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 September 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 October 31, 1995, there were outstanding 8,052,305 shares of
Registrant's common stock.
Page America Group, Inc. and Subsidiaries
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<CAPTION>
CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands)
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 796 $ 1,128
Accounts receivable,
net of allowance for doubtful accounts
of $273 and $283 1,171 1,665
Prepaid expenses and other current assets 1,829 503
Total current assets 3,796 3,296
PROPERTY, PLANT AND EQUIPMENT
Pagers 10,345 12,542
Radio Common Carrier equipment 12,886 14,683
Office equipment 3,930 4,002
Leasehold improvements 590 544
Building and land 64 100
27,815 31,871
Less accumulated depreciation and amortization (20,412) (20,947)
7,403 10,924
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $3,066 and $3,044 21,087 31,788
Customer lists, net of accumulated amortization of
$7,836 and $8,486 3,932 8,625
Other intangibles, net of accumulated amortization
of $3,108 and $2,940 9,513 12,595
Deferred financing costs, net 113 1,924
Deposits and other non-current assets 1,238 1,077
35,883 56,009
$47,082 $ 70,229
The accompanying notes are an integral part of these statements
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<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands, except share data)
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt $ 46,758 $ 1,068
Accounts payable 2,260 4,819
Accrued expenses and other liabilities 3,411 3,433
Preferred dividends payable 716 1,444
Customer deposits 309 544
Deferred revenue 1,252 1,529
Total current liabilities 54,706 12,837
LONG-TERM DEBT, less current maturities 89 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 -- $105 and $100 per share 30,068 28,888
Common stock--$.10 par value, authorized--100,000,000
shares, issued and outstanding--8,052,305 and 7,101,868
shares 805 710
Paid-in capital 52,863 49,830
Accumulated Deficit (91,449) (78,989)
(7,713) 439
$ 47,082 $ 70,229
The accompanying notes are an integral part of these statements
</TABLE>
<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
September 30, September 30,
1995 1994
<S> <C> <C>
Service revenues $ 6,083 $8,189
Sales revenues 577 1,240
Total revenues 6,660 9,429
Operating expenses:
Cost of service 636 689
Cost of sales 429 842
Selling 1,393 1,743
General and administrative 2,408 2,170
Technical 991 1,109
Depreciation 1,057 1,674
Amortization of intangibles 541 942
7,455 9,169
Operating profit (loss) (795) 260
Interest expense (1,544) (1,316)
Other income (expenses)
Amortization and write-off of deferred costs (2,401) (98)
Gain (loss) on disposal of assets (918) 177
Other (14) (166)
(3,333) (87)
Net loss (5,672) (1,143)
Dividends on preferred stock (716) (722)
Net Loss applicable to common stock (6,388) $(1,865)
Net loss applicable to common stock, per share $(.79) $ (.28)
Weighted average number of shares outstanding 8,038,439 6,575,346
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
(Unaudited)
NINE MONTHS ENDED
September 30, September 30,
1995 1994
<S> <C> <C>
Service revenues $21,085 $24,825
Sales revenues 2,139 3,578
Total revenues 23,224 28,403
Operating expenses:
Cost of service 2,113 2,105
Cost of sales 1,313 2,370
Selling 4,682 4,947
General and administrative 7,216 6,761
Technical 3,411 3,483
Depreciation 3,792 4,454
Amortization of intangibles 2,473 3,028
25,000 27,148
Operating profit (loss) (1,776) 1,255
Interest expense (4,796) (3,726)
Other income (expenses):
Amortization and write-off of deferred costs (2,594) (282)
Gain (loss) on disposal of assets (918) 355
Other (228) (318)
(3,740) (245)
Net loss (10,312) (2,716)
Dividends on preferred stock (2,148) (2,243)
Net loss applicable to common stock $(12,460) $(4,959)
Net loss applicable to common stock, per share $ (1.58) $ (.79)
Weighted average number of shares outstanding 7,897,354 6,250,081
The accompanying notes are an integral part of these statements.
</TABLE>
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<CAPTION>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ In Thousands)
(Unaudited)
Decrease in Cash and Cash Equivalents
NINE MONTHS ENDED
September 30, September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $23,166 $28,187
Cash paid to suppliers and employees (18,024) (17,612)
Interest paid (4,487) (3,447)
Costs related to financing of debt (739) (275)
Other (52) (42)
Net cash (used in) provided by operating activities (136) 6,811
Cash flows from investing activities:
Capital expenditures (4,700) (6,646)
Acquisitions and related liabilities -- (836)
Licensing costs (254) (789)
Net proceeds from disposal of assets 17,334 371
Net cash provided by (used in) investing activities 12,380 (7,900)
Cash flows from financing activities:
Proceeds from issuance of debt 117 136
Principal payments on debt (12,638) (754)
Cost related to preferred stock exchange - (27)
Cost related to issuance of preferred and common stock (55) (442)
Net cash used in financing activities (12,576) (1,087)
Net decrease in cash and cash equivalents (332) (2,176)
Cash and cash equivalents at beginning of period 1,128 2,912
Cash and cash equivalents at end of period $ 796 $ 736
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
($ In Thousands)
(Unaudited)
Reconciliation of net loss to net cash (used in)
provided by operating activities:
NINE MONTHS ENDED
September 30, September 30,
1995 1994
<S> <C> <C>
Net loss $(10,312) $(2,716)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation, amortization and write-off of
deferred costs 8,859 7,763
Net book value of pagers sold 1,223 2,329
Provision for losses on accounts receivable 516 657
Provision for lost pagers 200 215
Loss (gain) on disposal of assets 918 (355)
Other 331 ( 19)
Change in assets and liabilities:
Increase in accounts receivable (59) (216)
Increase in prepaid expenses and other (752) (676)
Costs related to financing of debt (739) (275)
Decrease in accounts payable (1,620) (52)
Increase in accrued expenses 1,299 156
Total adjustments 10,176 9,527
Net cash (used in) provided by operating activities $(136) $ 6,811
Supplemental schedule of noncash investing and financing activities:
Dividends accrued on outstanding shares of Preferred Stock $716 $723
Dividends added to the liquidation value of Preferred Stock $1,432 ----
Common Stock issued in connection with acquisition $1,471 ----
Common Stock issued to pay dividends on Preferred Stock 1,444 1,527
Capital expenditures financed 1,052 ----
Capital expenditures in accounts payable and accrued expenses 618 1,184
The accompanying notes are an integral part of these statements.
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Page America Group, Inc. and Subsidiaries
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 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 September 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.
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. In August, 1995 the Preferred shareholders
agreed to waive their rights to receive the dividend payment of
$1,432,000 due June 30, 1995. In exchange, this amount was added
to the liquidation value of
the shares in the Company's third fiscal quarter. As of
September 30, 1995 accrued dividends aggregated $715,900 or
$2.50 per share.
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.
NOTE D - SALE OF FLORIDA AND CALIFORNIA OPERATIONS
On July 28, 1995, the Company sold to Paging Network of
Florida, Inc. substantially all of its Florida and California
paging assets, with a net book value of approximately $19.1
million, for a cash sale price of approximately $19.3
million. $1.0 million of the sales price is being held in
escrow and is scheduled to be released to the Company over a two
year period, as provided for in the agreement. Part of
the proceeds was used to reduce the Company's senior debt by
$11.8 million and to prepay interest of $1.2 million through
December 29, 1995. In connection with this
sale, the Company incurred expenses amounting to approximately
$1.1 million. This sale includes approximately 78,000 pagers,
two statewide and several regional frequencies.
NOTE E - RESTRUCTURING OF DEBT
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. The Company used the net proceeds from the
sale of its Florida and California operations to reduce the debt
by $11.8 million and 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
the indebtedness under the Credit Facility. In its third fiscal
quarter the Company recorded a special charge of
approximately $1.8 million related to the amended agreement
which includes the write-down of deferred financing costs of
approximately $1.1 million. As of September 30, 1995, the
outstanding balance of the Credit Facility was $33.2 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 defer the cash payment of interest until
maturity. Commencing January 1, 1995, interest is accrued on
outstanding principal and unpaid 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
recorded a special charge of approximately $500,000 related to
the modified agreement, which includes the write-down of
deferred financing costs of
approximately $479,000.
During the remainder of 1995 the Company plans to pursue
opportunities with respect to obtaining long-term debt and
equity financing or selling some or all of its remaining
business in order to
satisfy amounts owed under the Credit Facility and subordinated
notes in accordance with their amended terms.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Nine Months Ended September 30, 1995 and September 30,
1994
Total revenues for the quarter ended September 30, 1995 were
$2.8 million (29.4 percent) lower than that of the 1994 quarter;
and for the nine month period ended September 30, 1995 were $5.2
million (18.2 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 decrease is also attributed to the sale
of the Company's operations in Florida and California on July
28, 1995. The Company had 308,000 units in service at June 30,
1995 and 221,000 units at September 30, 1995, a decrease of
87,000 units in the quarter.
The Company's units in service at September 30, 1995
showed a decrease of 90,000 units from December 31, 1994. A
substantial portion of this decrease (78,000 units) is
attributable o the sale of the Florida and California
operations. The Company's units in service of
307,000 at September 30, 1994 experienced an increase of 2,000
units from December 31, 1993.
Cost of service decreased by $53,000 (7.7 percent) in the
three month period over the same period in 1994 and remained
relatively constant in the nine month period when compared with
the same period in 1994. The decrease was principally due to
cost of service associated with the sold operations. Cost of
sales increased from 68 percent of sales revenues in 1994 to 74
percent in the 1995 quarter, primarily as a result of lower
selling
prices due to competitive pressure. The decrease to 61 percent
from 66 percent in the nine month period was principally a
result of lower pager costs.
Selling expenses decreased by $350,000 (20.1 percent) in the
quarter and $265,000 (5.4 percent) in the nine month period, as
compared to 1994. The decrease was primarily due to selling
expenses associated with the sold operations partially offset by
an increase in employee benefits.
General and administrative expenses increased by $238,000
(11.0 percent) and $455,000 (6.7 percent) in the three and nine
month periods, respectively, over the same periods in the prior
year. This was primarily due to increases in personnel costs,
lost pagers and professional fees, partially offset by
expenses associated with the sold operations.
Technical expenses decreased by $118,000 (10.6 percent) and
$72,000 (2.1 percent) in the three and nine month periods,
respectively, over the same periods in the prior year,
principally as a result of the sale of the Florida and
California operations partially offset by an increase in
personnel costs.
Depreciation expense decreased by $617,000 (36.9 percent)
and $662,000 (14.9 percent) in the respective three and nine
month periods of the current year. This resulted from the
decrease in pagers on lease to customers, the lower average
price of pagers purchased in 1995 and sale of depreciable assets
in Florida and California. Amortization expense decreased by
$401,000 (42.6 percent) and $555,000 (18.3 percent) in the three
and nine 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 $228,000 (17.3 percent) and
$1,070,000 (28.7 percent) for the three and nine 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) increased $3,246,000 in the quarter
and $3,495,000 in the nine month period of 1995. The increase
was primarily due to a write-down of deferred financing costs
related to the senior debt and subordinated debt amounting to
$1.6 million, loss realized on the sale of the Florida and
California operations of approximately $916,000 and costs
associated with the debt restructuring in the amount of
$723,000.
Net loss was $5.7 million (85.2 percent of total revenues)
in the quarter ended September 30, 1995, as compared to
$1.1 million (12.1 percent of total revenues) in the same
quarter
of 1994 and $10.3 million (44.4 percent of total revenues) in
the nine month period ended September 30, 1995 as compared to
$2.7 million (9.6 percent of total revenues) in the same period
of 1994.
EBITDA (earnings before interest, taxes, depreciation and
amortization) in the 1995 quarter was $803,000 as compared to
$2.9 million in the 1994 quarter; and $4.5 million in the nine
month period of 1995 as compared to $8.7 million in the 1994
period.
Financial Condition
Liquidity and Capital Resources
The Company had a working capital deficiency of $50.9
million at September 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
debt maturities of $45.7 million, of which $33.2 million and
$12.6 million related to
the senior credit facility and subordinated debt, respectively.
The Company's senior secured credit facility was amended in
July 1995 in connection with the sale of the Company's Florida
and California paging operations. Among other things, the
amendment accelerated the maturity date of such facility to
December 29, 1995, subject to extension under certain
circumstances until June 28, 1996. As of September 30, 1995,
the outstanding balance of the credit facility was $33.2
million. The Company's 12 percent subordinated notes due 2003
were also modified to provide for a final maturity of six months
subsequent to the final maturity of the credit facility and to
defer the cash payment of interest until maturity.
The ability of the Company to continue to implement its
plan of operations is dependent upon the refinancing of the
credit facility or the extension of the maturity date thereof.
In order to repay the amounts due under the credit facility and
subordinated notes in accordance with their amended terms, the
Company is actively pursuing
opportunities to obtain long-term debt and equity financing
and/or to sell some or all of its remaining assets. There is no
assurance that the Company will be able to obtain any financing
or to sell any of its assets.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated August 1,
1995 reporting on Items 2 and 5.
<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.
Date: November 20, 1995
PAGE AMERICA GROUP, INC.
(Registrant)
/s/ Martin Katz
Martin Katz
Chief Financial Officer
<TABLE> <S> <C>
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<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 796
<SECURITIES> 0
<RECEIVABLES> 1,444
<ALLOWANCES> 273
<INVENTORY> 44
<CURRENT-ASSETS> 4,298
<PP&E> 27,815
<DEPRECIATION> 20,412
<TOTAL-ASSETS> 47,082
<CURRENT-LIABILITIES> 54,706
<BONDS> 0
<COMMON> 805
0
30,068
<OTHER-SE> (38,586)
<TOTAL-LIABILITY-AND-EQUITY> 47,082
<SALES> 2,139
<TOTAL-REVENUES> 23,224
<CGS> 1,313
<TOTAL-COSTS> 25,000
<OTHER-EXPENSES> 3,740
<LOSS-PROVISION> 516
<INTEREST-EXPENSE> 4,796
<INCOME-PRETAX> (10,260)
<INCOME-TAX> 52
<INCOME-CONTINUING> (10,312)
<DISCONTINUED> 0
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<NET-INCOME> (10,312)
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