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, 1996 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
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- ------------------------------------------------------
------------
(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
<PAGE>
As of July 31, 1996, there were outstanding 16,037,095 shares of Registrant's
common stock.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS
($ In Thousands)
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 630 $ 751
Accounts receivable, net of allowance
for doubtful accounts of $223 and $277 858 1,017
Prepaid expenses and other current assets 1,291 944
------ ------
Total current assets 2,779 2,712
EQUIPMENT
Pagers 8,144 8,164
Radio Common Carrier equipment 13,144 12,914
Office equipment 3,951 3,946
Leasehold improvements 614 614
Building and land 64 64
--------- ---------
25,917 25,702
Less accumulated depreciation and amortization (19,045) (19,040)
--------- ---------
6,872 6,662
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $3,158 and $3,216 20,670 20,968
Customer lists, net of accumulated amortization
of $ 8,280 and $7,992 3,489 3,776
Other intangibles, net of accumulated amortization
of $ 3,328 and $3,184 8,801 8,945
Deferred financing costs, net -- 32
Deposits and other non-current assets 707 908
--------- ---------
33,667 34,629
--------- --------
$43,318 $44,003
======= =======
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(In Thousands, except share data)
<CAPTION>
June 30, December 31,
1996 1995
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
<S> <C> <C>
Current maturities of long-term debt $50,331 $48,666
Accounts payable 2,090 1,982
Accrued expenses and other liabilities 2,529 1,535
Preferred dividends payable 1,432 1,432
Customer deposits 276 299
Advance billings 1,579 1,242
------------ ---------
Total current liabilities 58,237 55,156
LONG-TERM DEBT, less current maturities 53 69
SHAREHOLDERS' EQUITY (DEFICIT)
Series One Convertible Preferred Stock, 10% cumulative $.01 par value,
authorized--310,000 shares, issued and outstanding -- 286,361 shares,
liquidation value --
$105 per share 30,068 30,068
Common stock--$.10 par value, authorized--100,000,000
shares, issued and outstanding--16,037,095 and
8,052,305 shares 1,604 805
Paid-in capital 53,501 52,850
Accumulated Deficit (100,145) (94,945)
---------- ---------
(14,972) (11,222)
--------- ---------
$ 43,318 $ 44,003
========= ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED
June 30, June 30,
1996 1995
<S> <C> <C>
Service revenues $5,214 $7,408
Sales revenues 527 755
--------- ---------
Total revenues 5,741 8,163
Operating expenses:
Cost of service 529 755
Cost of sales 368 409
Selling 1,085 1,614
General and administrative 1,504 2,646
Technical 886 1,212
Depreciation 986 1,321
Amortization of intangibles 358 897
--------- ---------
5,716 8,854
-------- --------
Operating profit (loss) 25 (691)
Interest expense (1,581) (1,642)
Other income (expenses):
Amortization of deferred costs (28) 121
Other (329) (81)
---------- ----------
(357) 40
---------- ---------
Net loss (1,913) (2,293)
Dividends on preferred stock (716) ( 716)
---------- ----------
Net Loss applicable to common stock $(2,629) $(3,009)
========== ==========
Net loss applicable to common stock, per share $(.27) $(.37)
========== ==========
Weighted average number of shares outstanding 9,786,919 8,031,393
=========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ In Thousands, except per share data)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED
June 30, June 30,
1996 1995
----------- --------
<S> <C> <C>
Service revenues $10,499 $15,002
Sales revenues 1,037 1,562
--------- ---------
Total revenues 11,536 16,564
Operating expenses:
Cost of service 1,059 1,477
Cost of sales 712 884
Selling 2,188 3,288
General and administrative 3,276 4,808
Technical 1,795 2,420
Depreciation 1,913 2,735
Amortization of intangibles 734 1,932
--------- ---------
11,677 17,544
--------- ---------
Operating profit (loss) (141) (980)
Interest expense (3,225) (3,253)
Other expenses:
Amortization of deferred costs (56) (193)
Other (346) (214)
--------- ---------
(402) (407)
--------- ---------
Net loss (3,768) (4,640)
Dividends on preferred stock (1,432) (1,432)
--------- ---------
Net Loss applicable to common stock $(5,200) $(6,072)
========== ==========
Net loss applicable to common stock, per share $(.58) $(.78)
========== ==========
Weighted average number of shares outstanding 8,919,612 7,825,642
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
Decrease in Cash and Cash Equivalents
<CAPTION>
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1996 1995(a)
---------- ----------
<S> <C> <C>
Net loss $(3,768) $(4,640)
Adjustments to net loss:
Depreciation and amortization 3,153 4,860
Net book value of pagers sold 644 860
Provision for losses on accounts
receivable 371 276
Provision for lost pagers 90 137
Issuance of promissory notes to
satisfy interest on subordinated debt 975 975
Other 319 243
Change in assets and liabilities:
Decrease in accounts receivable 101 106
Increase in prepaid expenses
and other (6) (212)
Decrease in accounts payable (176) (398)
Increase in accrued expenses 308 250
-------- -------
Net cash provided by operating activities 2,011 2,457
-------- -------
Cash flows from investing activities:
Capital expenditures (2,145) (2,301)
Licensing costs (4) (358)
-------- -------
Net cash used in investing activities (2,149) (2,659)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of debt 834 116
Principal payments on debt (562) (467)
Costs related to financing of debt (111) (208)
Costs related to sale of assets (144) --
Cost related to issuance of common stock -- (26)
--------- ---------
Net cash provided by (used in) financing activities 17 (585)
-------- ---------
Net decrease in cash and cash equivalents (121) (787)
Cash and cash equivalents at beginning of period 751 1,128
--------- --------
Cash and cash equivalents at end of period $ 630 $ 341
======== =======
(a) - Reclassified to conform with the current year presentation.
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<TABLE>
Page America Group, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(In Thousands)
<CAPTION>
(Unaudited)
SIX MONTHS ENDED
June 30, June 30,
1996 1995(a)
---------- ----------
Supplemental schedule of noncash investing and financing activities:
<S> <C> <C>
Dividends accrued on preferred stock $ 1,432 $ 1,432
Common stock issued in connection
with acquisition -- 1,471
Dividend payment on preferred stock 1,432 1,444
Capital expenditures in accounts payable
and accrued expenses 592 374
Capital expenditures financed -- 546
(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
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996
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, 1996 are not necessarily indicative of
the operating results that may be expected for the year ending December 31,
1996.
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, 1996. On June 12, 1996, accrued dividends
of $1,432,000 at December 31, 1995 were paid by the issuance of 7,899,590 shares
of the Company's Common Stock.
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 April 23, 1996, the Company entered into a definitive agreement to
sell substantially all of its assets to Metrocall Inc. for approximately $78.5
million, consisting of $55 million in cash and $23.5 million in Metrocall common
stock. The number of shares of Metrocall common stock to be received by Page
America will be based on the average price of Metrocall common stock during the
twenty trading days ending on the trading day five trading days immediately
prior to the closing date, provided that the price per share will not be less
than $17.8425 or more than $21.8075. The final purchase price is subject to
adjustment based on certain defined operating performance criteria prior to
closing. This sale is subject to the approval of the Company's shareholders and
regulatory authorities. Following completion of the transaction, which is
expected to occur during the latter part of this year, the Company plans to
liquidate. Excluded from the sale are cash, assets related to the employee
benefit plans and the sale of the Florida and California operations, liabilities
under the senior credit facility, subordinated debt agreement and NEC America
leasing contract and obligations with respect to federal, state and local taxes.
NOTE E - AMENDMENT OF THE CREDIT FACILITY
On April 26, 1996, the Company's senior secured credit facility with
certain banks ("Credit Facility") was modified to provide for a revolving credit
loan of $750,000, a waiver of all existing defaults on certain financial and
other covenants, the omission of financial covenants effective April 30, 1996
and an extension of the maturity date to the earlier of November 30, 1996 or the
completion of the sale of the Company's assets to Metrocall, Inc. As of June 30,
1996, the Company remains in default under the Credit Facility with resect to
the delivery of certain financial statements in 1996.
NOTE F - STOCK EXCHANGE LISTING
Due to Page America's inability to comply with all the financial
guidelines of the American Stock Exchange ("AMEX") for continued listing, the
Company's common stock was removed from the AMEX listing in April, 1996. The
AMEX has advised Page America that in view of the sale of its assets, trading in
the Company's common stock will not resume on the AMEX.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three and Six Months Ended June 30, 1996 and June 30, 1995
Total revenues for the quarter ended June 30, 1996 were $2.4 million
(29.7 percent) lower than that of the 1995 quarter; and for the six month period
ended June 30, 1996 were $5.0 million (30.4 percent) lower than the comparable
period of 1995. The sale of the Company's operations in Florida and California
in July, 1995 accounted for $1.9 million and $3.8 million of the decrease for
the three and six month periods, respectively. In addition, average revenue per
subscriber declined as the rates obtained from new subscribers were lower than
the rates associated with lost subscribers. Subscriber growth in 1995 and 1996
was limited, as pager purchases were constrained by limited available
capital.The Company had 223,000 units in service at March 31, 1996 and 222,000
units at June 30, 1996, an increase of 2,000 and 1,000 units, respectively, from
the 221,000 units at December 31, 1995. The Company's 308,000 units in service
at March 31 and June 30, 1995 showed a decrease of 3,000 units from the 311,000
units at December 31, 1994.
Cost of service decreased by $226,000 (29.9 percent) and $418,000 (28.3
percent) in the three and six month periods, respectively, over the same periods
in the prior year. The decrease was principally due to the cost of service
associated with the sold operations. Cost of sales increased for the three month
periods from 54.2 percent of sales revenues in 1995 to 69.8 percent in the 1996;
and to 68.7 percent from 56.6 percent for the six month periods. These increases
in cost of sales as a percent of sales revenues are principally a result of
lower selling prices due to competitive pressure.
Selling expenses decreased by approximately $529,000 (32.8 percent) in
the 1996 quarter and $1.1 million (33.5 percent) for the six month period as
compared with the same periods in 1995. $425,000 and $815,000 of the decreases
in the three and six month periods, respectively, were due to selling expenses
associated with the sold operations. The Company's remaining operations
experienced decreases primarily due to a reduction in personnel and sales.
General and administrative expenses decreased by $1.1 million (43.2
percent) and $1.5 million (31.9 percent) in the three and six month periods,
respectively, over the same periods in the prior year. This was principally due
to expenses associated with the sold operations and a reduction in personnel.
Technical expenses decreased by $326,000 (26.9 percent) and $625,000
(25.8 percent) for the three and six month periods, respectively, when compared
with the same periods in the 1995, principally as a result of the sale of the
Florida and California operations.
Depreciation expense decreased by $335,000 (25.4 percent) and $822,000
(30.1 percent) in the respective three and six month periods of the current
year, principally as a result of the sale of depreciable assets in Florida and
California. Amortization expense decreased by $539,000 (60.1 percent) and $1.2
million (62.0 percent) in the three and six months periods of 1996 over 1995,
principally due to the elimination of intangible assets related to the Florida
and California operations and the write-off, at the end of fiscal year 1995, of
certain intangibles related to the NYNEX acquisition.
Interest expense remained relatively constant for the three and six
month periods, as compared to the same periods in 1995.
Other expenses increased approximately $397,000 in the quarter and
remained relatively constant in the six month period in 1996. The quarter in
1996 included the amortization of banking fees of $450,000 associated with the
modification of the senior credit facility. In the six month period in 1996 this
increase was offset by the reduction in the amortization of deferred financing
costs related to the senior and subordinated debts which were written down
during the third quarter of 1995.
Net loss was $1.9 million (33.3 percent of total revenues) in the
quarter ended June 30, 1996, as compared to $2.3 million (28.1 percent of total
revenues) in the same quarter of 1995 and $3.8 million (32.7 percent of total
revenues) in the six month period ended June 30, 1996 as compared to $4.6
million (28.0 percent of total revenues) in the same period of 1995.
EBITDA (earnings before interest, taxes, depreciation and amortization)
in the 1996 quarter was $1.4 million as compared to $1.5 million in the 1995
quarter; and $2.5 million in the six month period of 1996 as compared to $3.7 in
the 1995 period.
Financial Condition
Liquidity and Capital Resources
The Company had a working capital deficiency of approximately $55.5
million at June 30, 1996 as compared to a deficiency of approximately $52.4
million at December 31, 1995. The increase in working capital deficiency was
primarily due to a loan of $750,000, accrued interest of $294,000 and banking
fees of $350,000 under the senior credit facility, accrued interest on the
subordinated debt of $1.1 million and $337,000 of deferred revenue.
On April 23, 1996, Page America entered into a definitive agreement to
sell substantially all of its assets to Metrocall, Inc. for a purchase price of
approximately $78.5 million which consists of $55 million in cash and $23.5
million in Metrocall common stock. The Company intends to pay the outstanding
senior debt of approximately $34 million, the subordinated debt of $13 million
and unpaid interest of approximately $3.1 million from cash generated by the
sale of its assets.
On April 26, 1996, the Company's senior secured credit facility with
certain banks ("Credit Facility") was modified to provide for a revolving credit
loan of $750,000, a waiver of all existing defaults on certain financial and
other covenants, the omission of financial covenants effective April 30, 1996
and an extension of the maturity date to the earlier of November 30, 1996 or the
completion of the sale of the Company's assets to Metrocall, Inc. As of June 30,
1996, the Company remains in default under the Credit Facility with respect to
the delivery of certain financial statements in 1996.
The Company's operating activities generated $2.0 million of cash flow
in the first six months of 1996. The Company believes that cash generated from
operations and proceeds from the $750,000 loan under the Credit Facility will be
sufficient to fund operations through the anticipated date of sale to Metrocall,
Inc. The Company does not have any material capital expenditure commitments.
<PAGE>
PART II - OTHER INFORMATION
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1996
PAGE AMERICA GROUP, INC.
(Registrant)
/s/ Kathleen C. Parramore
Kathleen C. Parramore
President and Chief Operating Officer
/s/ Martin Katz
Martin Katz
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000311048
<NAME> PAGE AMERICA GROUP, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 630
<SECURITIES> 0
<RECEIVABLES> 1,081
<ALLOWANCES> 223
<INVENTORY> 0
<CURRENT-ASSETS> 2,779
<PP&E> 25,917
<DEPRECIATION> 19,045
<TOTAL-ASSETS> 43,318
<CURRENT-LIABILITIES> 50,331
<BONDS> 0
0
30,068
<COMMON> 1,604
<OTHER-SE> (46,644)
<TOTAL-LIABILITY-AND-EQUITY> 43,318
<SALES> 1,037
<TOTAL-REVENUES> 11,536
<CGS> 712
<TOTAL-COSTS> 11,677
<OTHER-EXPENSES> 402
<LOSS-PROVISION> 371
<INTEREST-EXPENSE> 3,225
<INCOME-PRETAX> (3,744)
<INCOME-TAX> 24
<INCOME-CONTINUING> (3,768)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,768)
<EPS-PRIMARY> ($.58)
<EPS-DILUTED> ($.58)
</TABLE>
