Filed by Arch Wireless, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Commission File No. 333-115769
Subject Company: Arch Wireless, Inc.
Subject Company: Metrocall Holdings, Inc.
Subject Company: USA Mobility, Inc.
In connection with a proposed business combination transaction, on July 23, 2004 USA Mobility, Inc. (formerly known as Wizards-Patriots Holdings, Inc.), the holding company in the proposed transaction (Parent), filed with the Securities and Exchange Commission (the SEC) an amended registration statement on Form S-4, which includes a preliminary joint proxy statement/prospectus of Arch Wireless, Inc. (Arch) and Metrocall Holdings, Inc. (Metrocall) and other relevant documents in connection with the proposed transaction. In addition, Parent will prepare and file a definitive joint proxy statement/prospectus and other documents regarding the proposed transaction with the SEC. Investors of Arch and Metrocall are urged to read the definitive joint proxy statement/prospectus and other relevant materials because they will contain important information about Parent, Arch and Metrocall and the proposed transaction. The definitive joint proxy statement/prospectus will be sent to stockholders of Arch and Metrocall seeking their approval of the proposed transaction. Investors may obtain a free copy of these materials and other documents filed by Parent, Arch and Metrocall with the Securities and Exchange Commission at the SECs website at www.sec.gov. A free copy of the definitive joint proxy statement/prospectus, once it is available, also may be obtained from Arch Wireless, Inc., care of Bob Lougee, Lougee Consulting Group, 7 Bridgeton Way, Hopkinton, MA 01748, (tel.: 508-435-6117), or Metrocall Holdings, Inc., 6677 Richmond Highway, Alexandria, Virginia 22306, Attention: Shirley White (tel.: 703-660-6677). Investors also may access free copies of the documents filed with the SEC by Arch on Archs website at www.arch.com or upon written request to Arch at its address listed above, and investors may access free copies of the documents filed with the SEC by Metrocall on Metrocalls website at www.metrocall.com or upon written request to Metrocall at its address indicated above.
Arch and Metrocall and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Arch stockholders. The directors and executive officers of Arch include: William E. Redmond, Jr, Richard A. Rubin, Samme L. Thompson, James V. Continenza, Eric Gold, Carroll D. McHenry, Matthew Oristano, J. Roy Pottle and C. Edward Baker, Jr. The directors and executive officers of Metrocall include: Vincent D. Kelly, Royce Yudkoff, Eugene I. Davis, Nicholas A. Gallopo, David J. Leonard Brian OReilly, Steven D. Scheiwe, George Z. Moratis and Stan Sech. Stockholders may obtain additional information regarding the interests of such participants by reading the preliminary joint proxy statement/prospectus and, when it becomes available, the definitive joint proxy statement/prospectus.
Set forth below are written materials relating to the merger first published on or after the date hereof. These materials contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on the current expectations and beliefs of the management of Arch and Metrocall and are subject to a number of factors and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The forward-looking statements contained in these materials include statements about future financial and operating results, synergies and the proposed merger of Arch and Metrocall. These statements are not guarantees of future performance, involve certain risks, uncertainties and assumptions that are difficult to predict, and are based upon assumptions as to future events that may not prove accurate. Therefore, actual outcomes and results may differ materially from what is expressed therein.
Risks and uncertainties pertaining to the following factors, among others, could cause actual results to differ materially from those described in the forward-looking statements: the ability of Arch and Metrocall to obtain the stockholder and regulatory approvals required for the merger; the new companys ability to successfully integrate the businesses of the two companies; unexpected costs involved in the merger or in the new companys ability to achieve cost-cutting synergies; the impact of uncertainty surrounding the merger on the businesses of the two companies; the impact of competition or marketplace trends on the market for the companies products; and deterioration in the business of Arch or Metrocall prior to closing. Additional economic, business, competitive and/or regulatory factors affecting Archs and Metrocalls businesses generally that may cause actual results to differ materially are discussed in their respective filings with the SEC, including their Annual Reports on Form 10-K for the fiscal year ended December 31, 2003, each as amended by an Amendment No. 1 to Form 10-K filed on April 29, 2004. Arch and Metrocall do not undertake any obligation to (and expressly disclaim any such obligation to) update or alter their forward-looking statements, whether as a result of new information, future events or otherwise.
NEWS RELEASE
FOR IMMEDIATE RELEASE Tuesday, August 3, 2004 |
CONTACT: Bob Lougee (508) 435-6117 |
Arch Wireless Reports Second Quarter Operating Results
Westborough, MA (August 3, 2004) - Arch Wireless, Inc. (Nasdaq: AWIN; BSE: AWL), a leading wireless messaging and mobile information company, today announced consolidated net income of $3.1 million, or $0.15 per share, for the quarter ended June 30, 2004. Consolidated revenues for the second quarter of 2004 were $116 million.
Despite ongoing competition in the wireless messaging industry, we continued to improve our operations and business processes and are pleased with the companys second quarter operating results, said C. Edward Baker, Jr., chairman and chief executive officer. During 2003 and the first half of 2004 we made several important changes to our operating processes, allowing for continued expense savings and the creation of necessary processes to eliminate excess network capacity and maintain or improve many of our operating metrics, he added.
Arch reported a net decline of 209,000 messaging units in service for the quarter ended June 30, 2004 comprised of 202,000 one-way messaging units and 7,000 two-way messaging units. Messaging units in service totaled 3,969,000 at June 30, 2004 including 3,380,000 direct units in service and 589,000 indirect units in service. Average revenue per direct unit in service was $10.10 during the second quarter compared to $3.66 per indirect unit in service.
J. Roy Pottle, executive vice president and chief financial officer, said Arch continued to strengthen its financial position during the quarter. Arch became debt-free on May 28, 2004 when our wholly owned subsidiary, Arch Wireless Holdings, Inc. (AWHI), completed the final redemption of its 12% Subordinated Secured Compounding Notes due 2009, he said. In addition to repaying $300 million of debt over the past twenty-four months, Pottle noted, the company has successfully restructured its operations to reduce fixed costs in order to maintain operating margins despite declines in revenue. This provides Arch with increased operating and financial flexibility in advance of our pending merger with Metrocall.
Baker noted that progress toward Archs proposed merger with Metrocall is on schedule. We expect to file a definitive joint proxy statement/prospectus relating to the merger with the Securities and Exchange Commission in the near future, he said, which will clear the way for shareholders of both companies to vote on the merger after
distribution and review of the definitive joint proxy/prospectus. Arch and Metrocall currently plan to schedule special meetings of their respective shareholders for mid-September. Baker said the proposed merger also requires the approval and consent of the Federal Communications Commission and clearance from the U.S. Department of Justice. We expect those agency reviews to be completed within the next few months, he added, and that, as anticipated, the merger will be completed at the end of the third quarter or early in the fourth quarter. Arch and Metrocall announced a definitive merger agreement on March 29, 2004 in which both companies would combine into a new holding company.
In connection with the proposed business combination transaction, on July 23, 2004 USA Mobility, Inc. (formerly known as Wizards-Patriots Holdings, Inc.), the holding company in the proposed transaction (Parent), filed with the Securities and Exchange Commission (the SEC) an amended registration statement on Form S-4, which includes a preliminary joint proxy statement/prospectus of Arch and Metrocall and other relevant documents in connection with the proposed transaction. In addition, Parent will prepare and file a definitive joint proxy statement/prospectus and other documents regarding the proposed transaction with the SEC. Investors of Arch and Metrocall are urged to read the definitive joint proxy statement/prospectus and other relevant materials because they will contain important information about Parent, Arch and Metrocall and the proposed transaction. The definitive joint proxy statement/prospectus will be sent to stockholders of Arch and Metrocall seeking their approval of the proposed transaction. Investors may obtain a free copy of these materials and other documents filed by Parent, Arch and Metrocall with the Securities and Exchange Commission at the SECs website at www.sec.gov. A free copy of the definitive joint proxy statement/prospectus, once it is available, also may be obtained from Arch Wireless, Inc., 1800 West Park Drive, Suite 250, Westborough, MA 01581, Attention: Jerry Cimmino (tel.: 508-870-6700), or Metrocall Holdings, Inc., 6677 Richmond Highway, Alexandria, Virginia 22306, Attention: Shirley White (tel.: 703-660-6677). Investors also may access free copies of the documents filed with the SEC by Arch on Archs website at www.arch.com or upon written request to Arch at its address listed above, and investors may access free copies of the documents filed with the SEC by Metrocall on Metrocalls website at www.metrocall.com or upon written request to Metrocall at its address indicated above.
Arch and Metrocall and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Arch stockholders. The directors and executive officers of Arch include: William E. Redmond, Jr., Richard A. Rubin, Samme L. Thompson, James V. Continenza, Eric Gold, Carroll D. McHenry, Matthew Oristano, J. Roy Pottle and C. Edward Baker, Jr. The directors and executive officers of Metrocall include: Vincent D. Kelly, Royce Yudkoff, Eugene I. Davis, Nicholas A. Gallopo, David J. Leonard, Brian OReilly, Steven D. Scheiwe, George Z. Moratis and Stan Sech. Stockholders may obtain additional information regarding the interests of such participants by reading the preliminary joint proxy statement/prospectus and, when it becomes available, the definitive joint proxy statement/prospectus.
Arch Wireless, Inc., headquartered in Westborough, Mass., is a leading wireless messaging and mobile information company with operations throughout the United States. It offers a full range of wireless messaging and wireless e-mail services, including mobile data solutions for the enterprise, to business and retail customers nationwide. Arch provides services to customers in all 50 states, the District of Columbia, Puerto Rico, Canada, Mexico and in the Caribbean principally through a nationwide direct sales force, as well as through indirect resellers, retailers and other strategic partners. Additional information on Arch is available on the Internet at http://www.arch.com.
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 Archs expectations for future operating and financial performance and completion of its pending merger with Metrocall, 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 Archs 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 its paging products and services, Archs ability to continue to reduce operating expenses, possible delays in or failure to obtain shareholder or regulatory approvals of the merger with Metrocall, Archs 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 Archs periodic reports and registration statements filed with the Securities and Exchange Commission. Although Arch 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. Arch disclaims any intent or obligation to update any forward-looking statements.
ARCH WIRELESS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(unaudited and in thousands)
June 30, | December 31, | |||||||
2004 |
2003 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 22,367 | $ | 34,582 | ||||
Accounts receivable, net |
20,279 | 26,052 | ||||||
Deposits |
3,224 | 6,776 | ||||||
Prepaid rent |
384 | 514 | ||||||
Prepaid expenses and other |
8,331 | 7,381 | ||||||
Deferred income tax |
25,893 | 30,206 | ||||||
Total current assets |
80,478 | 105,511 | ||||||
Property and equipment |
391,936 | 394,436 | ||||||
Less accumulated depreciation and amortization |
(224,615 | ) | (180,563 | ) | ||||
Property and equipment, net |
167,321 | 213,873 | ||||||
Assets held for sale |
| 1,139 | ||||||
Intangible and other assets, net |
3 | 3 | ||||||
Deferred income tax |
191,955 | 189,346 | ||||||
$ | 439,757 | $ | 509,872 | |||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current maturities of long-term debt |
$ | | $ | 20,000 | ||||
Accounts payable |
8,403 | 8,836 | ||||||
Accrued compensation and benefits |
7,131 | 17,820 | ||||||
Accrued network costs |
7,100 | 7,893 | ||||||
Accrued property and sales taxes |
8,887 | 10,076 | ||||||
Accrued interest |
| 1,520 | ||||||
Accrued restructuring charges |
8,470 | 11,481 | ||||||
Accrued other |
7,028 | 8,104 | ||||||
Customer deposits and deferred revenue |
21,316 | 25,477 | ||||||
Total current liabilities |
68,335 | 111,207 | ||||||
Long-term debt, less current maturities |
| 40,000 | ||||||
Other long-term liabilities |
6,921 | 4,042 | ||||||
Stockholders equity: |
||||||||
Common stock |
2 | 2 | ||||||
Treasury stock |
(3,112 | ) | | |||||
Additional paid-in capital |
344,576 | 339,928 | ||||||
Deferred stock compensation |
(2,261 | ) | (2,682 | ) | ||||
Retained earnings |
25,296 | 17,375 | ||||||
Total stockholders equity |
364,501 | 354,623 | ||||||
$ | 439,757 | $ | 509,872 | |||||
ARCH WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(in thousands, except share and per share amounts)
(unaudited)
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
2004 |
2003 |
2004 |
2003 |
|||||||||||||
Revenues: |
||||||||||||||||
One-way messaging |
$ | 93,680 | $ | 126,761 | $ | 194,042 | $ | 263,632 | ||||||||
Two-way messaging |
22,117 | 27,315 | 45,414 | 55,197 | ||||||||||||
Total revenues |
115,797 | 154,076 | 239,456 | 318,829 | ||||||||||||
Operating expenses: |
||||||||||||||||
Cost of products sold |
856 | 1,374 | 1,794 | 3,032 | ||||||||||||
Service, rental, and maintenance |
36,988 | 48,511 | 75,976 | 98,646 | ||||||||||||
Selling |
8,757 | 11,721 | 17,825 | 24,215 | ||||||||||||
General and administrative |
28,968 | 43,887 | 60,085 | 92,979 | ||||||||||||
Depreciation and amortization |
31,071 | 30,638 | 57,380 | 63,861 | ||||||||||||
Stock based and other compensation |
2,510 | 4,276 | 5,448 | 6,471 | ||||||||||||
Restructuring charges |
| | 3,018 | | ||||||||||||
Total operating expenses |
109,150 | 140,407 | 221,526 | 289,204 | ||||||||||||
Operating income |
6,647 | 13,669 | 17,930 | 29,625 | ||||||||||||
Interest expense, net |
(1,700 | ) | (4,827 | ) | (5,029 | ) | (10,473 | ) | ||||||||
Other income (expense) |
177 | 73 | 345 | 83 | ||||||||||||
Income before income tax expense |
5,124 | 8,915 | 13,246 | 19,235 | ||||||||||||
Income tax expense |
(2,060 | ) | (3,671 | ) | (5,325 | ) | (7,920 | ) | ||||||||
Net income |
$ | 3,064 | $ | 5,244 | $ | 7,921 | $ | 11,315 | ||||||||
Basic net income per common share |
$ | 0.15 | $ | 0.26 | $ | 0.40 | $ | 0.57 | ||||||||
Diluted net income per common share |
$ | 0.15 | $ | 0.26 | $ | 0.39 | $ | 0.57 | ||||||||
Basic weighted average common shares outstanding |
19,965,076 | 20,000,000 | 19,982,635 | 20,000,000 | ||||||||||||
Diluted weighted average common shares outstanding |
20,109,191 | 20,025,555 | 20,093,617 | 20,012,848 | ||||||||||||
ARCH WIRELESS, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
Six Months Ended June 30, |
||||||||
2004 |
2003 |
|||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 7,921 | $ | 11,315 | ||||
Adjustments to reconcile net income to net cash
provided by operating activities: |
||||||||
Depreciation and amortization |
57,380 | 63,861 | ||||||
Accretion of long-term debt |
| 4,750 | ||||||
Amortization of stock and other compensation |
1,448 | 1,773 | ||||||
Deferred income tax provision |
5,325 | 7,920 | ||||||
(Gains) losses on disposals of property and |
(230 | ) | 61 | |||||
equipment
Other income |
(110 | ) | (119 | ) | ||||
Provisions for doubtful accounts and service
adjustments |
4,378 | 15,294 | ||||||
Changes in assets and liabilities: |
||||||||
Accounts receivable |
1,395 | (2,298 | ) | |||||
Prepaid expenses and other |
(129 | ) | 13,071 | |||||
Accounts payable and accrued expenses |
(18,711 | ) | (16,708 | ) | ||||
Customer deposits and deferred revenue |
(4,161 | ) | (4,340 | ) | ||||
Other long-term liabilities |
2,801 | 1,733 | ||||||
Net cash provided by operating activities |
57,307 | 96,313 | ||||||
Cash flows from investing activities: |
||||||||
Additions to property and equipment |
(8,138 | ) | (9,695 | ) | ||||
Proceeds from disposals of property and equipment |
1,618 | 2,232 | ||||||
Receipts from note receivable |
110 | 119 | ||||||
Net cash used for investing activities |
(6,410 | ) | (7,344 | ) | ||||
Cash flows from financing activities: |
||||||||
Repayment of long-term debt |
(60,000 | ) | (80,000 | ) | ||||
Capital contribution (distribution) |
(3,112 | ) | | |||||
Net cash used for financing activities |
(63,112 | ) | (80,000 | ) | ||||
Net increase (decrease) in cash and cash equivalents |
(12,215 | ) | 8,969 | |||||
Cash and cash equivalents, beginning of period |
34,582 | 37,187 | ||||||
Cash and cash equivalents, end of period |
$ | 22,367 | $ | 46,156 | ||||
Supplemental disclosures: |
||||||||
Interest paid |
$ | 6,690 | $ | 5,456 | ||||
Asset retirement obligations |
$ | | $ | 1,244 |
ARCH WIRELESS, INC.
UNIT IN SERVICE ACTIVITY
Three Months Ended |
||||||||||||||||
September 2003 |
December 2003 |
March 2004 |
June 2004 |
|||||||||||||
Direct One-Way: |
||||||||||||||||
Beginning units in service |
3,476,000 | 3,300,000 | 3,393,000 | 3,247,000 | ||||||||||||
Unit in service growth (decline) |
(176,000 | ) | 93,000 | (146,000 | ) | (125,000 | ) | |||||||||
Ending units in service |
3,300,000 | 3,393,000 | 3,247,000 | 3,122,000 | ||||||||||||
Revenues (000s) |
$ | 107,455 | $ | 101,497 | $ | 92,940 | $ | 87,226 | ||||||||
Average revenue per unit |
$ | 9.43 | $ | 9.35 | $ | 9.00 | $ | 8.77 | ||||||||
Two-Way: |
||||||||||||||||
Beginning units in service |
310,000 | 300,000 | 281,000 | 269,000 | ||||||||||||
Unit in service growth (decline) |
(10,000 | ) | (19,000 | ) | (12,000 | ) | (11,000 | ) | ||||||||
Ending units in service |
300,000 | 281,000 | 269,000 | 258,000 | ||||||||||||
Revenues (000s) |
$ | 25,940 | $ | 24,630 | $ | 22,756 | $ | 21,593 | ||||||||
Average revenue per unit |
$ | 27.67 | $ | 27.27 | $ | 26.66 | $ | 26.28 | ||||||||
Indirect One-Way: |
||||||||||||||||
Beginning units in service |
978,000 | 860,000 | 754,000 | 654,000 | ||||||||||||
Unit in service growth (decline) |
(118,000 | ) | (106,000 | ) | (100,000 | ) | (77,000 | ) | ||||||||
Ending units in service |
860,000 | 754,000 | 654,000 | 577,000 | ||||||||||||
Revenues (000s) |
$ | 9,491 | $ | 8,256 | $ | 7,422 | $ | 6,454 | ||||||||
Average revenue per unit |
$ | 3.44 | $ | 3.39 | $ | 3.49 | $ | 3.47 | ||||||||
Two-Way: |
||||||||||||||||
Beginning units in service |
9,000 | 8,000 | 9,000 | 8,000 | ||||||||||||
Unit in service growth (decline) |
(1,000 | ) | 1,000 | (1,000 | ) | 4,000 | ||||||||||
Ending units in service |
8,000 | 9,000 | 8,000 | 12,000 | ||||||||||||
Revenues (000s) |
$ | 737 | $ | 643 | $ | 541 | $ | 524 | ||||||||
Average revenue per unit |
$ | 21.96 | $ | 21.24 | $ | 21.09 | $ | 14.92 | (1) | |||||||
Total
Beginning units in service |
4,773,000 | 4,468,000 | 4,437,000 | 4,178,000 | ||||||||||||
Unit in service growth (decline) |
(305,000 | ) | (280,000 | ) | (259,000 | ) | (209,000 | ) | ||||||||
Adjustment |
| 249,000 | | | ||||||||||||
Ending units in service |
4,468,000 | 4,437,000 | 4,178,000 | 3,969,000 | ||||||||||||
(1) | Average revenue per unit includes the effect of approximately 4,900 telemetry unit additions during the quarter. These units have lower monthly charges than typical indirect units. |