e425
 

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 SEC’s 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 Arch’s 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 Metrocall’s 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 O’Reilly, 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 company’s ability to successfully integrate the businesses of the two companies; unexpected costs involved in the merger or in the new company’s 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 Arch’s and Metrocall’s 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 company’s 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 Arch’s 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 SEC’s 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 Arch’s 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 Metrocall’s 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 O’Reilly, 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 Arch’s 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 Arch’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 its paging products and services, Arch’s ability to continue to reduce operating expenses, possible delays in or failure to obtain shareholder or regulatory approvals of the merger with Metrocall, Arch’s 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 Arch’s 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.