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 June 30, 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 July 31, 1995, there were outstanding 8,031,393 shares of Registrant's
common stock.
Page America Group, Inc. and Subsidiaries
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands)
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 341 $ 1,128
Accounts receivable,
net of allowance for doubtful accounts
of $295 and $283 1,159 1,665
Assets held for sale 18,445
Prepaid expenses and other current assets 681 503
Total current assets 20,626 3,296
PROPERTY, PLANT AND EQUIPMENT
Pagers 9,967 12,542
Radio Common Carrier equipment 12,802 14,683
Office equipment 3,996 4,002
Leasehold improvements 584 544
Building and land 64 100
27,413 31,871
Less accumulated depreciation and amortization (20,226) (20,947)
7,187 10,924
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $2,916 and $3,044 21,194 31,788
Customer lists, net of accumulated amortization
$7,679 and $8,486 4,089 8,625
Other intangibles, net of accumulated amortization
$3,032 and $2,940 9,582 12,595
Deferred financing costs, net 1,917 1,924
Deposits and other non-current assets 1,067 1,077
37,849 56,009
$ 65,662 $ 70,229
</TABLE>
The accompanying notes are an integral part of these
statements
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands, except share data)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 59,212 $ 1,068
Accounts payable 3,783 4,819
Accrued expenses and other liabilities 2,338 3,433
Dividends payable 1,432 1,444
Customer deposits 324 544
Deferred revenue 1,188 1,529
Total current liabilities 68,277 12,837
LONG-TERM DEBT, less current maturities 128 56,953
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
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
shares issued and outstanding--8,031,393 and 7,101,868
shares 803 710
Paid-in capital 52,879 49,830
Accumulated Deficit (85,061) (78,989)
(2,743) 439
$ 65,662 $ 70,229
</TABLE>
The accompanying notes are an integral part of these
statements
Page America Group, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1995 1994
<S> <C> <C>
Service revenues $7,408 $8,214
Sales revenues 755 1,216
Total revenues 8,163 9,430
Operating expenses:
Cost of service 755 698
Cost of sales 409 832
Selling 1,614 1,641
General and administrative 2,646 2,238
Technical 1,212 1,168
Depreciation 1,321 1,409
Amortization of intangibles 897 1,040
8,854 9,026
Operating profit (loss) (691) 404
Interest expense (1,642) (1,245)
Other income (expenses):
Amortization of deferred costs 121 ( 94)
Other ( 81) 143
40 49
Net loss (2,293) ( 792)
Dividends on preferred stock (716) (764)
Net Loss applicable to common stock $(3,009) $(1,556)
Net loss applicable to common stock, per share $ (.37) $ (.25)
Weighted average number of shares outstanding 8,031,393 6,194,909
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
Page America Group, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1995 1994
<S> <C> <C>
Service revenues $15,002 $16,635
Sales revenues 1,562 2,339
Total revenues 16,564 18,974
Operating expenses:
Cost of service 1,477 1,416
Cost of sales 884 1,529
Selling 3,288 3,203
General and administrative 4,808 4,591
Technical 2,420 2,374
Depreciation 2,735 2,780
Amortization of intangibles 1,932 2,086
17,544 17,979
Operating profit (loss) (980) 995
Interest expense (3,253) (2,410)
Other income (expenses):
Amortization of deferred costs (193) (184)
Other (214) 26
(407) (158)
Net loss (4,640) (1,573)
Dividends on preferred stock (1,432) (1,545)
Net Loss applicable to common stock $(6,072) $(3,118)
Net loss applicable to common stock, per share $ (.78) $ (.51)
Weighted average number of shares outstanding 7,825,642 6,083,871
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
Page America Group, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in Thousands)
(Unaudited)
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $16,670 $19,027
Cash paid to suppliers and employees (11,316) (11,975)
Interest paid (2,869) (2,552)
Costs related to financing of debt (208) (111)
Other (28) (25)
Net cash provided by operating activities 2,249 4,364
Cash flows from investing activities:
Capital expenditures (2,311) (4,199)
Acquisitions and related liabilities -- (672)
Licensing costs (358) (336)
Cash escrowed for prospective acquisition -- (500)
Net proceeds from disposal of assets 10 192
Net cash used in investing activities (2,659) (5,515)
Cash flows from financing activities:
Proceeds from issuance of debt 116 100
Principal payments on debt (467) (538)
Cost related to preferred stock exchange - (28)
Cost related to issuance of preferred stock (26) (331)
Net cash used in financing activities (377) (797)
Net decrease in cash and cash equivalents (787) (1,948)
Cash and cash equivalents at beginning of period 1,128 2,912
Cash and cash equivalents at end of period $ 341 $ 964
The accompanying notes are an integral part of these statements.
</TABLE>
Page America Group, Inc. and
Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ in Thousands)
(Unaudited)
Reconciliation of net loss to net cash
provided by operating activities:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1995 1994
<S> <C> <C>
Net loss $ (4,640) $ (1,573)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 4,860 5,050
Net book value of pagers sold 860 1,508
Provision for losses on accounts receivable 276 487
Provision for lost pagers 137 124
Other 1,218 (288)
Change in assets and liabilities:
Decrease in accounts receivable 106 53
Increase in prepaid expenses and other (212) (518)
Costs related to financing of debt (208) (111)
(Decrease) increase in accounts payable (398) 49
Increase (decrease) in accrued expenses 250 (417)
Total adjustments 6,889 5,937
Net cash provided by operating activities $ 2,249 $ 4,364
Supplemental schedule of noncash investing and financing activities:
The Company accrued dividends on its outstanding shares of
Preferred Stock $1,432 $ 1,519
Common Stock issued in connection with acquisition 1,471 --
Common stock issued to pay dividends on Preferred Stock 1,444 --
Capital expenditures financed 546 --
Capital expenditures in accounts payable and accrued expenses 374 969
</TABLE>
The accompanying notes are an integral part of these
statements.
<PAGE>
Page America Group, Inc. and
Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 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 June 30, 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
$1,432,000, or $5.00 per preferred share, at June 30, 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
Net loss applicable to common stock 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.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(continued)
June 30, 1995
UNAUDITED
NOTE D - SUBSEQUENT EVENTS
On July 28, 1995, the Company sold substantially all of its
Florida and California paging assets to Paging
Network of Florida, Inc. for a cash sale price of approximately
$20 million. This sale includes approximately
78,000 pagers, two statewide and several regional frequencies.
Revenues from these operations were $3.8 million for the six
months ended June 30, 1995.
Net assets related to the sale are reflected in the
accompanying balance sheet as assets held for sale.
Concurrently with the sale of the Company's Florida and
California paging assets, the Company's senior secured
credit facility with certain banks ("Credit Facility") was
amended. Among other things, the amendment provides for an
acceleration of the final maturity to December 29, 1995 and
modified the financial covenants so that the Company would no
longer be in default thereof. In addition, the Company was
required to use the net
proceeds from the sale of its Florida and
California operations to reduce the debt by approximately $11.8
million and to prepay interest at the LIBOR rate
from August 1, 1995 through December 29, 1995. If on December
29, 1995, the Company has entered into a
letter of intent for the sale of its assets, the
maturity date shall be extended to February 29, 1996. The
maturity date shall be further extended to June 28, 1996, if on
February 29, 1996, the Company has an executed agreement to sell
its assets or, if on or before December 29, 1995 (or February
29, 1996 if the maturity date has been extended as provided in
the prior sentence), the Company has a signed commitment for the
refinancing in full of its indebtedness under the Credit
Facility. In its third fiscal quarter the Company will record a
special charge of approximately $1,349,500 related to the
amended agreement which includes the write-down of deferred
financing costs of approximately $1,104,700.
As of June 30, 1995, the outstanding balance of
the Credit Facility was $45 million.
On July 28, 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 the cash payment
of interest until maturity. Commencing January 1, 1995 the
principal and unpaid interest accrued interest
at an increased rate of 15 percent per annum, compounded
semi-annually. The maturity value of the
subordinated notes is $13 million. In its third fiscal quarter
the Company will record a special charge of approximately
$478,900 related to the write-down of deferred financing costs.
During the remainder of 1995, the Company plans to pursue
opportunities with respect to obtaining long-term debt and
equity financing or selling all of its remaining business
in order to satisfy amounts owed under the Credit Facility and
subordinated notes in accordance with their amended terms.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Six Months Ended June 30, 1995 and June 30, 1994
Total revenues for the quarter ended June 30, 1995 were $1.3
million (13.4 percent) lower than that of the
1994 quarter; and for the six month period ended June 30, 1995
were $2.4 million (12.7 percent) lower than the
comparable period of 1994. 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 conserve
capital. The Company had 308,000 units in service at
March 31, 1995 and June 30, 1995, a decrease of 3,000 units
from December 31, 1994. The
Company's units in service of 302,000 at March 31,
1994 also experienced a decrease of 3,000 units from
December 31, 1993. The 305,000 units
in service at June 30, 1994 remained the same compared to
December 31, 1993.
Cost of service increased by $57,000 (8.2%) and $61,000
(4.3%) in the three and six month periods,
respectively, over the same periods in the prior year. This
increase was due to an increase in the resale of
national paging services. Cost of sales decreased from 68
percent of sales revenues in 1994 to 54 percent in the
1995 quarter; and to 57 percent from 65 percent in the six month
periods. This decrease in cost of sales as a
percent of sales revenues is principally a result of lower
pager costs.
Selling expenses remained relatively constant in the quarter
and six month period ended June 30, 1995 when
compared with the same periods in 1994.
General and administrative expenses increased by $407,000
(18.0 percent) and $217,000 (4.7 percent) in the
three and six month periods, respectively, over the same periods
in the prior year. This was primarily due to
increases in salaries, rent, professional fees and property
taxes, partially offset by a reduction in bad debt
expense during the first quarter in 1995.
Technical expenses remained relatively constant in the
quarter and six month period ended June 30, 1995 as
compared to the same periods in 1994.
Depreciation expense decreased by $89,000 (6.3 percent) and
$45,000 (1.6 percent) in the respective three
and six month periods of the current year. This resulted from
the decrease in pagers on lease to
customers and the lower average
price of pagers purchased in 1995. Amortization
expense decreased by $143,000 (13.8 percent) and $154,000 (7.4
percent) in the three and six month periods of
1995 over 1994. This is principally due to certain customer
lists becoming fully
amortized in the second quarter of 1994 and first
quarter of 1995.
Interest expense increased by $397,000 (31.9 percent) and
$843,000 (35.0 percent) for the three and six month
periods in 1995 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 income (expenses) remained relatively constant in the
quarter and experienced a decrease of $249,000 in the six month
period of 1995. This was principally due to a reduction of
amortization of financing costs by $435,000 in the second
quarter resulting from a revision of the amortization period.
In addition, both periods in 1994 include a gain of
approximately $177,900 recognized on the sale of shares of
stock in a cellular interest, owned by a subsidiary of the
Company.
Net loss was $2.7 million (33.4 percent of total revenues) in
the quarter ended June 30, 1995, as compared
to $792,000 (8.4 percent of total revenues) in the same quarter
of 1994 and $5.1 million (30.6 percent of total
revenues) in the six month period ended June 30, 1995 as
compared to $1.6 million (8.3 percent of total
revenues) in the same period of 1994.
EBITDA (earnings before interest, taxes, depreciation and
amortization) in the 1995 quarter was $1.5 million
as compared to $2.9 million in the 1994 quarter; and $3.7
million in the six month period of 1995 as compared
to $5.9 in the 1994 period.
Financial Condition
Liquidity and Capital Resources
The Company had a working capital deficiency of $47.7 million
at June 30, 1995 as compared to a deficiency
of $9.5 million at December 31, 1994. The increase in working
capital deficiency was primarily due to an
increase in current maturities of $57.9 million , of which $44.5
million and $13.4 million related to the Credit Facility and
subordinated notes, respectively. This was partially offset by
the reclassification of certain Florida and California assets
and liabilities to net assets held for sale amounting to $18.4
million.
The Company's operating activities generated cash of $2.2
million during the first half of 1995. With the
modification of its existing senior and subordinated credit
agreements, the Company believes 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 fund its
working capital requirements and to support its
operations.
During the remainder of 1995, the Company plans to pursue
opportunities with respect to obtaining long-term debt and
equity financing or selling all of its remaining business in
order to satisfy amounts owed under the Credit Facility and
subordinated notes in accordance with their amended terms.
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: August 14, 1995
PAGE AMERICA GROUP, INC.
(Registrant)
/s/ Kathleen C. Parramore
Kathleen C. Parramore
President and Chief Operating Officer
/s/ Martin Katz
Martin Katz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 341
<SECURITIES> 0
<RECEIVABLES> 3,560
<ALLOWANCES> 295
<INVENTORY> 0
<CURRENT-ASSETS> 20,626
<PP&E> 27,413
<DEPRECIATION> 20,226
<TOTAL-ASSETS> 65,227
<CURRENT-LIABILITIES> 68,277
<BONDS> 0
<COMMON> 803
0
28,636
<OTHER-SE> (32,617)
<TOTAL-LIABILITY-AND-EQUITY> 65,227
<SALES> 1,562
<TOTAL-REVENUES> 16,564
<CGS> 884
<TOTAL-COSTS> 17,544
<OTHER-EXPENSES> 407
<LOSS-PROVISION> 276
<INTEREST-EXPENSE> 3,253
<INCOME-PRETAX> (6,045)
<INCOME-TAX> 27
<INCOME-CONTINUING> (6,072)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,072)
<EPS-PRIMARY> (0.78)
<EPS-DILUTED> (0.78)
