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, 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
incorporation or organization) Identification Number)
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 April 30, 1999, there were outstanding 16,024,585 shares of Registrant's
common stock.
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF NET ASSETS IN LIQUIDATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, 1999 December 31, 1998
--------------- -----------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 5,159 $ 524
Other assets - 274
Equity investments (Note D) 9,266 28,742
-------- ---------
14,425 29,540
-------- ---------
LIABILITIES
Accounts payable and accrued expenses 3,175 2,403
Senior Credit Facility (Note C) - 11,000
Subordinated notes payable (Note C) 20,800 20,800
--------- ---------
23,975 34,203
---------- ---------
Net deficiency in liquidation (Note C) $ (9,550) $ (4,663)
========== =========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
PAGE AMERICA GROUP, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
($ IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months
Ended Three Months
March 31, 1999 Ended
(Unaudited) March 31, 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 (744) (1,145)
Dividend income on preferred stock 47 545
Gain on sale of equity investments - 893
Unrealized (loss) gain on equity investments held for sale (4,108) 6,678
General and administrative expenses (82) (131)
----------- -----------
Net change in net (deficiency) assets in liquidation (4,887) 6,840
----------- -----------
Net (deficiency) assets in liquidation at end of period $ (9,550) $ 7,699
=========== ===========
Changes in the components of net (deficiency) assets in liquidation:
Increase in cash and cash equivalents $ 4,635 $ (7)
Decrease in other assets (274) 595
Net (decrease) increase in equity investments (19,476) 4,744
Decrease in senior credit facility 11,000 2,195
Increase in accrued expenses (772) (687)
----------- ------------
Net change in net (deficiency) assets in liquidation $ (4,887) $ 6,840
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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. 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. However, with respect to the
Subordinated debt obligations, it is not possible to determine the ultimate
settlement amount. Accordingly, such obligations have been stated at their face
value.
NOTE B - PREFERRED AND COMMON STOCK
Capital stock outstanding as of March 31, 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 C).
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 C).
NOTE C - 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 D). 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 March 31, 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 March 31,
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 $9.9 million (including payments for
interest) and the Preferred and Common shareholders would have received $2.9
million and $1.3 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 $19 million, any
remaining amounts available for distribution to the Subordinated Noteholders and
the Preferred and Common Shareholders of the Company will be made 50% to the
holders of the Subordinated Notes and 50% to the Preferred and Common
shareholders of Page America. Interest will continue to accrue on the
Subordinated Notes until the full amount of principal and interest due
thereunder shall have been paid in full or the obligations thereunder shall have
been otherwise satisfied in accordance with the terms and provisions of the
Forbearance Agreement.
Pursuant to the Forbearance Agreement, Page America's obligations to
repurchase the warrants held by the holders of the Subordinated Notes were
terminated. Under the Forbearance Agreement, Page America is not permitted to
enter into transactions with its stockholders, officers or directors or conduct
any business or incur any debt other than in connection with the satisfaction of
its obligations under the Credit Facility, payment of other permitted
liabilities and the implementation of its Plan of Liquidation.
NOTE D - EQUITY INVESTMENTS
The Company's equity investments are as follows ($ in Thousands):
March 31, 1999: FAIR VALUE COST
Metrocall Common Stock (3,056,856 shares) $9,266 $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
========= =======
The estimated fair value of the Metrocall Common Stock is based on the
closing price of $3.03125 per share on March 31, 1999 which resulted in net
depreciation of $4.1 million for the three months ended March 31, 1999.
The Series B Junior Convertible Preferred Stock, which was sold on
January 8, 1999 (See Note C), 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 AMERICA GROUP, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
CHANGES IN NET ASSETS IN LIQUIDATION for
the three months ended March 31, 1999
CASH AND CASH EQUIVALENTS
Cash and cash equivalents were $5.2 million at March 31, 1999 and $.5
million at December 31, 1998. During the three months ended March 31, 1999, the
Company received $15.7 million from the sale of all of its Metrocall Series B
Convertible Preferred Stock and $67,000 of interest income. Disbursements
principally consisted of $11.1 million to retire the senior credit facility and
pay any accrued interest and related expenses, and $80,000 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 three-month period ended March 31, 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 March 31, 1999, the
Company revalued its remaining Metrocall common stock of 3,056,856 shares based
on a closing price of $3.03125 and recorded an unrealized loss of $4.1 million.
ACCRUED EXPENSES
During the three-month period ended March 31, 1999, the Company
accrued interest on the subordinated notes of $780,000.
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.
<PAGE>
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 C 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.
In connection with the 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 C 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, 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 March 31,
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 $9.9 million and the Preferred and
Common shareholders would have received $2.9 million and $1.3 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 March 31, 1999, 64.2% 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)
/s/ David A. Barry
--------------------------
David A. Barry
President and Chairman
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<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
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0
30,068
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