<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-10475
PAGES, INC.
Incorporated - Delaware I.R.S. Identification No. 34-1297143
801 94th Avenue North, St. Petersburg, Florida 33702
Registrant's Telephone Number (813) 578-3300
Indicate by check mark whether the 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 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO ____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of latest practicable date: 4,789,208 common shares
outstanding, each without par value, as of May 10, 1995.
<PAGE> 2
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
------------------------------------
<TABLE>
<CAPTION>
ASSETS 1995 1994
----------- -----------
<S> <C> <C>
Current assets:
Cash $ 92,885 $ 671,602
Accounts receivable, net of allowance for
doubtful accounts of $154,000 and $168,000, respectively 10,897,265 13,965,086
Inventory 33,514,804 33,014,774
Prepaid expenses 3,472,019 3,394,212
Deferred income taxes 2,364,690 1,966,200
----------- -----------
Total current assets 50,341,663 53,011,874
----------- -----------
Property and equipment:
Buildings 3,206,647 3,313,721
Equipment 5,986,578 5,696,782
----------- -----------
9,193,225 9,010,503
Less accumulated depreciation (3,353,431) (3,014,424)
----------- -----------
5,839,794 5,996,079
Land 211,468 216,468
----------- -----------
Total property and equipment 6,051,262 6,212,547
----------- -----------
Other assets:
Assets held for disposition, net of allowance of
$246,779 and $270,838, respectively 1,219,579 1,195,520
Cost in excess of net assets acquired, net of accumulated
amortization of $354,783 and $312,345, respectively 6,302,510 5,903,553
Deferred income taxes 153,200 153,200
Other 1,308,879 1,257,872
----------- -----------
8,984,168 8,510,145
----------- -----------
TOTAL ASSETS $65,377,093 $67,734,566
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 3
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1995 and December 31, 1994
------------------------------------
<TABLE>
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY 1995 1994
----------- -----------
<S> <C> <C>
Current liabilities:
Accounts payable $11,007,759 $10,887,683
Short-term debt obligations 15,890,755 16,090,039
Accrued liabilities 1,951,945 2,678,058
Accrued tax liabilities 3,224,349 3,248,821
Deferred revenue 5,996,156 6,139,486
Current maturities on long-term debt
obligations 157,001 144,035
Current maturities on capitalized lease
obligations 69,719 26,468
----------- -----------
Total current liabilities 38,297,684 39,214,590
----------- -----------
Long-term obligations 8,017,205 8,927,312
----------- -----------
Stockholder's Equity:
Preferred shares: $.01 par value; authorized
300,000 shares; none issued and outstanding
Common shares: $.01 par value; authorized
20,000,000 shares; issued 5,087,921 shares 50,879 50,879
Capital in excess of par value 22,489,048 22,489,048
Foreign currency translation, net of ta x (209,188) (400,295)
Accumulated deficit (3,027,412) (2,305,845)
----------- -----------
19,303,327 19,833,787
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
----------- -----------
Total stockholders' equity 19,062,204 19,592,664
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $65,377,093 $67,734,56
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 4
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1995 and 1994
--------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Revenues $19,647,566 $19,370,192
----------- -----------
Costs and expenses:
Cost of goods sold 11,545,038 11,256,891
Selling, general and administrative 8,234,159 7,089,381
Interest 555,474 340,869
Depreciation and amortization 384,462 342,017
Foreign exchange 1,791
----------- -----------
20,719,133 19,030,949
----------- -----------
Income/(loss) before income taxes (1,071,567) 339,243
Benefit/(provision) for income taxes 350,000 (128,000)
----------- -----------
NET INCOME/(LOSS) $ (721,567) $ 211,243
=========== ===========
Income/(loss) per common and
common equivalent share $ (0.15) $ 0.04
=========== ===========
Weighted average common and common
equivalent shares outstanding 4,789,000 5,831,000
=========== ===========
</TABLE>
See accompanying notes
<PAGE> 5
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1995 and 1994
--------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss)/income $ (721,567) $ 211,243
------------ ------------
Adjustments to reconcile net (loss)/income
to cash provided by operating activities:
Depreciation and amortization 384,462 342,017
Deferred income taxes (350,000) 128,000
Foreign exchange 1,791
Changes in assets and liabilities, net of
effect of acquisition by children's
literature segment 1995:
(Increase) decrease in assets:
Accounts receivable 3,525,278 3,473,744
Inventory (157,896) (2,194,886)
Prepaid expenses and other assets (16,642) (290,260)
Increase (decrease) in liabilities:
Accounts payable and accrued liabilities (631,754) (1,323,598)
Deferred revenue (493,330) (55,775)
------------ ------------
Total adjustments 2,260,118 81,033
------------ ------------
Net cash provided by operating activities 1,538,551 292,276
------------ ------------
Cash flows from investing activities:
Payments for purchases of property and equipment (172,765) (137,666)
Payment for acquisition by children's literature segment (733,000)
------------ ------------
Cash used in investing activities (905,765) (137,666)
------------ ------------
Cash flows from financing activities:
Proceeds from debt obligations 19,247,563 11,610,589
Principal payments on debt and lease obligations (20,450,148) (11,734,371)
------------ ------------
Cash used in financing activities (1,202,585) (123,782)
------------ ------------
Effect of exchange rate changes on cash (8,918) (44,066)
------------ ------------
Decrease in cash (578,717) (13,238)
Cash, beginning of period 671,602 299,717
------------ ------------
Cash, end of period $ 92,885 $ 286,479
============ ============
</TABLE>
See accompanying notes
<PAGE> 6
PAGES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements have not been audited,
but reflect all adjustments which, in the opinion of management, are necessary
for a fair presentation of financial position, results of operations and cash
flows for the periods presented, after elimination of all material intercompany
accounts and transactions. All adjustments are of a normal and recurring
nature. The consolidated group will be collectively referred to as "the
Company". The operations of School Book Fairs, Inc. ("SBF") are the Company's
children's literature business segment and the operations of Clyde A. Short
Company, Inc. ("CAS") are the Company's incentive/recognition awards business
segment.
The Company's business segments are highly seasonal with the children's
literature business cycle closely correlating the school year and the
incentive/recognition awards business skewed toward the end of a calendar year.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
During the Spring of 1993, the Company was advised that the Internal
Revenue Service ("IRS") may assess additional income taxes in connection with
the examination of the tax returns of School Book Fairs and its affiliates for
the fiscal years ending July 31, 1989, 1990, and 1991. In June 1993, the
Company recorded a $2 million adjustment to its purchase price allocation of SBF
assets, which increased the cost in excess of assets acquired (i.e. - goodwill)
and recorded a corresponding increase in accrued tax liabilities and related
costs. The IRS has notified the Company that the significant issues being
examined relate to the transfer of assets between related companies during
fiscal 1989, interest imputed on intercompany accounts during fiscal 1989, 1990
and 1991 and rent deductions taken on certain rental properties in fiscal 1989,
1990 and 1991.
In December 1994, the IRS notified the Company of its preliminary intent to
make adjustments to taxable income related to these issues. If the notice of
proposed adjustments becomes a final assessment and the assessment is ultimately
sustained, it could generate a tax liability of as much as approximately $5.2
million, exclusive of interest and penalties. The Company believes the IRS'
position regarding the proposed adjustments to taxable income for the value of
assets transferred and related impact on intercompany interest is substantially
overstated. Accordingly, although no formal assessment has been received from
the IRS, the Company intends to vigorously defend its position against such
proposed adjustments, including litigation, if necessary. The Company is unable
to determine the ultimate outcome of this uncertainty and accordingly, has not
provided for any additional amounts in excess of the $2 million relating to this
proposed assessment in the March 31, 1995 financial statements.
On February 28, 1995, John Minnick d/b/a Minnick Capital Management filed a
class action suit in the United States District Court, Middle District of
Florida, Tampa Division on behalf of all persons who sold PAGES, Inc. common
stock between 11:49 a.m., January 9, 1995 and January 16, 1995, against PAGES,
Inc. and corporate officers S. Robert Davis, Richard A. Stimmel and Charles A.
Davis alleging that those defendants violated Section 10(b) of the Securities
Exchange Act of 1934 and Rule 10b-5 thereunder by selectively disclosing only
adverse information while in possession of material non-public positive
information about the Company during the period between January 9 and January
<PAGE> 7
16, 1995. The action seeks class certification, a judgment declaring the
conduct to be in violation of the law, an award of unspecified damages and
interest, costs attorneys' fees and expert witness fees and costs along with
such other further relief as the court deems proper or just. The Company and
the other defendants deny any wrongdoing and intend to vigorously defend the
action.
THREE MONTHS ENDED MARCH 31, 1995, COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
- --------------------------------------------------------------------------------
Consolidated revenues for the three months ended March 31, 1995,
approximated $19.6 million compared to approximately $19.4 million for the three
months ended March 31, 1994, an increase of 1% or approximately $200,000. The
Company's children's literature segment accounted for approximately $14.8
million of revenues for the three months ended March 31, 1995, compared to
approximately $13.6 million of revenues for the three months ended March 31,
1994, an increase of 9% or approximately $1.2 million. The increase in
revenues is principally attributable to the current quarter including revenues
from the operations of third quarter 1994 acquisitions, as well as revenues from
the operations of an acquisition in January 1995.
International revenues in U.S. dollars associated with the children's
literature business segment approximated $3.8 million for the three months ended
March 31, 1995, compared to approximately $4.1 million of revenues for the three
months ended March 31, 1994. In local currencies, international revenues for
the 1995 period decreased 11% over the comparable 1994 period, however, due to
foreign currency fluctuations, the U.S. dollar revenues from foreign operations
were down approximately 7%. The decline in international revenues is
principally attributable to lower revenues per event in the elementary school
market as well as the purposeful postponement of preschool events in the quarter
ended March 31, 1995, as compared to the quarter ended March 31, 1994.
The Company's incentive/recognition awards business segment accounted for
approximately $4.8 million in revenues for the three months ended March 31,
1995, compared to $5.7 million in revenues for the three months ended March 31,
1994, a decrease of 16% or approximately $900,000. The decline is principally
attributable to a decrease in volume on certain existing customers coupled with
delayed redemption on new accounts. The majority of revenues generated by the
incentive/recognition awards business segment are from the sale of products, and
revenues from services are insignificant.
Consolidated cost of goods sold was approximately $11.5 million for the
three months ended March 31, 1995, compared to approximately $11.3 million for
the three months ended March 31, 1994, an increase of 2.5% or approximately
$200,000. The Company's children's literature business segment accounted for
approximately $8.7 million of consolidated cost of goods sold for the three
months ended March 31, 1995, compared to approximately $8 million for the three
months ended March 31, 1994, an increase of 9% or approximately $700,000. The
increase in cost of goods sold was due to the increase in revenues. As a
percentage of revenues from the children's literature business segment, cost of
goods sold increased by 0.5% to 58.8% during the first quarter of 1995 compared
to 58.3% for the same period in 1994.
The Company's incentive/recognition awards business segment accounted for
approximately $2.8 million of consolidated cost of goods sold for the three
months ended March 31, 1995 compared to approximately $3.3 million for the three
months ended March 31, 1994, a decrease of 14% or approximately $500,000. The
decline in cost of goods sold was attributable to the decline in revenues. As a
<PAGE> 8
percentage of revenues from the incentive/recognition awards business segment,
cost of goods sold increased 1.2% to 58.7% in 1995, from 57.5% in 1994. The
increase in cost of goods sold is principally attributable to a change in
product mix.
Consolidated selling, general, and administrative expense was approximately
$8.2 million for the three months ended March 31, 1995, compared to
approximately $7.1 million for the three months ended March 31, 1994, an
increase of 16% or approximately $1.1 million. Selling, general, and
administrative expense associated with the Company's children's literature
business segment was approximately $6 million for the three months ended March
31, 1995, compared to $4.7 million for the three months ended March 31, 1994, an
increase of 28% or approximately $1.3 million. The increase is attributable to
incurring selling, general, and administrative costs associated with late 1994
and early 1995 children's literature business segment acquisitions.
Additionally, the children's literature business segment incurred selling,
general and administrative expenses as a result of a change in the historical
channels of product distribution and additional costs incurred to support higher
revenue levels that did not materialize.
Selling, general, and administrative expense associated with the Company's
incentive/recognition awards business segment was approximately $2 million for
the three months ended March 31, 1995, compared to approximately $2.2 million
for the three months ended March 31, 1994, a decrease of 9% or approximately
$200,000. The decrease in selling, general, and administrative expense is
primarily due to a reduction in promotional costs incurred during the three
months ended March 31, 1995.
The Company continues to implement its re-engineering efforts aimed at
reducing operating costs at both business segments. Full time staffing levels
at May 12, 1995, have been reduced by approximately 45 personnel or 14% from
year-end levels. The Company continues to review its product lines and channels
of distribution for additional cost savings.
Consolidated general corporate and administrative expense was approximately
$188,000 for the three months ended March 31, 1995, compared to $184,000 for the
three months ended March 31, 1994, an increase of 2% or approximately $4,000.
Consolidated interest expense was approximately $555,000 for the three
months ended March 31, 1995, compared to $341,000 for the three months ended
March 31, 1994, an increase of 63% or $214,000. During the 1995 period, the
children's literature business segment had higher levels of borrowings at
significantly higher interest rates. The higher levels of borrowings resulted
from seasonal needs, acquisitions and business expansion.
Consolidated depreciation and amortization expense was approximately
$384,000 for the three months ended March 31, 1995, compared to $342,000 for the
three months ended March 31, 1994, an increase of 12% or approximately $42,000.
The increase in depreciation and amortization expense was primarily due to
acquisitions made in the children's literature business segment during the third
quarter of 1994 and the first quarter of 1995 which increased depreciable
assets.
The income tax benefit for the three months ended March 31, 1995 was
$350,000. The current period benefit is based on the Company's anticipated
annual effective tax rate.
<PAGE> 9
Earnings (loss) per common and common equivalent share decreased to a loss
of $0.15 for the three months ended March 31, 1995, compared to earnings of
$0.04 for the three months ended March 31, 1994. The decrease in per share
amounts was attributable to approximately a $1 million decrease in earnings and
a 1,402,000 decrease in the weighted average common and common equivalent shares
used to compute per share amounts. The decrease in common equivalent shares was
attributable to the exclusion of such common stock equivalents when they are
anti-dilutive and was somewhat offset by additional shares issued in the August,
1994 stock offering.
THREE MONTHS ENDED MARCH 31, 1994, COMPARED TO THREE MONTHS ENDED MARCH 31, 1993
- --------------------------------------------------------------------------------
Consolidated revenues for the three months ended March 31, 1994,
approximated $19.4 million compared to approximately $17.6 million for the three
months ended March 31, 1993, an increase of 10% or approximately $1.8 million.
The Company's children's literature business segment accounted for approximately
$13.6 million of revenues for the three months ended March 31, 1994, compared to
approximately $13.3 million of revenues for the three months ended March 31,
1993, an increase of 2% or approximately $300,000. Although revenues were up,
they were up less than anticipated due to an unusually harsh winter and a series
of natural disasters, which caused numerous school closings, and due to the
timing of the Easter-Spring holiday vacation at the end of the first quarter.
In the prior fiscal year, the Easter-Spring holiday vacation fell in the second
quarter ended June 30, 1993.
International revenues in U.S. dollars associated with the children's
literature business segment were approximately $4.1 million for each of the
three months ended March 31, 1994 and 1993. In local currencies, international
revenues for the 1994 period increased by 1.6% over the comparable 1994 period;
however, due to foreign currency fluctuations, the U.S. dollar revenues from
foreign operations were approximately even with the same quarter last year.
The Company' incentive/recognition awards business segment accounted for
approximately $5.7 million of revenues for the three months ended March 31,
1994, compared to $4.3 million of revenues for the three months ended March 31,
1993, an increase of 33% or approximately $1.4 million. During the second
quarter ended June 30, 1993, the Company expanded its customer base and
recognition awards business through a marketing alliance with L.G. Balfour
Company, Inc. (a manufacturer of emblematic jewelry). The expanded customer
base and awards business was principally responsible for the increase in
revenues. The majority of revenues generated by the incentive/recognition
awards business segment are from the sale of products, and revenues from
services are insignificant.
Consolidated cost of goods sold was approximately $11.3 million for the
three months ended March 31, 1994, compared to approximately $10.4 million for
the three months ended March 31, 1993, an increase of 8.7% or approximately $0.9
million. The Company's children's literature business segment accounted for
approximately $8 million of costs of goods sold for the three months ended March
31, 1994, compared to approximately $7.8 million for the three months ended
March 31, 1993, an increase of 2% or approximately $200,000. As a percentage of
revenues from the children's literature business segment, cost of goods sold
remained relatively constant for the two periods, registering 58.9% during the
1994 period compared to 58.8% during the 1993 period.
The Company's incentive/recognition awards business segment accounted for
approximately $3.3 million of cost of goods sold for the three months ended
<PAGE> 10
March 31, 1994, compared to approximately $2.6 million for the three months
ended March 31, 1993, an increase of 27% or approximately $700,000. The
increase in cost of goods sold was attributable to the increase in revenues. As
a percentage of revenues from the incentive/recognition awards business segment,
cost of goods sold improved 3.6% to 57.5% in 1994 from 61.1% in 1993. The 3.6%
decrease in cost of goods sold is principally attributable to the change in
client redemption patterns.
Consolidated selling, general, and administrative expense was approximately
$7.1 million for the three months ended March 31, 1994, compared to
approximately $6.4 million for the three months ended March 31, 1993, an
increase of 11% or approximately $700,000. Selling, general, and administrative
expense associated with the Company's children's literature business segment was
approximately $4.7 million for the three months ended March 31, 1994, compared
to approximately $4.4 million in the comparable period for 1993, an increase of
6.8% or approximately $300,000. The 1994 period financial statements reflect
additional selling and general expenses associated with the expansion and
development of product lines, all relating to a concerted effort by the Company
to increase its market share.
Selling, general, and administrative expense associated with the Company's
incentive/recognition awards business segment was approximately $2.2 million for
the three months ended March 31, 1994, compared to approximately $1.8 million
for the three months ended March 31, 1993, an increase of 22% or approximately
$400,000. Selling, general, and administrative expense for the 1994 period
attributable to the incentive/recognition awards business increased as a result
of addition expenses incurred in connection with the previously mentioned
expansion of customer base and expansion of the incentive/recognition awards
business, sales commissions, and the cost of additional sales support,
administrative, and warehousing personnel. Selling, general, and administrative
expense decreased from 41.8% of revenues for the three months ended March 31,
1994, to 38.5% for the three months ended March 31, 1993.
Consolidated general corporate and administrative expense was approximately
$184,000 for the three months ended March 31, 1994, compared to $199,000 for the
three months ended March 31, 1993, a decrease of 7.5% or $15,000.
Consolidated interest expense was approximately $341,000 for the three
months ended March 31, 1994, compared to $266,000 for the three months ended
March 31, 1993, and increase of 28.2% or $75,000. During the 1994 period, both
business segments had higher levels of borrowings at slightly higher interest
rates. The higher levels of borrowings resulted from seasonal needs and
business expansion.
Consolidated depreciation and amortization expense was approximately
$342,000 for the three months ended March 31, 1994, compared to $292,000 for the
three months ended March 31, 1993, an increase of 17% or approximately $50,000.
The increase in depreciation and amortization expense was primarily due to
acquisitions made in the children's literature business segment during second
through fourth quarters of 1993, which increased depreciable assets.
Additionally, the Company's Consolidated Financial Statements for the three
months ended March 31, 1994, includes the amortization of the $2 million of
costs in excess of net assets acquired associated with the School Book Fairs
purchase price adjustment which was recorded in the three months ended June 30,
1993.
<PAGE> 11
Consolidated income before income taxes was approximately $339,000 for the
three months ended March 31, 1994, compared to $190,000 for the comparable
period in 1993, an increase of 78% or approximately $149,000.
The income tax provision was $128,000 for the three months ended March 31,
1994, compared to a tax provision of $68,000 for the three months ended March
31, 1993, an increase of 88% or $60,000, reflecting the anticipated additional
taxes associated with the Company's additional earnings.
Net income (after provision for income taxes) was approximately $211,000
for the first three months ended March 31, 1994, as compared to approximately
$122,000 for first three months ended March 31, 1993, an increase of 73% or
approximately $89,000. Earnings per common and common equivalent share
increased to $0.04 in 1994, from $0.03 in 1993.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
The Company's primary sources of liquidity have been cash generated from
operating activities from both of its business segment, and amounts available
under its existing credit facilities. The Company's primary uses of funds
consist of financing inventory and receivables for both business segments, with
the funding of acquisitions as a secondary use.
The following table presents a summary of the Company's cash flows (in
thousands) for the three months ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Cash provided by operating activities $ 1,539 $ 292
Capital expenditures, net (173) (138)
Net borrowings on debt obligations (1,203) (124)
Payment for business acquisitions (733) -
Other (9) (43)
------------ ------------
Net decrease in cash $ (579) $ (13)
============ ============
</TABLE>
The Company has a $25 million revolving credit facility which consists of
the following: a $6 million short-term credit line ($1,570,289 unused at March
31, 1995) for use in the incentive/recognition awards business (the "CA Short
Line"), a $7 million short-term credit line ($487,029 unused at March 31, 1995)
for use in the children's literature business (the "School Book Fairs Line"), a
$9.5 million line ($2,784,217 unused at March 31, 1995) for acquisitions and for
working capital (the "Acquisition Line") and a $2.5 million short term note
obtained in July 1994 for use in funding an acquisition (the "Time Credit").
<PAGE> 12
The CA Short Line and School Book Fairs Line are due in full on June 1, 1995,
subject to annual renewal. The Time Credit is due in full on June 30, 1995 and
the Acquisition Line is due on June 1, 1996. Additionally, the Company has a
$2.8 million credit facility in the United Kingdom ($388,677 unused at March 31,
1995) for use in its children's literature business. The United Kingdom
facility is payable on demand.
The Company anticipates that operating cash flows during the next twelve
months, coupled with the renewal or extension of short-term credit facilities
will cover operating expenditures and meet the current maturities on long-term
obligations. The Company has no reason to believe existing short-term credit
facilities will not be renewed or extended. The Company does not anticipate any
material expenditures for property, plant and equipment during the next twelve
months.
SEASONALITY:
- ------------
Both of the Company's business segments are highly seasonal with the
children's literature cycle closely correlating the school year and the
incentive awards business skewed towards the end of a calendar year. Due to the
seasonality of its businesses, the Company experiences negative cash flow during
the summer months. Further, in order to build its inventory for its fall sales,
the Company's borrowings increase over the summer and generally peak during late
fall. As a result of the Company's seasonality, inventory and receivables reach
peak levels during the months of October through December.
<PAGE> 13
PART II
ITEM 1: LEGAL PROCEEDINGS
- -------
The description of the legal proceedings included in Management's
Discussion and Analysis of Financial Condition and Results of
Operations included in Part I of this report is incorporated herein by
reference.
ITEM 5: OTHER INFORMATION
- -------
The Company has discontinued discussions with respect to a possible
sale of the Company. However, the Company will continue from time to
time to explore possible business combinations, strategic alliances
and acquisitions when and should such opportunities arise.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
- -------
(a) Exhibit Number 11
Computation of Earnings Per Share
(b) No reports on Form 8-K have been filed during the quarter ended
March 31, 1995.
<PAGE> 14
Signature
---------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PAGES, INC.
Registrant
<TABLE>
<S> <C>
Date: May 12, 1995 By: R.A. STIMMEL
------------ ----------------------------
R.A. Stimmel, President
and Principal Financial Officer
</TABLE>
<PAGE> 15
EXHIBIT II
PAGES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Three Months Three Months
Ended Ended
March 31, March 31,
1995 1994
------------ ------------
<S> <C> <C>
Primary:
Weighted average number of
common shares outstanding 4,789,000 3,531,000
Adjustment for stock options
which have a dilutive effect
based upon the average market
price for common stock:
Add dilutive effect - 2,938,000
Deduct shares that could be
repurchased from the proceeds
of dilutive options - (638,000)
------------ ------------
Weighted average common and
common equivalent shares 4,789,000 5,831,000
============ ============
Net (loss)/income $ (721,567) $ 211,243
Earnings adjustment (20% rule) -
------------ ------------
Net income for computation purposes $ (721,567) $ 211,243
============ ============
Earnings per common and
common equivalent share $ (0.15) $ 0.04
============ ============
Fully Diluted:
Weighted average number of
common shares outstanding 4,789,000 3,531,000
Adjustment for stock options
which have a dilutive effect
based upon the market price
for common stock at end of period:
Add dilutive stock options - 2,938,000
Deduct shares that could be
repurchased from the proceeds
of the dilutive options - (638,000)
----------- ------------
Fully diluted shares 4,789,000 5,831,000
=========== ============
Net (loss)/income $ (721,567) $ 211,243
Earnings adjustment (20% rule) -
----------- ------------
Net (loss)/income for computation purposes $ (721,567) $ 211,243
=========== ============
Earnings per common and common
equivalent share assuming full
dilution $ (0.15) $ 0.04
=========== ============
</TABLE>
