Muzak LLC Announces Fourth Quarter Results

Business Wire, Feb 28, 2003

Business Editors

FORT MILL, S.C.--(BUSINESS WIRE)--Feb. 28, 2003

Muzak LLC ("Muzak" or the "Company"), the leading provider of business music services in the United States, today announced financial results for the quarter and year ended December 31, 2002.

Music and other business services revenue for the quarter ended December 31, 2002 was $41.9 million, an 8.2% increase, compared to $38.7 million during the quarter ended December 31, 2001. Equipment sales and related services revenue increased 9.2%, or $1.2 million, to $14.7 million during the quarter ended December 31, 2002 from $13.4 million in the comparable 2001 period. As a result, total revenue for the quarter ended December 31, 2002 was $56.6 million, an 8.5% increase, compared to $52.1 million during the quarter ended December 31, 2001. EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) was $19.1 million for the quarter ended December 31, 2002, an increase of $2.3 million or 13.6%, compared to $16.8 million, adjusted for certain non-cash and one time charges, in the quarter ended December 31, 2001.

For the year ended December 31, 2002, the Company had music and other business services revenue of $163.0 million, total revenue of $217.8 million and EBITDA adjusted for non-cash and one-time charges of $71.2 million, representing increases of 8.3%, 7.1%, and 8.4%, respectively over the year ended December 31, 2001. See attached reconciliation of net loss to EBITDA for the quarters and years ended December 31, 2002 and 2001.

"We continue to experience strength in our core music and other business services revenue. We have signed several new national clients during 2002, including Microsoft, Washington Mutual, Men's Wearhouse, Popeye's, Red Lobster, and Orkin Pest Control, among others. Additionally, we have been successful in recontracting and selling additional services to several of our national clients. We are enthusiastic about our national and local business and believe that 2003 will continue to bring consistent music and other business services revenue growth," commented Bill Boyd, Chief Executive Officer.

"Equipment sales increased 9.2% in the fourth quarter as compared to the prior year and 3.5% on a full year basis. The second half of 2002 reflects our targeted efforts to develop our equipment sales consistent with our growth in monthly recurring billings. We expect to realize continual growth in equipment sales during 2003," remarked Bill Boyd.

"We have achieved several operational and administrative initiatives during 2002" commented Stephen Villa, Chief Operating Officer. These accomplishments include:

-- Decreasing our annualized cancellation rate from 11.8% in 2001 to 10.7% in 2002, a $1.2 million positive EBITDA impact on an annualized basis

-- Improving our equipment and related services margin to 22% in the 2nd half of 2002, a 4 point improvement, over the 1st half of 2002- due in part to the implementation of our automated technician labor scheduling system

-- Decreasing other selling, general, and administrative expenses as a percentage of revenue from 28.5% in 2001 to 27.1% in 2002

-- Reducing capital expenditures by $4.1 million, or 10.0% in 2002 as compared to 2001, while continuing to achieve 8% music and other business services revenue growth

-- Reducing borrowings under the revolving loan facility by $2.3 million, a 13.3% reduction as compared to 2001

"The above accomplishments have resulted in a decrease in total leverage, excluding related party debt, from 4.54x in the fourth quarter of 2001 to 3.98x in the fourth quarter of 2002. In addition to the expected 2003 sales growth, we feel well positioned to make continued improvements in the operational and administrative areas," remarked Stephen Villa.

Muzak LLC will have a conference call on February 28, 2003 at 11:30 a.m. (Eastern Standard Time) to discuss fourth quarter and full year 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 March 1, 2003. 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.