SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A-1
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
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 No.)
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
Common Stock, $.10 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the 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 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [ X ] No [ ]
----- -----
As of February 28, 1995, the aggregate market value of the
voting
stock held by non-affiliates of the registrant, based on the
closing price, was approximately $21,817,000.
As of February 28, 1995, the registrant had 7,593,764 shares of
Common Stock outstanding.
Indicate by check mark if disclosure of delinquent filers
pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment
to this Form 10-K. [ X ]
-----
Item 1. BUSINESS
GENERAL
Page America Group, Inc. (the "Company" or "Page
America") provides paging, messaging and information products
and
services through networks which it owns and operates as a radio
common carrier ("RCC") under licenses from the Federal
Communications Commission ("FCC"). As of December 31, 1994, the
Company provided paging services through 20 offices in ten
states
to approximately 311,000 pagers in geographic areas encompassing
a total population of 38 million people.
The Company's strategy is to concentrate its
operations
in major metropolitan markets in which it can achieve both
critical mass and a substantial market share position, allowing
it
to maximize growth. The Company targets specific user segments
and, through its broad distribution capabilities, markets and
delivers its comprehensive package of paging and value-added
messaging services to each particular segment. The Company has
secured licenses for multiple channels in each of its markets
and
has developed, and continues to develop, networks which can
support significant future growth in paging units as well as
value-added messaging and information services. The Company
emphasizes customer ownership of pagers, as compared to leasing
of
pagers, which significantly reduces the Company's capital
costs. At March 1, 1995, approximately 69 percent of the
Company's units in service were customer owned.
The number of pagers served by the Company has
increased
over 385 percent since April 1, 1989, from 64,000 to 311,000
pagers at December 31, 1994. The Company's total revenues have
increased from $10.3 million in fiscal year 1989 to $37.3
million
in fiscal year 1994. Cash flows from operating activities
have increased from $1.8 million in fiscal year 1989 to $8.4
million in fiscal year 1994. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") has increased from $1.8
million in fiscal year 1989 to $9.4 million in fiscal year 1994.
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.
Page America was incorporated in 1976 under the laws of
the State of New York. The Company's principal executive
offices
are located at 125 State Street, Hackensack, New Jersey 07601,
and
its telephone number is (201) 342-6676. Unless the context
indicates otherwise, the terms "Company" and "Page America" as
used herein refer to Page America Group, Inc. and its
subsidiaries.
SALE OF CALIFORNIA AND FLORIDA OPERATIONS
In February 1995, the Company entered into an
agreement
with Paging Network of Florida, Inc. providing for the sale by
the
Company of its California and Florida paging assets for a cash
purchase price of $22,370,000. The purchase price is subject to
reduction based on the level of revenues derived from these
operations during the two calendar months immediately preceding
the closing. The assets to be sold consist of the assets which
the Company acquired from Crico Communications Corporation
("Crico") on December 30, 1993 and the 900 Mhz channel which is
licensed to provide state-wide coverage in California which the
Company acquired in 1994 for a purchase price of $500,000. The
purchase price paid by the Company for the Crico assets
consisted
of $12,650,000 in cash paid to Crico's lenders, the issuance of
an
aggregate of 1,435,903 shares of Common Stock to Crico's lenders
and the issuance of 240,000 shares of Common Stock and warrants
to
purchase 130,000 shares of Common Stock at an exercise price of
$5.00 per share to a company related to certain shareholders of
Crico. Completion of this transaction is subject to the
satisfaction of conditions normally contained in these types of
transactions, including FCC approval. Consummation of the
transaction is expected to occur during the second half of 1995.
All but $1.5 million of the net proceeds to be received by the
Company from this sale will be used to repay indebtedness
outstanding under the Company's bank credit facility.
BACKGROUND OF THE PAGING INDUSTRY
Radio paging began more than four decades ago as an
adjunct to telephone answering services, delivering tone-only
messages to subscribers. Beginning in the 1970's,
cost-effective
technological innovations and regulatory reforms helped to
accelerate the use of paging services. Advances in
microprocessor
technology facilitated dramatic reductions in the size and
weight
of pagers. In 1982, the FCC increased the number of available
channels for paging, further stimulating growth of the industry.
During the 1980's, the paging industry expanded
significantly. Factors contributing to the growth in the paging
industry include: (i) a continuing shift towards a service-based
economy and a resultant need to keep in contact; (ii) increasing
mobility among workers; (iii) increasing awareness of the
benefits
of mobile communications; (iv) a reduction in the price of
pagers;
(v) product distribution at the retail level; and (vi)
increasing
availability of information service-based offerings.
In addition, the benefits of mobile and wireless
communications have gained widespread acceptance as a result of
the growth in cellular communications. The Company believes
that
paging will continue to grow with the wireless communications
industry generally, because it believes paging is the most
cost-effective form of mobile communication. Since paging is a
form of one-way communication, it is less expensive than
communicating by cellular telephones. Pagers and air time
required to transmit an average message cost less than equipment
and air time for cellular telephones. In fact, some users
of cellular telephones use a pager in conjunction with their
telephones to screen incoming calls and to minimize usage-based
charges.
The availability of value-added paging products and
services is creating demand within certain market segments which
previously had not been attracted by the benefits of basic
paging
services alone. Demand for paging services is anticipated to
increase further as a result of technological advances which
permit messaging to be integrated into business tools (such as
lap
top and palm top computers) and into consumer products (such as
wristwatches).
BUSINESS STRATEGY
The Company's objective is to maximize revenues by
focusing on a business strategy which emphasizes the following
elements: (i) major metropolitan market focus; (ii) broad
product
distribution capabilities; (iii) network infrastructure and
channel capacity; (iv) comprehensive service options; (v)
targeted market segments; (vi) value-added services; and (vii)
customer ownership of pagers. Since 1994, Smith Barney Inc. has
been retained by the Company as its exclusive financial advisor
to
render financial advisory services to the Company in connection
with the possible sale of one or more of the Company's
paging operations. Except for the sale of the Company's Florida
and California operations, no other sales of assets by the
Company are presently pending.
Major Metropolitan Market Focus. The Company
presently operates in the New York and Chicago
metropolitan area markets and in Southeastern
Florida and Northern California, serving an aggregate
population of 38 million. Based upon its knowledge and
experience in these markets, the Company believes that in
each of its markets, the four largest competitors serve
approximately 80 percent of pager users. The Company has
entered into an agreement to sell its operations in
California and Florida. Significant barriers to entry
exist in the New York and Chicago metropolitan area
markets, since there are no more FCC paging channels
currently available for license and substantial capital
would be required to construct and operate efficient
and competitive paging systems. The efficiencies of
maintaining centralized key functions have enabled the
Company to consistently reduce operating costs per pager
in service.
Broad Product Distribution Capabilities. The
Company has developed and is continuing to expand
multiple distribution channels which reach targeted
market segments. Products are distributed through a
number of different outlets, including 16 sales offices,
one company-owned retail store, a direct sales force and
resellers.
Network Infrastructure and Channel Capacity. The
Company believes that controlling licenses to a large
number of FCC-allocated paging channels is important to
adequately service both current and future demand for
paging and messaging services. The New York network
utilizes 230 transmitters over 12 available paging
channels to provide service to 145,000 pagers throughout
most of Connecticut, New York State south of Albany
(including Long Island), New Jersey and Eastern
Pennsylvania. The Chicago network consists of 70
transmitters over 11 available paging channels. This
network provides service to 88,000 pagers from the
Wisconsin border, throughout Illinois, Northern Indiana
and into Western Michigan. The Florida network
utilizes 60 transmitters over 13 available paging channels
to provide service to 53,000 pagers in Southeastern
Florida. The California network consists of 34
transmitters on six available paging channels providing
service to 25,000 pagers in the San Francisco/San Jose
metropolitan area. In July 1994, the Company acquired a
900 Mhz channel which is licensed to provide state-wide
coverage in California and which currently includes eleven
constructed transmitter sites in the Los Angeles
metropolitan area. The Company has substantial capacity
to expand in its New York and Chicago metropolitan area
markets utilizing its existing network without the need
for more licenses or significant additional capital
expenditures.
Comprehensive Service Options. Since the Company has
multiple channels, it is able to offer customers the
widest possible choice in services (tone, tone/voice,
numeric, alphanumeric), geographic coverage and pricing
options. Customers select from a wide variety of pagers,
which come with both silent and audible alerts.
Convenience, as evidenced by the location of the sales
offices, and flexible policies regarding service plan
options are significant components of why customers select
Page America.
Targeted Market Segments. The Company has designed
its product and service offerings to attract defined user
groups. The Company's marketing efforts are focused on
four principal market segments: mobile workers; medical
and other on-call professionals; business professionals
seeking a competitive advantage and the home market.
Value-Added Services. The Company provides
subscribers with value-added services, such as voice mail
messaging and operator-assisted alphanumeric messaging, as
well as equipment related services, including loss and
damage protection and paging maintenance programs. Such
offerings include: PageTalkSM, a voice mail system;
PageGramSM, which involves delivery of messages from a
personal computer; Group Calling, which allows
notification of several pager users simultaneously with a
common telephone number; and Nationwide Paging
which enables a subscriber to be paged in over 200 cities
across the United States. Provision of value-added
services enables the Company to maximize revenues.
Customer Ownership of Pagers. The Company emphasizes
customer ownership of pagers, as compared to leasing,
since customer ownership significantly reduces the
Company's capital costs and reduces potential exposure to
changes in technology. Approximately 69 percent of the
Company's units in service are customer owned (including
resellers).
PAGING SERVICES
Paging operations consist of a process of signaling,
through the use of a radio transmission network, a portable
pocket
size, battery-operated radio receiver carried by a subscriber,
commonly called a "pager" or a "beeper". Each paging subscriber
is assigned a distinct telephone number. When a telephone call
for a subscriber is received at one of the Company's
computerized
paging terminals, the Company transmits a radio signal to the
subscriber's pager, which causes the pager to emit a beep,
vibrate
or generate another signal and, in certain cases, provides the
subscriber with additional information from the caller.
The Company currently provides the following four types
of pagers:
TYPE OF PAGER FUNCTIONS
Tone Only Alerts the user with a signal, so the user
will know to call a pre-determined
telephone
number (such as the office).
Tone and Voice Alerts the user with a signal, followed by
a brief voice message.
Numeric (Digital) Visually displays numbers (such as a
Display telephone number or a coded message) on a
screen to communicate with the user.
Alphanumeric Display Visually displays up to one-third of a
page
of text and/or numbers on a screen so the
user receives actual messages, instead of
just a telephone number or coded message.
The table below sets forth the number of various types of
pagers in service with subscribers of the Company at the dates
indicated:
<TABLE>
TYPES OF PAGERS IN SERVICE WITH SUBSCRIBERS OF THE COMPANY
<CAPTION>
December 31,
-----------------------------------------------------
1992 1993 1994
--------------- --------------- -------------
Units % Units % Units %
----- ---- ------- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Digital
display 208,400 91.4% 286,900 94.1% 283,100 91.0%
Tone only 12,500 5.5% 8,000 2.6% 8,300 2.7%
Tone and
voice 300 0.1% 1,000 0.3% 1,000 0.3%
Alphanumeric
display 6,800 3.0% 9,100 3.0% 18,600 6.0%
------- ----- ------- ---- ------- -----
Total 228,000 100% 305,000 100% 311,000 100%
</TABLE>
The Company sells and leases a variety of paging models,
including credit card-sized pagers, pen-like pagers, wristwatch
pagers and conventional pagers, with a range of available
options,
such as silent vibrating alert and extended message memory. The
Company provides its subscribers with local, wide-area and
national coverage. The Company currently purchases most of its
pagers from NEC America, Inc. and believes that pagers will
continue to be available to it from a number of sources.
The Company's value-added services include PageTalkSM,
which combines the features of an answering machine and paging,
enabling a caller to leave a voice message in the private
mailbox
of an end user on the Company's voice mail system, which in turn
pages the end user to call the mailbox and retrieve the message;
PageGramSM, which permits people originating messages to the end
user to use either an operator or a personal computer to send a
message to an end user who carries an alphanumeric pager; Group
Calling, which allows the notification of several pager users
simultaneously with a common telephone number; and Nationwide
Paging, which allows a pager user to be paged in over 200 cities
across the United States on a common frequency.
The Company provides paging services to pagers that are
either (i) owned by the Company and leased to its subscribers,
(ii) owned by its subscribers or (iii) owned by third party
resellers which buy pagers from the Company, lease or sell such
pagers to their own subscribers and resell the Company's
paging services as resellers under agreements with the Company.
Subscribers who own their own pagers pay a monthly paging
service
fee to the Company. Subscribers who lease pagers pay a monthly
rental fee which is combined with a monthly paging service fee.
Service fees, leasing rates and purchase prices for pagers vary
widely by region served, service type and number of pagers
purchased or leased by the subscriber.
The following table sets forth the respective numbers
and percentages of pagers that are (i) serviced directly by the
Company and owned by the Company, (ii) serviced directly by the
Company and owned by subscribers and (iii) serviced by the
Company
through third party resellers, which may be owned by the third
party resellers or by their subscribers.
<TABLE>
OWNERSHIP OF PAGERS IN SERVICE WITH SUBSCRIBERS OF THE COMPANY
<CAPTION>
December 31,
-----------------------------------------------------
1992 1993 1994
--------------- --------------- -------------
Units % Units % Units %
----- ---- ------- ----- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Company owned 92,500 40.6 104,700 34.3 95,800 30.8
Subscriber owned 63,700 28.0 101,800 33.4 109,500 35.2
Third party reseller 71,800 31.4 98,500 32.3 105,700 34.0
------- ----- ------- ----- ------- ----
Total 228,000 100% 305,000 100% 311,000 100%
======= ===== ======= ==== ======= ====
</TABLE>
TECHNICAL FACILITIES
The Company owns and operates RCC network facilities in
each of its four markets. Page America presently provides
service
over six primary channels in New York, three primary channels in
Chicago, four primary channels in Florida and one primary
channel
in California enabling the Company to provide a wide range of
coverage, pricing and product offerings. One channel in New
York,
for example, is devoted exclusively to alphanumeric service.
The
Company's operations are highly automated and centralized, with
all sales offices linked to a centralized billing, inventory and
customer service computer system, and allowing direct
interfacing from its resellers.
The Company completed construction of its own RCC system
in New York in 1985. On July 13, 1990, the Company acquired the
New York metropolitan area paging assets and business of NYNEX
Mobile Communications Company and its affiliates ("NYNEX").
This
acquisition increased the Company's number of units in service
by
approximately 74,000 pagers. The New York technical facilities
currently consist of seven paging terminals. The New York
network
utilizes 230 transmitters over 12 available channels to provide
service to 145,000 pagers throughout most of Connecticut, New
York
State south of Albany (including Long Island), New Jersey and
Eastern Pennsylvania.
The Chicago RCC facilities, which were acquired by the
Company in 1984, serve approximately 88,000 pagers in the
Illinois
and Northwestern Indiana areas. The Chicago technical
facilities
consist of three paging terminals, and the Chicago network
consists of 70 transmitters over 11 available channels.
This network provides service from the Wisconsin border,
throughout Illinois, Northwestern Indiana and into Western
Michigan.
The Florida RCC facilities, which were acquired by the
Company from Crico in 1993, serve approximately 53,000 pagers in
Southeastern Florida. The Florida technical facilities consist
of
two paging terminals, and the network consists of 60
transmitters
over 13 available channels. This network provides service
throughout Southeastern Florida.
The California RCC facilities, which were also
acquired
by the Company from Crico in 1993, serve approximately 25,000
pagers in the San Francisco/San Jose metropolitan area. Another
9,800 of the Company's pagers in California are on systems owned
by other carriers. The California technical facilities consist
of
one paging terminal, and the network consists of 34 transmitters
over 6 available channels.
MARKETING
The Company's customers include individuals,
corporations and other organizations whose business or personal
needs involve field operations or require substantial mobility,
accessibility and the need to receive timely information.
Potential users of pagers include people in every industry. The
Company services four principal market segments: mobile workers;
medical and other on-call professionals; business professionals
seeking a competitive advantage and the home market.
In order to reach these markets, the Company has
developed four channels of distribution: a direct sales force,
resellers, independent retail dealers and retail stores. Each
of
the Company's distribution channels focuses on those market
segments which it addresses most cost effectively. At
December 31, 1994, the Company employed 140 persons in direct
sales and marketing support positions.
The following table sets forth the respective revenues
and percentages of revenues that are
attributed to (i) the Company's direct sales force, including
retail dealers, (ii) third party resellers and
(iii) retail store.
<TABLE>
CHANNELS OF DISTRIBUTION
<CAPTION>
December 31,
---------------------------------------------------------------
1992 1993 1994
------------------ ------------------ -----------------
Revenues % Revenues % Revenues %
----- ---- ------- ----- ------- ----
<S> <C> <C> <C> <C> <C> <C>
Direct Sales Force(1) $26,262,600 80.06 $24,301,200 80.32 $30,626,400 82.20
Resellers 6,542,700 19.94 5,955,900 19.68 6,504,500 17.46
Retail Store -- -- -- -- 127,000 0.34
----------- ----- ----------- ----- ---------- -----
Total $32,805,300 100% $30,257,100 100% $37,257,900 100%
=========== ===== =========== ===== =========== =====
(1) Includes sales offices and retail dealers.
</TABLE>
The Company's own direct sales force operates out of
16 sales offices. The direct sales effort is supported through
a multimedia marketing campaign with advertising, promotion and
subscriber enhancement campaigns. The Company also advertises
in print media, including periodicals and yellow pages.
The Company also has a sales force which sells
products and services in bulk to resellers and retail dealers.
Resellers purchase service at wholesale rates from the Company,
and in turn, provide service to their own customers. Resellers
contribute to the Company's profits without the Company having
to incur any significant selling or administrative overhead.
Independent
retail dealers, consisting of electronics and video stores, also
market the Company's products.
The Company, in order to market its products directly
to the consumers and reduce its cost of sales, opened one
Company-owned store in New York in 1994 and plans to open four
additional stores by the end of 1995. These stores sell
cellular
as well as paging products and maintain a high end, high
tech appearance attracting consumers at all levels.
The Company's marketing strategies have been focused
on small to medium-sized customer accounts, with the result that
the Company is not dependent on any single customer or reseller.
No single customer or reseller accounted for more than one
percent of the Company's total revenues in the fiscal year ended
December 31, 1994.
REGULATION
The construction and operation of RCCs are subject to
both federal and state regulation, principally by the FCC under
the Communications Act of 1934, as amended (the "Communications
Act"). The Company believes it is in compliance with all
applicable federal and state regulations.
RCC operations may be conducted only on channels
assigned by the FCC. The FCC grants a license for the use of
such
channels only upon compliance with FCC regulations. Upon
receiving a grant, a licensee is authorized to construct and
operate an RCC facility in the assigned area using the
designated
channel. In the Company's markets all available channels have
been allocated.
The FCC licenses granted to the Company are for terms of
10 years, at the end of which time renewal applications must be
approved by the FCC. The Company's current licenses all expire
in 1999. In the past, FCC renewal applications routinely have
been granted upon a demonstration of compliance with FCC
regulations
and adequate service to the public. The FCC has granted each
renewal license the Company has filed. Although the Company is
unaware of any circumstances which would prevent the
grant of any renewal applications, no assurance can be given
that
any of the Company's licenses will be renewed by the FCC. In
addition, the FCC has the authority to revoke or modify
licenses.
No licenses owned by the Company have ever been revoked.
The Communications Act requires licensees such as the
Company to obtain prior approval from the FCC for the transfer
of
control of any construction permit or station license, or any
rights thereunder. The Communications Act also requires prior
approval by the FCC of acquisitions by the Company of
other paging companies and transfers by the Company of a
controlling interest in any of its licenses or
construction permits. The FCC has approved each acquisition and
transfer of control for which the Company has sought approval.
The Communications Act also limits foreign ownership
of
entities that hold licenses from the FCC. All the Company's FCC
licenses are owned by wholly-owned subsidiaries of the Company.
As a result, no more than 25 percent of the Company's stock may
be
owned or voted by aliens or their representatives, a foreign
government or its representatives, or a foreign entity.
In addition to regulation by the FCC, certain states
impose various regulations on certain paging operations of the
Company. Such regulations may require the Company to obtain
certificates of public convenience and necessity before
constructing paging facilities or offering paging services and
before modifying, expanding or abandoning such services. The
Company may also be subject to regulations requiring the
submission, for prior approval, of the rates, terms and
conditions
under which it plans to provide service, or any changes to those
rates. Contracts for service and financial information
regarding
the Company may also be required to be filed. Those states
which
regulate paging services may also require the Company to obtain
prior approval for the sale or acquisition of controlling
interests in any other paging company certificates, licenses,
construction permits or assets. The Company believes that
to date all such required certificates and state approvals have
been granted. Although no assurances can be given with respect
to
future approvals, the Company knows of no reason to believe such
approvals will not be granted to the Company in connection with
anticipated future requests.
From time to time, legislation which could potentially
affect the Company, either beneficially or adversely, is
proposed
by federal and state legislators. In 1993, federal legislation
was enacted which permits auction of new radio spectrum
allocated
by the FCC to new or existing services which may have the effect
of increasing competition for scarce spectrum and affecting
costs
of operation in markets in which the Company operates.
COMPETITION
The Company experiences competition, from independent
companies as well as Regional Bell Operating Companies, in its
efforts to attract and retain customers for its services in the
markets in which it operates. Competition for subscribers to
the
Company's paging services is based primarily on the quality,
price
and breadth of services offered (including geographic coverage
in
each market served). Since the transmitting and receiving
equipment is virtually identical, companies differentiate
themselves by marketing, channels of distribution, price
competition, the variety of service options and breadth of
service coverage (more transmitters covering a larger
territory).
The Company believes that based on the quality, price and
breadth
of services offered, it generally competes effectively with its
competitors.
Many RCCs in the United States are small companies
serving limited market areas; however, some of the Company's
competitors, including Regional Bell Operating Companies, are
larger, have greater financial resources and are more
established
than the Company.
In addition, future technological advances in the
telecommunications industry could create new services or
products
competitive with the paging services currently provided by the
Company. There can be no assurance that the Company would not
be
adversely affected in the event of such technological change.
EMPLOYEES
At February 28, 1995, Page America employed 269
persons,
none of whom was represented by a labor union. Page America
believes that its relations with its employees are good.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this amendment to this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PAGE AMERICA GROUP, INC.
By:/s/ Kathleen C. Parramore
Kathleen C. Parramore
President
May 25, 1995
