Stockholders' Equity

6 Months Ended

Jun. 30, 2011

(16) Stockholders’ Equity — The authorized capital stock of the Company consists of 75 million shares of common stock, par value $0.0001 per share, and 25 million shares of preferred stock, par value $0.0001 per share.

Changes in Stockholders’ Equity. Changes in stockholders’ equity for the six months ended June 30, 2011 consisted of:


	(Dollars in thousands)

Balance at January 1, 2011	$	184,390
Net income for the six months ended June 30, 2011		59,246
Cash dividends declared		(11,217)
Issued, purchased, retired common stock, and other		471
Amortization of stock based compensation		679

Balance at June 30, 2011	$	233,569

General. At June 30, 2011 and December 31, 2010, there were 22,100,815 and 22,066,805 shares of common stock outstanding, respectively, and no shares of preferred stock outstanding.

At June 30, 2011, the Company had no stock options outstanding.

In connection with and prior to the November 2004 merger of Arch and Metrocall Holdings, Inc. (“Metrocall”) and subsidiaries, the Company established the USA Mobility, Inc. Equity Incentive Plan (the “Equity Plan”). Under the Equity Plan, the Company has the ability to issue up to 1,878,976 shares of its common stock to eligible employees and non-executive members of its Board of Directors in the form of shares of common stock, stock options, shares of restricted common stock (“restricted stock”), restricted stock units (“RSUs”) or stock grants. Restricted stock awarded under the Equity Plan entitles the stockholder to all rights of common stock ownership except that the restricted stock may not be sold, transferred, exchanged, or otherwise disposed of during the restriction period, which will be determined by the Compensation Committee of the Board of Directors of the Company. RSUs are generally convertible into shares of common stock pursuant to the Restricted Stock Unit Agreement when the appropriate vesting conditions have been satisfied.

The following table summarizes the activities under the Equity Plan from inception through June 30, 2011:


	Activity

Equity securities approved		1,878,976
Less: Equity securities issued to eligible employees
2005 LTIP		(103,937)
2006 LTIP⁽¹⁾		(183,212)
2009 LTIP		(337,147)
2011 LTIP		(211,587)
STIP⁽²⁾		(108,254)
Less: Equity securities issued to non-executive members of the Board of Directors
Restricted stock		(71,114)
Common stock⁽³⁾		(28,696)
Add: Equity securities forfeited by eligible employees
2005 LTIP		22,488
2006 LTIP		21,358
2009 LTIP		80,104
Add: Restricted stock forfeited by the non-executive members of the Board of Directors		3,985

Total available at June 30, 2011		962,964


⁽¹⁾		On November 14, 2008, the Company’s Board of Directors approved an additional grant of 7,129 shares of restricted stock under the 2006 LTIP Initial Target Award to eligible employees. In March 2009, the Company’s Board of Directors approved an additional grant of 43,511 shares of common stock as an Additional Target Award under the 2006 LTIP to eligible employees.

⁽²⁾		Pursuant to his employment agreement, Mr. Vincent D. Kelly, the Company’s President and Chief Executive Officer (“CEO”), received 50 percent of his Short-Term Incentive Plan (“STIP”) award in common stock of the Company. In relation to his 2009 STIP award, on March 4, 2010 Mr. Kelly received 60,799 shares of common stock based on the closing stock price on February 26, 2010 of $11.26 per share. In relation to his 2010 STIP award, on March 4, 2011 Mr. Kelly received 47,455 shares of common stock based on the closing stock price on February 25, 2011 of $15.21 per share.

⁽³⁾		19,605 existing RSUs were converted into shares of the Company’s common stock and issued to the non-executive members of the Company’s Board of Directors on March 17, 2008. In addition, 9,091 shares of common stock have been issued in lieu of cash payments to the non-executive members of the Company’s Board of Directors for services performed.

2009 Long-Term Incentive Plan (“LTIP”). On January 6, 2009, the Company’s Board of Directors approved a long-term incentive program that included a cash component and a stock component in the form of RSUs based upon achievement of expense reduction and earnings before interest, taxes, depreciation, amortization and accretion goals during the Company’s 2012 calendar year and continued employment with the Company. RSUs were granted under the Equity Plan pursuant to a Restricted Stock Unit Agreement based upon the closing price per share of the Company’s common stock on January 15, 2009 of $12.01. The Company’s Board of Directors awarded 329,416 RSUs to certain eligible employees and also approved that future cash dividends related to the existing RSUs will be set aside and paid in cash to each eligible employee when the RSUs are converted into shares of common stock. Existing RSUs would be converted into shares of common stock on the earlier of a change in control of the Company (as defined in the Equity Plan) or on or after the third business day following the day that the Company files its 2012 Annual Report on Form 10-K (“2012 Annual Report”) with the SEC but in no event later than December 31, 2013.

Any unvested RSUs granted under the Equity Plan and the related cash dividends are forfeited if the participant terminates employment with USA Mobility. As of December 31, 2010, a total of 76,707 RSUs and the related cash dividends have been forfeited offset by new grants of 7,731 RSUs resulting in an outstanding balance of 260,440 RSUs. During the first quarter of 2011, 3,397 RSUs and the related cash dividends were forfeited. As of March 31, 2011, a total of 80,104 RSUs have been forfeited resulting in an outstanding balance of 257,043 RSUs.

The Company used the fair-value based method of accounting for the 2009 LTIP and is amortizing $3.0 million (prior to the effect of forfeitures) to expense over the 48-month vesting period. A total of $0.2 million was included in stock based compensation expense for the three months ended June 30, 2011 and 2010, respectively; and a total of $0.4 million was included in stock based compensation for the six months ended June 30, 2011 and 2010, respectively, in relation to the 2009 LTIP.

Also on January 6, 2009, the Company provided for long-term cash performance awards to the same certain eligible employees under the 2009 LTIP. Similar to the RSUs, the vesting period for these long-term cash performance awards is 48 months upon attainment of the established performance goals and would be paid on the earlier of a change in control of the Company (as defined in the Equity Plan); or on or after the third business day following the day that the Company files its 2012 Annual Report with the SEC but in no event later than December 31, 2013.

The Company is ratably recognizing $2.8 million (prior to the effect of forfeitures) to expense over the 48-month vesting period. A total of $0.2 million was included in payroll and related expense for the three months ended June 30, 2011 and 2010, respectively; and a total of $0.4 million was included in payroll and related expenses for each of the six months ended June 30, 2011 and 2010, respectively, for these long-term cash performance awards. Any unvested long-term cash performance awards are forfeited if the participant terminates employment with USA Mobility.

2011 LTIP. On March 15, 2011, the Company’s Board of Directors adopted a long-term incentive program that included a stock component in the form of RSUs. The 2011 LTIP provides eligible employees the opportunity to earn RSUs based upon achievement of performance goals, established by the Company’s Board of Directors for revenue and operating cash flows for the Company (including Amcom) during the period from January 1, 2011 through December 31, 2014 (the “performance period”), and continued employment with the Company. For the purpose of the 2011 LTIP as it relates to Amcom, the performance period is considered as April 1, 2011 through December 31, 2014. On April 7, 2011, the Company’s Board of Directors granted eligible employees from Amcom RSUs under the Equity Plan pursuant to a Restricted Stock Unit Agreement based upon the closing price per share of the Company’s common stock on April 6, 2011 of $15.41. The Company’s Board of Directors awarded 211,587 RSUs to certain eligible employees at Amcom and also approved that future cash dividends related to the existing RSUs will be set aside and paid in cash to each eligible employee when the RSUs are converted into shares of common stock. Existing RSUs would be converted into shares of common stock on the earlier of a change in control of the Company (as defined in the Equity Plan) or on or after the third business day following the day that the Company files its 2014 Annual Report on Form 10-K (“2014 Annual Report”) with the SEC but in no event later than December 31, 2015. Any unvested RSUs granted under the Equity Plan and the related cash dividends are forfeited if the participant terminates employment with USA Mobility. The Company used the fair-value based method of accounting for the 2011 LTIP and is amortizing $2.9 million (prior to the effect of forfeitures) to expense over the 45-month vesting period beginning on April 1, 2011. A total of $0.2 million was included in stock based compensation expense for the three months ended June 30, 2011 in relation to the 2011 LTIP.

Board of Directors Equity Compensation. On August 1, 2007, for periods of service beginning on July 1, 2007, the Company’s Board of Directors approved that, in lieu of RSUs, each non-executive director will be granted in arrears on the first business day following the quarter of service, restricted stock under the Equity Plan for their service on the Board of Directors and committees thereof. The restricted stock would be granted quarterly based upon the closing price per share of the Company’s common stock at the end of each quarter, such that each non-executive director would receive $40,000 per year of restricted stock ($50,000 for the Chair of the Audit Committee). The restricted stock will vest on the earlier of a change in control of the Company (as defined in the Equity Plan) or one year from the date of grant, provided, in each case, that the non-executive director maintains continuous service on the Board of Directors. Future cash dividends related to the restricted stock will be set aside and paid in cash to each non-executive director on the date the restricted stock vests. In addition to the quarterly restricted stock grants, the non-executive directors would be entitled to cash compensation of $40,000 per year ($50,000 for the Chair of the Audit Committee), also payable quarterly. These sums are payable, at the election of the non-executive director, in the form of cash, shares of common stock, or any combination thereof.

The following table details information on the restricted stock vested by or awarded to the Company’s non-executive directors in 2011.


									Restricted
				Restricted		Restricted			Stock		Cash
Service for the		Price Per		Stock		Stock			Awarded and		Dividends
Three Months Ended	Grant Date	Share⁽¹⁾		Awarded		Vested		Vesting Date	Outstanding		Paid⁽²⁾

December 31, 2009	January 2, 2010		11.01		4,767		(4,767)	January 3, 2011		—	$	9,534
March 31, 2010	April 1, 2010		12.67		4,143		(4,143)	April 1, 2011		—		4,143
June 30, 2010	July 1, 2010		12.92		4,063		(4,063)	July 1, 2011		—		8,126
September 30, 2010	October 1, 2010		16.03		3,276		—	October 1, 2011		3,276		—
December 31, 2010	January 3, 2011		17.77		2,955		—	January 2, 2012		2,955		—
March 31, 2011	April 1, 2011		14.48		3,627		—	April 2, 2012		3,627		—
June 30, 2011	July 1, 2011		15.26		3,439		—	July 2, 2012		3,439		—

Total					26,270		(12,973)			13,297	$	21,803


⁽¹⁾		The quarterly restricted stock awarded is based on the price per share of the Company’s common stock on the last trading day prior to the quarterly grant date.

⁽²⁾		Amount excludes interest earned and paid upon vesting of shares of restricted stock.

The shares of restricted stock will vest one year from the date of grant and the related cash dividends on the vested restricted stock will be paid to the Company’s non-executive directors. These grants of shares of restricted stock will reduce the number of shares eligible for future issuance under the Equity Plan.

The Company used the fair-value based method of accounting for the equity awards. A total of $52,500 was included in stock based compensation expense for each of the three months ended June 30, 2011 and 2010, respectively; and a total of $0.1 million was included in stock based compensation expense for each of the six months ended June 30, 2011 and 2010, respectively.

The following table details information on the cash dividends declared in 2011 relating to the restricted stock issued to the Company’s non-executive directors:


			Payment	Per Share		Total
Year	Declaration Date	Record Date	Date	Amount		Amount

2011	February 23	March 17	March 31	$	0.25	$	3,609
	May 4	May 20	June 24		0.25		3,480

Total				$	0.50	$	7,089

Board of Directors Common Stock. As of June 30, 2011, a cumulative total of 9,091 shares of common stock have been issued in lieu of cash payments to the non-executive directors for services performed. These shares of common stock reduced the number of shares eligible for future issuance under the Equity Plan.

Cash Dividends to Stockholders. The following table details the Company’s cash dividend payments made during 2011. Cash dividends paid as disclosed in the statements of cash flows for the six months ended June 30, 2011 and 2010 include previously declared cash dividends on shares of vested restricted stock issued to the non-executive directors of the Company’s Board of Directors. Cash dividends on RSUs and restricted stock have been accrued and are paid when the applicable vesting conditions are met. Accrued cash dividends on forfeited RSUs and restricted stock are also forfeited.

Declaration

Record

Payment

Per Share

Total

Year

Date

Amount

Payment⁽¹⁾

(Dollars in

thousands)

2011

February 23

March 17

March 31

0.25

5,531

May 4

May 20

June 24

0.25

5,529

Total

0.50

11,060


⁽¹⁾		The total payment reflects the cash dividends paid in relation to common stock and vested restricted stock.

Future Cash Dividends to Stockholders. On July 27, 2011, the Company’s Board of Directors declared a regular quarterly dividend distribution of $0.25 per share of common stock, with a record date of August 19, 2011, and a payment date of September 9, 2011. This dividend distribution of approximately $5.5 million will be paid from available cash on hand.

Common Stock Repurchase Program. On July 31, 2008, the Company’s Board of Directors approved a program for the Company to repurchase up to $50.0 million of its common stock in the open market during the twelve-month period commencing on or about August 5, 2008. Credit Suisse Securities (USA) LLC will administer such purchases. The Company expects to use available cash on hand and net cash provided by operating activities to fund the common stock repurchase program.

The Company’s Board of Directors approved a supplement to the common stock repurchase program effective March 3, 2009. The supplement reset the repurchase authority to $25.0 million as of January 1, 2009 and extended the purchase period through December 31, 2009.

On November 30, 2009, the Company’s Board of Directors approved a further extension of the purchase period from December 31, 2009 to March 31, 2010. On March 3, 2010, the Company’s Board of Directors approved an additional supplement effective March 3, 2010 which reset the repurchase authority to $25.0 million as of January 1, 2010 and extended the purchase period through December 31, 2010.

From the inception of the common stock repurchase program through December 31, 2010, the Company has repurchased a total of 5,556,331 shares of its common stock under this program for approximately $51.7 million (excluding commissions). Repurchased shares of the Company’s common stock were accounted for as a reduction to common stock and additional paid-in-capital in the period in which the repurchase occurred. There was approximately $16.1 million of common stock repurchase authority remaining under the program as of December 31, 2010. This repurchase authority allowed the Company, at management’s discretion, to selectively repurchase shares of its common stock from time to time in the open market depending upon market price and other factors. All repurchased shares of common stock are returned to the status of authorized but unissued shares of the Company.

On December 6, 2010, the Company’s Board of Directors approved another supplement to the common stock repurchase program effective on January 3, 2011. The supplement reset the repurchase authority to $25.0 million as of January 3, 2011 and extended the purchase period through December 31, 2011.

During the first quarter of 2011, the Company incurred debt associated with the acquisition of Amcom. The Company plans to aggressively repay the debt while maintaining its long-standing policy of returning capital to stockholders. To accelerate the payment of debt, the Company temporarily suspended its common stock repurchase program and will subsequently review this program by December 31, 2011.

Additional Paid-in Capital. For the six months ended June 30, 2011, additional paid-in capital increased by $1.2 million. The increase in 2011 was due primarily to amortization of stock based compensation and a net issuance of common stock under the 2010 STIP to the Company’s CEO after purchase of common stock from the executive for tax withholdings.

Net Income per Common Share. Basic net income per common share is computed on the basis of the weighted average common shares outstanding. Diluted net income per common share is computed on the basis of the weighted average common shares outstanding plus the effect of all potentially dilutive common shares including outstanding restricted stock using the “treasury stock” method plus the effect of outstanding RSUs, which are treated as contingently issuable shares. During the first quarter of 2011, the Company acquired a total of 20,027 shares of the Company’s common stock from the Company’s CEO in payment of required tax withholdings for the common stock awarded on March 4, 2011 related to the 2010 STIP. These shares of common stock acquired were retired and excluded from the Company’s reported outstanding share balance as of June 30, 2011. For the six months ended June 30, 2011, no shares of common stock were repurchased by the Company under its common stock repurchase program. The components of basic and diluted net income per common share for the six months ended June 30, 2011 and 2010, respectively, were as follows:


	For the Three Months Ended June 30,				For the Six Months Ended June 30,
	2011		2010		2011		2010
	(Dollars in thousands, except share and per share amounts)

Net income	$	18,595	$	13,089	$	59,246	$	21,974

Weighted average shares of common stock outstanding		22,086,848		22,307,488		22,075,185		22,479,834
Dilutive effect of restricted stock and RSUs		465,014		313,219		368,232		313,993

Weighted average shares of common stock and common stock equivalents		22,551,862		22,620,707		22,443,417		22,793,827

Net income per common share
Basic	$	0.84	$	0.59	$	2.68	$	0.98

Diluted	$	0.82	$	0.58	$	2.64	$	0.96

- Definition

Disclosures related to accounts comprising shareholders' equity, including other comprehensive income. Includes: (1) balances of common stock, preferred stock, additional paid-in capital, other capital and retained earnings; (2) accumulated balance for each classification of other comprehensive income and total amount of comprehensive income; (3) amount and nature of changes in separate accounts, including the number of shares authorized and outstanding, number of shares issued upon exercise and conversion, and for other comprehensive income, the adjustments for reclassifications to net income; (4) rights and privileges of each class of stock authorized; (5) basis of treasury stock, if other than cost, and amounts paid and accounting treatment for treasury stock purchased significantly in excess of market; (6) dividends paid or payable per share and in the aggregate for each class of stock for each period presented; (7) dividend restrictions and accumulated preferred dividends in arrears (in aggregate and per share amount); (8) retained earnings appropriations or restrictions, such as dividend restrictions; (9) impact of change in accounting principle, initial adoption of new accounting principle and correction of an error in previously issued financial statements; (10) shares held in trust for Employee Stock Ownership Plan (ESOP); (11) deferred compensation related to issuance of capital stock; (12) note received for issuance of stock; (13) unamortized discount on shares; (14) description, terms and number of warrants or rights outstanding; (15) shares under subscription and subscription receivables; effective date of new retained earnings after quasi-reorganization and deficit eliminated by quasi-reorganization and, for a period of at least ten years after the effective date, the point in time from which the new retained dates; and (16) retroactive effective of subsequent change in capital structure.

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