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, 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
--------------
- ------------------------------------------------------
(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, 1996, there were outstanding 16,037,095 shares of Registrant's
common stock.
Page 1 of 14
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<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
September 30, December 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 616 $ 751
Accounts receivable, net of allowance
for doubtful accounts of $257 and $277 1,008 1,017
Prepaid expenses and other current assets 670 944
-------- -------
Total current assets 2,294 2,712
EQUIPMENT
Pagers 7,846 8,164
Radio Common Carrier equipment 13,197 12,914
Office equipment 3,951 3,946
Leasehold improvements 614 614
Building and land 64 64
---------- ---------
25,672 25,702
Less accumulated depreciation and amortization (19,248) (19,040)
---------- ---------
6,424 6,662
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $3,669 and $3,216 20,730 20,968
Customer lists, net of accumulated amortization
of $8,429 and $7,992 3,340 3,776
Other intangibles, net of accumulated amortization
of $3,400 and $3,184 8,730 8,945
Deferred financing costs, net -- 32
Deposits and other non-current assets 488 908
--------- ---------
33,288 34,629
-------- --------
$42,006 $44,003
======= =======
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
September 30, December 31,
1996 1995
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of debt $51,166 $48,666
Accounts payable 1,613 1,982
Accrued expenses and other liabilities 2,240 1,535
Preferred dividends payable 2,148 1,432
Customer deposits 260 299
Advance billings 1,580 1,242
---------- ---------
Total current liabilities 59,007 55,156
LONG-TERM DEBT, less current maturities 46 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 (102,220) (94,945)
---------- ---------
(17,047) (11,222)
--------- ---------
$ 42,006 $ 44,003
========= ========
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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)
THREE MONTHS ENDED
September 30, September 30,
1996 1995
------------ --------------
<S> <C> <C>
Service revenues $5,145 $6,083
Sales revenues 461 577
--------- ---------
Total revenues 5,606 6,660
Operating expenses:
Cost of service 546 636
Cost of sales 350 429
Selling 887 1,393
General and administrative 1,656 2,408
Technical 663 991
Depreciation 969 1,057
Amortization of intangibles 372 541
--------- ---------
5,443 7,455
-------- --------
Operating profit (loss) 163 (795)
Interest expense (1,487) (1,544)
Other income (expenses):
Amortization and write-off
of deferred costs (6) (2,401)
Gain (loss) on disposal of assets 65 (918)
Other (94) (14)
-------- --------
(35) (3,333)
---------- ----------
Net loss (1,359) (5,672)
Dividends on preferred stock (716) (716)
---------- ----------
Net Loss applicable to common stock $(2,075) $(6,388)
========== ==========
Net loss applicable to common stock, per share $(.13) $(.79)
========== ==========
Weighted average number of shares outstanding 16,037,095 8,038,439
=========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
NINE MONTHS ENDED
September 30, September 30,
1996 1995
------------ --------------
<S> <C> <C>
Service revenues $15,644 $21,085
Sales revenues 1,498 2,139
--------- ---------
Total revenues 17,142 23,224
Operating expenses:
Cost of service 1,605 2,113
Cost of sales 1,062 1,313
Selling 3,075 4,682
General and administrative 4,933 7,216
Technical 2,459 3,411
Depreciation 2,882 3,792
Amortization of intangibles 1,106 2,473
----------- ---------
17,122 25,000
--------- ---------
Operating profit (loss) 20 (1,776)
Interest expense (4,712) (4,796)
Other income (expenses):
Amortization and write-off
of deferred costs (61) (2,594)
Gain (loss) on disposal of assets 84 (918)
Other (458) (228)
--------- ---------
(435) (3,740)
--------- ----------
Net loss (5,127) (10,312)
Dividends on preferred stock (2,148) (2,148)
--------- ---------
Net Loss applicable to common stock $(7,275) $(12,460)
========== ===========
Net loss applicable to common stock, per share $(.64) $(1.58)
========== ==========
Weighted average number of shares outstanding 11,309,424 7,897,354
=========== =========
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
DECREASE IN CASH AND CASH EQUIVALENTS
NINE MONTHS ENDED
September 30, September 30,
1996 1995(A)
------------ -----------
<S> <C> <C>
Net loss $(5,127) $(10,312)
Adjustments to net loss:
Depreciation, amortization and write-off of
deferred costs 4,049 8,859
Net book value of pagers sold 960 1,223
Provision for losses on accounts receivable 640 516
Provision for lost pagers 151 200
Issuance of promissory notes to
satisfy interest on subordinated debt 1,463 1,463
(Gain) loss on disposal of assets (84) 918
Other 465 331
Change in assets and liabilities:
Increase in accounts receivable (331) (59)
Decrease (increase) in prepaid expenses and other 148 (752)
Decrease in accounts payable (285) (1,620)
Increase (decrease) in accrued expenses 574 (164)
--------- ---------
Net cash provided by operating activities 2,623 603
--------- -----
Cash flows from investing activities:
Capital expenditures (2,826) (4,700)
Licensing costs (216) (254)
Net proceeds from disposal of assets 619 17,334
------- ---------
Net cash (used in) provided by investing activities (2,423) 12,380
-------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt 1,334 117
Principal payments on debt (1,359) (12,638)
Costs related to financing of debt (113) (739)
Costs related to planned Metrocall transaction (197) --
Cost related to issuance of preferred and common stock -- (55)
--------- ---------
Net cash used in financing activities (335) (13,315)
---------- ------------
Net decrease in cash and cash equivalents (135) (332)
Cash and cash equivalents at beginning of period 751 1,128
-------- -------
Cash and cash equivalents at end of period $ 616 $ 796
======== =======
(A)-Reclassified to conform with the current year presentation.
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(Unaudited)
NINE MONTHS ENDED
September 30, September 30,
1996 1995(A)
------------ ------------
<S> <C> <C>
Supplemental schedule of noncash investing and financing activities:
Dividends accrued on preferred stock $ 2,148 $ 716
Common stock issued in connection
with acquisition -- 1,471
Dividends added to the liquidation value of
Preferred Stock -- 1,432
Common stock issued as payment on preferred stock 1,432 1,444
Capital expenditures in accounts payable
and accrued expenses 194 618
Capital expenditures financed 637 1,052
(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
SEPTEMBER 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 periods ended September 30, 1996 are not necessarily
indicative of the operating results that may be expected for the year ending
December 31, 1996.
The Financial Statements have been prepared on a going concern basis. The
Company, since its inception, has experienced a deficiency in working capital
and recurring losses. During 1995, the maturities of the Company's credit
facility and subordinated notes were accelerated due to defaults caused by its
financial difficulties (see Note E). Such debt is classified as a current
liability and the Company's current liabilities exceeded its current assets by
$56.7 million at September 30, 1996. The Company intends to pay the balance due
under the credit facility and the subordinated notes from cash generated by the
sale of its assets (see Note D).
All of these matters raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amounts or classifications of liabilities that
may result from the outcome of this uncertainty.
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 at September 30, 1996 ($7.50 per
preferred share) have been accrued and are reflected as a current liability. 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 calculated 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 used in
this calculation will not be less than $17.8425 or more than $21.8075. The final
purchase price is also subject to adjustment based on certain defined operating
performance criteria prior to closing. If the transaction closed on September
30, 1996, the final purchase price would have been $55 million in cash, 806,000
shares of Metrocall Common Stock (which had a market value of $6.375 per share
at that date) and the assumption by Metrocall of $2.8 million of net
liabilities. 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 early part of next year, the Company plans to
liquidate. Excluded from the sale are cash, assets related to the employee
benefit plans and to the Florida and California operations which had been
previously sold, 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
September 30, 1996, the Company remained in default under the Credit Facility
with respect to the timely delivery of certain financial statements in 1996. All
such financial statements have been delivered.
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 planned 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 NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
TOTAL REVENUES for the quarter ended September 30, 1996 were $ 1.1 million
( 15.8 percent) lower than that of the 1995 quarter; and for the nine month
period ended September 30, 1996 revenues were $6.1 million (26.2 percent) lower
than the comparable period of 1995. The sale of the Company's operations in
Florida and California in July, 1995 accounted for $560,000 and $4.4 million of
the decrease for the three and nine 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 216,000 units in
service at September 30, 1996, a decrease of 6,000 units from the 222,000 units
at June 30, 1996 and a decrease of 5,000 units from the 221,000 units at
December 31, 1995. The Company had 221,000 units in service at September 30,
1995, a decrease of 87,000 units from the 308,000 units at June 30, 1995 and
90,000 units from the 311,000 units at December 1, 1994. A substantial portion
of the decrease (78,000 units) in the third quarter of 1995 was attributable to
the sale of the Florida and California operations.
COST OF SERVICE decreased by $90,000 (14.2 percent) and $508,000 (24.0
percent) in the three and nine 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 as a percent of sales
revenue increased for the three month periods from 74.4 percent in 1995 to 76.0
percent in 1996; and from 61.4 percent to 70.9 percent for the nine month
periods. These increases are principally a result of lower selling prices due to
competitive pressure.
SELLING expenses decreased by approximately $506,000 (36.3 percent) in the
1996 quarter and $1.6 million (34.3 percent) for the nine month period as
compared with the same periods in 1995. $189,000 and $1.0 million of the
decreases in the three and nine 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 $752,000 (31.2 percent)
and $2.3 million (31.6 percent) in the three and nine month periods,
respectively, over the same periods in the prior year. This was principally due
to expenses associated with the sold operations, a reduction in personnel and a
decrease in professional fees.
TECHNICAL expenses decreased by $328,000 (33.1 percent) and $952,000 (27.9
percent) for the three and nine 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 $88,000 (8.3 percent) and $910,000 (24.0
percent) in the respective three and nine month periods of the current year,
principally as a result of the sale of depreciable assets in Florida and
California. AMORTIZATION expense decreased by $169,000 (31.2 percent) and $1.4
million (55.3 percent) in the three and nine 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 nine month
periods, as compared to the same periods in 1995.
OTHER EXPENSES decreased approximately $3.3 million in the three and nine
month periods in 1996. The decrease was primarily due to the following special
charges in 1995: a write-down of deferred financing costs related to the senior
debt and subordinated debt amounting to $1.6 million; a loss realized on the
sale of the Florida and California operations of approximately $916,000 and a
$723,000 write down of deferred financing costs during the third quarter of
1995. The nine month period in 1996 included banking fees of $450,000 associated
with the modification of the senior credit facility.
NET LOSS was $1.4 million (24.2 percent of total revenues) in the quarter
ended September 30, 1996, as compared to $5.7 million (85.2 percent of total
revenues) in the same quarter of 1995 and $5.1 million (29.9 percent of total
revenues) in the nine month period ended September 30, 1996 as compared to $10.3
million (44.4 percent of total revenues) in the same period of 1995.
EBITDA (earnings before interest, taxes, depreciation and amortization) in
the 1996 quarter was $1.5 million as compared to $803,000 in the 1995 quarter;
and $4.0 million in the nine month period of 1996 as compared to $4.5 million in
the 1995 period.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of approximately $56.7 million
at September 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 unfavorable operating results, principally relating to interest costs
and accrued dividends on the Series One Preferred Stock.
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 number of shares of Metrocall common
stock to be received by Page America will be calculated 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 used in this calculation will not be less than $17.8425
or more than $21.8075. The final purchase price is also subject to adjustment
based on certain defined operating performance criteria prior to closing. If the
transaction closed on September 30, 1996, the final purchase price would have
been $55 million in cash, 806,000 shares of Metrocall Common Stock (which had a
market vaule of $6.375 per share at that date) and the assumption by Metrocall
of $2.8 million of net liabilities. The Company intends to pay the outstanding
senior debt of approximately $34 million, the subordinated debt of $13 million
and unpaid interest of approximately $ 3.7 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
September 30, 1996, the Company remained in default under the Credit Facility
with respect to the timely delivery of certain financial statements in 1996. All
such financial statements have been delivered.
The Company's operating activities generated $2.6 million of cash flow in
the first nine months of 1996. The Company believes that cash generated from
operations, proceeds from the $750,000 revolving loan under the Credit Facility
and other funds which the Company anticipates receiving 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>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
None
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
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: November 14, 1996
PAGE AMERICA GROUP, INC.
(Registrant)
/S/ KATHLEEN PARRAMORE
Kathleen C. Parramore
President and Chief Operating Officer
/S/ MARTIN KATZ
Martin Katz
Chief Financial Officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 616
<SECURITIES> 0
<RECEIVABLES> 1,265
<ALLOWANCES> 257
<INVENTORY> 0
<CURRENT-ASSETS> 2,294
<PP&E> 25,672
<DEPRECIATION> (19,248)
<TOTAL-ASSETS> 42,006
<CURRENT-LIABILITIES> 59,007
<BONDS> 0
0
30,068
<COMMON> 1,604
<OTHER-SE> (48,719)
<TOTAL-LIABILITY-AND-EQUITY> 42,006
<SALES> 1,498
<TOTAL-REVENUES> 17,142
<CGS> 1,062
<TOTAL-COSTS> 17,122
<OTHER-EXPENSES> 435
<LOSS-PROVISION> 640
<INTEREST-EXPENSE> 4,712
<INCOME-PRETAX> (5,091)
<INCOME-TAX> 36
<INCOME-CONTINUING> (5,127)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,127)
<EPS-PRIMARY> (0.64)
<EPS-DILUTED> 0
</TABLE>
