Glenayre Technologies, Inc and Subsidiaries Unaudited Pro Forma Combined Statement of Operations For the six months ended June 30, 2005 (In thousands, except per share amounts) Universal Pro Glenayre Manufac- Forma Technologies, turing & Adjust- Consoli- Inc. Logistics ments Notes dated Revenues $60,676 $163,450 $(47,403)(a) $176,723 Cost of Revenues 34,146 97,925 (2,548)(b) 129,522 GROSS MARGIN 26,530 65,525 (44,855) 47,200 OPERATING EXPENSES: Selling, general and administrative expense 19,085 17,420 2,083 (c) 38,588 Research and development expense 6,982 - - 6,982 Advertising expense - - - - Amortization of intangible assets 566 - 2,903 (d) 3,469 Other operating expenses 15 - - 15 Total Operating Expenses 26,648 17,420 4,986 49,054 OPERATING INCOME (LOSS) (118) 48,105 (49,841) (1,853) OTHER INCOME (EXPENSE): Interest income 1,101 259 - 1,360 Interest expense (512) (143) (1,758)(e) (2,413) Gains (losses) on disposal of assets, net (1) (39) - (40) Other income (1,005) 1,399 - 394 Total Other Income (expense) (417) 1,476 (1,758) (699) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (535) 49,581 (51,599) (2,553) Provision (benefit) for income taxes 163 12,207 (12,207)(g) 163 INCOME (LOSS) FROM CONTINUING OPERATIONS $(698) $37,374 $(39,392) $(2,716) INCOME (LOSS) PER WEIGHTED AVERAGE COMMON SHARE: Income (loss) from continuing operations $(0.01) $0.56 $(0.59) $(0.04) INCOME (LOSS) PER COMMON SHARE - ASSUMING DILUTION: Income (loss) from continuing operations $(0.01) $0.56 $(0.59) $(0.04) Depreciation expense included in Income (Loss) from continuing operations: $2,022 $5,546 $- $7,568 See notes to unaudited pro forma condensed combined statement of operations Glenayre Technologies, Inc and Subsidiaries Unaudited Pro Forma Combined Statement of Operations For the year ended December 31, 2004 (In thousands, except per share amounts) Universal Pro Glenayre Manufac- Forma Technologies, turing & Adjust- Consoli- Inc. Logistics ments Notes dated Revenues $50,575 $403,103 $(122,728)(a) $330,950 Cost of Revenues 25,857 250,164 (20,643)(b) 255,377 GROSS MARGIN 24,718 152,939 (102,085) 75,572 OPERATING EXPENSES: Selling, general and administrative expense 19,886 32,756 5,888 (c) 58,530 Research and development expense 13,374 - - 13,374 Advertising expense 556 - - 556 Amortization of intangible assets - - 6,805 (d) 6,805 Other operating expenses 172 - - 172 Total Operating Expenses 33,987 32,756 12,692 79,436 OPERATING INCOME (LOSS) (9,269) 120,183 (114,777) (3,864) OTHER INCOME (EXPENSE): Interest income 1,203 714 - 1,917 Interest expense (228) (953) (4,966)(e) (6,147) Gains (losses) on disposal of assets, net 84 - - 84 Other income 15 (2,800) 2,880 (f) 95 Total Other Income (expense) 1,074 (3,039) (2,086) (4,051) INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (8,195) 117,144 (116,863) (7,915) Provision (benefit) for income taxes (55) 50,832 (49,157)(g) 1,620 INCOME (LOSS) FROM CONTINUING OPERATIONS $(8,140) $66,312 $(67,706) $(9,535) INCOME (LOSS) PER WEIGHTED AVERAGE COMMON SHARE: Income (loss) from continuing operations $(0.12) $1.00 $(1.02) $(0.14) INCOME (LOSS) PER COMMON SHARE - ASSUMING DILUTION: Income (loss) from continuing operations $(0.12) $1.00 $(1.02) $(0.14) Depreciation expense included in Income (Loss) from continuing operations: $1,783 $20,165 $(3,354) $18,594 See notes to unaudited pro forma condensed combined statement of operations Glenayre Technologies, Inc. Summary Schedule of Non-GAAP Financial Data (In thousands) Unaudited The following summary of financial data shows the reconciliation of pro forma income (loss) from continuing operations, as determined in accordance with accounting principles generally accepted in the United States (GAAP), to pro forma income (loss) from continuing operations before one-time gains and charges and earnings before interest, taxes, depreciation and amortization from continuing operations before one-time gains and charges. EBITDA is income (loss) from continuing operations, excluding one-time gains and charges, before net interest income, income taxes and depreciation and amortization and is presented because the Company believes that such information is commonly used in both the telecommunications industry and the entertainment industry as one measure of a company's operating performance. EBITDA from continuing operations is not determined in accordance with generally accepted accounting principles, it is not indicative of cash provided by operating activities, should not be used as a measure of operating income and cash flows from operations as determined under GAAP, and should not be considered in isolation or as an alternative to, or to be more meaningful than, measures of performance determined in accordance with GAAP. EBITDA, as calculated by the Company, may not be comparable to similarly titled measures reported by other companies and could be misleading unless all companies and analysts calculated EBITDA in the same manner. Six Months Ended Year ended June 30, December 31 2005 2004 Pro forma income (loss) from continuing operations $(2,716) $(9,535) Indirect acquisition and employment costs (1) 1,618 Patent litigation settlement costs (2) 2,700 Pro Forma Income (loss) from continuing operations before one-time gains and charges (1,098) (6,835) Provision for income taxes 163 1,620 Loss on currency translation (3) 1,300 Gain on currency swaps (262) Interest income, net 1,053 4,230 Depreciation and amortization 11,037 25,399 EBITDA from continuing operations before one-time gains and charges $12,193 $24,414 EBITDA from continuing operations before one-time gains and charges by segment Messaging business 3,383 (4,687) EDC 8,810 29,101 $12,193 $24,414 (1) In connection with the acquisition of the CD/DVD manufacturing and distribution operations of Universal Music Group, the company incurred certain indirect acquisition costs and one-time employment related costs. (2) Represents damages awarded to Phillip Jackson for a patent infringement lawsuit. (3) As a result of a decline in the Euro exchange rate. NOTES TO THE UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION The following pro forma adjustments are included in the unaudited pro forma condensed combined statements of operations: (a) To adjust revenues as follows: - Reduce revenue by approximately $102 million for 2004 and $39 million for the six months ended June 30, 2005 to reflect the pricing terms in the supply agreements in effect immediately after the acquisition transaction between Entertainment Distribution Company, LLC ("EDC"), a majority owned subsidiary of Glenayre, and Universal Music Group; and - Eliminate freight revenue of approximately $20 million for 2004 and $8 million for the six months ended June 30, 2005 to reflect net revenue based on the terms of the new supply agreements. (b) To adjust cost of revenues as follows: - Eliminate freight of approximately $20 million for 2004 and $8 million for the six months ended June 30, 2005 based on the terms of the new supply agreements; and - Increase royalty expenses by approximately $5 million for the six months ended June 30, 2005 to reflect the royalty rates to be paid by EDC. (c) To adjust general and administrative costs as follows: - Add certain corporate overhead and compensation costs of $5 million for 2004 and $2.1 million for the six months ended June 30, 2005 for incremental costs related to new contracts to support the acquired business; - Eliminate pension costs of approximately $1.6 million related to pension liabilities not acquired, and certain other general and administrative costs of $0.3 million incurred by businesses not acquired for 2004; and - To eliminate certain non-recurring income of $2.9 million for 2004 generated by former business of UM&L that were not acquired (d) To reflect additional amortization expenses related to intangible assets acquired. The actual amortization amount is subject to change based on the final valuation results. (e) To reflect additional interest charges related to the new term loan of $46.5 million, the amortization of related deferred financing costs, and accretion of deferred rebates to be paid to Universal Music Group, pursuant to the asset and share purchase agreements. (f) To eliminate loss of $2.9 million for 2004 related to sale of buildings to other affiliates of Universal Music. (g) To adjust the combined tax provision to reflect the tax effect of the pro forma adjustments and the application of Glenayre's tax attributes to the acquired business. The pro forma combined provision for income taxes does not reflect the amounts that would have resulted had Glenayre and UM&L filed consolidated income tax returns during the periods presented. PRNewswire-FirstCall -- Aug. 15 DATASOURCE: Glenayre Technologies, Inc. Web site: http://www.glenayre.com/ Company News On-Call: http://www.prnewswire.com/comp/111723.html

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