SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
FOR QUARTER ENDED MARCH 31, 1995 COMMISSION FILE NO. 1-10682
PAGE AMERICA GROUP, INC.
(Exact name of registrant as specified in its charter)
NEW YORK 13-2865787
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
125 STATE STREET, SUITE 100, HACKENSACK, NEW JERSEY 07601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201)
342-6676
(Former address, if changed since last report) (Zip Code)
Indicate by check mark whether Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding
twelve months (or for such shorter period of time
that the Registrant was required to file such reports), and (2)
has been subject to such filings for the past
ninety days.
Yes /X/ No
As of April 30, 1995, there were outstanding 8,031,393 shares of
Registrant's common stock.
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
March 31, December 31,
1995 1994(a)
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 91 $ 1,128
Accounts receivable,
net of allowance for doubtful accounts
of $373 and $283 1,004 1,345
Assets held for sale 19,257 19,749
Prepaid expenses and other current assets 767 460
Total current assets 21,119 22,682
PROPERTY, PLANT AND EQUIPMENT
Pagers 10,098 10,377
Radio Common Carrier 12,703 12,572
Office equipment 4,011 3,899
Leasehold improvements 513 509
Building and land 64 64
27,389 27,421
Less accumulated depreciation and amortization (20,028) (19,960)
7,361 7,461
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $2,766 and $2,616 21,301 21,392
Customer lists, net of accumulated amortization
$7,484 and $7,150 4,284 4,618
Other intangibles, net of accumulated amortization
$2,957 and $2,881 9,654 9,725
Deferred financing costs, net 1,632 1,924
Deposits and other non-current assets 950 900
37,821 38,559
$ 66,301 $ 68,702
(a) - Reclassified to conform with the current year presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
March 31, December 31,
1995 1994(a)
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 19,267 $ 18,245
Accounts payable 3,324 3,949
Accrued expenses and other liabilities 1,302 3,433
Dividends payable 716 1,444
Customer deposits 341 359
Deferred revenue 1,264 1,066
Total current liabilities 26,214 28,496
LONG-TERM DEBT, less current maturities 39,810 39,767
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Series One Convertible Preferred Stock, 10% cumulative,
$.01 par value, authorized -- 310,000 shares, issued
and outstanding -- 286,361 and 288,881 shares,
liquidation value -- $100 per share 28,636 28,888
Common stock--$.10 par value, authorized--100,000,000
issued and outstanding--8,031,393 and 7,101,868
shares 803 710
Paid-in capital 52,892 49,830
Accumulated Deficit (82,054) (78,989)
277 439
$ 66,301 $ 68,702
(a) - Reclassified to conform with the current year presentation.
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
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PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1995 1994
<S> <C> <C>
Service revenues $7,593 $8,421
Sales revenues 807 1,123
Total revenues 8,400 9,544
Operating expenses:
Cost of service 722 718
Cost of sales 475 696
Selling 1,675 1,562
General and administrative 2,163 2,353
Technical 1,207 1,206
Depreciation 1,415 1,371
Amortization of intangibles 1,035 1,046
8,692 8,952
Operating (loss) profit (292) 592
Interest expense (1,610) (1,166)
Other expenses:
Amortization of deferred costs (315) (91)
Other (132) (117)
(447) (208)
Net loss (2,349) (782)
Dividends on preferred stock (716) (803)
Net Loss applicable to common stock $(3,065) $(1,585)
Net loss applicable to common stock, per share $ (.40) $ (.26)
Weighted average number of shares outstanding 7,617,605 6,009,600
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 9,051 $ 9,488
Cash paid to suppliers and employees (6,330) (6,341)
Interest paid (1,814) (933)
Costs related to financing of debt (33) (26)
Other (8) (13)
Net cash provided by operating activities 866 2,175
Cash flows from investing activities:
Capital expenditures (1,665) (2,439)
Acquisitions and related liabilities - (58)
Licensing costs (188) (391)
Net proceeds from disposal of assets 8 8
Net cash used in investing activities (1,845) (2,880)
Cash flows from financing activities:
Proceeds from issuance of debt 111 103
Principal payments on debt (156) (287)
Cost related to issuance of common stock (13) -
Cost related to issuance of preferred stock - (275)
Net cash used in financing activities (58) (459)
Net decrease in cash and cash equivalents (1,037) (1,164)
Cash and cash equivalents at beginning of period 1,128 2,912
Cash and cash equivalents at end of period $ 91 $ 1,748
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
RECONCILIATION OF NET LOSS TO NET CASH
PROVIDED BY OPERATING ACTIVITIES:
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1995 1994
<S> <C> <C>
Net loss $(2,349) $ (782)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 2,765 2,507
Net book value of pagers sold 463 691
Provision for losses on accounts receivable (3) 188
Provision for lost pagers 67 66
Other 611 (145)
Change in assets and liabilities:
Decrease (increase) in accounts receivable 651 (56)
Increase in prepaid expenses and other (337) (111)
Costs related to financing of debt (33) (26)
Decrease in accounts payable (275) (791)
(Decrease) increase in accrued expenses (694) 634
Total adjustments 3,215 2,957
Net cash provided by operating activities $ 866 $ 2,175
Supplemental schedule of noncash investing and financing activities:
Dividends accrued on Preferred Stock $ 716 $ 760
Common Stock issued in connection with acquisition 1,471 -
Dividend payment on Preferred Stock 1,444 -
Capital expenditures financed 546 -
Capital expenditures in accounts payable and accrued expenses 955 402
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
UNAUDITED
NOTE A - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (which include only
normally recurring adjustments) necessary to present fairly the
consolidated financial position, results of operations and cash
flows of the Company for all interim periods presented
have been made. The results of operations for the period ended
March 31, 1995 are not necessarily indicative of the operating
results that may be expected for the year ending December 31,
1995.
NOTE B - DIVIDENDS ON PREFERRED STOCK
Series One Convertible Preferred Stock has a 10 percent
dividend, payable semi-annually in arrears. Payment of
dividends may be made in cash or in Common Stock of the Company.
Dividends in arrears aggregated $716,000, or $2.50 per preferred
share, at March 31, 1995. On March 8, 1995, the Company issued
437,629 shares of its Common Stock to the holders of Series One
Convertible Preferred Stock, as full payment of $1,444,000 of
dividends in arrears as of December 31, 1994.
NOTE C - LOSS PER SHARE
Loss per share is computed based upon the weighted average
number of common shares outstanding during the periods presented
and is computed after giving effect to preferred stock dividend
requirements. Stock options, warrants and the assumed
conversion of the convertible preferred stock have not been
included in the calculation, since their inclusion would not be
dilutive for each of the periods presented.
NOTE D - SALE OF ASSETS
On February 27, 1995, the Company entered into a definitive
agreement to sell its Florida and California properties to
Paging Network of Florida, Inc. for approximately $22 million in
cash, subject to certain adjustments. This sale, subject to
regulatory approval, includes approximately 78,000 pagers, two
statewide and several regional frequencies. Net assets related
to the sale are reflected in the accompanying balance sheet
as assets held for sale.
NOTE E - SUBSEQUENT EVENTS
In April, 1995, the Company's senior secured credit facility
with certain banks ("Credit Facility") was modified to provide
for a final maturity of June 30, 1996, with principal payments
of $250,000, $250,000 and $500,000 to be paid on October 10,
1995, December 31, 1995 and March 31, 1996, respectively. In
addition, the Company is obligated to use the net proceeds
(minimum of $15 million) from the sale of its California and
Florida paging operations to reduce amounts outstanding under
the Credit Facility. If at June 30, 1996, the Company has an
executed agreement to sell additional assets or a loan
commitment to repay the Credit Facility in its entirety, the
final maturity will be extended to September 30, 1996 and an
additional principal payment of $500,000 will be due on June 30,
1996. As part of the modification, the Company agreed to pay a
fee of up to $500,000 to the banks on or before October 10,
1995. As of March 31, 1995, the outstanding balance of the
Credit Facility was $45 million.
In April, 1995, the Company's 12 percent subordinated notes due
2003 were modified to provide for a final maturity of six months
subsequent to the final maturity of the Credit Facility and to
eliminate payment of interest until maturity. Commencing January
1, 1995 the principal and unpaid interest will accrue interest
at an
increased rate of 15 percent per annum, compounded
semi-annually. The maturity value of the subordinated notes is
$13 million.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
TOTAL REVENUES for the quarter ended March 31, 1995 were
approximately $1.1 million (12 percent) lower than that of the
1994 quarter. Average revenue per subscriber declined as the
rates obtained from new subscribers were lower than the rates
associated with lost subscribers. Subscriber growth was
restricted, as pager purchases were limited, by management, to
an amount necessary to maintain the subscriber base in order to
conserve capital. The Company had 308,000 units in service at
March 31, 1995, a decrease of 3,000 units from the 311,000 units
in service at December 31, 1994. The Company's units in service
in 1994 also experienced a decrease of 3,000 units, from the
305,000 units at December 31, 1993 to the 302,000 units
at March 31, 1994.
COST OF SERVICE remained relatively constant in the quarter
ended March 31, 1995, as compared to the 1994 period. COST OF
SALES decreased from 62.0 percent of sales revenues in the first
quarter of 1994 to 58.8 percent in the same period in 1995. This
decrease in cost of sales as a percent of sales revenues is
principally a result of the Company's maintenance of the sale
price of a paging unit accompanied by lower current capital
costs.
SELLING expense increased by approximately $113,000 (7.3
percent) in the 1995 quarter as compared to 1994, primarily due
to increases in salaries.
GENERAL AND ADMINISTRATIVE expenses experienced a decrease of
$190,000 (8.1 percent) in 1995 as compared to the same period in
the prior year. This decrease was principally due to a reduction
in bad debt expense and collection fees.
TECHNICAL expenses for the first quarter of 1995 remained
relatively constant when compared with the same period in 1994.
DEPRECIATION AND AMORTIZATION expense remained relatively
constant for quarter ended March 31, 1995, as compared to the
same quarter in 1994.
INTEREST EXPENSE increased by approximately $444,000 (38.1
percent) primarily due to higher interest rates, in the current
period, on borrowings outstanding under the Company's senior
credit facility and subordinated debt agreement.
OTHER EXPENSES increased approximately $239,000 (115.6
percent) in 1995, principally due to an increase of $224,000
(248.4%) in amortization of financing costs resulting from the
modification of the Company's senior and subordinated debt
agreements.
NET LOSS was $2.3 million (27.9 percent of total revenues) in
the quarter ended March 31, 1995, as compared to $782,000 (8.2
percent of total revenues) in the same quarter of 1994.
EBITDA (earnings before interest, taxes, depreciation and
amortization) in the 1995 quarter was $2.2 million as compared
to $3.0 million in the 1994 quarter. EBITDA is a standard
measure of financial performance in the paging industry, but
should not be construed as an alternative to operating income or
cash flow from operating activities as determined in accordance
with generally accepted accounting principles.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of approximately
$5.1 million at March 31, 1995 as compared to a deficiency of
approximately $5.8 million at December 31, 1994. The decrease
in the working capital deficiency was primarily due to the
payment of current liabilities that did not require cash,
namely, $1.4 million of accrued dividends at December 31, 1994
on the Series One Preferred Stock and $1.5 million of additional
purchase price in connection with the acquisition of the
Company's Florida and California operations, partially offset by
an increase of $500,000 in current maturities related to the
bank credit facility, accrued dividends on Series One Preferred
Stock at March 31, 1995 of $716,000 and $198,000 of deferred
revenue. Net assets held for sale decreased by $492,000,
principally due to the amortization of certificates of authority
and customer lists.
The Company's operating activities generated $866,000
in the first three months of 1995. Management expects that the
net proceeds from the sale of its Florida and California paging
operations and cash to be generated from operations for the
remainder of 1995, will be sufficient to meet loan payments due
in 1995 and fund targeted capital expenditures and growth in
terms of subscribers and total revenues.
The Company's growth requires substantial capital
expenditures, primarily for paging equipment. Management
estimates that capital expenditures for the remainder of 1995
will be approximately $4.1 million ($3.6 million for pagers and
$500,000 for RCC equipment). The Company does not have any
material capital expenditure commitments.
<PAGE>
PART II - OTHER
INFORMATION
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Date: May 15, 1995
PAGE AMERICA GROUP, INC.
(Registrant)
/S/ STEVEN L. SINN
Steven L. Sinn
Chief Executive Officer
/S/ MARTIN KATZ
Martin Katz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
FINANCIAL SCHEDULE FOR 10Q
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 91
<SECURITIES> 0
<RECEIVABLES> 1,377
<ALLOWANCES> 373
<INVENTORY> 0
<CURRENT-ASSETS> 21,119
<PP&E> 27,389
<DEPRECIATION> 20,028
<TOTAL-ASSETS> 66,301
<CURRENT-LIABILITIES> 26,214
<BONDS> 0
<COMMON> 803
0
28,636
<OTHER-SE> (29,162)
<TOTAL-LIABILITY-AND-EQUITY> 66,301
<SALES> 807
<TOTAL-REVENUES> 8,400
<CGS> 475
<TOTAL-COSTS> 8,692
<OTHER-EXPENSES> 447
<LOSS-PROVISION> (3)
<INTEREST-EXPENSE> 1,610
<INCOME-PRETAX> (3,057)
<INCOME-TAX> 8
<INCOME-CONTINUING> (3,065)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,065)
<EPS-PRIMARY> (0.40)
<EPS-DILUTED> 0
</TABLE>
