<PAGE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 14, 1995
------------------------
PRONET INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 0-16029 75-1832168
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
600 DATA DRIVE
SUITE 100
PLANO, TEXAS
(Address of principal 75075
executive offices) (Zip code)
</TABLE>
Registrant's telephone number, including area code: (214) 964-9500
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
ITEM 5. OTHER EVENTS.
(A) NATIONWIDE PAGING, INC. AUDITED FINANCIAL STATEMENTS
On August 14, 1995, the Company announced the signing of a letter of intent
to acquire the assets of Nationwide Paging, Inc. ("Nationwide"), a paging
operation located in Southern California with more than 45,000 subscribers. The
transaction is subject to various conditions and approvals and is anticipated to
close in the first quarter of 1996. Attached hereto as Exhibit 99.1 are audited
financial statements as of and for the year ended December 31, 1994.
(B) APPLE COMMUNICATIONS, INC. AUDITED FINANCIAL STATEMENTS
On July 11, 1995, the Company announced the signing of a letter of intent to
acquire the stock of Apple Communications, Inc. ("Apple"), a Chicago-based
paging operation with approximately 41,500 subscribers. The transaction is
subject to various conditions and approvals and is anticipated to close in the
first quarter of 1996. Attached hereto as Exhibit 99.2 are audited financial
statements as of and for the year ended December 31, 1994.
(C) SIGNET PAGING OF RALEIGH, INC. AUDITED FINANCIAL STATEMENTS
On July 11, 1995, the Company announced the signing of a letter of intent to
acquire the assets of SigNet Paging of Raleigh, Inc. ("Signet Raleigh"), a North
Carolina-based paging operation with more than 13,000 subscribers. The
transaction is subject to various conditions and approvals and is anticipated to
close in the first quarter of 1996. Attached hereto as Exhibit 99.3 are audited
financial statements as of and for the year ended December 31, 1994.
(D) PAGING AND CELLULAR OF TEXAS, AUDITED STATEMENT OF NET LIABILITIES
On August 4, 1995, the Company announced the signing of a letter of intent
to acquire the assets of Paging and Cellular of Texas ("P&C"), a Houston-based
reseller of paging services. P&C currently is the Company's largest reseller
serving more than 40,000 subscribers in the state of Texas. The transaction is
subject to various conditions and approvals and is anticipated to close in the
first quarter of 1996. Attached hereto as Exhibit 99.4 are audited financial
statements as of and for the year ended December 31, 1994.
(E) COBBWELLS INC. D/B/A PAGE ONE MESSAGING SERVICE AUDITED FINANCIAL
STATEMENTS
On August 8, 1995, the Company announced the signing of a letter of intent
to acquire the assets of Cobbwells Inc. d/b/a Page One Messaging Service ("Page
One"), a Georgia-based paging operation with approximately 30,000 subscribers.
The transaction is subject to various conditions and approvals and is
anticipated to close in the first quarter of 1996. Attached hereto as Exhibit
99.5 are audited financial statements as of and for the year ended December 31,
1994.
(F) RCS PAGING, A DIVISION OF REISENWEAVER COMMUNICATIONS, INC. AUDITED
STATEMENTS OF ASSETS ACQUIRED
On August 23, 1995, the Company announced the signing of a letter of intent
to acquire the paging operations of RCS Paging, a Division of Reisenweaver
Communications, Inc. ("RCS"), a North Carolina-based paging company. The
transaction is subject to various conditions and approvals and is anticipated to
close in the first quarter of 1996. Attached hereto as Exhibit 99.6 are audited
financial statements as of and for the year ended December 31, 1994.
(G) A.G.R. ELECTRONICS, INC. AND AFFILIATES AUDITED COMBINED FINANCIAL
STATEMENTS
On August 23, 1995, the Company announced the signing of a letter of intent
to acquire the paging operations of A.G.R. Electronics, Inc. and affiliates
("AGR"), a Florida-based paging company. The transaction is subject to various
conditions and approvals and is anticipated to close in the first quarter of
1996. Attached hereto as Exhibit 99.7 are audited combined financial statements
as of and for the year ended December 31, 1994.
(H) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Attached hereto as Exhibit 99.8 are certain pro forma condensed consolidated
financial statements and notes thereto of the Company and its completed and
pending acquisitions.
2
<PAGE>
(I) ACQUISITION OF LEWIS PAGING, INC. AND GOLD COAST PAGING, INC.
On September 7, 1995, the Company announced that it completed the previously
announced acquisitions of Georgia-based Lewis Paging, Inc. and Florida-based
Gold Coast Paging, Inc. Lewis Paging, which will add more than 15,000
subscribers, was acquired for approximately $5.6 million of which approximately
$3.5 million was paid in cash at closing with the remaining amount deferred,
payable in cash or stock, at the Company's discretion, anytime within one year
of closing. Gold Coast, which will add more than 6,000 subscribers, was acquired
for approximately $2.3 million which was paid in cash at closing. The purchase
prices include payments for accounts receivable and inventory. Based on the
financial statements as of and for the year ended December 31, 1994, Lewis and
Gold Coast do not qualify as significant acquisitions by the Company in
accordance with the definition of a significant acquisition of the Company in
accordance with the definition of a significant acquisition in accordance with
Rule 3.05 of Regulation S-X.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PRONET INC.
(Registrant)
By /s/ JAN E. GAULDING
-----------------------------------
Jan E. Gaulding,
SENIOR VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING
OFFICER)
Date: September 14, 1995
4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------- --------------------------------------------------------------------------------------------------
<S> <C>
Financial information of businesses to be acquired:
99.1 Nationwide Paging, Inc
Report of Independent Auditors
Balance Sheets as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Operations and Accumulated Deficit for the Year Ended December 31, 1994 and the Six
Months Ended June 30, 1995 (unaudited)
Statements of Cash Flows for the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (unaudited)
99.2 Apple Communications, Inc.
Report of Independent Auditors
Balance Sheets as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Income and Retained Earnings for the Year Ended December 31, 1994 and the Six Months
Ended June 30, 1995 (unaudited)
Statements of Cash Flows for the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (unaudited)
99.3 SigNet Paging of Raleigh, Inc.
Report of Independent Auditors
Balance Sheets as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Operations for the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (unaudited)
Statements of Stockholders' Equity for the Year Ended December 31, 1994 and the Six Months Ended
June 30, 1995 (unaudited)
Statements of Cash Flows for the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (unaudited)
99.4 Paging and Cellular of Texas (A Sole Proprietorship)
Report of Independent Auditors
Statements of Net Liabilities as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Revenues and Expenses for the Year Ended December 31, 1994 and the Six Months Ended
June 30, 1995 (unaudited)
99.5 Cobbwells, Inc. d/b/a Page One Messaging Services
Report of Independent Auditors
Balance Sheets as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Operations and Accumulated Deficit for the Year Ended December 31, 1994 and the Six
Months Ended June 30, 1995 (unaudited)
Statements of Cash Flows for the Year Ended December 31, 1994 and the Six Months Ended June 30,
1995 (unaudited)
99.6 RCS Paging, a Division of Reisenweaver Communications, Inc.
Report of Independent Auditors
Statements of Assets to be Acquired as of December 31, 1994 and June 30, 1995 (unaudited)
Statements of Revenue and Operating Expenses for the Year Ended December 31, 1994 and the Six
Months Ended June 30, 1995 (unaudited)
</TABLE>
<PAGE>
EXHIBIT INDEX (CONTINUED)
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
-------------- --------------------------------------------------------------------------------------------------
99.7 A.G.R. Electronics, Inc.
<S> <C>
Report of Independent Auditors
Combined Balance Sheets as of December 31, 1994 and June 30, 1995 (unaudited)
Combined Statements of Operations and Accumulated Deficit for the Year Ended December 31, 1994 and
the Six Months Ended June 30, 1995 (unaudited)
Combined Statements of Cash Flows for the Year Ended December 31, 1994 and the Six Months Ended
June 30, 1995 (unaudited)
Pro Forma Condensed Consolidated Financial Statements of ProNet Inc.:
99.8 Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1995 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the Year Ended December 31, 1994
(unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the Six Months Ended June 30, 1995
(unaudited)
Schedule A Pending Acquisitions Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1995
(unaudited)
Schedule B Completed Acquisitions Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 1994 (unaudited)
Schedule C Pending Acquisitions Pro Forma Condensed Consolidated Statement of Operations for the Year Ended
December 31, 1994 (unaudited)
Schedule D Completed Acquisitions Pro Forma Condensed Consolidated Statement of Operations for the Six Months
Ended June 30, 1995 (unaudited)
Schedule E Pending Acquisitions Pro Forma Condensed Consolidated Statement of Operations for the Six Months
Ended June 30, 1995 (unaudited)
</TABLE>
<PAGE>
EXHIBIT 99.1
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Nationwide Paging, Inc.
We have audited the accompanying balance sheet of Nationwide Paging, Inc.
(the Company), as of December 31, 1994, and the related statements of operations
and accumulated deficit, and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Nationwide Paging, Inc. at
December 31, 1994, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
September 9, 1995
<PAGE>
NATIONWIDE PAGING, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------- JUNE 30, 1995
-------------
(UNAUDITED)
<S> <C> <C>
Cash................................................................................ $ 5,985 $ --
Trade accounts receivable........................................................... 147,599 120,128
Inventories......................................................................... 292,847 227,278
------------- -------------
Total current assets................................................................ 446,431 347,406
Equipment:
Communication equipment (Note 3).................................................. 514,559 794,783
Office and other equipment........................................................ 99,146 176,299
------------- -------------
613,705 971,082
Less allowance for depreciation................................................... 158,922 196,358
------------- -------------
454,783 774,724
Other assets........................................................................ 30,926 23,790
------------- -------------
Total assets........................................................................ $ 932,140 $ 1,145,920
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Trade payables and accrued liabilities............................................ $ 234,509 $ 337,530
Note Payable to Stockholder (Note 6).............................................. 640,615 709,559
Deferred revenue.................................................................. 187,980 --
Current maturities of long-term debt (Note 3)..................................... 95,939 191,715
------------- -------------
Total current liabilities........................................................... 1,159,043 1,238,804
Long-term debt, less current maturities............................................. 477,472 452,869
Stockholder's deficit:
Common stock, No par value:
Authorized shares -- 100
Issued and outstanding shares -- 100............................................ 10,000 10,000
Accumulated deficit............................................................... (714,375) (555,753)
------------- -------------
(704,375) (545,753)
------------- -------------
Total liabilities and stockholder's deficit......................................... $ 932,140 $ 1,145,920
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
NATIONWIDE PAGING, INC.
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Revenues............................................................................ $ 3,839,237 $ 2,484,824
Cost of products sold............................................................... 1,406,295 1,034,621
------------- -------------
2,432,942 1,450,203
Cost of services:................................................................... 530,087 462,507
------------- -------------
Gross margin...................................................................... 1,902,855 987,696
Expenses:
Selling, general, and administrative.............................................. 1,772,541 742,878
Depreciation and amortization..................................................... 57,872 40,872
------------- -------------
1,830,413 783,750
------------- -------------
Operating income.................................................................... 72,442 203,926
Interest expense.................................................................... 83,458 45,324
------------- -------------
Net loss............................................................................ (11,016) 158,602
Accumulated deficit at the beginning of year........................................ (703,359) (714,375)
------------- -------------
Accumulated deficit at the end of year.............................................. $ (714,375) $ (555,773)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
NATIONWIDE PAGING, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------ SIX MONTHS
ENDED JUNE
30,
1994
------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss) income..................................................................... $ (11,016) $ 158,622
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization....................................................... 57,872 40,872
Changes in operating assets and liabilities:
Trade accounts receivable......................................................... (14,449) 27,471
Inventories....................................................................... (151,326) 65,569
Other assets...................................................................... (23,957) 7,136
Trade payables and accrued liabilities............................................ 56,021 103,021
Deferred revenue.................................................................. 44,578 (187,980)
------------ ------------
Net cash used in operating activities................................................. (42,277) 214,711
------------ ------------
INVESTING ACTIVITIES
Purchases of property and equipment................................................... (9,077) (360,813)
FINANCING ACTIVITIES
Borrowings from stockholder........................................................... 87,302 68,944
Payments on note payable to stockholder............................................... (39,456) --
Proceeds from borrowings.............................................................. 25,000 71,173
Payments on long-term debt............................................................ (33,126) --
------------ ------------
Net cash provided by financing activities............................................. 39,720 140,117
Net decrease in cash.................................................................. (11,634) (5,985)
Cash at beginning of year............................................................. 17,619 5,985
------------ ------------
Cash at end of year................................................................... $ 5,985 $ --
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
NATIONWIDE PAGING, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION
Nationwide Paging, Inc. (the Company), is engaged in the sale of pagers and
related airtime service, primarily in the southern California area.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Company's customers are concentrated in southern California. No single
customer accounted for a significant amount of the Company's sales. The Company
reviews a customer's credit history before extending credit and generally does
not require significant collateral. Bad debts are recognized on the specific
write-off method.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
generally range from three to ten years.
INCOME TAXES
The Company has elected to be taxed under the Subchapter S provisions of the
Internal Revenue Code. Accordingly, the Company's income or loss passes to its
stockholder for inclusion in his individual income tax returns.
OTHER ASSETS
Other assets includes a non-compete agreement which is amortized over the
term of the agreement. Accumulated amortization totaled $6,040 at December 31,
1994.
NOTE 3. -- BORROWING ARRANGEMENTS
Long-term debt at December 31, 1994, consists of the following:
<TABLE>
<S> <C>
Paging equipment and pager notes payable, due in varying monthly
installments, plus interest at 10% per annum, through December
1998, secured by the communication equipment.................... $ 550,129
Other............................................................ 23,282
---------
573,411
Less current portion............................................. 95,939
---------
$ 477,472
---------
---------
</TABLE>
At December 31, 1994, maturities of long-term debt under the terms of the
existing loan agreement are as follows:
<TABLE>
<S> <C>
1995............................................................. $ 95,939
1996............................................................. 156,594
1997............................................................. 162,296
1998............................................................. 158,582
---------
$ 573,411
---------
---------
</TABLE>
NOTE 4. -- RETIREMENT PLAN
The Company has a profit sharing plan covering all employees meeting defined
service requirements. Contributions are at the discretion of the Company.
Expense recognized related to the plan totaled $3,500 in 1994.
<PAGE>
NATIONWIDE PAGING, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. -- LEASES
The Company leases office space and certain tower transmission sites under
agreements which are classified as operating leases. Rent expense for 1994 under
such operating leases was $159,786, including payments to the stockholder.
Future minimum lease payments required under the tower transmission site
operating leases are as follows:
<TABLE>
<S> <C>
1996............................................................. $ 114,508
1997............................................................. 90,099
1998............................................................. 53,686
1999............................................................. 48,200
2000............................................................. 36,560
Years thereafter................................................. 94,320
---------
$ 437,373
---------
---------
</TABLE>
NOTE 6. -- RELATED PARTY TRANSACTIONS
The Company leases its office space from its stockholder. In 1994, the
Company recognized $42,000 of expense related to this lease.
The Company has a note due on demand from its stockholder of $640,615.
Interest is charged at a variable rate as allowed by the IRS (6.55% at December
31, 1994), and the Company recognized interest expense of $27,302 during 1994
related to this note.
<PAGE>
EXHIBIT 99.2
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Apple Communications, Inc.
We have audited the accompanying balance sheet of Apple Communications, Inc.
(the Company), as of December 31, 1994, and the related statements of
operations, and retained earnings, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Apple Communications, Inc.,
at December 31, 1994, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
August 4, 1995
<PAGE>
APPLE COMMUNICATIONS, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------ JUNE 30,
1995
-----------
(UNAUDITED)
<S> <C> <C>
Cash.................................................................................. $ 307,358 $ 558,949
Equipment:
Communications equipment............................................................ 500,720 520,519
Office and other equipment.......................................................... 235,198 247,427
------------ -----------
735,918 767,946
Less allowance for depreciation..................................................... 312,670 366,440
------------ -----------
423,248 401,506
Other assets.......................................................................... 4,350 5,550
------------ -----------
Total assets.......................................................................... $ 734,956 $ 966,005
------------ -----------
------------ -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables...................................................................... $ 117,802 $ --
Deferred revenue.................................................................... 154,500 220,765
Other accrued expenses and liabilities.............................................. 230,988 --
------------ -----------
Total current liabilities............................................................. 503,290 220,765
Stockholders' equity:
Common stock, no par value:
Authorized shares -- 100
Issued and outstanding shares -- 4................................................ 188,000 188,000
Retained earnings................................................................... 43,666 557,240
------------ -----------
231,666 745,240
------------ -----------
Total liabilities and stockholders' equity............................................ $ 734,956 $ 966,005
------------ -----------
------------ -----------
</TABLE>
See accompanying notes.
<PAGE>
APPLE COMMUNICATIONS, INC.
STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Total revenues...................................................................... $ 5,397,291 $ 2,796,746
Cost of products sold............................................................... 1,539,244 579,459
------------- -------------
3,858,047 2,217,287
Expenses:
Selling, general, and administrative.............................................. 3,576,177 1,751,010
Depreciation and amortization..................................................... 105,220 53,770
------------- -------------
3,681,397 1,804,780
------------- -------------
Operating income.................................................................... 176,650 412,507
Other income (expense):
Interest and other income......................................................... 5,167 --
Interest expense.................................................................. (5,511) --
------------- -------------
Income before income taxes.......................................................... 176,306 412,507
Provision for income taxes.......................................................... 93,491 109,149
------------- -------------
Net income.......................................................................... 82,815 303,358
Retained deficit at beginning of period............................................. (39,149) 43,666
------------- -------------
Retained earnings at end of period.................................................. $ 43,666 $ 347,024
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
APPLE COMMUNICATIONS, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------ SIX MONTHS
ENDED JUNE
30,
1995
------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................ $ 82,815 $ 303,358
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization....................................................... 105,220 53,770
Changes in operating assets and liabilities:
Trade payables.................................................................... 81,579 92,414
Other assets and liabilities, net................................................. 149,991 (165,923)
------------ ------------
Net cash provided by operating activities............................................. 419,605 283,619
INVESTING ACTIVITIES
Purchase of property and equipment.................................................... (39,257) (32,028)
------------ ------------
Net cash used in investing activities................................................. (39,257) (32,028)
FINANCING ACTIVITIES
Repayment of advances from stockholder................................................ (122,678) --
------------ ------------
Net cash used in financing activities................................................. (122,678) --
Net increase in cash.................................................................. 257,670 251,591
Cash at beginning of year............................................................. 49,688 307,358
------------ ------------
Cash at end of year................................................................... $ 307,358 $ 558,949
------------ ------------
------------ ------------
SUPPLEMENTAL INFORMATION
Cash payments for interest............................................................ $ 29,687 $ 58,949
------------ ------------
------------ ------------
Cash payments for income taxes........................................................ $ 41,320 $ --
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
APPLE COMMUNICATIONS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION
Apple Communications, Inc. (the Company), was incorporated in December 1989
and is engaged in the sale of pagers and related airtime service, primarily in
the Chicago area.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Company's customers are concentrated in Chicago and surrounding areas.
No single customer accounted for a significant amount of the Company's sales The
Company reviews a customer's credit history before extending credit and
generally does not require significant collateral. Bad debts are recognized on
the specific write-off method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
generally range from three to ten years.
INCOME TAXES
The liability method is used in accounting for income taxes. Accordingly,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases and are measured using the enacted tax rates
and laws that will be in effect when the differences are expected to reverse.
NOTE 3. -- INCOME TAXES
The provision for income taxes consists of applicable federal and state
income taxes. At December 31, 1994, the Company has a net deferred tax asset of
$73,000 resulting primarily from temporary differences between the carrying
value of property and equipment, accounts payable, and deferred revenue and
amounts used for income tax purposes, and the Company's alternative minimum tax
credit carryforward, which was fully offset by a valuation allowance of $73,000,
of which $24,000 was generated in 1994. At December 31, 1994, the Company had an
alternative minimum tax credit carryforward of $18,000.
NOTE 4. -- RELATED PARTY TRANSACTIONS
In 1994, the Company paid $16,000 to a stockholder to rent the Company's
principal office space.
The Company had obtained advances from one of its stockholders. During 1994,
the Company repaid outstanding advances of $122,678, plus interest at 9%,
amounting to $29,867.
NOTE 5. -- LEASES
The Company leases office space and certain tower transmission sites under
agreements which are classified as operating leases. Rent expense for 1994 under
such operating leases was $138,699, including the principal office space.
A schedule of future minimum rental payments required under operating leases
that have initial or remaining noncancelable lease terms in excess of one year
as of December 31, 1994, are as follows:
<TABLE>
<S> <C>
1995...................................................... $ 38,359
1996...................................................... 21,745
1997...................................................... 5,714
1998...................................................... 9,868
1999...................................................... 10,067
Thereafter................................................ 4,230
---------
Total..................................................... $ 89,983
---------
---------
</TABLE>
<PAGE>
EXHIBIT 99.3
REPORT OF INDEPENDENT AUDITORS
Board of Directors
SigNet Paging of Raleigh, Inc.
We have audited the accompanying balance sheet of SigNet Paging of Raleigh,
Inc. (the Company), as of December 31, 1994, and the related statements of
operations, stockholder's equity, and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of SigNet Paging of Raleigh,
Inc., at December 31, 1994, and the results of its operations and its cash flows
for the year then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Dallas, Texas
August 9, 1995
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------- JUNE 30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Cash................................................................................ $ 16,628 $ 38,730
Trade accounts receivable, less allowance of $20,000................................ 66,058 77,580
Inventories......................................................................... 14,072 17,596
Other current assets................................................................ 41,062 2,263
------------- -------------
Total current assets................................................................ 137,820 136,169
Equipment:
Pagers............................................................................ 1,763,713 1,836,449
Communications equipment.......................................................... 433,796 396,445
Office and other equipment........................................................ 334,135 343,312
------------- -------------
2,531,644 2,576,206
Less allowance for depreciation................................................... 1,343,337 1,473,278
------------- -------------
1,188,307 1,102,928
------------- -------------
Total assets........................................................................ $ 1,326,127 $ 1,239,097
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Trade payables and accrued liabilities............................................ $ 125,037 $ 124,678
Customer deposits................................................................. 13,350 6,627
Current maturities of long-term debt.............................................. 361,464 192,000
------------- -------------
Total current liabilities........................................................... 499,851 323,305
Long-term debt, less current maturities............................................. 442,262 554,032
Stockholder's equity:
Common stock, $100 par value:
Authorized shares -- 1,000
Issued and outstanding shares -- 500............................................ 50,000 50,000
Additional paid-in capital........................................................ 923,896 923,896
Retained earnings (deficit)....................................................... (589,882) (612,136)
------------- -------------
384,014 361,760
------------- -------------
Total liabilities and stockholder's equity.......................................... $ 1,326,127 $ 1,239,097
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Recurring revenues................................................................ $ 2,528,153 $ 1,408,400
Product sales..................................................................... 138,385 99,756
------------- -------------
Total revenues...................................................................... 2,666,538 1,508,156
Cost of products sold............................................................... 141,428 115,028
------------- -------------
2,525,110 1,393,128
Cost of services:
Pager lease and access services................................................... 464,187 298,119
------------- -------------
Gross margin...................................................................... 2,060,923 1,095,009
Expenses:
Selling, general, and administrative.............................................. 1,222,077 675,744
Depreciation and amortization..................................................... 423,446 215,076
------------- -------------
1,645,523 890,820
------------- -------------
Operating income.................................................................... 415,400 204,189
Other expense....................................................................... (101,215) (19,653)
------------- -------------
Net income.......................................................................... $ 314,185 $ 184,536
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED
---------------- PAID-IN EARNINGS
SHARES AMOUNT CAPITAL (DEFICIT) TOTAL
------ ------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993......................... 500 $50,000 $ 923,896 $(515,405) $ 458,491
Net income.................. -- -- -- 314,185 314,185
Stockholder distributions... -- -- -- (388,662) (388,662)
------ ------- ---------- --------- ---------
Balance at December 31,
1994......................... 500 50,000 923,896 (589,882) 384,014
Net income (unaudited)...... -- -- -- 184,536 184,536
Stockholder distributions
(unaudited)................ -- -- -- (206,790) (206,790)
------ ------- ---------- --------- ---------
Balance at June 30, 1995
(unaudited).................. 500 $50,000 $ 923,896 $(612,136) $ 361,760
------ ------- ---------- --------- ---------
------ ------- ---------- --------- ---------
</TABLE>
See accompanying notes.
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------ SIX MONTHS
ENDED JUNE
30,
1995
------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................................ $ 314,185 $ 184,536
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization....................................................... 423,446 215,076
Loss on sale of property and equipment.............................................. 16,424 --
Changes in operating assets and liabilities:
Trade accounts receivable......................................................... 63,712 (11,522)
Inventories....................................................................... (3,038) (3,524)
Other assets...................................................................... 703 38,799
Trade payables and accrued liabilities............................................ 86,776 (359)
Customer deposits................................................................. (11,075) (6,723)
------------ ------------
Net cash provided by operating activities............................................. 891,133 416,283
------------ ------------
INVESTING ACTIVITIES
Purchase of property and equipment.................................................... (662,662) (129,697)
Purchase of certificate of deposit.................................................... (38,671) --
Proceeds from sale of property and equipment.......................................... 105,715
------------ ------------
Net cash used by investing activities................................................. (595,618) (129,697)
FINANCING ACTIVITIES
Stockholder distributions............................................................. (388,662) (206,790)
Proceeds from borrowing............................................................... 461,663 --
Payment on borrowings................................................................. (497,358) (57,694)
------------ ------------
Net cash used in financing activities................................................. (424,357) (264,484)
Net decrease in cash.................................................................. (128,842) 22,102
Cash at beginning of year............................................................. 145,470 16,628
------------ ------------
Cash at end of year................................................................... $ 16,628 $ 38,730
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION
SigNet Paging of Raleigh, Inc. (the Company), was incorporated July 1988 and
is engaged in the sale of pagers and related airtime service, primarily in the
central North Carolina area.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Company's customers are concentrated in central North Carolina. No
single customer accounted for a significant amount of the Company's sales. The
Company reviews a customer's credit history before extending credit and
generally does not require significant collateral. Bad debts are recognized on
the specific write-off method.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined by the
first-in, first-out (FIFO) method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
generally range from, three to ten years.
INCOME TAXES
The Company has elected to be taxed under the Subchapter S provisions of the
Internal Revenue Code. Accordingly, the Company's income or loss passes to its
stockholder for inclusion in his individual income tax returns.
NOTE 3. -- BORROWING ARRANGEMENTS
Long-term debt at December 31, 1994, consists of the following:
<TABLE>
<S> <C>
Pager notes payable, due in varying
monthly installments, plus interest at
12% per annum, collateralized by pagers
with a carrying value of approximately
$770,000................................ $ 664,488
Notes payable to bank, due in varying
monthly installments, plus interest at
8% to 15% per annum, collateralized by
equipment and vehicles with a carrying
value of approximately $119,000 and a
certificate of deposit of $38,000 which
is included as other assets............. 129,955
Other.................................... 9,283
----------
803,726
Less current portion..................... 361,464
----------
$ 442,262
----------
----------
</TABLE>
Borrowings under the loans are subject to certain financial covenants that
include the maintenance of minimum tangible net worth, as defined, and of
certain financial ratios.
<PAGE>
SIGNET PAGING OF RALEIGH, INC.
NOTES TO FINANCIAL STATEMENTS, (CONTINUED)
NOTE 3. -- BORROWING ARRANGEMENTS (CONTINUED)
At December 31, 1994, maturities of long-term debt under the terms of the
existing loan agreement are as follows:
<TABLE>
<S> <C>
1995..................................................... $ 361,464
1996..................................................... 396,492
1997..................................................... 18,933
1998..................................................... 17,802
1999..................................................... 9,035
---------
$ 803,726
---------
---------
</TABLE>
NOTE 4. -- LEASES
The Company leases office space and certain tower transmission sites under
agreements which are classified as operating leases. Rent expense for 1994 under
such operating leases was $51,972.
<PAGE>
EXHIBIT 99.4
REPORT OF INDEPENDENT AUDITORS
To Daniel Sheppard, DBA
Paging and Cellular of Texas
(A Sole Proprietorship):
We have audited the accompanying Statement of Net Liabilities of Paging and
Cellular of Texas (A Sole Proprietorship) as of December 31, 1994, and the
related statement of revenues and expenses, for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the net liabilities of Paging and Cellular of Texas as
of December 31, 1994, and the revenues and expenses for the year then ended in
conformity with generally accepted accounting principles.
KPMG PEAT MARWICK LLP
Houston, Texas
September 8, 1995
<PAGE>
PAGING AND CELLULAR OF TEXAS
(A SOLE PROPRIETORSHIP)
STATEMENTS OF NET LIABILITIES
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------- JUNE 30, 1995
-------------
(UNAUDITED)
<S> <C> <C>
Current assets:
Cash.............................................................................. $ 1,655 $ 15,468
Accounts receivable less allowance for doubtful accounts of $6,000 and $7,000 at
December 31, 1994 and June 30, 1995, respectively................................ 326,562 392,415
Accounts receivable -- affiliated company (note 8)................................ 242,557 430,150
Prepaid expenses and other assets................................................. 6,842 3,299
------------- -------------
Total current assets............................................................ 577,616 841,332
------------- -------------
Fixed assets, at cost, less accumulated depreciation of $787,428 and $777,634 at
December 31, 1994 and June 30, 1995, respectively (note 3)......................... 4,034,333 3,555,952
------------- -------------
Total assets.................................................................... $ 4,611,949 $ 4,397,284
------------- -------------
------------- -------------
LIABILITIES
Current liabilities:
Notes payable -- bank............................................................. $ 15,000 $ --
Accounts payable and accrued liabilities.......................................... 40,292 96,405
Sales taxes payable............................................................... 55,170 57,761
Payable to owner.................................................................. 21,776 --
Unearned revenue.................................................................. 364,862 --
Deferred income (note 4).......................................................... 342,462 368,640
Current portion of obligations under capital leases (note 9)...................... 1,599,622 1,630,528
------------- -------------
Total current liabilities....................................................... 2,439,184 2,153,334
Notes payable....................................................................... 25,000 25,000
Obligations under capital leases (note 9)........................................... 2,217,893 1,949,096
------------- -------------
Total liabilities............................................................... 4,682,077 4,127,430
------------- -------------
Net assets (liabilities)........................................................ $ (70,128) $ 269,854
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGING AND CELLULAR OF TEXAS
(A SOLE PROPRIETORSHIP)
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30, 1995
-------------
(UNAUDITED)
<S> <C> <C>
Revenues:
Service income.................................................................... $ 3,530,585 $ 2,049,117
Pager sales and other income...................................................... 1,186,587 767,455
------------- -------------
Total revenues.................................................................. 4,717,172 2,816,572
------------- -------------
Cost of goods sold:
Air time cost..................................................................... 1,118,470 696,916
Pagers -- lost, sold or damaged beyond repair..................................... 1,054,794 650,537
Pager depreciation................................................................ 694,985 347,884
------------- -------------
Total cost of goods sold........................................................ 2,868,249 1,695,337
------------- -------------
Gross margin.................................................................... 1,848,923 1,121,235
General and administrative expenses................................................. 1,534,144 760,073
------------- -------------
Operating income................................................................ 314,779 361,162
Interest expense.................................................................... (383,642) (190,058)
------------- -------------
Expenses in excess of revenues.................................................. $ (68,863) $ 171,104
------------- -------------
------------- -------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
PAGING AND CELLULAR OF TEXAS
(A SOLE PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1994
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements include the accounts of Paging and Cellular of
Texas (a DBA and sole proprietorship, owned by Dan Sheppard). The following is a
summary of significant accounting policies used by Paging and Cellular of Texas
(the Company).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents for the purpose of reporting cash flows include
cash on deposit and amounts due from banks with an original maturity of three
months or less.
REVENUE AND EXPENSE RECOGNITION
For financial statement purposes, the Company utilizes the accrual method of
accounting in recognizing income and expenses. Under the accrual method, income
is recognized as earned and expenses are recorded as incurred.
FIXED ASSETS
The fixed assets are recorded at cost and depreciated over their estimated
useful lives of 7 years using the straight-line method of depreciation.
INCOME TAXES
Income taxes are not recognized on these financial statements. The income or
loss is passed on to the individual owner who recognizes these items on his
personal income tax return. Owner's draws and contributions are accumulated and
charged or credited to owner's equity at the end of each year.
CONCENTRATION OF CREDIT RISK
The Company provides paging services primarily to businesses in the greater
Houston metropolitan area. The Company performs periodic credit evaluations of
its customers' financial condition and generally does not require significant
collateral. Receivables are generally due within 30 days.
NOTE 2 -- PAGER INCOME
Pager income is comprised of pager rental income and air time fees. Income
is recognized as earned over the contract terms.
NOTE 3 -- FIXED ASSETS
Fixed assets are stated at cost and consist of the following at December 31,
1994:
<TABLE>
<S> <C>
Furniture and fixtures................................. $ 46,791
Office equipment....................................... 122,030
Pagers................................................. 4,652,940
----------
$4,821,761
----------
----------
</TABLE>
NOTE 4 -- DEFERRED INCOME
The Company collects the first and last month's rent upon issuing a pager
rental contract. The first month is recorded as income immediately and the last
month as deferred income. The funds collected as the last month's rent are
recognized as income in the last month of service and reduce the deferred income
account at that time.
NOTE 5 -- LONG-TERM DEBT
Long-term debt consists of an unsecured note, dated August 31, 1993, due to
an individual, upon sale of Company, bearing interest at 10%.
NOTE 6 -- BANK LINE OF CREDIT
The Company has available a revolving loan totalling $15,000, at a rate of
12.5%. There was no unused line of credit at December 31, 1994.
<PAGE>
PAGING AND CELLULAR OF TEXAS
(A SOLE PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- CHANGE OF OWNERSHIP
On March 14, 1994, Dan Sheppard (Sheppard) personally purchased Mike
Wheeler's (Wheeler) 50% interest in Paging and Cellular of Texas (a Limited
Partnership). All assets and liabilities became the sole and exclusive property
of Sheppard. Sheppart assumed all liabilities of the partnership and agreed to
pay Wheeler a sum, payable weekly, for the next 425 weeks beginning March 18,
1994.
On March 14, 1994, the partnership dissolved and transferred all assets and
liabilities to Dan Sheppard, the only remaining partner. On March 15, 1994, Dan
Sheppard contributed, in totality, the assets and liabilities he received from
the partnership into a new entity, which he is operating as a sole
proprietorship. Dan Sheppard is doing business as (DBA) Paging and Cellular of
Texas. The assets were transferred at historical cost.
NOTE 8 -- AFFILIATED COMPANY
Dan Sheppard is the majority owner in an affiliated company. Paging and
Cellular of Texas charges the affiliate a management fee to cover the cost of
air time, telephones, salaries, and rent. These charges totalled approximately
$69,000 for the year ended December 31, 1994. Also during the year ended
December 31, 1994, Paging and Cellular of Texas sold paging equipment to the
affiliated company in the amount of approximately $262,000. As of December 31,
1994, the affiliate owned the Company a balance of $242,557.
NOTE 9 -- OBLIGATIONS UNDER CAPITAL LEASES
Included in fixed assets are the following assets held under capital leases:
<TABLE>
<S> <C>
Pagers......................................................... $4,583,251
Other fixed assets............................................. 112,914
----------
Assets under capital lease..................................... 4,696,165
Less accumulated depreciation.................................. (737,587)
----------
Assets under capital lease, net................................ $3,958,578
----------
----------
</TABLE>
Capital lease obligations are summarized as follows:
<TABLE>
<S> <C>
Leases of paging equipment with lease periods expiring at
various dates through February 1998, at various interest
rates......................................................... $3,756,802
Leases of office equipment with lease periods expiring through
October 1998, at various interest rates....................... 60,713
----------
Total obligations under capital leases....................... 3,817,515
Less current installments...................................... (1,599,622)
----------
Obligations under capital leases, less current
installments................................................ $2,217,893
----------
----------
</TABLE>
The Company also leases office space under operating leases, expiring March
2004. Rental expense for operating leases amounted to $35,411 for the year ended
December 31, 1994.
<PAGE>
PAGING AND CELLULAR OF TEXAS
(A SOLE PROPRIETORSHIP)
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- OBLIGATIONS UNDER CAPITAL LEASES (CONTINUED)
Minimum lease payments under leases expiring subsequent to December 31, 1994
are:
<TABLE>
<CAPTION>
CAPITAL
YEAR ENDED LEASES OPERATING LEASES
------------------------------------------------------------ ------------- ----------------
<S> <C> <C>
1995...................................................... $ 1,948,777 $ 72,561
1996...................................................... 1,440,788 95,304
1997...................................................... 877,122 81,225
1998...................................................... 153,275 92,055
1999...................................................... -- 95,304
Thereafter................................................ -- 474,354
------------- ----------------
Total minimum lease payments.............................. 4,419,962 $ 910,803
----------------
----------------
Less amounts representing interest........................ (602,447)
-------------
Present value of net minimum lease payments............... $ 3,817,515
-------------
-------------
</TABLE>
NOTE 10 -- CHANGES IN NET LIABILITIES
The changes in net liabilities for the year ended December 31, 1995 consist
of the following:
<TABLE>
<S> <C>
Net assets, beginning of year................................... $ 168,548
Owner's contributions during the year........................... 81,166
Owner's draws during the year................................... (250,979)
Expenses in excess of revenues for the year..................... (68,863)
---------
Net liabilities, end of year.................................... $ (70,128)
---------
---------
</TABLE>
<PAGE>
EXHIBIT 99.5
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cobbwells, Inc.
We have audited the accompanying balance sheet of Cobbwells, Inc., d/b/a
Page One Messaging Services as of December 31, 1994, and the related statements
of operations and accumulated deficit and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Cobbwells, Inc., at December
31, 1994, and the results of its operations and its cash flows for the year then
ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
August 25, 1995
<PAGE>
COBBWELLS, INC.
D/B/A/ PAGE ONE MESSAGING SERVICES
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------- JUNE 30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Cash................................................................................ $ 75,739 $ 24,390
Trade accounts receivable........................................................... 40,387 16,232
Inventories......................................................................... 73,181 110,369
Prepaids and other current assets................................................... -- 40,172
------------- -------------
Total current assets................................................................ 189,307 191,163
Equipment:
Pagers............................................................................ 475,174 567,961
Communications equipment.......................................................... 912,695 981,000
Buildings and other equipment..................................................... 287,521 352,964
------------- -------------
1,675,390 1,901,925
Less allowance for depreciation................................................... 716,634 (896,634)
------------- -------------
958,756 1,005,291
Note receivable from related party (Note 3)......................................... 14,000 --
------------- -------------
Total assets........................................................................ $ 1,162,063 $ 1,196,454
------------- -------------
------------- -------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade payables.................................................................... $ 80,255 $ --
Advances from stockholders (Note 3)............................................... 276,450 276,448
Customer deposits................................................................. 17,013 19,881
Other accrued expenses and liabilities............................................ 55,547 4,226
Current maturities of long-term debt (Note 4)..................................... 1,148,682 1,111,776
------------- -------------
Total current liabilities........................................................... 1,577,947 1,412,331
Stockholders' deficit:
Common stock, $100 par value:
Authorized shares -- 1,000
Issued and outstanding shares -- 153............................................ 15,300 15,300
Accumulated deficit............................................................... (431,184) (231,177)
------------- -------------
Total stockholders' deficit......................................................... (415,884) (215,877)
------------- -------------
Total liabilities and stockholders' deficit......................................... $ 1,162,063 $ 1,196,454
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
COBBWELLS, INC.
D/B/A PAGE ONE MESSAGING SERVICES
STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Total revenues...................................................................... $ 3,794,301 $ 2,500,987
Cost of products sold............................................................... 981,253 533,017
------------- -------------
2,813,048 1,967,970
Cost of services -- pager lease and access services................................. 606,088 293,374
------------- -------------
2,206,960 1,674,596
Expenses:
Selling, general, and administrative.............................................. 1,959,209 1,229,869
Depreciation and amortization..................................................... 232,688 180,000
------------- -------------
2,191,897 1,409,869
------------- -------------
Operating income.................................................................... 15,063 264,727
Interest expense.................................................................... 108,337 64,720
------------- -------------
Net (loss)/income................................................................... (93,274) 200,007
Accumulated deficit at beginning of year............................................ (337,910) (431,184)
------------- -------------
Accumulated deficit at end of year.................................................. $ (431,184) $ (231,177)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
COBBWELLS, INC.
D/B/A PAGE ONE MESSAGING SERVICES
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
------------
(UNAUDITED)
<S> <C> <C>
OPERATING ACTIVITIES
Net (loss)/income.................................................................... $ (93,274) $ 200,007
Adjustments to reconcile net loss/income to net cash provided by operating
activities:
Depreciation and amortization...................................................... 232,688 180,000
Changes in operating assets and liabilities:
Trade accounts receivable........................................................ 6,619 38,155
Inventories and other assets..................................................... (25,384) (77,360)
Trade payables and accrued liabilities........................................... 3,532 (128,710)
------------- ------------
Net cash provided by operating activities............................................ 124,181 212,092
------------- ------------
INVESTING ACTIVITY
Purchase of property and equipment................................................... (420,383) (226,535)
FINANCING ACTIVITIES
Advances from stockholders........................................................... 13,000 --
Proceeds from long-term debt......................................................... 1,222,926 --
Payments on long-term debt........................................................... (863,985) (36,906)
------------- ------------
Net cash provided by financing activities............................................ 371,941 (39,906)
------------- ------------
Net increase in cash................................................................. 75,739 (51,349)
Cash at beginning of year............................................................ -- 75,739
------------- ------------
Cash at end of year.................................................................. $ 75,739 $ 24,390
------------- ------------
------------- ------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid in cash................................................................ $ 105,340 $ 67,717
------------- ------------
------------- ------------
</TABLE>
See accompanying notes.
<PAGE>
COBBWELLS, INC.
D/B/A PAGE ONE MESSAGING SERVICES
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION
Cobbwells, Inc. (the Company), doing business as Page One Messaging
Services, sells and leases paging equipment and operates paging systems in
Georgia.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Company's customers are concentrated in Georgia. No single customer
accounted for a significant amount of the Company's sales. The Company reviews a
customer's credit history before extending credit and generally does not require
significant collateral. Bad debts are recognized on the specific write-off
method.
CASH
For purposes of the statement of cash flows, the Company considers all
highly liquid instruments purchased with maturities of three months or less to
be cash investments.
INVENTORIES
Inventories are valued at the lower of cost or market. Cost is determined by
the first-in, first-out (FIFO) method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
generally range from five to thirty years.
INCOME TAXES
The Company has elected to be taxed under the Subchapter S provisions of the
Internal Revenue Code. Accordingly, the Company's income or loss passes to its
stockholders for inclusion in their individual income tax returns.
NOTE 3. -- RELATED PARTY TRANSACTIONS
The Company has received advances from it stockholders. There is no formal
agreement covering the advances which are due on demand. The Company has not
recognized any interest on these advances.
During 1994, an affiliate purchased a building from the Company by assuming
the remaining mortgage of approximately $26,000 and issuing a note payable to
the Company for $14,000. The Company pays this affiliate $6,000 a month for
rental of the building. There is no formal agreement covering this lease.
NOTE 4. -- LONG-TERM DEBT
The Company has term loans of $700,733 and $426,949 with a bank which are
payable in equal monthly installments of $13,221 and $7,115, and bear interest
at 8.50% and the bank's prime rate (8.50% at December 31, 1994) plus 1.25%,
respectively. These loans mature in May 1999 and December 1999, respectively.
The Company has two lines of credit of $250,000 and $200,000 which were to
mature in May 1995. No amounts are outstanding under these lines of credit at
December 31, 1994. The lines of credit bear interest at the bank's prime rate
(8.50% at December 31, 1994) plus 1.25%. During May 1995, the maturity dates of
these lines of credit were extended to May 1996.
Borrowings under the term loans and lines of credit are secured by
substantially all assets of the Company.
The term loans and lines of credit agreements contain various restrictive
covenants, including restrictions on capital expenditures and the payment of
dividends, and requirements to maintain
<PAGE>
COBBWELLS, INC.
D/B/A PAGE ONE MESSAGING SERVICES
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. -- LONG-TERM DEBT (CONTINUED)
certain financial ratios as defined in the agreements. The Company is not in
compliance with the restrictive covenants at December 31, 1994, and, therefore,
the term notes are classified as current liabilities.
NOTE 5. -- COMMITMENTS AND CONTINGENCIES
The Company leases offices, autos, and communications equipment under leases
classified as operating leases. Rental expense for 1994 was approximately
$259,000. Future minimum rental commitments at December 31, 1994, are as
follows:
<TABLE>
<S> <C>
1995..................................................... $ 171,570
1996..................................................... 132,782
1997..................................................... 69,118
1998..................................................... 10,150
---------
Total.................................................. $ 383,620
---------
---------
</TABLE>
<PAGE>
EXHIBIT 99.6
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Reisenweaver Communications, Inc.
We have audited the accompanying Statement of Assets to be Acquired of RCS
Paging, A Division of Reisenweaver Communications, Inc., as of December 31,
1994, and the related Statement of Revenue and Operating Expenses for the year
then ended. These Statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the Statements based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the Statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the Statements. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the Statements. We believe that
our audit provides a reasonable basis for our opinion.
The accompanying Statements were prepared for the purpose of complying with
the Rules and Regulations of the Securities and Exchange Commission for
inclusion in Form 8-K of ProNet Inc. and are not intended to be a complete
presentation of the Reisenweaver Communications, Inc.'s financial position or
results of operations.
In our opinion, the Statements referred to above present fairly, in all
material respects, the assets to be acquired of RCS Paging, A Division of
Reisenweaver Communications, Inc., at December 31, 1994, and the revenue and
expenses for the year then ended in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
September 9, 1995
<PAGE>
RCS PAGING
A DIVISION OF REISENWEAVER COMMUNICATIONS, INC.
STATEMENTS OF ASSETS TO BE ACQUIRED
<TABLE>
<CAPTION>
DECEMBER 31,
1994
------------- JUNE 30,
1995
-------------
(UNAUDITED)
<S> <C> <C>
Trade accounts receivable........................................................... $ 36,497 $ 57,251
Communication equipment............................................................. 1,244,827 1,333,412
Less allowance for depreciation..................................................... (777,889) (886,080)
------------- -------------
466,938 447,332
------------- -------------
Total assets to be acquired......................................................... $ 503,435 $ 504,583
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
RCS PAGING
A DIVISION OF REISENWEAVER COMMUNICATIONS, INC.
STATEMENTS OF REVENUE AND OPERATING EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1994
------------- SIX MONTHS
ENDED JUNE
30,
1995
-----------
(UNAUDITED)
<S> <C> <C>
Revenue............................................................................... $ 1,459,483 $ 743,340
Cost of products sold................................................................. 244,343 126,916
------------- -----------
1,215,140 616,424
Expenses:
Selling, general, and administrative................................................ 841,293 433,498
Depreciation and amortization....................................................... 185,760 100,902
------------- -----------
1,027,053 534,400
------------- -----------
Excess of Revenue over Operating Expenses............................................. $ 188,087 $ 82,024
------------- -----------
------------- -----------
</TABLE>
See accompanying notes.
<PAGE>
RCS PAGING
A DIVISION OF REISENWEAVER COMMUNICATION, INC.
NOTES TO STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION AND BASIS OF PRESENTATION
RCS Paging (the Division) is a Division of Reisenweaver Communication, Inc.
(the Company) that provides paging services in the western North Carolina area.
In August 1995, the Company signed a letter of intent to sell certain assets,
primarily accounts receivable and communication equipment of the RCS Paging
Division to ProNet Inc.
These Statements have been prepared to separately identify the paging assets
and operations of the RCS Paging Division in accordance with the letter of
intent between the Company and ProNet Inc.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Division's customers are concentrated in western North Carolina. No
single customer accounted for a significant amount of the Division's sales. The
Division reviews a customer's credit history before extending credit and
generally does not require significant collateral. Bad debts are recognized on
the specific write-off method.
DEPRECIATION AND AMORTIZATION
Communication equipment is recorded at cost. Depreciation is computed by
accelerated methods over the estimated useful lives of the assets. Estimated
useful lives are generally five to seven years.
INCOME TAXES
Income taxes have not been provided since the RCS Paging Division is part of
the Company which has elected to be taxed under the Subchapter S provisions of
the Internal Revenue Code. Accordingly, the Company's income or loss passes to
its stockholders for inclusion in their individual income tax returns.
NOTE 3. -- PLEDGED ASSETS
Substantially all of the RCS Paging Division's paging equipment and accounts
receivable are pledged as collateral for a certain term note of the Company,
which note payable is not being assumed by ProNet Inc.
NOTE 4. -- COMMITMENTS AND CONTINGENCIES
Certain disclosures, commitments and contingencies such as long-term capital
and operating leases, notes payable and pending litigation that apply to the
Company have been omitted from these special statements because they do not
relate directly to the RCS Paging Division, but to the Company taken as a whole
and are excluded as a part of the proposed purchase of certain assets by ProNet
Inc.
The Company leases office space and certain tower transmission sites under
agreements which are classified as operating leases. Rent expense for 1994 under
such operating leases was $51,972.
The following is a schedule by year of future minimum rental payments
required under the operating leases that have initial or remaining noncancelable
lease terms in excess of one year as of December 31, 1994:
<TABLE>
<S> <C>
1995...................................................... $ 22,354
1996...................................................... 6,154
1997...................................................... 4,604
1998...................................................... 4,354
1999...................................................... 3,829
Thereafter................................................ 4,256
---------
Total..................................................... $ 45,551
---------
---------
</TABLE>
<PAGE>
RCS PAGING
A DIVISION OF REISENWEAVER COMMUNICATION, INC.
NOTES TO STATEMENTS (CONTINUED)
NOTE 5. -- OVERHEAD CHARGES
Corporate overhead charges of $225,533 which have been included in the
Statement of Revenue and Operating Expenses are allocated to the Division at the
Company's discretion based upon revenue of the Division relative to the
Company's total revenue. The Company's management believes this is a reasonable
allocation method.
<PAGE>
EXHIBIT 99.7
REPORT OF INDEPENDENT AUDITORS
Board of Directors
A.G.R. Electronics, Inc.
We have audited the accompanying combined balance sheet of A.G.R.
Electronics, Inc., and A.G.R. Beepers, Inc. (the Company) as of December 31,
1994, and the related combined statement of operations and accumulated deficit
and cash flows for the year then ended. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of A.G.R.
Electronics, Inc. and A.G.R. Beepers, Inc. at December 31, 1994, and the
combined results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
Dallas, Texas
September 9, 1995
<PAGE>
A.G.R. ELECTRONICS, INC.
COMBINED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1994 1995
------------ ------------
<S> <C> <C>
(UNAUDITED)
Cash.................................................................................. $ -- $ 1,700
Trade accounts receivable............................................................. 95,152 131,361
Inventories........................................................................... 8,749 17,889
------------ ------------
Total current assets.................................................................. 103,901 150,950
Equipment:
Communications equipment............................................................ 698,400 798,598
Office and other equipment.......................................................... 134,782 149,841
------------ ------------
Total equipment..................................................................... 833,182 948,439
Less allowance for depreciation..................................................... (298,768) (374,227)
------------ ------------
Net equipment....................................................................... 534,414 574,212
Other assets.......................................................................... 7,475 7,475
------------ ------------
Total assets.......................................................................... $ 645,790 $ 732,637
------------ ------------
------------ ------------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Trade payables...................................................................... $ 196,802 $ 181,929
Payable to stockholder.............................................................. 28,101 --
Current maturities of long-term debt................................................ 127,872 179,084
Other accrued expenses and liabilities.............................................. 37,738 63,975
------------ ------------
Total current liabilities............................................................. 390,513 424,988
Long-term debt........................................................................ 448,911 513,741
Stockholders' deficit:
Common stock, $5 par value:
Authorized shares -- 100
Issued and outstanding shares -- 100.............................................. 500 500
Additional paid in capital.......................................................... 34,500 35,000
Accumulated deficit................................................................. (228,634) (241,592)
------------ ------------
Total stockholders' deficit......................................................... (193,634) (206,092)
------------ ------------
Total liabilities and stockholders' deficit........................................... $ 645,790 $ 732,637
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
A.G.R. ELECTRONICS, INC.
COMBINED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE
1994 30, 1995
------------- -------------
<S> <C> <C>
(UNAUDITED)
Revenue............................................................................. $ 2,499,542 $ 1,293,966
Cost of products sold............................................................... 596,406 424,114
------------- -------------
1,903,136 869,852
Cost of services
Pager lease and access services................................................... 627,988 136,560
------------- -------------
1,275,148 733,292
Expenses:
Selling, general, and administrative.............................................. 1,092,012 655,582
Depreciation...................................................................... 125,533 75,362
------------- -------------
1,217,545 730,944
------------- -------------
Operating income.................................................................... 57,603 2,348
Other income (expense):
Other income........................................................................ 3,114 11,380
Interest expense.................................................................... (47,470) (26,686)
------------- -------------
(44,356) (15,306)
Income before income taxes.......................................................... 13,247 (12,958)
Income tax expense.................................................................. 3,165 --
------------- -------------
Net income.......................................................................... 10,082 (12,958)
Beginning accumulated deficit....................................................... (238,716) (228,634)
------------- -------------
Ending accumulated deficit.......................................................... $ (228,634) $ (241,592)
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
<PAGE>
A.G.R. ELECTRONICS, INC.
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS
DECEMBER 31, ENDED JUNE
1994 30, 1995
------------ ------------
<S> <C> <C>
(UNAUDITED)
Operating activities:
Net Income (loss)................................................................... $ 10,082 $ (12,958)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation...................................................................... 125,533 75,362
Changes in operating assets and liabilities:
Trade accounts receivable....................................................... (59,016) (36,209)
Inventories..................................................................... (8,749) (9,140)
Other assets.................................................................... (1,348) --
Trade payables.................................................................. 32,062 (14,873)
Other accrued expenses and liabilities.......................................... 8,103 26,737
------------ ------------
Net cash provided by operating activities............................................. 106,667 28,919
Investing activities:
Purchases of equipment.............................................................. (317,022) (115,160)
Financing activities:
Proceeds from payable to stockholder................................................ 28,101 --
Payment on loan payable to shareholder.............................................. -- (28,101)
Proceeds from long-term debt........................................................ 260,768 116,042
Payments on long-term debt.......................................................... (85,309) --
------------ ------------
Net cash provided by financing activities............................................. 203,560 87,941
Net decrease in cash.................................................................. (6,795) 1,700
Cash at beginning of year............................................................. 6,795 --
------------ ------------
Cash at end of year................................................................... $ -- $ 1,700
------------ ------------
------------ ------------
Supplementary disclosures of cash flow information:
Cash paid during the period for income taxes........................................ $ 3,165 $ --
------------ ------------
------------ ------------
Cash paid during the period for interest............................................ $ 45,516 $ 34,506
------------ ------------
------------ ------------
</TABLE>
See accompanying notes.
<PAGE>
A.G.R. ELECTRONICS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE 1. -- ORGANIZATION AND BASIS OF PRESENTATION
These financial statements combine the financial positions and operations of
A.G.R. Electronics, Inc. (Electronics) and A.G.R. Beepers, Inc. (Beepers)
(collectively, the Company). The Company sells and leases paging equipment and
operates paging systems in Florida. Electronics and Beepers are controlled by
the same stockholder. A letter of intent has been signed to sell the Company to
ProNet Inc.
NOTE 2. -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CREDIT CONCENTRATIONS
The Company's customers are concentrated in southern Florida. No single
customer accounted for a significant amount of the Company's sales. The Company
reviews a customer's credit history before extending credit and does not require
significant collateral. Bad debts are recognized on the specific write-off
method.
INVENTORIES
Inventories are valued at lower of cost or market. Cost is determined by the
first-in-first-out (FIFO) method.
EQUIPMENT
Equipment is recorded at cost. Depreciation is computed by the straight-line
method over the estimated useful lives of the assets. Estimated useful lives
range from five to ten years.
INCOME TAXES
The liability method is used in accounting for income taxes. Accordingly,
deferred tax assets and liabilities are determined based on differences between
financial reporting and tax bases of assets and liabilities and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.
NOTE 3. -- RELATED PARTY TRANSACTIONS
The Company receives advances from one of its stockholders on a periodic
basis in order to meet short term cash flow requirements. These advances are
non-interest bearing and are payable as cash flow requirements permit. At
December 31, 1994, the Company owed the stockholder $28,101.
The Company provides paging transmission services to a company which is
partially owned by a stockholder. These services are provided at a price which
is comparable to that charged to other customers. The Company recognized revenue
of approximately $143,000 from this affiliate in 1994.
NOTE 4. -- LONG TERM DEBT
Long term debt at December 31, 1994 consists of the following:
<TABLE>
<S> <C>
Notes payable at rates ranging from 12.5% to 14.0%, due in monthly
installments of principal and interest with maturities ranging from
October 1, 1996 to January 1, 2000; collateralized by communications
equipment............................................................... $ 566,410
Note payable at 9.75% due in monthly installments of principal and
interest maturing on June 19, 1997...................................... 10,373
---------
576,783
Less current portion..................................................... 127,872
---------
Long-term debt........................................................... $ 448,911
---------
---------
</TABLE>
<PAGE>
A.G.R. ELECTRONICS, INC.
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1994
NOTE 4. -- LONG TERM DEBT (CONTINUED)
As of December 31, 1994, scheduled maturities of long term debt are as
follows:
<TABLE>
<S> <C>
1995..................................................... $ 127,872
1996..................................................... 162,141
1997..................................................... 133,684
1998..................................................... 91,449
1999..................................................... 60,995
Thereafter............................................... 642
---------
Total.................................................... $ 576,783
---------
---------
</TABLE>
NOTE 5. -- INCOME TAXES
The provision for income taxes consists of applicable federal and state
taxes. At December 31, 1994, the Company has a net deferred tax asset of $64,000
resulting primarily from temporary differences between the carrying value of
property and equipment, accounts payable and deferred revenue. These amounts
have been fully offset by a valuation allowance of $64,000 of which $13,000 was
provided in the current year.
NOTE 6. -- COMMITMENTS AND CONTINGENCIES
The Company leases certain equipment, transmission facilities, and office
space. Rent expense for the year ended December 31, 1994 totaled $66,000. Future
minimum lease commitments under noncancelable operating leases at December 31,
1994 are as follows:
<TABLE>
<S> <C>
1995..................................................... $ 93,486
1996..................................................... 73,729
1997..................................................... 47,016
1998..................................................... 6,884
1999..................................................... 6,020
---------
Total.................................................... $ 277,135
---------
---------
</TABLE>
<PAGE>
EXHIBIT 99.8
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Since January 1994, the Company has completed the acquisition of all of the
outstanding capital stock of Contact and Metropolitan and substantially all of
the paging assets of Radio Call, ChiComm, High Tech, Signet, Carrier, All City,
Americom, Lewis and Gold Coast (collectively, the "Completed Acquisitions"). The
Company has signed definitive agreements or letters of intent to acquire all of
the outstanding capital stock of and substantially all of the paging assets of
Nationwide, Apple, Signet Raleigh, P&C, PageOne, Williams, RCS, Total, Sun and
AGR (collectively, the "Pending Acquisitions"). The combination of the Completed
Acquisitions and the Pending Acquisitions is referred to as the "Acquisitions".
The accompanying unaudited pro forma condensed consolidated balance sheet of
the Company combines the historical consolidated balance sheet of the Company
and the balance sheets of Americom, Lewis, Gold Coast and the Pending
Acquisitions as if the acquisitions had occurred on June 30, 1995. The
accompanying unaudited pro forma condensed consolidated statement of operations
of the Company for the year ended December 31, 1994 combines the historical
consolidated statement of operations of the Company and the statements of
operations of the Acquisitions as if the Acquisitions had occurred on January 1,
1994, and assumes that they were funded with the proceeds of the Company's $100
million Senior Subordinated Notes (the "Notes") or by borrowings under the
Company's credit facility. The accompanying unaudited pro forma condensed
consolidated statement of operations of the Company for the six months ended
June 30, 1995, combines the historical statement of operations of the Company
and the statements of operations of Signet, Carrier, Metropolitan, All City,
Americom, Lewis, Gold Coast and the Pending Acquisitions as if the acquisitions
of Signet, Carrier, Metropolitan, All City, Americom, Lewis, Gold Coast and the
Pending Acquisitions had occurred on January 1, 1995, and assumes that they were
funded with the proceeds of the Notes and borrowings under the Company's credit
facility.
The pro forma condensed consolidated financial statements do not purport to
represent what the Company's results of operations would have been had the
Acquisitions occurred on the dates indicated or for any future period or date.
The pro forma adjustments give effect to available information and assumptions
that management believes are reasonable. The pro forma condensed consolidated
financial statements should be read in conjunction with the Company's historical
consolidated financial statements and the financial statements of certain
Acquisitions and the notes thereto included or incorporated elsewhere herein.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PENDING
GOLD ACQUISITIONS PRO FORMA
PRONET AMERICOM LEWIS COAST (1) ADJUSTMENTS
----------- ----------- --------- --------- -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Current Assets............................. $ 60,248 $ 1,279 $ 520 $ 65 $ 3,572 $ (51,160)
Equipment
Pagers................................... 26,926 -- 233 242 7,359 (2,380)
Communications equipment................. 19,877 2,530 390 375 3,166 (3,431)
Security systems equipment............... 11,186 -- -- -- -- --
Office and other......................... 5,388 -- 69 166 6,815 (3,675)
----------- ----------- --------- --------- -------------- -----------
63,377 2,530 692 783 17,340 (9,486)
Less allowance for depreciation.......... 28,762 1,337 371 775 8,264 (9,486)
----------- ----------- --------- --------- -------------- -----------
34,615 1,193 321 8 9,076 --
----------- ----------- --------- --------- -------------- -----------
Goodwill and other assets, net............. 73,646 (40) 2 148 755 87,232
----------- ----------- --------- --------- -------------- -----------
TOTAL ASSETS............................... $ 168,509 $ 2,432 $ 843 $ 221 $ 13,403 $ 36,072
----------- ----------- --------- --------- -------------- -----------
----------- ----------- --------- --------- -------------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities........................ $ 10,451 $ 2,381 $ 190 $ 891 $ 6,868 $ (8,812)
Deferred payments.......................... 8,719 -- -- -- -- 17,210
Long-term debt, less current maturities.... 99,283 74 301 -- 3,876 20,742
Shareholders' equity (deficit)............. 50,056 (23) 352 (670) 2,659 6,932
----------- ----------- --------- --------- -------------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.................................... $ 168,509 $ 2,432 $ 843 $ 221 $ 13,403 $ 36,072
----------- ----------- --------- --------- -------------- -----------
----------- ----------- --------- --------- -------------- -----------
<CAPTION>
PRO FORMA
CONSOLIDATED
------------
<S> <C>
Current Assets............................. $ 14,524
Equipment
Pagers................................... 32,380
Communications equipment................. 22,907
Security systems equipment............... 11,186
Office and other......................... 8,763
------------
75,236
Less allowance for depreciation.......... 30,023
------------
45,213
------------
Goodwill and other assets, net............. 161,743
------------
TOTAL ASSETS............................... $ 221,480
------------
------------
L
Current liabilities........................ $ 11,969
Deferred payments.......................... 25,929
Long-term debt, less current maturities.... 124,276
Shareholders' equity (deficit)............. 59,306
------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY.................................... $ 221,480
------------
------------
<FN>
------------------------
(1) See Schedule A for detail of the Pending Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL RESULTS
-----------------------------------------
COMPLETED PENDING PRO FORMA PRO FORMA
PRONET ACQUISITIONS (1) ACQUISITIONS (1) ADJUSTMENTS CONSOLIDATED
--------- -------------- -------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUES
Service revenues............................. $ 33,079 $ 27,815 $ 21,537 $ -- $ 82,431
Product sales................................ 6,639 6,266 6,972 -- 19,877
--------- -------------- -------------- ----------- ------------
Total revenues............................. 39,718 34,081 28,509 -- 102,308
Cost of products sold........................ 6,644 6,201 6,743 -- 19,588
--------- -------------- -------------- ----------- ------------
33,074 27,880 21,766 -- 82,720
COST OF SERVICES............................... 9,185 6,315 5,043 -- 20,543
--------- -------------- -------------- ----------- ------------
GROSS MARGIN................................. 23,889 21,565 16,723 -- 62,177
EXPENSES
Sales, general and administrative............ 12,126 14,224 13,412 (3,305) 36,457
Depreciation and amortization................ 8,574 4,608 2,518 9,646 25,346
--------- -------------- -------------- ----------- ------------
20,700 18,832 15,930 6,341 61,803
--------- -------------- -------------- ----------- ------------
OPERATING INCOME (LOSS)...................... 3,189 2,733 793 (6,341) 374
OTHER INCOME (EXPENSE)
Interest expense............................. (1,774) (2,542) (829) (9,734) (14,879)
Interest and other income.................... 173 32 116 -- 321
--------- -------------- -------------- ----------- ------------
(1,601) (2,510) (713) (9,734) (14,558)
--------- -------------- -------------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES............ 1,588 223 80 (16,075) (14,184)
Provision (benefit) for income taxes........... 895 323 96 (1,314) --
--------- -------------- -------------- ----------- ------------
NET INCOME (LOSS).......................... $ 693 $ (100) $ (16) $ (14,761) $ (14,184)
--------- -------------- -------------- ----------- ------------
--------- -------------- -------------- ----------- ------------
<FN>
------------------------
(1) See Schedules B and C for detail of the Completed and Pending Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL RESULTS
-----------------------------------------
COMPLETED PENDING PRO FORMA PRO FORMA
PRONET ACQUISITIONS (1) ACQUISITIONS (1) ADJUSTMENTS CONSOLIDATED
--------- -------------- -------------- ----------- ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
REVENUES
Service revenues............................. $ 23,892 $ 7,241 $ 12,266 $ (192) $ 43,207
Product sales................................ 4,669 1,418 3,808 -- 9,895
--------- -------------- -------------- ----------- ------------
Total revenues............................. 28,561 8,659 16,074 (192) 53,102
Cost of products sold........................ 4,595 1,080 3,809 -- 9,484
--------- -------------- -------------- ----------- ------------
23,966 7,579 12,265 (192) 43,618
COST OF SERVICES............................... 5,894 1,488 2,526 -- 9,908
--------- -------------- -------------- ----------- ------------
GROSS MARGIN................................. 18,072 6,091 9,739 (192) 33,710
EXPENSES
Sales, general and administrative............ 10,212 3,146 7,202 (936) 19,624
Depreciation and amortization................ 6,461 890 1,286 3,790 12,427
--------- -------------- -------------- ----------- ------------
16,673 4,036 8,488 2,854 32,051
--------- -------------- -------------- ----------- ------------
OPERATING INCOME (LOSS)...................... 1,399 2,055 1,251 (3,046) 1,659
OTHER INCOME (EXPENSE)
Interest expense............................. (1,894) (615) (430) (4,614) (7,553)
Interest and other income.................... 123 135 158 -- 416
--------- -------------- -------------- ----------- ------------
(1,771) (480) (272) (4,614) (7,137)
--------- -------------- -------------- ----------- ------------
INCOME (LOSS) BEFORE INCOME TAXES............ (372) 1,575 979 (7,660) (5,478)
Provision (benefit) for income taxes........... (37) 193 109 (265) --
--------- -------------- -------------- ----------- ------------
NET INCOME (LOSS)............................ $ (335) $ 1,382 $ 870 $ (7,395) $ (5,478)
--------- -------------- -------------- ----------- ------------
--------- -------------- -------------- ----------- ------------
<FN>
------------------------
(1) See Schedules D and E for details of the Completed and Pending
Acquisitions.
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE A
PENDING ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SIGNET PAGING &
NATIONWIDE APPLE RALEIGH CELLULAR PAGEONE WILLIAMS RCS TOTAL
----------- --------- --------- --------- ----------- ----------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets.............. $ 347 $ 558 $ 136 $ 842 $ 191 $ 612 $ 58 $ 161
Equipment
Pagers.................... -- -- 1,836 4,153 568 705 -- 97
Communications
equipment................ 795 521 396 -- 981 473 -- --
Office and other.......... 176 247 343 180 353 96 1,333 238
----------- --------- --------- --------- ----------- ----------- --------- ---------
971 768 2,575 4,333 1,902 1,274 1,333 335
Less allowance for
depreciation............. 196 366 1,473 778 897 1,123 886 145
----------- --------- --------- --------- ----------- ----------- --------- ---------
775 402 1,102 3,555 1,005 151 447 190
Goodwill and other assets,
net........................ 24 6 -- -- -- 181 -- 4
----------- --------- --------- --------- ----------- ----------- --------- ---------
TOTAL ASSETS................ $ 1,146 $ 966 $ 1,238 $ 4,397 $ 1,196 $ 944 $ 505 $ 355
----------- --------- --------- --------- ----------- ----------- --------- ---------
----------- --------- --------- --------- ----------- ----------- --------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities......... $ 1,239 $ 430 $ 322 $ 2,153 $ 1,412 $ 391 $ -- $ 284
Deferred payments........... -- -- -- -- -- -- -- --
Long-term debt, less current
maturities................. 453 -- 554 1,974 -- 375 -- 6
Shareholders' equity
(deficit).................. (546) 536 362 270 (216) 178 505 65
----------- --------- --------- --------- ----------- ----------- --------- ---------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY....... $ 1,146 $ 966 $ 1,238 $ 4,397 $ 1,196 $ 944 $ 505 $ 355
----------- --------- --------- --------- ----------- ----------- --------- ---------
----------- --------- --------- --------- ----------- ----------- --------- ---------
<CAPTION>
TOTAL PENDING
AGR SUN ACQUISITIONS
--------- --------- -------------
<S> <C> <C> <C>
Current assets.............. $ 151 $ 516 $ 3,572
Equipment
Pagers.................... -- -- 7,359
Communications
equipment................ -- -- 3,166
Office and other.......... 949 2,900 6,815
--------- --------- -------------
949 2,900 17,340
Less allowance for
depreciation............. 374 2,026 8,264
--------- --------- -------------
575 874 9,076
Goodwill and other assets,
net........................ 7 533 755
--------- --------- -------------
TOTAL ASSETS................ $ 733 $ 1,923 $ 13,403
--------- --------- -------------
--------- --------- -------------
Current liabilities......... $ 426 $ 211 $ 6,868
Deferred payments........... -- -- --
Long-term debt, less current
maturities................. 514 -- 3,876
Shareholders' equity
(deficit).................. (207) 1,712 2,659
--------- --------- -------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY....... $ 733 $ 1,923 $ 13,403
--------- --------- -------------
--------- --------- -------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE B
COMPLETED ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
SEVEN MONTHS
TWO MONTHS ENDED
ENDED FEB. JULY 31, 1994 YEAR ENDED DECEMBER 31, 1994
28, 1994 ---------------------- -------------------------------
----------- RADIO
CONTACT CALL CHICOMM HIGH TECH SIGNET CARRIER
----------- --------- ----------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues...................................... $ 1,599 $ 3,200 $ 2,225 $ 291 $ 4,750 $ 2,435
Product sales......................................... 743 738 338 -- 1,100 900
----------- --------- ----------- --------- --------- ---------
Total revenues...................................... 2,342 3,938 2,563 291 5,850 3,335
Cost of products sold................................. 956 536 296 -- 1,089 1,185
----------- --------- ----------- --------- --------- ---------
1,386 3,402 2,267 291 4,761 2,150
COST OF SERVICES........................................ 202 755 486 86 1,149 203
----------- --------- ----------- --------- --------- ---------
GROSS MARGIN........................................ 1,184 2,647 1,781 205 3,612 1,947
EXPENSES
Sales, general and administrative..................... 1,022 2,181 792 220 2,287 1,603
Depreciation and amortization......................... 93 689 413 128 627 228
----------- --------- ----------- --------- --------- ---------
1,115 2,870 1,205 348 2,914 1,831
----------- --------- ----------- --------- --------- ---------
OPERATING INCOME (LOSS)............................. 69 (223) 576 (143) 698 116
OTHER INCOME (EXPENSE)
Interest expense...................................... (46) (44) (141) -- (292) (124)
Interest and other income............................. -- -- -- -- 5 --
----------- --------- ----------- --------- --------- ---------
(46) (44) (141) -- (287) (124)
----------- --------- ----------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES................... 23 (267) 435 (143) 411 (8)
Provision (benefit) for income taxes.................. -- (59) -- -- -- --
----------- --------- ----------- --------- --------- ---------
NET INCOME (LOSS)................................... $ 23 $ (208) $ 435 $ (143) $ 411 $ (8)
----------- --------- ----------- --------- --------- ---------
----------- --------- ----------- --------- --------- ---------
<CAPTION>
TOTAL
COM-
PLETED
METRO- ACQUISI-
POLITAN ALL CITY AMERICOM GOLD COAST LEWIS TIONS
----------- --------- ----------- ----- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues...................................... $ 4,835 $ 3,257 $ 3,477 $ 699 $ 1,047 $ 27,815
Product sales......................................... 152 387 1,105 -- 803 6,266
----------- --------- ----------- ----- --------- ---------
Total revenues...................................... 4,987 3,644 4,582 699 1,850 34,081
Cost of products sold................................. 156 299 1,015 -- 669 6,201
----------- --------- ----------- ----- --------- ---------
4,831 3,345 3,567 699 1,181 27,880
COST OF SERVICES........................................ 1,517 833 856 158 70 6,315
----------- --------- ----------- ----- --------- ---------
GROSS MARGIN........................................ 3,314 2,512 2,711 541 1,111 21,565
EXPENSES
Sales, general and administrative..................... 1,622 1,670 1,764 232 831 14,224
Depreciation and amortization......................... 597 1,225 381 92 135 4,608
----------- --------- ----------- ----- --------- ---------
2,219 2,895 2,145 324 966 18,832
----------- --------- ----------- ----- --------- ---------
OPERATING INCOME (LOSS)............................. 1,095 (383) 566 217 145 2,733
OTHER INCOME (EXPENSE)
Interest expense...................................... -- (1,595) (291) -- (9) (2,542)
Interest and other income............................. 27 -- -- -- -- 32
----------- --------- ----------- ----- --------- ---------
27 (1,595) (291) -- (9) (2,510)
----------- --------- ----------- ----- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES................... 1,122 (1,978) 275 217 136 223
Provision (benefit) for income taxes.................. 382 -- -- -- -- 323
----------- --------- ----------- ----- --------- ---------
NET INCOME (LOSS)................................... $ 740 $ (1,978) $ 275 $ 217 $ 136 $ (100)
----------- --------- ----------- ----- --------- ---------
----------- --------- ----------- ----- --------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE C
PENDING ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1994
(UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
-------------------------------------------------------------
SIGNET PAGING &
NATIONWIDE APPLE RALEIGH CELLULAR PAGEONE
----------- --------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues........................................... $ 2,503 $ 3,938 $ 2,528 $ 3,530 $ 2,862
Product sales.............................................. 1,336 1,459 138 1,187 932
----------- --------- ----------- ----------- -----------
Total revenues........................................... 3,839 5,397 2,666 4,717 3,794
Cost of products sold...................................... 1,406 1,539 141 1,055 981
----------- --------- ----------- ----------- -----------
2,433 3,858 2,525 3,662 2,813
COST OF SERVICES............................................. 530 545 464 1,118 606
----------- --------- ----------- ----------- -----------
GROSS MARGIN............................................. 1,903 3,313 2,061 2,544 2,207
EXPENSES
Sales, general and administrative.......................... 1,773 3,031 1,222 1,534 1,959
Depreciation and amortization.............................. 58 105 424 695 233
----------- --------- ----------- ----------- -----------
1,831 3,136 1,646 2,229 2,192
----------- --------- ----------- ----------- -----------
OPERATING INCOME (LOSS).................................. 72 177 415 315 15
OTHER INCOME (EXPENSE)
Interest expense........................................... (83) (6) (101) (384) (108)
Interest and other income.................................. -- 5 -- -- --
----------- --------- ----------- ----------- -----------
(83) (1) (101) (384) (108)
----------- --------- ----------- ----------- -----------
INCOME (LOSS) BEFORE INCOME TAXES........................ (11) 176 314 (69) (93)
Provision (benefit) for income taxes....................... -- 93 -- -- --
----------- --------- ----------- ----------- -----------
NET INCOME (LOSS)........................................ $ (11) $ 83 $ 314 $ (69) $ (93)
----------- --------- ----------- ----------- -----------
----------- --------- ----------- ----------- -----------
<CAPTION>
TOTAL
PEND-
ING
ACQUISI-
WILLIAMS RCS TOTAL AGR SUN TIONS
----------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues........................................... $ 1,087 $ 1,259 $ 528 $ 1,537 $ 1,765 $ 21,537
Product sales.............................................. 138 200 333 962 287 6,972
----------- --------- --------- --------- --------- ---------
Total revenues........................................... 1,225 1,459 861 2,499 2,052 28,509
Cost of products sold...................................... 107 244 332 596 342 6,743
----------- --------- --------- --------- --------- ---------
1,118 1,215 529 1,903 1,710 21,766
COST OF SERVICES............................................. 104 376 211 628 461 5,043
----------- --------- --------- --------- --------- ---------
GROSS MARGIN............................................. 1,014 839 318 1,275 1,249 16,723
EXPENSES
Sales, general and administrative.......................... 749 436 356 1,092 1,260 13,412
Depreciation and amortization.............................. 100 186 18 126 573 2,518
----------- --------- --------- --------- --------- ---------
849 622 374 1,218 1,833 15,930
----------- --------- --------- --------- --------- ---------
OPERATING INCOME (LOSS).................................. 165 217 (56) 57 (584) 793
OTHER INCOME (EXPENSE)
Interest expense........................................... (65) (29) (6) (47) -- (829)
Interest and other income.................................. 35 -- 73 3 -- 116
----------- --------- --------- --------- --------- ---------
(30) (29) 67 (44) -- (713)
----------- --------- --------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES........................ 135 188 11 13 (584) 80
Provision (benefit) for income taxes....................... -- -- -- 3 -- 96
----------- --------- --------- --------- --------- ---------
NET INCOME (LOSS)........................................ $ 135 $ 188 $ 11 $ 10 $ (584) $ (16)
----------- --------- --------- --------- --------- ---------
----------- --------- --------- --------- --------- ---------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE D
COMPLETED ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
TWO MONTHS ENDED THREE MONTHS ENDED FOUR MONTHS ENDED
FEBRUARY 28, 1995 MARCH 31, 1995 APRIL 30, 1995
--------------------- ----------------------- --------------------------
SIGNET CARRIER METROPOLITAN ALL CITY
--------------------- ----------------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
REVENUES
Service revenues.................................... $ 872 $ 532 $ 1,870 $ 1,139
Product sales....................................... 109 197 50 47
----- ----- ------------- -----------
Total revenues.................................... 981 729 1,920 1,186
Cost of products sold............................... 109 179 54 --
----- ----- ------------- -----------
872 550 1,866 1,186
COST OF SERVICES...................................... 273 59 514 272
----- ----- ------------- -----------
GROSS MARGIN...................................... 599 491 1,352 914
EXPENSES
Sales, general and administrative................... 367 286 592 511
Depreciation and amortization....................... 17 54 215 292
----- ----- ------------- -----------
384 340 807 803
----- ----- ------------- -----------
OPERATING INCOME (LOSS)........................... 215 151 545 111
OTHER INCOME (EXPENSE)
Interest expense.................................... (54) (26) -- (528)
Interest and other income........................... 2 1 20 --
----- ----- ------------- -----------
(52) (25) 20 (528)
----- ----- ------------- -----------
INCOME (LOSS) BEFORE INCOME TAXES................. 163 126 565 (417)
Provision (benefit) for income taxes................ -- 1 192 --
----- ----- ------------- -----------
NET INCOME (LOSS)................................. $ 163 $ 125 $ 373 $ (417)
----- ----- ------------- -----------
----- ----- ------------- -----------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1995 TOTAL
----------------------------------- COMPLETED
AMERICOM GOLD COAST LEWIS ACQUISITIONS
----------- ----- --------- -------------
<S> <C> <C> <C> <C>
REVENUES
Service revenues.................................... $ 1,810 $ 319 $ 699 $ 7,241
Product sales....................................... 430 -- 585 1,418
----------- ----- --------- -------------
Total revenues.................................... 2,240 319 1,284 8,659
Cost of products sold............................... 371 -- 367 1,080
----------- ----- --------- -------------
1,869 319 917 7,579
COST OF SERVICES...................................... 259 75 36 1,488
----------- ----- --------- -------------
GROSS MARGIN...................................... 1,610 244 881 6,091
EXPENSES
Sales, general and administrative................... 782 121 487 3,146
Depreciation and amortization....................... 209 37 66 890
----------- ----- --------- -------------
991 158 553 4,036
----------- ----- --------- -------------
OPERATING INCOME (LOSS)........................... 619 86 328 2,055
OTHER INCOME (EXPENSE)
Interest expense.................................... (4) -- (3) (615)
Interest and other income........................... 97 -- 15 135
----------- ----- --------- -------------
93 -- 12 (480)
----------- ----- --------- -------------
INCOME (LOSS) BEFORE INCOME TAXES................. 712 86 340 1,575
Provision (benefit) for income taxes................ -- -- -- 193
----------- ----- --------- -------------
NET INCOME (LOSS)................................. $ 712 $ 86 $ 340 $ 1,382
----------- ----- --------- -------------
----------- ----- --------- -------------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
SCHEDULE E
PENDING ACQUISITIONS
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1995
--------------------------------------------------------------------------
SIGNET PAGING &
NATIONWIDE APPLE RALEIGH CELLULAR PAGEONE WILLIAMS
----------- --------- ----------- ----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues................................... $ 1,502 $ 2,297 $ 1,408 $ 2,049 $ 1,935 $ 532
Product sales...................................... 983 500 100 767 566 83
----------- --------- ----------- ----------- ----------- -----
Total revenues................................... 2,485 2,797 1,508 2,816 2,501 615
Cost of products sold.............................. 1,035 570 115 650 533 61
----------- --------- ----------- ----------- ----------- -----
1,450 2,227 1,393 2,166 1,968 554
COST OF SERVICES..................................... 463 10 298 697 293 55
----------- --------- ----------- ----------- ----------- -----
GROSS MARGIN..................................... 987 2,217 1,095 1,469 1,675 499
EXPENSES
Sales, general and administrative.................. 743 1,751 676 760 1,230 406
Depreciation and amortization...................... 41 54 215 348 180 56
----------- --------- ----------- ----------- ----------- -----
784 1,805 891 1,108 1,410 462
----------- --------- ----------- ----------- ----------- -----
OPERATING INCOME (LOSS).......................... 203 412 204 361 265 37
OTHER INCOME (EXPENSE)
Interest expense................................... (45) -- (38) (202) (65) (29)
Interest and other income.......................... -- -- 19 12 -- 21
----------- --------- ----------- ----------- ----------- -----
(45) -- (19) (190) (65) (8)
----------- --------- ----------- ----------- ----------- -----
INCOME (LOSS) BEFORE INCOME TAXES................ 158 412 185 171 200 29
Provision (benefit) for income taxes............... -- 109 -- -- -- --
----------- --------- ----------- ----------- ----------- -----
NET INCOME (LOSS)................................ $ 158 $ 303 $ 185 $ 171 $ 200 $ 29
----------- --------- ----------- ----------- ----------- -----
----------- --------- ----------- ----------- ----------- -----
<CAPTION>
TOTAL
PENDING
RCS TOTAL AGR SUN ACQUISITIONS
--------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C>
REVENUES
Service revenues................................... $ 602 $ 286 $ 891 $ 764 $ 12,266
Product sales...................................... 141 141 403 124 3,808
--------- --------- --------- --------- -----------
Total revenues................................... 743 427 1,294 888 16,074
Cost of products sold.............................. 127 150 424 144 3,809
--------- --------- --------- --------- -----------
616 277 870 744 12,265
COST OF SERVICES..................................... 193 161 137 219 2,526
--------- --------- --------- --------- -----------
GROSS MARGIN..................................... 423 116 733 525 9,739
EXPENSES
Sales, general and administrative.................. 222 230 655 529 7,202
Depreciation and amortization...................... 101 7 75 209 1,286
--------- --------- --------- --------- -----------
323 237 730 738 8,488
--------- --------- --------- --------- -----------
OPERATING INCOME (LOSS).......................... 100 (121) 3 (213) 1,251
OTHER INCOME (EXPENSE)
Interest expense................................... (18) (6) (27) -- (430)
Interest and other income.......................... -- 95 11 -- 158
--------- --------- --------- --------- -----------
(18) 89 (16) -- (272)
--------- --------- --------- --------- -----------
INCOME (LOSS) BEFORE INCOME TAXES................ 82 (32) (13) (213) 979
Provision (benefit) for income taxes............... -- -- -- -- 109
--------- --------- --------- --------- -----------
NET INCOME (LOSS)................................ $ 82 $ (32) $ (13) $ (213) $ 870
--------- --------- --------- --------- -----------
--------- --------- --------- --------- -----------
</TABLE>
See accompanying notes to unaudited pro forma condensed consolidated financial
statements.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
On March 1, 1994, the Company completed the acquisition of all the
outstanding capital stock of Contact for approximately $19.0 million in cash
(including amounts paid pursuant to noncompetition agreements). On August 1,
1994, the Company completed the purchase of substantially all of the paging
assets of Radio Call and certain of its affiliates for approximately $7.8
million in cash (including amounts paid pursuant to noncompetition agreements).
On August 1, 1994, the Company also completed the purchase of substantially all
of the Chicago area paging assets of ChiComm for approximately $9.8 million,
comprised of approximately $8.9 million in cash at closing (including amounts
paid pursuant to noncompetition agreements) and a $900,000 Deferred Payment.
Effective December 31, 1994, the Company purchased substantially all of the
paging assets of High Tech for $900,000, comprised of $700,000 in cash at
closing and a $200,000 Deferred Payment. On March 1, 1995, the Company purchased
substantially all of the paging assets of Signet for approximately $9.0 million,
comprised of approximately $4.8 million in cash at closing and a $4.2 million
Deferred Payment. On April 1, 1995, the Company completed the purchase of
substantially all of the paging assets of Carrier for approximately $6.5
million, comprised of approximately $3.5 million in cash at closing and a
Deferred Payment of approximately $3.0 million. On May 3, 1995, the Company
completed the acquisition of all the outstanding capital stock of Metropolitan
for approximately $21.0 million in cash. On May 19, 1995, the Company completed
the purchase of substantially all of the paging assets of All City for
approximately $6.4 million, comprised of approximately $6.1 million in cash at
closing and a $350,000 Deferred Payment. On July 1, 1995, the Company completed
the purchase of substantially all of the paging assets of Americom for
approximately $17.5 million, comprised of approximately 8.8 million in cash at
closing and a Deferred Payment of $8.7 million. On September 1, 1995, the
Company completed the purchase of substantially all of the paging assets of
Lewis for approximately $5.6 million, comprised of approximately $3.5 million in
cash at closing and a $2.1 million Deferred Payment. On September 1, 1995, the
Company completed the purchase of substantially all of the paging assets of Gold
Coast for approximately $2.3 million in cash. These acquisitions were accounted
for as purchases and were financed with the proceeds of the Notes or by
borrowings under the Company's credit facility. The results of operations for
Contact, Radio Call, ChiComm, High Tech, Signet, Carrier, All City and
Metropolitan are included in the actual results of operations of the Company
from the respective dates of acquisition, and the historical balance sheet of
the Company at June 30, 1995 includes these acquisitions.
On July 10, 1995, the Company signed a letter of intent to purchase all the
outstanding capital stock of Apple. On July 10, 1995, the Company signed a
letter of intent to purchase substantially all of the paging assets of Signet
Raleigh. On July 26, 1995, the Company signed a letter of intent to purchase
substantially all of the paging assets of Sun. On August 2, 1995, the Company
signed a letter of intent to purchase substantially all of the paging assets of
P&C. On August 7, 1995, the Company signed a letter of intent to purchase
substantially all of the paging assets of Page One. On August 11, 1995, the
Company signed a letter of intent to purchase substantially all of the paging
assets of Nationwide. On August 21, 1995, the Company signed a letter of intent
to purchase all of the outstanding capital stock of Williams. On August 22,
1995, the Company signed letters of intent to acquire substantially all of the
paging assets of RCS and all of the outstanding capital stock of Total and AGR.
The aggregate purchase price for the Pending Acquisitions is approximately $74.9
million and is comprised of approximately $59.2 million in cash at closing, $6.4
million in Deferred Payments and $9.3 million in the Company's Common Stock. The
Company will issue approximately 437,000 shares of Common Stock, based on the
closing stock price of the Company's Common Stock on or before June 30, 1995, in
order to satisfy an aggregate of approximately $9.3 million in purchase price
obligations, to be paid upon the closing thereof. These transactions are subject
to various conditions, including FCC, regulatory and other third party
approvals, and the execution of definitive agreements. All Deferred Payments
listed above are due one year from the closing of the respective transactions
and are payable, at the Company's discretion, either in cash or shares of the
Company's Common Stock based on market value at the date of payment.
All of the Pending Acquisitions will be accounted for as purchases and are
assumed to be funded with a portion of the proceeds of the Notes and borrowings
under the Company's credit facility.
The unaudited pro forma condensed consolidated statements of operations
reflect the Acquisitions as if the Acquisitions had been completed at the
beginning of the periods presented. The Company and the Acquisitions except for
Contact and Gold Coast operated on a December 31 fiscal year basis. Gold Coast
operated on a June 30 fiscal year basis. Gold Coast's results of operations for
the six months ended June 30, 1994 were combined with the
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
results of operations for the six months ended December 31, 1994 to reflect the
year ended December 31, 1994. The respective results of operations for Contact,
Radio Call, ChiComm and High Tech from January 1, 1994 to the dates of the
respective acquisitions were combined with the actual results of operations of
the Company, Signet, Carrier, Metropolitan, All City, Americom, Lewis, Gold
Coast and the Pending Acquisitions for the year ended December 31, 1994 to
determine the pro forma results of operations for the year ended December 31,
1994. The respective results of operations for Signet, Carrier, Metropolitan,
and All City from January 1, 1995 to the date of acquisition were combined with
the actual results of operations of the Company, Americom, Lewis, Gold Coast,
and the Pending Acquisitions for the six months ended June 30, 1995 to determine
the pro forma results of operations for the six months ended June 30, 1995.
The historical financial information presented for ChiComm includes an
audited Statement of Net Assets and a Summary of Income and Direct Operating
Expenses. ChiComm was a stand alone division of Chicago Communication Service,
Inc. and was not a separate reporting entity. The Summary of Income and Direct
Operating Expenses excludes certain overhead and corporate expenses not directly
related to ChiComm. The historical financial information presented for RCS
includes an audited Statement of Assets to be Acquired and a Statement of
Revenue and Operating Expenses. RCS is a division of Reisenweaver
Communications, Inc. and is not a separate reporting entity. The Statement of
Revenue and Operating Expenses excludes certain corporate expenses not directly
related to RCS.
The accompanying pro forma condensed consolidated balance sheet as of June
30, 1995, has been prepared as if the Americom, Lewis and Gold Coast
acquisitions and the Pending Acquisitions had occurred on that date and reflects
the following adjustments:
(A) A pro forma adjustment is made to reflect the fair value of those
assets and liabilities that were acquired as a result of the Americom, Lewis
and Gold Coast acquisitions and the Pending Acquisitions. The Company did
not acquire cash or assume certain trade payables, certain accrued expenses
or existing long-term debt.
(B) A pro forma adjustment is made to goodwill equal to the excess of
the applicable purchase price over the fair values assigned to assets and
liabilities acquired. A pro forma adjustment is made to other assets to
record the noncompetition agreements based on amounts stated in the
respective letters of intent or definitive agreements.
(C) A pro forma adjustment is made to (i) reverse the $11.1 million of
debt (including current maturities) of Americom, Lewis and Gold Coast and
the Pending Acquisitions that were not, and will not, be assumed by the
Company, (ii) record the use of cash and the borrowings under the Credit
Facility, and (iii) record the incurrence of Deferred Payments of $6.4
million in connection with the acquisitions of Americom, Lewis and the
Pending Acquisitions. All Deferred Payments are classified as long-term
liabilities since the Company has the option to make the Deferred Payments
in cash with funds available from the proceeds of the Credit Facility or in
shares of the Company's Common Stock.
The accompanying pro forma condensed consolidated statements of operations
for the year ended December 31, 1994 and for the six months ended June 30, 1995,
have been prepared by combining the historical results of the Company and the
Acquisitions for such respective periods and reflect the following adjustments:
(D) A pro forma adjustment is made to reflect the effect on net revenues
and costs of sales related to the segment of the operations of All City not
acquired by the Company.
(E) The pro forma adjustment to sales, general and administrative
expenses represents expenses that either would or would not have been
incurred had the Acquisitions occurred at the beginning of the periods
presented. For Signet, All City, Metropolitan, Americom, Gold Coast, Lewis
and Apple, cost savings relate to decreased salaries (primarily due to
reductions in senior management of the Acquisitions), office rent,
professional fees, telephone costs and bad debts. For ChiComm, additional
costs relate to additional salaries and office rent.
(F) Pro forma adjustments are made to the statements of operations to
reflect additional depreciation and amortization expense based on the fair
value of the assets acquired as if the Acquisitions had occurred at the
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PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
beginning of the periods presented. Pro forma depreciation is computed using
the straight-line method over the remaining estimated useful lives of the
assets. The noncompetition agreements are amortized using the straight-line
method over the terms of the agreements, and goodwill is amortized using the
straight-line method over a 15-year term.
(G) Interest expense is comprised of interest on long-term debt and the
Deferred Payments, plus the commitment fee on the Credit Facility. Pro forma
adjustments reflect (i) the reversals of interest expense of $1.0 million
for the six months ended June 30, 1995 and $3.4 million for the year ended
December 31, 1994 on debt of the Acquisitions not assumed by the Company and
(ii) the increase in interest expense due to the sale of the Notes at an
assumed annual rate of 11.875%. Interest expense on the Deferred Payments is
provided as required by the definitive agreements or letters of intent.
(H) A pro forma adjustment is made to reflect the effect upon the income
tax provision as if the Acquisitions had occurred at the beginning of the
periods presented. The proforma tax benefit for the year ended December 31,
1994 and the six months ended June 30, 1995 was offset by a valuation
reserve, resulting in no tax expense/benefit for either pro forma period.
The primary differences in the effective tax rate between the Company's
historical financial statements and the pro forma statements are state taxes
and the amortization of goodwill related to the acquisitions of Contact,
Metropolitan, Apple, Williams, Total and AGR, which is assumed not to be
deductible for tax purposes, and the provision for a valuation reserve for
deferred taxes.
The pro forma condensed consolidated financial information presented is not
necessarily indicative of either the results of operations that would have
occurred had the acquisitions taken place at the beginning of the periods
presented or of future results of operations of the combined operations.
