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 MARCH 31, 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)
125STATE 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 April 30, 1996, there were outstanding 8,052,305 shares of Registrant's
common stock.
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<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
($ IN THOUSANDS)
March 31, December 31,
1996 1995
(Unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $573 $ 751
Accounts receivable,
net of allowance for doubtful accounts
of $285 and $277 852 1,017
Prepaid expenses and other current assets 1,142 944
--------- ---------
Total current assets 2,567 2,712
EQUIPMENT
Pagers 8,067 8,164
Radio Common Carrier equipment 13,097 12,914
Office equipment 3,949 3,946
Leasehold improvements 614 614
Building and land 64 64
---------- ---------
25,791 25,702
Less accumulated depreciation and amortization (19,344) (19,040)
--------- ---------
6,447 6,662
OTHER ASSETS
Certificates of authority, net of accumulated
amortization of $3,367 and $3,216 20,816 20,968
Customer lists, net of accumulated amortization
$8,145 and $7,992 3,623 3,776
Other intangibles, net of accumulated amortization
$3,256 and $3,184 8,874 8,945
Deferred financing costs, net 16 32
Deposits and other non-current assets 599 908
--------- ---------
33,928 34,629
-------- --------
$42,942 $44,003
======== =======
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THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS
<TABLE>
<CAPTION>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
March 31, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Current maturities of long-term debt $49,378 $48,666
Accounts payable 1,564 1,982
Accrued expenses and other liabilities 1,834 1,535
Preferred dividends payable 2,148 1,432
Customer deposits 284 299
Advance billings 1,466 1,242
---------- ---------
Total current liabilities 56,674 55,156
LONG-TERM DEBT, less current maturities 61 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--8,052,305 shares 805 805
Paid-in capital 52,850 52,850
Accumulated Deficit (97,516) (94,945)
--------- ---------
(13,793) (11,222)
--------- ---------
$ 42,942 $ 44,003
========= ========
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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)
(UNAUDITED)
THREE MONTHS ENDED
March 31, March 31,
1996 1995
---------- --------
Service revenues $5,285 $7,593
Sales revenues 510 807
--------- ----------
Total revenues 5,795 8,400
Operating expenses:
Cost of service 530 722
Cost of sales 344 475
Selling 1,103 1,675
General and administrative 1,772 2,163
Technical 909 1,207
Depreciation 928 1,415
Amortization of intangibles 376 1,035
---------- ----------
5,962 8,692
---------- ----------
Operating profit (167) (292)
Interest expense (1,644) (1,610)
Other expenses:
Amortization of deferred costs (27) (315)
Other (17) (132)
--------- ----------
(44) (447)
--------- -----------
Net loss (1,855) (2,349)
Dividends on preferred stock (716) (716)
---------- -----------
Net Loss applicable to common stock $(2,571) $(3,065)
========== ==========
Net loss applicable to common stock, per share $(.32) $(.40)
========== ==========
Weighted average number of shares outstanding 8,052,305 7,617,605
========== =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
DECREASE IN CASH AND CASH EQUIVALENTS
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1996 1995(A)
---------- ----------
Net loss $(1,855) $(2,349)
Adjustments to net loss:
Depreciation and amortization 1,331 2,765
Net book value of pagers sold 304 463
Provision for losses on accounts
receivable 200 (3)
Provision for lost pagers 45 67
Issuance of promissory notes to
satisfy interest on subordinated debt 487 487
Other 169 124
Change in assets and liabilities:
Decrease in accounts receivable 156 651
Decrease (increase) in prepaid expenses
and other 84 (337)
Decrease in accounts payable (351) (275)
Increase (decrease) in accrued expenses 288 (694)
------- ---------
Net cash provided by operating activities 858 899
------- --------
Cash flows from investing activities:
Capital expenditures (989) (1,665)
Licensing costs -- (188)
Net proceeds from disposal of assets -- 8
------- ---------
Net cash used in investing activities (989) (1,845)
------- ---------
Cash flows from financing activities:
Proceeds from issuance of debt 84 111
Principal payments on debt (128) (156)
Costs related to financing of debt (3) (33)
Cost related to issuance of common stock -- (13)
-------- ---------
Net cash used in financing activities (47) (91)
-------- ---------
Net decrease in cash and cash equivalents (178) (1,037)
Cash and cash equivalents at beginning of period 751 1,128
-------- -------
Cash and cash equivalents at end of period $573 $ 91
======== =======
(A) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(IN THOUSANDS)
(Unaudited)
THREE MONTHS ENDED
March 31, March 31,
1996 1995(A)
---------- ----------
Supplemental schedule of noncash investing and financing activities:
Dividends accrued on preferred stock $ 716 $ 716
Common stock issued in connection
with acquisition -- 1,471
Dividend payment on preferred stock -- 1,444
Capital expenditures in accounts payable
and accrued expenses 151 955
Capital expenditures financed -- 546
(A) - Reclassified to conform with the current year presentation.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 March 31, 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 $2,148,000, or
$7.50 per preferred share, at March 31, 1996. It is anticipated that accrued
dividends at December 31, 1995, which aggregated $1,432,000, will be paid by
the issuance of approximately 7,900,000 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 - SUBSEQUENT EVENTS
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 days preceding the closing. 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.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
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.
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 AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
TOTAL REVENUES for the quarter ended March 31, 1996 were approximately
$2.6 million (31.0 percent) lower than that of the 1995 quarter. The sale of
the Company's operations in Florida and California in July, 1995 accounted for
$2.0 million of the decrease, 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 221,000 units at
December 31, 1995, an increase of 2,000 units in the first quarter of 1996. The
Company's 308,000 units in service at March 31, 1995 showed a decrease of 3,000
units from the 311,000 units at December 31, 1994.
COST OF SERVICE decreased by $192,000 (26.6 percent) in the three
month period in 1996 over the same period in 1995. The decrease was principally
due to cost of service associated with the sold operations. COST OF SALES
increased from 58.9 percent of sales revenues in the first quarter of 1995 to
67.5 percent in the same period in 1996. This increase in cost of sales as a
percent of sales revenues is principally a result of lower selling prices due
to competitive pressure.
SELLING expenses decreased by approximately $572,000 (34.1 percent) in
the 1996 quarter as compared to 1995. $390,000 of the decrease was due to
selling expenses associated with the sold operations. The Company's remaining
operations experienced a decrease of $182,000 primarily due to a reduction in
personnel and sales.
GENERAL AND ADMINISTRATIVE expenses experienced a decrease of $391,000
(18.1 percent) in 1996 as compared to the same period in the prior year. This
was principally due to expenses associated with the sold operations, partially
offset by an increase in bad debt expense.
TECHNICAL expenses for the first quarter of 1996 decreased by $298,000
(24.7 percent) when compared with the same period in 1995, principally as a
result of the sale of the Florida and California operations.
DEPRECIATION expense decreased by $487,000 (34.4 percent), $336,000 of
which was due to the sale of depreciable assets in Florida and California. The
decrease experienced by the Company's existing operations resulted from the
lower average price of pagers purchased and the decrease in pagers on lease to
customers. AMORTIZATION EXPENSE decreased by $659,000 (63.7 percent)
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.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
INTEREST EXPENSE remained relatively constant for quarter ended March
31, 1996, as compared to the same quarter in 1995.
OTHER EXPENSES decreased approximately $403,000 (90.2 percent) in
1996, as the first quarter of 1995 included $298,000 of amortization of
deferred financing costs related to the senior and subordinated debts. These
costs were written down during the third quarter of 1995.
NET LOSS was $1.9 million (32.0 percent of total revenues) in the
quarter ended March 31, 1996, as compared to $2.3 million (28.0 percent of
total revenues) in the same quarter of 1995.
EBITDA (earnings before interest, taxes, depreciation and
amortization) in the 1996 quarter was $1.1 million as compared to $2.2 million
in the 1995 quarter.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
The Company had a working capital deficiency of approximately $54.1
million at March 31, 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 an increase in accrued interest on subordinated debt of
$561,000 and accrued dividends on Series One Convertible Preferred Stock of
$716,000.
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 $33 million, the subordinated debt of $13 million
and unpaid interest of approximately $2.6 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.
The Company's operating activities generated $858,000 of cash flow in the
first three 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. The Company does not have any material capital expenditure
commitments.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
None
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: May 15, 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
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 573
<SECURITIES> 0
<RECEIVABLES> 1,137
<ALLOWANCES> 285
<INVENTORY> 0
<CURRENT-ASSETS> 2,567
<PP&E> 25,791
<DEPRECIATION> 19,334
<TOTAL-ASSETS> 42,942
<CURRENT-LIABILITIES> 56,674
<BONDS> 0
0
30,068
<COMMON> 805
<OTHER-SE> (44,666)
<TOTAL-LIABILITY-AND-EQUITY> 42,942
<SALES> 510
<TOTAL-REVENUES> 5,795
<CGS> 344
<TOTAL-COSTS> 5,962
<OTHER-EXPENSES> 44
<LOSS-PROVISION> 200
<INTEREST-EXPENSE> 1,644
<INCOME-PRETAX> (1,851)
<INCOME-TAX> 4
<INCOME-CONTINUING> (1,855)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,855)
<EPS-PRIMARY> (0.32)
<EPS-DILUTED> 0
</TABLE>
