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, 1999 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 Identification Number)
incorporation or organization)
ONE INTERNATIONAL PLACE, BOSTON MA 02110
(Address of principal executive offices) Zip Code
Registrant's telephone number, including area code: (617) 330-8950
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
filing requirements for the past ninety days.
Yes __X__ No ___
As of July 31, 1999, there were outstanding 16,024,585 shares of Registrant's
common stock.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
September 30, 1999
(UNAUDITED) DECEMBER 31, 1998
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 4,938 $ 524
Other assets - 274
Equity investments (Note E) 3,821 28,742
------- -------
8,759 29,540
------ -------
LIABILITIES
Accounts payable and accrued expenses 2,926 2,403
Senior Credit Facility (Note D) - 11,000
Subordinated notes payable (Note D) 21,694 20,800
-------- -------
24,620 34,203
-------- -------
Net deficiency in liquidation (Note D) $ (15,861) $ (4,663)
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
---- ----
<S> <C> <C>
Net (deficiency) assets in liquidation at beginning of period $ (4,663) $ 859
---------- ----------
Changes in net deficiency in liquidation attributed to:
Interest expense, net (1,271) (3,297)
Dividend income on preferred stock 47 1,726
Gain on sale of equity investments - 1,363
Unrealized (loss) gain on equity investments held for sale (9,553) (660)
General and administrative expenses (421) (411)
------------ ----------
Net change in net (deficiency) assets in liquidation (11,198) (1,279)
---------- ----------
Net (deficiency) assets in liquidation at end of period $ (15,861) $ (420)
=========== =========
Changes in the components of net (deficiency) assets in liquidation:
Increase (decrease) in cash and cash equivalents $ 4,414 $ (647)
(Decrease) increase in other assets (274) 629
Net (decrease) increase in equity investments (24,921) (2,470)
Decrease in senior credit facility 11,000 3,195
Increase in subordinated notes payable (894) (975)
Increase in accrued expenses (523) (1,011)
----------- ----------
Net change in net (deficiency) assets in liquidation $ (11,198) $ (1,279)
========== =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
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 net assets in liquidation and changes in net assets in liquidation of the
Company for all interim periods presented have been made.
In connection with the sale of substantially all of the Company's
assets to Metrocall, Inc., the Company adopted a plan of liquidation and has
changed its basis of accounting from the going concern basis to the liquidation
basis in accordance with generally accepted accounting principles, effective
July 1, 1997. Under the reorganization discussed in Note B below, on June 16,
1999, the Company became a debtor-in-possession under Chapter 11 of the U.S.
Bankruptcy Code. Consequently, assets have been valued at estimated net
realizable value and liabilities are presented at their estimated settlement
amounts, subject to the terms of the Forbearance Agreement, dated July 1, 1997,
between the Company and the holder of its Subordinated Notes described in Note
D. However, with respect to the Subordinated Note obligations, it is not
possible to determine the ultimate settlement amount. Accordingly, such
obligations have been stated at their face value.
NOTE B - BANKRUPTCY PROCEEDINGS
On June 16, 1999, the Company filed voluntary petitions for relief
under Chapter 11 of the U.S. bankruptcy Code. The Company filed a prepackaged
and presolicited Plan and Disclosure Statement that allows for the complete
liquidation of the Company and distribution of their remaining assets to
creditors and shareholders. The Plan provides that Administrative Claims,
Priority Claims and General Unsecured Claims will be paid in full in cash. The
Plan adopted the same distribution provisions that had been previously approved
in the Forbearance Agreement dated July 1, 1997, as described in Note D. That
is, excess amounts will be distributed 70% to the holders of the Subordinated
Notes, 21% to the holders of Preferred Stock and 9% to the holders of Common
Stock until the holders of the Subordinated Notes shall have indefeasibly
received $19 million, and thereafter 50% to the holders of Subordinated Notes,
35% to the holders of Preferred Stock and 15% to the holders of Common Stock.
The Company concluded that the Chapter 11 filing was necessary because, in
attempting to dissolve under the Plan of Liquidation discussed in Note D, it was
determined that it would take several years to obtain all necessary tax
clearances; and in addition, the declining market price for the Metrocall common
stock (see Note D) had limited the Company's ability to sell large blocks of
these securities at prices considered reasonable.
Under Chapter 11 proceedings, litigation and actions by creditors to
collect certain claims existing at the Petition date are stayed, without
specific bankruptcy Court authorization to pay such claims. The Company has
received authorization, pursuant to the first day orders, to continue business
operations as a debtor-in-possession and to pay certain claims related to the
administration of the proceedings and other claims. The Company has no
employees, leases no property and has no assets, other than cash and Metrocall
securities representing the remaining net proceeds received from the sale of its
assets (see Note D).
The Bankruptcy Court established August 2, 1999 as the bar date for
the filing of all claims other than Government claims against the Company; and
December 13, 1999 as the bar date for the filing of all Government claims
against the Company. Certain claims filed against the Company are contingent or
in dispute and will be liquidated.
Prepetition liabilities subject to compromise at September 30, 1999
include the following:
($ in Thousands)
15% Subordinated Notes $21,694
Accrued interest 2,580
Accrued taxes 309
----------
$24,583
Because of the Chapter 11 proceedings, there has been no accrual of
interest on the Subordinated Notes since June 16, 1999.
NOTE C - PREFERRED AND COMMON STOCK
Capital stock outstanding as of September 30, 1999 and December 31,
1998 consists of the following:
Series One
Preferred Common
STOCK STOCK
Par value $.01 $.10
Shares authorized 310,000 100,000,000
Shares issued and outstanding 286,361 16,024,585
Series One Convertible Preferred Stock has a liquidation value of $105
per share and a 10 percent dividend which was payable semi-annually in arrears.
Payment of dividends may be made in cash or in Common Stock of the Company.
Dividends in arrears aggregated $4,295,000, or $15.00 per preferred share, at
June 30, 1997. The Preferred shareholders, upon the completion of the sale of
assets on July 1, 1997, waived their rights to receive the dividend payment of
$4,295,000 and their rights to future dividends (see Note D).
The holders of Page America's Series One Preferred Stock have agreed
that 30% of any distributions otherwise payable to them with respect to their
liquidation preference will be distributed to the holders of Page America's
Common Stock (See Note D).
NOTE D - SALE OF ASSETS AND PLAN OF LIQUIDATION
On July 1, 1997, the Company sold substantially all of its assets to
Metrocall, Inc. ("Metrocall") for a sale price (as adjusted) of approximately
$60.7 million including the assumption of $2.2 million of liabilities. Page
America received $24.8 million in cash, $15 million of Series B Junior
Convertible Preferred Stock of Metrocall and $18.7 million of Common Stock of
Metrocall, inclusive of a post-closing working capital adjustment resulting in
the Company returning 85,602 shares of common stock to Metrocall. Certain shares
of Metrocall common stock with a fair market value of $4.0 million (832,250
common shares) at the date of sale were held in escrow until April 1, 1998 and,
pursuant to the sale agreement, those shares were released to the Company on
that date. Excluded from the sale were cash, assets related to the employee
benefit plans and to the Florida and California operations which had been
previously sold, liabilities under the Credit Facility, subordinated debt
agreement and NEC America leasing contract, obligations with respect to federal,
state and local taxes and certain other liabilities. In 1997, the Company
recognized a gain from the sale of assets to Metrocall of approximately $22.9
million, net of expenses related to the sale of approximately $1.5 million. On
January 8, 1999, the Company sold all of its Metrocall Series B Convertible
Preferred Stock plus accrued dividends for $15.7 million and realized a loss of
$2.8 million, which is reflected in the Statement of Net Assets in Liquidation
as of December 31, 1998 (See Note E). In 1998, the Company sold 606,800 shares
of Metrocall common stock and realized a net gain of $1,353,000. During the six
month period ended December 31, 1997, the Company sold 248,200 shares of
Metrocall common stock and realized a net gain of $627,000. At September 30,
1999 and December 31, 1998, the Company held 3,056,856 shares of common stock of
Metrocall.
In connection with the sale discussed above, the Company adopted a
plan of complete liquidation and dissolution of the corporate entity which
became effective with the completion of the Metrocall sale. Accordingly, on July
1, 1997, the company changed from the going concern basis of accounting to the
liquidation basis of accounting. The value of the assets to be available for
payment of its liabilities and distribution to the Page America shareholders
upon liquidation cannot be ascertained at this time and will depend among other
things, on the total amount of its liabilities and the market value of the
Metrocall Common Stock. Had the Plan of Liquidation been completed on September
30, 1999, and assuming that the asset values reflected in the accompanying
Statement of Net Assets in Liquidation had been realized, the holders of the
Subordinated Notes would have received approximately $5.9 million (including
payments for interest) and the Preferred and Common shareholders would have
received $1.8 million and $.8 million, respectively (see discussion below).
However, the actual amount to be distributed to the holders of the Subordinated
Notes and the Preferred and Common shareholders will be dependent on the value
of the Metrocall Common Stock at the time the shares are sold or distributed,
and subject to other liabilities that could arise in connection with completing
the Plan of Liquidation and Dissolution, including obtaining required clearance
from the various tax authorities. Pursuant to the Plan of Liquidation, the
Company will continue in existence for the sole purpose of winding up its
affairs and will not engage in any business activities other than activities
related to implementation of the Plan of Liquidation.
Concurrently with the sale of substantially all of the Company's
assets, the Company's Credit Facility was amended. Among other things, the
amendment provided for an extension of the maturity date to December 31, 1998
and a waiver of all existing covenant defaults. In addition, the Company was
required to use $20.5 million of the cash proceeds from the sale to reduce the
debt by approximately $18.4 million and pay accrued interest of $2.0 million and
certain closing expenses. On September 30, 1997, pursuant to the amended
agreement, the Company paid a reinstatement fee of $350,000 originally due on
November 30, 1996. Under the terms of the Credit Facility, the Company was not
permitted to make any payments to the holders of Subordinated Notes or to its
common or preferred shareholders, but it was permitted to pay accounts payable,
claims, expenses and liabilities incurred in connection with its liquidation.
Any amounts received from the sale of Metrocall securities in excess of
appropriate cash reserves was required to be paid in reduction of amounts
outstanding under the Credit Facility. The Credit Facility was retired on
January 8, 1999 with proceeds from the sale of the Metrocall Series B
Convertible Preferred Stock.
The holders of Subordinated Notes and the Company entered into a
Forbearance Agreement (the "Forbearance Agreement") pursuant to which the
holders have agreed to forbear from collecting on such Subordinated Notes until
the earlier of August 31, 1999 or the occurrence of certain events relating to
Page America, as described in the Forbearance Agreement. During the forbearance
period, the holders of the Subordinated Notes will not initiate any action,
exercise any remedy or make any claim against the Company with respect to the
Subordinated Notes. In consideration of such forbearance, and in complete
satisfaction of all amounts of principal and interest due, after all amounts
have been paid in full under the Credit Facility, the holders of the
Subordinated Notes will be entitled to receive 70% of cash available for
distribution to the Subordinated Noteholders, and the Preferred and Common
shareholders of the Company, up to an aggregate distribution to Subordinated
Noteholders of $19 million, with the remaining 30% to be distributed to the
Preferred and Common shareholders of Page America. After the holders of
Subordinated Notes have indefeasibly received a total of $19 million, any
remaining amounts available for distribution to the Subordinated Noteholders and
the Preferred and Common Shareholders of the Company will be made 50% to the
holders of the Subordinated Notes and 50% to the Preferred and Common
shareholders of Page America. Interest will continue to accrue on the
Subordinated Notes until the full amount of principal and interest due
thereunder shall have been paid in full or the obligations thereunder shall have
been otherwise satisfied in accordance with the terms and provisions of the
Forbearance Agreement.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes were
terminated. Under the Forbearance Agreement, Page America is not permitted to
enter into transactions with its stockholders, officers or directors or conduct
any business or incur any debt other than in connection with the satisfaction of
its obligations under the Credit Facility, payment of other permitted
liabilities and the implementation of its Plan of Liquidation.
NOTE E - EQUITY INVESTMENTS
The Company's equity investments are as follows ($ in Thousands):
<TABLE>
<CAPTION>
September 30, 1999: FAIR VALUE COST
<S> <C> <C>
Metrocall Common Stock (3,056,856 shares) $ 3,821 $14,711
======= =======
December 31, 1998: FAIR VALUE COST
Metrocall Series B Junior Convertible Preferred Stock $15,368 $18,080
Metrocall Common Stock (3,056,856 shares) 13,374 14,711
-------- --------
$28,742 $32,791
======= =======
</TABLE>
The estimated fair value of the Metrocall Common Stock is based on the
closing price of $1.25 per share on September 30, 1999 which resulted in net
depreciation of $9.6 million for the nine months ended September 30, 1999.
The Series B Junior Convertible Preferred Stock, which was sold on
January 8, 1999 (See Note D), had a 14% dividend rate payable semi-annually in
arrears on May 15 and November 15. Payment of dividends may be made in cash or
in kind. The Series B Preferred Stock could have been redeemed by Metrocall at
any time and was required to be redeemed by Metrocall on July 1, 2009, if not
previously redeemed or converted by that date. On November 15, 1998 and May 15,
1998, the Company received 118 shares ($1,118,000 face value) and 111 shares
($1,110,000 face value), respectively, of Series B Junior Convertible Preferred
in payment of dividends accrued for the six month periods ended November 15,
1998 and May 15, 1998, respectively. On November 15, 1997, the Company received
79 shares ($790,000 face value) of Series B Junior Convertible Preferred in
payment of dividends accrued from July 1 to November 15, 1997.
Realized gains and losses on the sale of these securities and net
unrealized gains or losses on these securities available for sale have been
reflected in the statement of changes in net assets in liquidation.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
CHANGES IN NET ASSETS IN LIQUIDATION
for the nine months ended September 30, 1999
CASH AND CASH EQUIVALENTS
Cash and cash equivalents were $4.9 million at June 30, 1999 and $.5
million at December 31, 1998. During the nine months ended September 30, 1999,
the Company received $15.7 million from the sale of all of its Metrocall Series
B Convertible Preferred Stock and $186,000 of interest income. Disbursements
principally consisted of $11.1 million to retire the senior credit facility and
pay any accrued interest and related expenses, $221,000 of Chapter 11 filing
related expenses, and $163,000 of general and administrative expenses.
OTHER ASSETS
In January 1999, the Company received $318,000 in payment of accrued
dividends on the Metrocall Series B Preferred Stock in connection with the sale
of the these securities.
EQUITY INVESTMENTS
During the nine-month period ended September 30, 1999, the Company
sold all of its Metrocall Series B Preferred Stock for $15.7 million and
realized a net loss of $2.8 million, which was recognized in 1998. On September
30, 1999, the Company revalued its remaining Metrocall common stock of 3,056,856
shares based on a closing price of $1.25 and recorded an unrealized loss of $9.6
million.
ACCRUED EXPENSES
During the nine-month period ended September 30, 1999, the Company
accrued interest on the subordinated notes of $532,000 net of $894,000, which
has been reclassified as additional subordinated notes under the Note Purchase
Agreement. The Company also accrued $37,000 of legal fees in connection with the
Chapter 11 filing and other expenses.
SENIOR CREDIT FACILITY
In January 1999, in connection with its sale of the Series B Preferred
Stock, the Company paid $11.1 million to repay in full the Credit facility.
LIQUIDITY AND CAPITAL RESOURCES
In connection with the sale of substantially all of its assets to
Metrocall, Inc., the Company adopted a plan of complete liquidation and
dissolution of corporate entity which became effective with the completion of
the Metrocall sale (See Note D to the Condensed Consolidated Financial
Statements). Accordingly, on July 1, 1997, the Company changed from the going
concern basis of accounting to the liquidation basis of accounting. The cash
received by the Company from this sale was not sufficient for the Company to pay
in full in cash its outstanding obligations under the Credit Facility or under
the Subordinated Notes or to pay its other outstanding liabilities. Page America
will pay the balance of its obligations primarily from proceeds generated by the
sale or redemption of Metrocall Common Stock.
On June 16, 1999 (the "Petition Date"), Company filed voluntary
petitions for reorganization and a pre-packaged Chapter 11 liquidating plan of
reorganization (the "Plan") under Chapter 11 of the United States Bankruptcy
Code (Chapter 11") in the United States Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court"). The Company concluded that the
Chapter 11 filing was necessary because, in attempting to dissolve under the
Plan of Liquidation discussed in Note D, it was determined that it would take
several years to obtain all necessary tax clearances; and in addition, the
declining market price for the Metrocall common stock (see Note D) had limited
the Company's ability to sell large blocks of these securities at prices
considered reasonable.
In connection with the sale transaction, Page America renegotiated its
Credit Facility such that the remaining outstanding balance of $15,271,831 as of
July 1, 1997 was due and payable on or prior to December 31, 1998. In August and
October, 1997, the Company paid $326,484 and $750,000, respectively, of the
Credit Facility, and during 1998, the Company paid down an additional $3,195,347
of the Credit Facility, reducing the balance to $11,000,000. All amounts
outstanding under the Credit Facility were paid in full in January 1999 from the
proceeds of the sale of the Series B Preferred Stock (See Note D to the
Condensed Consolidated Financial Statements).
On July 1, 1997, concurrent with the sale of the Company's assets, the
holders of Subordinated Notes have agreed to forbear from collecting on such
Subordinated Notes until the earlier of December 31, 1998, which has been
extended until August 31, 1999, or the occurrence of certain events relating to
Page America, as described in the Forbearance Agreement. During the forbearance
period, the holders of the Subordinated Notes will not initiate any action,
exercise any remedy or make any claim against the Company with respect to the
Subordinated Notes. In consideration of such forbearance and in complete
satisfaction of all amounts of principal and interest due, and as further agreed
to under the Chapter 11 filing, the holders of the Subordinated Notes will be
entitled to receive 70% of cash available for distribution to the Subordinated
Note holders and the Preferred and Common Shareholders of the Company up to an
aggregate distribution to Subordinated Noteholders of $19 million, with the
remaining 30% to be distributed to the Preferred and Common shareholders of Page
America. After the holders of Subordinated Notes have indefeasibly received a
total of $19 million, any remaining amounts available for distribution to the
Subordinated Note Holders and the Preferred and Common Shareholders of the
Company will be made 50% to the holders of the Subordinated Notes and 50% to the
Preferred and Common shareholders of Page America. Interest will continue to
accrue on the Subordinated Notes until the full amount of principal and interest
due thereunder shall have been paid in full or the obligations thereunder shall
have been otherwise satisfied in accordance with the terms and provisions of the
Forbearance Agreement. The holders of Page America's Series One Preferred Stock
have agreed that 30% of any distributions otherwise payable to them with respect
to their liquidation preference will be distributed to the holders of Page
America's Common Stock. Had the Plan of liquidation been completed on September
30, 1999, and assuming the asset values reflected in the accompanying Statement
of Net Assets in Liquidation had been realized, the holders of the Subordinated
Notes would have received approximately $5.9 million and the Preferred and
Common shareholders would have received $1.8 million and $.8 million,
respectively. However the actual amounts to be distributed to the holders of the
Subordinated Notes and the Preferred and Common shareholders will be dependent
on the value of the Metrocall Common Stock at the time the shares are sold or
distributed, and subject to other liabilities that could arise in connection
with completing the Plan of Liquidation and Dissolution, including obtaining
required clearance from the various tax authorities.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes have been
terminated. Page America is not permitted to enter into transactions with its
stockholders, officers or directors or conduct any business or incur any debt
other than in connection with the satisfaction of its obligations under the
Credit Facility, payment of other permitted liabilities and the implementation
of its Plan of Liquidation.
The Plan of Liquidation contemplates that Page America will distribute
any remaining assets to its common and preferred shareholders and to the holders
of Subordinated Notes in accordance with the terms and provisions of the
Forbearance Agreement and as described above. The value of the assets, if any,
to be available for distribution to the Page America shareholders upon
liquidation cannot be ascertained at this time and will depend, among other
things, on the total amount of its liabilities and the value of the Metrocall
Common Stock to be realized by Page America.
COMPANY SPECIFIC RISKS
MARKET RISK DISCLOSURE
LIMITED ASSET DIVERSIFICATION
The Company's future liquidity and net realizable value of its assets
are dependent upon the economic success of Metrocall and are also subject to the
volatility of the public securities markets. At September 30, 1999, 43.6% of the
Company's remaining assets were Common Stock of Metrocall.
<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: May 12, 1999
PAGE AMERICA GROUP, INC.
(Registrant)
--------------------------
David A. Barry
President and Chairman
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30,068
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