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 June 30, 1997
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: 6,434,009 common shares
outstanding, each $0.01 par value, as of August 8, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
------------ ------------ ----------- -----------
<C> <S> <C> <C> <C>
Revenues $ 6,943,688 $ 6,646,418 $14,087,882 $16,103,486
------------ ------------ ----------- -----------
Costs and Expenses:
Cost of goods sold 4,173,853 3,974,567 8,310,405 9,674,280
Selling, general and administrative 3,263,128 3,102,919 6,049,998 7,328,404
Interest, net 188,999 158,525 378,329 520,517
Depreciation and amortization 162,985 152,087 434,053 385,807
Gain on sale of distribution channel -- -- -- (3,255,337)
------------ ------------ ----------- -----------
7,788,965 7,388,098 15,172,785 14,653,671
------------ ------------ ----------- -----------
Income(loss) from continuing operations
before income taxes (845,277) (741,680) (1,084,903) 1,449,815
Provision for income taxes -- -- -- --
------------ ------------ ----------- -----------
Income(loss) from continuing operations (845,277) (741,680) (1,084,903) 1,449,815
Discontinued operations:
Income from operations -- (302,240) -- 78,528
Cumulative effect of change in
accounting principle -- -- -- 994,664
------------ ------------ ----------- -----------
NET INCOME(LOSS) $ (845,277) $ (1,043,920) $(1,084,903) $ 2,523,007
Income(loss) per common share:
Income(loss) from continuing
operations $ (0.14) $ (0.14) $ (0.18) $ 0.25
Discontinued operations before
cumulative effect of change in
accounting principle -- (0.05) -- 0.01
Cumulative effect of change in
accounting principle -- -- -- 0.17
------------ ------------ ----------- -----------
Income(loss) per common share $ (0.14) $ (0.19) $ (0.18) $ 0.43
============= ============= ============ ============
Weighted average common and common
equivalent shares 6,194,000 5,436,000 6,196,000 5,786,000
============= ============= ============ ============
</TABLE>
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
------------- -----------
ASSETS
Current Assets:
Cash $ 190,117 $ 317,911
Accounts receivable, net of
allowance for doubtful
accounts of $189,000 and
$316,000, respectively 1,647,000 6,896,366
Inventory 11,358,684 19,358,374
Prepaid expenses 1,104,659 1,541,964
Note receivable from CA Short Company 100,000 --
------------- -----------
Total current assets 14,400,460 28,114,615
------------- -----------
Property and equipment:
Buildings 1,070,201 4,264,259
Equipment 2,265,361 4,045,248
------------- -----------
3,335,562 8,309,507
Less accumulated depreciation (1,333,377) (2,448,860)
------------- -----------
2,002,185 5,860,647
Land 420,000 631,468
------------- -----------
Total property and equipment, net 2,422,185 6,492,115
Other assets:
Note receivable from CA Short Company 4,900,000 --
Cost in excess of net assets acquired,
net of accumulated amortization of
$1,015,000 and $645,000, respectively 4,525,406 5,828,757
Other 238,452 884,752
------------- -----------
9,663,858 6,713,509
------------- -----------
TOTAL ASSETS $26,486,503 $41,320,239
============= ===========
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1997 1996
------------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 2,143,226 $ 3,388,341
Short-term debt obligations 10,446,603 13,120,561
Accrued liabilities 1,045,779 2,060,637
Accrued tax liabilities 1,765,467 2,283,836
Deferred revenue 805,633 3,068,320
Current portion of long-term
debt obligations 133,451 158,160
Current portion of capital
lease obligations 62,361 100,123
------------- -----------
Total current liabilities 16,402,520 24,179,978
------------- -----------
Long-term debt and capital lease
obligations 1,232,624 1,328,986
Deferred revenue -- 2,935,626
------------- -----------
Total liabilities 17,635,144 28,444,590
Commitments and contingencies
Stockholders' 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 6,492,722 and
6,497,268 shares, respectively 64,927 64,973
Capital in excess of par value 21,266,059 23,951,788
Notes receivable from stock sales (903,123) (903,123)
Accumulated deficit (11,335,381) (9,996,866)
------------- -----------
9,092,482 13,116,772
Less 298,713 shares of common stock in
treasury, at cost (241,123) (241,123)
------------- -----------
Total stockholders' equity 8,851,359 12,875,649
------------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $26,486,503 $41,320,239
============= ===========
See accompanying notes
<PAGE>
PAGES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended
June 30, June 30,
1997 1996
------------- -----------
Cash Flow Used In Operations:
Income(loss) from continuing operations $(1,084,903) $ 1,449,815
Reconciliation to net cash flow used in
continuing operations:
Depreciation and amortization 434,053 385,807
Gain on sale of distribution channel -- (3,255,337)
Changes in working capital items of
continuing operations:
Accounts receivable 605,339 1,552,101
Inventory 836,537 3,974,212
Prepaid expenses and other assets (302,611) (335,215)
Accounts payable and accrued liabilities (899,253) (4,693,722)
Deferred revenue (310,370) (400,114)
------------- -----------
Net cash used in continuing operations (721,208) (1,322,453)
------------- -----------
Net cash from (used in) discontinued
operations (152,787) 178,730
------------- -----------
Net cash used in operations (873,995) (1,143,723)
------------- -----------
Cash Flow From (Used In) Investing Activities:
Proceeds from sale of property and equipment -- 8,031
Payments for purchases of property and
equipment (90,754) (119,212)
Proceeds from disposition of distribution
channel -- 11,287,500
------------- -----------
Net cash flow from (used in)
investing activities (90,754) 11,176,319
------------- -----------
Cash Flow From (Used In) Financing Activities:
Proceeds from issuance of stock -- 279,772
Proceeds from debt obligations 12,748,906 17,439,222
Payments on debt and lease obligations (11,911,951) (28,057,223)
------------- -----------
Net cash flow from (used in) financing
activities 836,955 (10,338,229)
------------- -----------
Effect of changes in exchange rates
on cash -- (14,543)
------------- -----------
Decrease in cash (127,794) (320,176)
Cash, beginning of period 317,911 532,855
------------- -----------
Cash, end of period $ 190,117 $ 212,679
============= ==============
See accompanying notes
<PAGE>
PAGES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
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. All adjustments are of a normal and recurring nature.
The children's literature business is highly seasonal and correlated
closely to the school year. The results of operations for the interim periods
are not necessarily indicative of the results to be expected for the full year.
Certain reclassifications were made to the prior year financial statements
to conform to current period presentations. The interim consolidated financial
statements and notes thereto are presented as permitted by the Securities and
Exchange Commission and do not contain certain information included in the
Company's annual financial statements and notes thereto. These financial
statements should be read in conjunction with the Company's audited financial
statements and notes thereto for the fiscal year ended December 31, 1996.
Note 2. Discontinued Operations
Effective on the close of business on December 31, 1996, the Company
completed a tax-free spin-off of the common stock of the Company's wholly-owned
subsidiary, CA Short Company ("CAS") through a distribution to the stockholders
of Pages, Inc. of one and one-half shares of CAS common stock for every ten
shares of Pages, Inc. common stock outstanding on the record date. Effective
January 1, 1997, CAS issued a subordinated debenture to Pages, Inc. in the
principal amount of $5.0 million bearing interest at 7% per annum payable
quarterly, with principal payments of $100,000 each due at the end of the first
four years, and a final payment of $4.6 million due at the end of the fifth
year. The Company had an investment and advances due from CAS prior to the
spin-off that totaled approximately $7.7 million. Capital in excess of par
value of the Company was reduced by approximately $2.7 million effective
January 1, 1997, to record the spin-off transaction.
The spin-off of this discontinued operation represents the entire
incentive/awards segment of the Company's business. The statements of
operations for the three and six months ended June 30, 1996, have been restated
to reflect the results of CAS as a discontinued operation. Revenues for CAS
were $4.1 and $9.9 million for the three and six months ended June 30, 1996,
respectively. Net income (loss) was $(300,000) and $1.0 million, respectively.
Included in the year to date net income is a $1.0 million cumulative effect of
an accounting change adopted by CAS as of January 1, 1996. CAS changed its
method of accounting for the recognition of revenues relating to advance
deposits.
The components of net assets of the CAS discontinued operations included
in the balance sheet at December 31, 1996, follow:
Cash $ 130,972
Accounts receivable, net 4,644,027
Inventory 7,163,153
Prepaid expenses 803,321
Property and equipment, net 3,931,800
Costs in excess of net asset acquired, net 1,133,023
Other assets 622,257
Accounts payable (1,572,022)
Accrued liabilities (342,156)
Short-term debt obligations (3,669,746)
Deferred revenue (4,887,943)
<PAGE>
Note 3. Disposition of United Kingdom and Discontinuance of Canadian
Distribution Channels
The Company sold its United Kingdom subsidiary in March 1996. Revenues in
U.S. dollars for the United Kingdom subsidiary for the six months ended June
30, 1996, approximated $1.4 million, with loss before income taxes of
approximately $117,000.
The Company discontinued its Canadian distribution channel in March, 1996.
Revenues in U.S. dollars for the Canadian distribution channel for the six
months ended June 30, 1996, approximated $363,000, with loss before income
taxes of approximately $132,000.
Note 4. Supplemental Cash Flow Information
Cash payments during the six months ended June 30, 1997 and 1996, included
interest of $477,000 and $551,000, respectively, and income taxes of $560,000
and $0, respectively.
During the three months ended March 31, 1997, the Company acquired a
$5,000,000 note receivable from CA Short Company in connection with the spin-
off of this wholly-owned subsidiary effective on the close of business on
December 31, 1996. Interest at 7% has been paid quarterly to the Company.
Note 5. Stock Appreciation Rights
Included in the results of operations for the six months ended June 30,
1997, is a reduction in administrative compensation expense of $431,287
associated with the Company's Stock Appreciation Rights issued under the
executive incentive compensation plan in October, 1996. Effective April 1,
1997, the Stock Appreciation Rights program dated November 1, 1996, was
canceled.
Note 6. Income Taxes
There was no income tax provision for the three and six months ended June
30, 1997, due to the Company's net operating loss position and the full
valuation of any resulting deferred tax benefit. Estimated income tax rates
based on annualized income were taken into consideration.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
Certain statements contained in this Form 10-Q under "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
regarding matters that are not historical facts are "forward looking
statements" (as such term is defined in the Private Securities Litigation
Reform Act of 1995) and because such statements involve risks and
uncertainties, actual results may differ materially from those expressed or
implied by such forward-looking statements. Those statements include remarks
regarding the intent, belief, or current expectations of the Company, its
directors, or its officers with respect to, among other things: (i) the
Company's ability to raise additional capital; (ii) future operating cash
flows; (iii) ability of the Company to absorb additional volume; and (iv) the
Company's growth strategy, including the introduction of new book fair
concepts. Prospective investors are cautioned that any such forward-looking
statements are not guarantees of future performance and involve risks and
uncertainties, and that actual results may differ materially from those
projected, anticipated or expected in the forward-looking statements as a
result of various factors, many of which, such as the Company's ability to
raise additional capital, are beyond the control of the Company. The
accompanying information contained in this Form 10-Q, including without
limitation the information set forth under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operations", identifies
important factors that could cause such differences.
<PAGE>
Second Quarter 1997 Compared with Second Quarter 1996
Revenues for the three months ended June 30, 1997, approximated $6.9
million compared to approximately $6.6 million for the three months ended June
30, 1996, an increase of 4% or approximately $300,000. The increase in
revenues is principally attributable to the following: a 5% increase in average
revenue per fair on approximately the same number of domestic book fair events
held in the current quarter compared to the same period in 1996 (5% or
$300,000); and a 20% increase in sales in the Pages Library Services division
(3% or $185,000), offset by a decrease of 3% or $185,000 in sales of
discontinued product lines from second quarter 1996.
Cost of goods sold was approximately $4.2 million for the three months
ended June 30, 1997, compared to approximately $4.0 million for the three
months ended June 30, 1996, an increase of 5% or approximately $200,000. The
increase in costs of goods sold is due to the increase in revenues discussed
above. As a percentage of revenues, cost of goods sold was 60.1% during the
second quarter of 1997, approximately the percentage for the same period in
1996 of 59.8%.
Selling, general, and administrative expense was approximately $3.3
million for the three months ended June 30, 1997, compared to approximately
$3.1 million for the three months ended June 30, 1996, an increase of 5% or
approximately $200,000. Increased selling expenditures to roll out four new
types of book fairs account for the increase.
Interest expense was approximately $189,000 for the three months ended
June 30, 1997, compared to $159,000 for the three months ended June 30, 1996,
an increase of 19% or $30,000. The average outstanding debt for the three
months ended June 30, 1997, approximated $11.7 million compared to $8.4 million
for the three months ended June 30, 1996. Additionally, the average interest
rate for the three months ended June 30, 1997, approximated 9.50% compared to
approximately 8.25% for the three months ended June 30, 1996. Netted in
interest expense for the three months ended June 30, 1997, is approximately
$90,000 of interest income earned on the $5.0 million note receivable from the
former subsidiary, CA Short Company.
Depreciation and amortization expense was approximately $163,000 for the
three months ended June 30, 1997, compared to $152,000 for the three months
ended June 30, 1996, an increase of 7% or approximately $11,000.
There was no income tax provision for the three months ended June 30,
1997, due to the Company's net operating loss position and the full valuation
of any resulting deferred tax benefit. Estimated income tax rates based on
annualized income were taken into consideration.
The second quarter ended June 30, 1997, resulted in an operating loss of
$845,000 compared to an operating loss of $742,000 in the second quarter ended
June 30, 1996. Without the gross profit from discontinued product lines
included in the second quarter ended June 30, 1996, operating results for the
second quarter ended June 30, 1997, approximated the results for the same
period in 1996.
The second quarter ended June 30, 1997, resulted in a net loss of $845,000
versus a net loss of $1.0 million in the second quarter ended June 30, 1996.
Included in the net loss for the second quarter ended June 30, 1996, was
$300,000 of loss from the discontinued operations of the Company's subsidiary,
CA Short Company (which was spun-off to shareholders at December 31, 1996).
Without the loss from discontinued operations and the gross profit from
discontinued product lines mentioned above, net results for the second quarter
ended June 30, 1997, approximated the same as the period in 1996. Primary and
fully diluted loss per share improved from $.19 in the comparable quarter last
year to a net loss per share of $.14.
<PAGE>
Six Months Ended June 30, 1997 Compared with Six Months Ended June 30, 1996
Revenues for the six months ended June 30, 1997, approximated $14.0
million compared to approximately $16.1 million for the six months ended June
30, 1996, a decrease of 13% or approximately $2.1 million. Considering the
comparative quarterly discussion above, the decrease in revenues is principally
attributable to the following: the sale of the United Kingdom operation in
March 1996 (9% or $1.4 million); the discontinuance of the Canadian
distribution channel in early March 1996 (2% or $400,000); and a 2% or
$300,000 decrease in year to date sales from discontinued product lines. Year
to date revenues for 1997 from domestic book fair events approximate year to
date 1996 revenue levels.
Cost of goods sold was approximately $8.3 million for the six months ended
June 30, 1997, compared to approximately $9.7 million for the six months ended
June 30, 1996, a decrease of 14% or approximately $1.4 million. Considering
the comparative quarterly discussion above, the decrease in cost of goods sold
is due to the reduction in year to date revenues discussed above. Cost of
goods sold as a percentage of revenues was 59.0% for the six months ended June
30, 1997, compared to 60.1% for the six months ended June 30, 1996.
Selling, general and administrative expense was approximately $6.0 million
for the six months ended June 30, 1997, compared to $7.3 million for the six
months ended June 30, 1996, a decrease of 17% or approximately $1.3 million.
Considering the comparative quarterly discussion above, the net decrease in
selling, general and administrative expense is attributable to the sale of the
United Kingdom operations and the discontinuance of the Canadian distribution
channel in March 1996, and the reduction in expenses of approximately $431,000
in March 1997, to record the current value of Stock Appreciation Rights issued
in 1996.
Interest expense was approximately $378,000 for the six months ended June
30, 1997, compared to approximately $521,000 for the six months ended June 30,
1996, a decrease of 27% or approximately $143,000. The average outstanding
debt for the six months ended June 30, 1997, approximated $11.7 million
compared to $12.5 million for the six months June 30, 1996. The average
interest rate for the six months ended June 30, 1997, approximated 9.38%
compared to approximately 8.55% for the six months ended June 30, 1996. Netted
in interest expense for the six months ended June 30, 1997 is approximately
$180,000 of interest income earned on the $5.0 million note receivable from the
former subsidiary, CA Short Company.
Depreciation and amortization expense was approximately $434,000 for the
six months ended June 30, 1997, compared to $386,000 for the six months ended
June 30, 1996, an increase of 12% of $48,000.
The six months ended June 30, 1997, resulted in an operating loss of $1.1
million compared to operating income of $1.4 million for the six months ended
June 10, 1996. The operating results of the six months ended June 30, 1996,
included a $3.3 million gain recorded on the sale of the United Kingdom
distribution channel. Without the gain, operating results improved in the six
months June 30, 1997, over the six months ended June 30, 1996.
The six months ended June 30, 1997, resulted in a net loss of $1.1 million
versus net income of $2.5 million for the six months ended June 30, 1996.
Included in the net income for the six months ended June 30, 1996, was $1.0
million of income from the discontinued operations of the Company's former
subsidiary, CA Short Company (which was spun-off to shareholders at December
31, 1996). Without the income from discontinued operations and the gain
mentioned above, net results improved in the six months ended June 30, 1997,
over the six months ended June 30, 1996. Primary and fully diluted earnings
per share decreased from $.43 for the six months ended June 30, 1996, to a net
loss per share of $.18 for the six months ended June 30, 1997.
<PAGE>
Liquidity and Capital Resources
The Company had a net decrease in cash for the six months ended June 30,
1997, of $128,000, compared to a net decrease for the comparable period in the
prior year of $320,000. Cash provided by financing activities funded the net
cash used in operating and investing activities during the six months ended
June 30, 1997.
For the six months ended June 30, 1997, continuing operations used
$721,000 in cash as compared to $1.3 million during the six months ended June
30, 1996. Included in operating cash outlays in the six months ended June 30,
1997, was $375,000 and $560,000, relating to the settlements of the previously
disclosed litigation with Gruner + Jahr and the Internal Revenue Service,
respectively. The decrease in cash used in operations for the first quarter of
1997 resulted primarily from improved income from operations (approximately
$700,000) and an increase in the days outstanding of trade accounts payable.
Cash used in investing activities was $91,000 for the six months ended
June 30, 1997, representing payments for capital expenditures. The six months
ended June 30, 1996 had cash provided by investing activities of $11.2 million,
primarily representing the proceeds from the sale of the United Kingdom
distribution channel.
For the six months ended June 30, 1997, net cash provided by financing
activities was $837,000. This compares to net cash used in financing
activities of $10.3 million for the six months ended June 30, 1996. Financing
activities consisted primarily of borrowings and paydowns on the revolving line
of credit in 1997. In the comparable period in 1996, proceeds from the sale of
the United Kingdom distribution channel were used to repay debt obligations.
The Company's primary source of liquidity has been amounts available under its
existing credit facility. The Company has an $11.5 million revolving credit
facility ($1.1 million unused at June 30, 1997) bearing interest at the
lender's prime rate plus 1%, due June 30, 1998.
The Company does not anticipate any material expenditures for property and
equipment during the next twelve months.
During the second half of 1997 and early 1998, the Company plans to expand
several of its product lines and introduce new book fair concepts. The Company
anticipates an increase in revenues from these plans and to do so will require
an increased inventory investment. The Company anticipates that during the next
twelve months, to cover operating expenditures and meet the current maturities
on long term obligations, its operating cash flow, coupled with the revolving
credit facility must be supplemented by raising additional capital (in the form
of debt or equity financing) of approximately $3,500,000. During the second
quarter of 1997 the Company canceled plans to conduct a public rights offering
to its shareholders. The Company anticipates raising capital through private
placements. During the third quarter of 1997, $1.5 million or 42% of the
capital was raised through private placements of stock ($420,000) and 12%
convertible subordinated notes ($1,050,000). Management has been actively
seeking such capital and believes that the additional capital will be raised
during the third and fourth quarters of 1997, however no assurance can be given
that this will occur. If the Company is unable to raise the needed capital,
product line expansion will be delayed, some purchase commitments will be
canceled and existing vendor payments restructured so that operating
expenditures and debt obligations may be covered by operating cash flow and the
revolving credit facility .
<PAGE>
Seasonality
The children's literature business is highly seasonal and correlated
closely to the school year. As a result, most of the income is generated
between the months of September and May. Due to the seasonality, 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. Inventory and receivables
reach peak levels during the months of October through December.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
(a) On December 27, 1996, the Company filed an action in U.S.
District Court for the Northern District of Ohio against Arthur
Andersen & Co. LLP seeking in excess of $16,000,000 in damages.
The complaint is a result of the final outcome of the Internal
Revenue Service assessment settled in October, 1996, and
representations made by Arthur Andersen & Co. during Pages, Inc's
purchases of School Book Fairs, Inc. at May 19, 1992.
(b) In March, 1997, the Company reached a settlement with Gruner +
Jahr Printing and Publishing Company (G + J) on previously disclosed
litigation. As a result of the settlement, the Company made a
payment to G + J of $300,000 in March, 1997. No legal proceedings
were terminated during the three months ended June 30, 1997, other
than routine litigation incidental to the Company's business.
ITEM 2: CHANGES IN SECURITIES
None.
ITEM 3: DEFAULT UPON SENIOR SECURITIES
None.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on May 30,
1997. The matter voted upon was the election of four directors. The
votes cast at the meeting numbered as follows:
Votes Cast
------------------------- Broker
Nominees For Against Withheld Absentions Non-Votes
------------ ------- ----- -------- ---------- ---------
S. Robert Davis 5,332,742 0 18,999 0 0
Randall J. Asmo 5,335,879 0 15,862 0 0
Juan F. Sotos 5,335,879 0 15,862 0 0
Robert J. Tierney 5,335,879 0 15,862 0 0
ITEM 5: OTHER INFORMATION
None.
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
Exhibit
Number Description of Document
------- -----------------------
3(a)1 Certificate of Incorporation dated October 5, 1994
3(b)1 By-laws of the Company
11 Computation of Per Share Earnings
(b) Reports on 8-K:
A report on Form 8-K dated and filed June 11, 1997, under Item 5
announcing four new school book fair programs and the
cancellation of the Stock Appreciation Rights program.
A report on Form 8-K dated and filed June 30, 1997, under Item 5
announcing that a large private investor had purchased over
$420,000 of the Company's common stock in a private placement
transaction.
A report on Form 8-K dated and filed July 17, 1997, under Item 4
announcing the dismissal of Deloitte & Touche LLP as the
Company's principal independent accountant.
Footnotes:
(1) Incorporated by reference to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1994, File Number 0-10475, filed in
Washington, D.C.
<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)
Dated: August 15, 1997 By: /s/ Steven L. Canan
--------------------- --------------------------
Steven L. Canan
Vice President, Treasurer and
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
EXHIBIT 11
PAGES, INC.
COMPUTATION OF PER SHARE EARNINGS
Three Months Six Months
Ended Ended
June 30, 1997 June 30, 1997
------------- -------------
Primary
Weighted average number of common shares
outstanding 6,194,000 6,196,000
Adjustment for stock options which have a
dilutive effect based upon the average
market price for common stock:
Add dilutive stock options -- --
Deduct shares that could be repurchased
from the proceeds of dilutive options -- --
------------- -------------
Weighed average common and common equivalent
shares 6,194,000 6,196,000
============= =============
Net income(loss) $ (845,277) $(1,084,903)
Earnings adjustment (20% rule) -- --
------------- -------------
Net income(loss) for computation purposes $ (845,277) $(1,084,903)
============= =============
Income(loss) per common and common
equivalent share $ (.14) $ (.18)
============= =============
Fully diluted
Weighted average number of common shares
outstanding 6,194,000 6,196,000
Adjustment for stock options which have a
dilutive effect based upon the market
price for common stock at the end of the
period:
Add dilutive stock options 57,000 69,000
Deduct shares that could be repurchased
from the proceeds of dilutive options (54,000) (68,000)
------------- -------------
Fully diluted shares 6,197,000 6,197,000
============= =============
Net income(loss) $ (845,277) $(1,084,903)
Earnings adjustment (20% rule) -- --
------------- -------------
Net income(loss) for computation purposes $ (845,277) $(1,084,903)
============= =============
Income(loss) per common and common
equivalent share assuming full dilution $ (.14) $ (.18)
============= =============
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 190,117
<SECURITIES> 0
<RECEIVABLES> 1,836,000
<ALLOWANCES> 189,000
<INVENTORY> 11,358,684
<CURRENT-ASSETS> 14,400,460
<PP&E> 3,755,562
<DEPRECIATION> 1,333,377
<TOTAL-ASSETS> 26,486,503
<CURRENT-LIABILITIES> 16,402,520
<BONDS> 1,232,624
0
0
<COMMON> 64,927
<OTHER-SE> 8,786,432
<TOTAL-LIABILITY-AND-EQUITY> 26,486,503
<SALES> 14,087,882
<TOTAL-REVENUES> 14,087,882
<CGS> 8,310,405
<TOTAL-COSTS> 8,310,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 378,329
<INCOME-PRETAX> (1,084,903)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,084,903)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,084,903)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 212,679
<SECURITIES> 0
<RECEIVABLES> 4,005,776
<ALLOWANCES> 393,000
<INVENTORY> 16,339,963
<CURRENT-ASSETS> 22,014,673
<PP&E> 8,651,225
<DEPRECIATION> 2,258,571
<TOTAL-ASSETS> 35,271,061
<CURRENT-LIABILITIES> 21,341,391
<BONDS> 1,177,900
0
0
<COMMON> 57,609
<OTHER-SE> 12,694,161
<TOTAL-LIABILITY-AND-EQUITY> 35,271,061
<SALES> 16,103,486
<TOTAL-REVENUES> 16,103,486
<CGS> 9,674,280
<TOTAL-COSTS> 9,674,280
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 520,517
<INCOME-PRETAX> 1,449,815
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,449,815
<DISCONTINUED> 78,528
<EXTRAORDINARY> 0
<CHANGES> 994,664
<NET-INCOME> 2,523,007
<EPS-PRIMARY> .43
<EPS-DILUTED> .43
</TABLE>
