<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 176,649
<SECURITIES> 0
<RECEIVABLES> 7,549,330
<ALLOWANCES> 426,000
<INVENTORY> 18,607,814
<CURRENT-ASSETS> 27,795,324
<PP&E> 8,381,280
<DEPRECIATION> 2,086,932
<TOTAL-ASSETS> 41,047,567
<CURRENT-LIABILITIES> 17,003,857
<BONDS> 10,351,745
0
0
<COMMON> 56,152
<OTHER-SE> 13,635,813
<TOTAL-LIABILITY-AND-EQUITY> 41,047,567
<SALES> 15,221,985
<TOTAL-REVENUES> 15,221,985
<CGS> 9,102,620
<TOTAL-COSTS> 9,102,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 368,146
<INCOME-PRETAX> 2,519,963
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,519,963
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,519,963
<EPS-PRIMARY> 0.44
<EPS-DILUTED> 0.44
</TABLE>
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 Quarterly Period Ended March 31, 1996
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: 5,462,153 common shares
outstanding, each $0.01 par value, as of May 1, 1996.
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
ASSETS 1996 1995
------------ -----------
Current assets:
Cash $ 176,649 $ 532,855
Accounts receivable, net of allowance for
doubtful accounts of $426,000 and $457,000,
respectively 7,123,330 9,931,548
Inventory 18,607,814 27,840,561
Prepaid expenses 1,887,531 2,229,829
------------ -----------
Total current assets 27,795,324 40,534,793
------------ -----------
Property and equipment:
Buildings 4,256,881 4,256,881
Equipment 3,492,931 5,810,714
------------ -----------
7,749,812 10,067,595
Less accumulated depreciation (2,086,932) (3,442,661)
------------ -----------
5,662,880 6,624,934
Land 631,468 631,468
------------ -----------
Total property and equipment, net 6,294,348 7,256,402
------------ -----------
Other assets:
Cost in excess of net assets acquired,
net of accumulated amortization of $520,531
and $479,075, respectively 5,953,123 5,994,579
Other 1,004,772 1,063,701
------------ -----------
6,957,895 7,058,280
------------ -----------
TOTAL ASSETS $41,047,567 $54,849,475
------------ -----------
See accompanying notes
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
LIABILITIES AND
STOCKHOLDERS' EQUITY 1996 1995
------------ -----------
Current liabilities:
Accounts payable $3,607,126 $8,394,054
Short-term debt obligations - 5,478,407
Accrued liabilities 3,338,152 2,417,940
Accrued tax liabilities 3,167,219 3,216,088
Deferred revenue 6,671,151 6,970,220
Current maturities on long-term debt obligations 155,881 157,145
Current maturities on capitalized lease obligations 64,328 168,619
------------ -----------
Total current liabilities 17,003,857 26,802,473
------------ -----------
Long-term obligations 10,351,745 17,373,403
------------ -----------
Stockholder's Equity:
Preferred stock: $.01 par value; authorized
300,000 shares; none issued and outstanding
Common stock: $.01 par value; authorized
20,000,000 shares; issued 5,615,181 and
5,474,556 shares, respectively 56,152 54,746
Capital in excess of par value 22,882,537 22,760,194
Foreign currency translation, net of tax - (374,654)
Accumulated deficit (9,005,601) (11,525,564)
------------ -----------
13,933,088 10,914,722
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
------------ -----------
Total stockholders' equity 13,691,965 10,673,599
------------ -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $41,047,567 $54,849,475
------------ -----------
See accompanying notes
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended March 31, 1996 and 1995
1996 1995
------------ -----------
Revenues $15,221,985 $18,913,877
------------ -----------
Costs and expenses:
Cost of goods sold 9,102,620 11,212,859
Selling, general and administrative 6,170,780 7,660,515
Interest 368,146 555,474
Depreciation and amortization 315,813 381,102
Gain on sale of distribution channel (3,255,337) -
------------ -----------
12,702,022 19,809,950
------------ -----------
Income/(loss) from continuing operations
before income taxes 2,519,963 (896,073)
Benefit for income taxes - 350,000
------------ -----------
Income/(loss) from continuing operations 2,519,963 (546,073)
Discontinued operations - (175,494)
------------ -----------
NET INCOME/(LOSS) $ 2,519,963 $ (721,567)
------------ -----------
Income/(loss) per common share:
Income/(loss) from continuing operations $ 0.44 $ ( 0.11)
Discontinued operations 0.00 (0.04)
------------ -----------
Income/(loss) per common share $ 0.44 $ ( 0.15)
------------ -----------
Weighted average common and common
equivalent shares outstanding 5,721,000 4,789,000
------------ -----------
See accompanying notes
<PAGE>
PAGES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended March 31, 1996 and 1995
1996 1995
------------ -----------
Cash flows from operating activities:
Net income/(loss) $2,519,963 $ (721,567)
------------ -----------
Adjustments to reconcile net income/(loss)
to cash provided by operating activities:
Depreciation and amortization 315,813 381,102
Gain on sale of distribution channel (3,255,337) -
Deferred income taxes - (350,000)
Changes in assets and liabilities, net of
effect of disposition in 1996 and acquisition in
1995 by the children's literature segment:
(Increase) decrease in assets:
Accounts receivable 2,075,772 3,525,278
Inventory 2,767,974 (157,896)
Prepaid expenses and other assets (347,294) (13,282)
Decrease in liabilities:
Accounts payable and accrued liabilities (3,008,356) (631,754)
Deferred revenue (299,069) (493,330)
------------ -----------
Total adjustments (1,750,497) 2,260,118
------------ -----------
Net cash provided by operating activities 769,466 1,538,551
------------ -----------
Cash flows from investing activities:
Proceeds from sale of property and equipment 8,031 -
Payments for purchases of property and equipment (50,581) (172,765)
Proceeds from disposition in children's literature
segment 11,287,500 -
Payment for acquisition by children's literature
segment - (733,000)
------------ -----------
Cash provided by(used in) investing activities 11,244,950 (905,765)
------------ -----------
Cash flows from financing activities:
Proceeds from debt obligations 16,957,372 19,247,563
Principal payments on debt and lease obligations (29,438,044) (20,450,148)
Proceeds from issuance of stock 123,749 -
------------ -----------
Cash used in financing activities (12,356,923) (1,202,585)
------------ -----------
Effect of exchange rate changes on cash (13,699) (8,918)
------------ -----------
Decrease in cash (356,206) (578,717)
Cash, beginning of period 532,855 671,602
------------ -----------
Cash, end of period $ 176,649 $ 92,885
Supplemental disclosures of cash flow information:
Cash paid for interest: $ 430,947 $ 495,596
------------ -----------
Cash paid for taxes: $ 0 $ 0
------------ -----------
See accompanying notes
<PAGE>
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. These consolidated financial statements should be read in conjunction
with the Company's audited financial statements and notes thereto for the fiscal
year ended December 31, 1995. 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
Internal Revenue Service Assessment
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.
In October of 1995, the Company received four Notices of Deficiency from
the IRS relating to this examination. The Notices of Deficiency assessed
additional income taxes of $4,693,681 and penalties of $1,358,630. Using a
constant annual interest rate of 9%, interest payable as of March 31, 1996, on
the aforementioned asserted deficiencies would approximate $4 million. The
asserted deficiencies are attributable primarily to a restructuring of SBF and
related entities that occurred on August 31, 1988, in which, along with other
events, certain assets were transferred between related companies. The IRS has
challenged, among other things, the values assigned to those assets by the
parties to the transaction, contending that the assets were undervalued and that
SBF recognized a substantial taxable gain in the transaction. The Company
intends to vigorously contest the various assertions made by the IRS in the
notices of deficiency and believes the IRS's position regarding the adjustments
to taxable income is substantially overstated. The Company has retained the law
firm of Akin, Gump, Strauss, Hauer & Feld as counsel, and in January 1996,
filed petitions with the Tax Court disputing the IRS valuation of the assets
transferred, and other points in the IRS assessment.
On March 7, 1996, the IRS filed answers to each of the four petitions,
generally denying the allegations set forth therein. 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
assessment in its March 31, 1996 financial statements. A resolution of these
matters in favor of the IRS could adversely affect the liquidity of the Company
and, if greater than $2 million, would affect earnings in the year any such
assessment is sustained.
Discontinued Operations
In 1995, the Company adopted plans to discontinue the operations of its
Read Aloud Book Club division (the "Club"). The Company anticipates that
operations of the Club will cease in the second quarter of 1996. The Club is
accounted for as a discontinued operation in the accompanying consolidated
statements of operations. Losses anticipated to be incurred between the
measurement date (December 31, 1995) and the expected date on which operations
will cease, as well as phase out costs on the Club, were provided for in the
December 31, 1995 consolidated financial statements.
Disposition of United Kingdom and Discontinuance of Canadian
Distribution Channels
On March 6, 1996, the Company sold to Scholastic Limited, a United Kingdom
subsidiary of Scholastic, Inc. and its affiliates ("Scholastic") all the capital
stock of School Book Fairs, Limited ("Limited"), the Company's United Kingdom
subsidiary for $4,764,781 cash. Additionally, as part of the transaction, (i)
Scholastic paid in full (1) the outstanding balance of $2,129,846 due by Limited
to Lloyds Bank and (2) an intercompany payable due from Limited to the Company
in the amount of $2,317,873 and (ii) the Company signed a Non-Competition
Agreement pursuant to which, in return for the payment of $1,500,000 in cash,
the Company agreed for a five-year period not to compete with the book fair
business of Scholastic and its affiliates in the following countries: Canada,
the United Kingdom, Ireland, Germany, Italy, Greece, Eastern Europe, including
without limitation, the Commonwealth of Independent States, Turkey, the
countries of the Middle East and Africa.
On March 6, 1996, the Company closed its distribution channel in Canada
and on March 13, 1996, the Company sold a portion of its inventory in Canada to
Scholastic Canada, Ltd., a corporation organized under the laws of Canada for
$575,000 cash.
The net proceeds of the above-described transactions of $8,950,000 after
the pay off of the Lloyds Bank debt and estimated transaction costs were used to
reduce the Company's domestic bank indebtedness. Included in the accompanying
March 31, 1996, consolidated financial statements is a $3,255,337 gain on the
transaction.
New Bank Agreement
On March 27, 1996, the Company negotiated a new $16 million revolving
credit facility to replace the previous $25 million of domestic bank credit
line. The credit facility consists of the following: a $5 million long-term
credit loan for use in the incentive/recognition awards business (the "CA Short
Line") and an $11 million long-term credit loan for use in the children's
literature business (the "School Book Fairs Line"). The interest rate on the
facility is prime plus 1%. The facility is due in full by June 1, 1997, subject
to annual renewals.
<PAGE>
Three months ended March 31, 1996, Compared to three months ended March 31, 1995
Information about the Company's operations by business segments:
<TABLE>
<CAPTION>
Incentive/ Children's
Recognition Awards Literature Corporate Consolidated
-------------------- -------------------- --------- --------------------
Millions Percentage Millions Percentage Millions Millions Percentage
-------- ---------- -------- ---------- -------- -------- ----------
Quarter Ended
March 31, 1996:
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues $5.8 100.0 $9.4 100.0 $15.2 100.0
Gross Profit 2.4 41.0 3.7 39.7 6.1 40.2
Selling, general & admin. 1.9 33.7 4.1 43.0 0.2 6.2 40.5
Depreciation & amort. 0.1 1.4 0.2 2.5 0.3 2.1
Gain on sale of
distribution channel - 3.3 34.4 3.3 21.4
Operating Income/(loss) 0.5 8.1 2.6 27.3 (0.2) 2.9 19.0
Interest expense 0.4 2.4
Income before income taxes 2.5 16.6
Quarter Ended
March 31, 1995:
Revenues 4.8 100.0 14.1 100.0 18.9 100.0
Gross Profit 2.0 41.3 5.7 40.5 7.7 40.7
Selling, general & admin. 2.0 41.6 5.5 38.8 0.2 7.7 40.5
Depreciation & amort. 0.1 1.5 0.3 2.2 0.4 2.0
Operating loss (0.1) (1.9) (0.1) (1.3) (0.2) (0.4) (1.8)
Interest expense 0.5 2.9
Loss from continuing operations,
before income taxes (0.9) (4.7)
Discontinued operations (0.2) (1.2) (0.2) (1.0)
Loss before income taxes (1.1) (5.7)
</TABLE>
Consolidated revenues for the three months ended March 31, 1996,
approximated $15.2 million compared to approximately $18.9 million for the three
months ended March 31, 1995, a decrease of 20% or approximately $3.7 million.
The Company's children's literature business segment accounted for approximately
$9.4 million of revenues for the three months ended March 31, 1996, compared to
approximately $14.1 million of revenues for the three months ended March 31,
1995, a decrease of 33% or approximately $4.6 million. The decrease in
revenues in the children's literature business segment is principally
attributable to the following: the sale of the United Kingdom operations in
early March 1996; the discontinuance of the Canadian distribution channel in
early March 1996; an approximate 16% reduction in the number of domestic book
fair events held in the current quarter compared to the same period in 1995;
and the disposal and phase out of certain children's literature business segment
distribution channels in the third and fourth quarters of 1995.
The Company's incentive/recognition awards business segment accounted for
approximately $5.8 million in revenues for the three months ended March 31,
1996, compared to $4.8 million in revenues for the three months ended March 31,
1995, an increase of 19% or approximately $1 million. The increase is
principally attributable to maintaining volume on certain existing customers
coupled with increasing volume from 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 $9.1 million for the
three months ended March 31, 1996, compared to approximately $11.2 million for
the three months ended March 31, 1995, a decrease of 19% or approximately $2.1
million. The Company's children's literature business segment accounted for
approximately $5.7 million of consolidated cost of goods sold for the three
months ended March 31, 1996, compared to approximately $8.4 million for the
three months ended March 31, 1995, a decrease of 32% or approximately $2.7
million. The decrease in cost of goods sold was due to the reduction in
revenues. As a percentage of revenues from the children's literature business
segment, cost of goods sold increased by 0.8% to 60.3% during the first quarter
of 1996 compared to 59.5% for the same period in 1995. The increase in cost of
goods sold as a percentage of revenues is due to a change in product mix.
The Company's incentive/recognition awards business segment accounted for
approximately $3.4 million of consolidated cost of goods sold for the three
months ended March 31, 1996 compared to approximately $2.8 million for the three
months ended March 31, 1995, an increase of 20% or approximately $600,000. 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 increased 0.3% to 59.0% in 1996, from 58.7% in 1995. The
0.3% increase in cost of goods sold is principally attributable to a change in
product mix.
Consolidated selling, general, and administrative expense was
approximately $6.2 million for the three months ended March 31, 1996, compared
to approximately $7.7 million for the three months ended March 31, 1995, a
decrease of 19% or approximately $1.5 million. Selling, general, and
administrative expense associated with the Company's children's literature
business segment was approximately $4.1 million for the three months ended March
31, 1996, compared to $5.5 million for the three months ended March 31, 1995, a
decrease of 25% or approximately $1.4 million. The decrease in selling, general
and administrative expense is attributable to re-engineering efforts implemented
in 1995 which included full-time staffing level reductions and due to the sale
of the United Kingdom subsidiary in early March 1996.
Selling, general, and administrative expense associated with the Company's
incentive/recognition awards business segment was approximately $1.9 million for
the three months ended March 31, 1996, compared to approximately $2 million for
the three months ended March 31, 1995, a decrease of 3% or approximately
$100,000. The decrease in selling, general, and administrative expense is
primarily due to numerous cost reduction efforts implemented by the Company.
Consolidated general corporate and administrative expense was
approximately $155,000 for the three months ended March 31, 1996, compared to
$188,000 for the three months ended March 31, 1995, a decrease of 17.5% or
approximately $33,000.
Consolidated interest expense was approximately $368,000 for the three
months ended March 31, 1996, compared to $555,000 for the three months ended
March 31, 1995, a decrease of 34% or $187,000. In connection with the sale of
the United Kingdom distribution channel in March 1996, a portion of the
proceeds was used to pay down outstanding debt. The average outstanding debt
for the three months ended March 31, 1996 approximated $18.3 million compared to
$25.9 million for the three months ended March 31, 1995. Additionally, the
average interest rate for the three months ended March 31, 1996 approximated
8.85% compared to approximately 9.33% for the three months ended March 31,
1995.
Consolidated depreciation and amortization expense was approximately
$316,000 for the three months ended March 31, 1996, compared to $381,000 for the
three months ended March 31, 1995, an decrease of 17% or approximately $65,000.
The decrease in depreciation and amortization expense was principally
attributable to the disposal of the United Kingdom distribution channel in early
March 1996 and its related fixed assets.
The income tax provision for the three months ended March 31, 1996 was $0.
The current period provision is based on the Company's anticipated annual
effective tax rate.
Earnings per common and common equivalent share increased to earnings of
$0.44 for the three months ended March 31, 1996, compared to a loss of $0.15 for
the three months ended March 31, 1995. The increase in per share amounts was
attributable to the approximate $3.3 million gain recorded on the sale of the
United Kingdom distribution channel in the current quarter.
Liquidity and Capital Resources:
The Company's primary sources of liquidity have been cash generated from
operating activities from both of its business segments, and amounts available
under its existing credit facilities. Additionally, the Company generated cash
from the sale of its United Kingdom distribution channel in March 1996. 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, 1996 and 1995:
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ -----------
Cash provided by operating activities $ 769 $ 1,539
Capital expenditures, net (51) (173)
Net borrowings on debt obligations (12,480) (1,203)
Payment for business acquisitions - (733)
Proceeds from disposition in children's
literature segment 11,288 -
Other 118 (9)
------------ -----------
Net decrease in cash $ (356) $ (579)
------------ -----------
The Company has a $16 million revolving credit facility which consists of
the following: a $5 million short-term credit line ($3,970,708 unused at March
31, 1996) for use in the incentive/recognition awards business (the "CA Short
Line") and an $11 million short-term credit line ($2,918,145 unused at March 31,
1996) for use in the children's literature business (the "School Book Fairs
Line"). The CA Short Line and School Book Fairs Line are due in full on June 1,
1997, subject to annual renewal.
The Company anticipates that operating cash flows during the next twelve
months will cover operating expenditures and meet the current maturities on
long-term obligations. The Company does not anticipate any material
expenditures for property, plant and equipment during the next twelve months.
Should the Internal Revenue Service prevail in a potential tax assessment, it
would place additional demands on the Company's cash and lines of credit.
During 1995, Gruner + Jahr Printing and Publishing Company ("G+J") filed
an action against the Company seeking in excess of $900,000 in damages which has
been stayed by the court pending the resolution of an action filed by the
Company in federal court against G+J and Gareth Stevens, Inc., seeking
compensation arising out of the Company's purchase from G+J of the Read Aloud
Book Club. Gareth Stevens, Inc. filed a counterclaim in the action seeking an
unspecified amount of damages. The federal court action is in the pleading and
discovery stage and it is not possible at this time to predict the outcome.
However, if the Company is unsuccessful in its action and G+J and Gareth Stevens
are successful, the Company's liquidity may be adversely affected.
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>
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 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Number 11
Computation of Earnings Per Share
(b) A report on Form 8-K dated March 6, 1996, was filed on March 19,
1996, under Item 2 disclosing the disposition of the United
Kingdom subsidiary and the closing of the Canadian distribution
channel.
<PAGE>
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
Date: May 15, 1996 By: /s/ Tamara L. Zeph
------------------ -----------------------
Tamara L. Zeph,
Principal Financial and
Accounting Officer
<PAGE>
EXHIBIT II
PAGES, INC. AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ -----------
Primary:
Weighted average number of
common shares outstanding 5,180,000 4,789,000
Adjustment for stock options
which have a dilutive effect
based upon the average market
price for common stock:
Add dilutive effect 1,424,000 -
Deduct shares that could be
repurchased from the proceeds
of dilutive options (883,000) -
------------ -----------
Weighed average common and
common equivalent shares 5,721,000 4,789,000
------------ -----------
Income/(loss) from continuing operations $ 2,519,963 $ (546,073)
Discontinued operations - (175,494)
------------ -----------
Net income/(loss) 2,519,963 (721,567)
Earnings adjustment (20% rule) - -
------------ -----------
Net income/(loss) for computation purposes $ 2,519,963 $ (721,567)
------------ -----------
Income/(loss) per common share:
Income/(loss) from continuing operations $ 0.44 $ (0.11)
Discontinued Operations - (0.04)
------------ -----------
Earnings/(loss) per common and common
equivalent share $ 0.44 $ (0.15)
------------ -----------
<PAGE>
Three Months Three Months
Ended Ended
March 31, March 31,
1996 1995
------------ -----------
Fully diluted:
Weighted average number of
common shares outstanding 5,180,000 4,789,000
Adjustment for stock options
which have a dilutive effect
based upon the average market
price for common stock:
Add dilutive effect 1,424,000 -
Deduct shares that could be
repurchased from the proceeds
of dilutive options (883,000) -
------------ -----------
Fully diluted shares 5,721,000 4,789,000
------------ -----------
Income/(loss) from continuing operations $ 2,519,963 $ (546,073)
Discontinued operations - (175,494)
------------ -----------
Net income/(loss) 2,519,963 (721,567)
Earnings adjustment (20% rule) - -
------------ -----------
Net income/(loss) for computation purposes $ 2,519,963 $ (721,567)
------------ -----------
Income/(loss) per common share:
Income/(loss) from continuing operations $ 0.44 $ (0.11)
Discontinued Operations - (0.04)
------------ -----------
Earnings/(loss) per common and common
equivalent share assuming full dilution $ 0.44 $ (0.15)
------------ -----------
<PAGE>
