable period. Additionally, we have signed several new national clients during 2002, including Orkin Pest Control, Gart Sports, Kwik Trip, Sunbelt Rentals, Men's Wearhouse and Wolfgang Puck. Equipment sales increased 18.3% in the third quarter as compared to the prior year and 9.7% over the second quarter of 2002. This is a direct result of our targeted efforts to develop our equipment sales consistent with our growth in monthly recurring billings. We expect full year music and other business services revenue growth to be approximately 8% and for equipment sales to slightly exceed the comparable 2001 period," commented Bill Boyd, Chief Executive Officer.
"We remain committed to identifying and implementing cost efficiencies. Our focus on managing labor technician costs is enabling us to improve overall installation and service costs as evidenced by the 3.8% improvement in equipment and labor margins in the third quarter of 2002 versus the prior year. In addition, we have decreased other selling, general, and administrative expenses as a percentage of revenue each sequential quarter during 2002, down from 28.8% in the first quarter of 2002 to 26.1% in the third quarter, " commented Stephen Villa, Chief Operating Officer.
Muzak LLC will have a conference call on November 6, 2002 at 3:30 p.m. (Eastern Standard Time) to discuss third quarter 2002 results. The call in number is 1-800-756-4697 and the access code is 0801. A replay of the call will be available for one week beginning on November 7, 2002. The replay number is 1-800-756-3819 and the access code is 080100.
Muzak, the leading audio imaging company, enhances brands and creates experiences with Audio Architecture(TM) and Muzak Voice(TM). More than 100 million people hear Muzak programs each day. We deliver 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.
Muzak LLC
Financial Highlights
--------------------
(unaudited, dollars in thousands)
Quarter Ended Quarter Ended
09/30/2002 09/30/2001 %Change 06/30/2002
Selected Operations Data
Revenues
Music and Other Business
Services $ 41,177 $ 37,851 8.8% $ 40,406
Equipment Sales and
Related Services 14,989 12,675 18.3% 13,663
------ ------ ---- ------
Total Revenues 56,166 50,526 11.2% 54,069
------ ------ ---- ------
Cost of Revenues
Music and Other Business
Services 7,779 7,396 5.2% 7,743
Equipment Sales and
Related Services 11,874 10,519 12.9% 11,043
------ ------ ---- ------
Total Cost of Revenues 19,653 17,915 9.7% 18,786
------ ------ ---- ------
Selling, General and
Administrative
Amortization of
Commissions 3,260 2,476 31.7% 3,042
Other Selling, General
and Administrative 14,671 13,926 5.3% 14,809
------ ------ ---- ------
Total Selling, General
and Administrative 17,931 16,402 9.3% 17,851
------ ------ ---- ------
One time expenses and
other non-cash
charges (income) (77) 99 -177.8% 3,048
------ ------ ----- ------
EBITDA (1) $ 18,659 $ 16,110 15.8% $ 14,384
====== ====== ===== ======
EBITDA Margin 33.2% 31.9% 26.6%
Adjusted EBITDA (2) $ 18,582 $ 16,209 14.6% $ 17,432
====== ====== ==== ======
Adjusted EBITDA Margin 33.1% 32.1% 32.2%
Balance sheet data (end of period)
Total Assets $ 478,093 $ 506,856 $ 482,019
Revolving Loan 22,800 20,000 19,800
Total Debt (3) 315,677 309,092 312,655
Other financial data
Interest Expense $ 6,829 $ 7,431 $ 7,012
Net Debt to Adjusted
EBITDA (4) 4.23x 4.72x 4.48x
(1) EBITDA reflects Earnings Before Interest, Taxes, Depreciation
and Amortization.
(2) Represents EBITDA adjusted for non cash charges and one-time
expenses. The quarter ended June 30, 2002 includes a one-time charge
of approximately $3.1 million relating to an accrual for prior period
licensing royalties and related expenses.
(3) Total debt excludes $2.2 million of debt of a subsidiary that
is non-recourse to the Company.
(4) Reflects Total Debt described in (3) above less cash divided
by Adjusted EBITDA described in (2) above on a Last Quarter Annualized
Basis.
Muzak LLC
Financial Highlights
--------------------
Nine Months ended
09/30/2002 09/30/2001 % Change
-------------------------------
Selected Operations Data
Revenues
Music and Other Business Services $121,123 $111,782 8.4%
Equipment Sales and Related Services 40,075 39,447 1.6%
-------------------------------
Total Revenues 161,198 151,229 6.6%
-------------------------------
Cost of Revenues
Music and Other Business Services 23,283 21,955 6.0%
Equipment Sales and Related Services 32,474 29,515 10.0%
-------------------------------
Total Cost of Revenues 55,757 51,470 8.3%
-------------------------------
Selling, General and Administrative
Amortization of Commissions 9,182 6,829 34.5%
Other Selling, General and
Administrative 44,132 44,054 0.2%
-------------------------------
Total Selling, General and
Administrative 53,314 50,883 4.8%
-------------------------------
One time expenses and other non-cash
charges (income) 3,491 876 298.5%
-------------------------------
EBITDA (1) $48,636 $48,000 1.3%
======================
EBITDA Margin 30.2% 31.7%
Adjusted EBITDA (2) $52,127 $48,876 6.7%
======================
Adjusted EBITDA Margin 32.3% 32.3%
(1) EBITDA reflects Earnings Before Interest, Taxes, Depreciation
and Amortization.
(2) Represents EBITDA adjusted for non cash charges and one time
expenses. The nine months ended September 30, 2002 includes one-time
charges of approximately $0.5 million relating to postponed financing
transactions and a $3.1 million accrual for prior period licensing
royalties and related expenses. The nine months ended September 30,
2001 includes a one-time charge of approximately $0.7 million relating
to postponed financing transactions.
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