<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 4, 1996
----------------------------------
PRONET INC.
(Exact name of issuer as specified in its charter)
DELAWARE 0-16029 75-1832168
(State or other (Commission File Number) (I.R.S. Employer
jurisdiction of Identification Number)
incorporation)
6340 LBJ FREEWAY 75240
DALLAS, TEXAS (Zip Code)
(Address of Principal
Executive Offices)
Registrant's telephone number, including area code: (214) 687-2000
- --------------------------------------------------------------------------------
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<PAGE>
ITEM 5. OTHER EVENTS.
(a) SIGNING OF DEFINITIVE AGREEMENT FOR NATIONWIDE PAGING, INC.
On January 9, 1996, ProNet Inc. (the "Company") signed a definitive agreement
to purchase the outstanding capital stock of Nationwide Paging, Inc.
("Nationwide") for an amount to be determined based upon the terms of the
agreement. Nationwide serves more than 70,000 subscribers in Los Angeles.
This transaction is subject to various conditions and approvals and is
anticipated to close in the second quarter of 1996. Based on the unaudited
financial statements as of and for the year ended December 31, 1995,
Nationwide does not qualify as a significant acquisition by the Company in
accordance with the definition of a significant acquisition in Rule 3.05 of
Regulation S-X.
(b) PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
Attached hereto as Exhibit 99.1 are certain pro forma condensed
consolidated financial statements and notes thereto of the Company of its
completed and pending acquisitions.
(c) ACQUISITION OF A.G.R. ELECTRONICS, INC. AND AFFILIATES, TOTAL
COMMUNICATION SERVICES, INC. AND WILLIAMS METRO COMMUNICATIONS CORP.
AND AFFILIATES
On February 6, 1996, the Company announced that it completed the
previously announced acquisitions of three Florida-based companies, A.G.R.
Electronics, Inc. and affiliates ("AGR"), Total Communication Services, Inc.
("Total") and Williams Metro Communications Corp. and affiliates
("Williams"). AGR, which will add more than 50,000 subscribers, was acquired
for approximately $6.5 million which was paid in cash at closing. Williams,
which will add more than 6,500 subscribers, was acquired for approximately
$2.7 million which was paid in cash at closing. Total, which adds more than
13,000 subscribers, was acquired for approximately $2.2 million of which
$400,000 was paid in cash and $1.8 million in common stock of the Company at
closing. In addition, upon the final grant of certain licenses, the Company
would pay an additional $1.5 million for AGR and $400,000 for Total. The
purchase prices include payments for accounts receivable, pager inventory and
certain fixed assets associated with the operation of the paging systems.
Based on the unaudited financial statements as of and for the year ended
December 31, 1995, AGR, Total and Williams do not qualify as significant
acquisitions by the Company in accordance with the definition of a
significant acquisition in Rule 3.05 of Regulation S-X.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
The following pro forma financial information is attached hereto and filed
as part of this report:
(b) PRO FORMA FINANCIAL INFORMATION.
- Unaudited Pro Forma Condensed Balance Sheet for the Company as of
December 31, 1995, consolidating the assets and certain
liabilities of the Company, Sun Paging Communications ("Sun"),
SigNet Paging of Raleigh, Inc. ("Signet Raleigh"), Cobbwells,
Inc. dba Page One ("Page One"), AGR, Total, Williams and
Nationwide.
- Unaudited Pro Forma Condensed Consolidated Statements of
Operations for the Company for the year ended December 31, 1995,
incorporating the operating revenues and expenses of the
Company, Signet Paging of Charlotte, Inc. ("Signet"), Carrier
Paging Systems, Inc. ("Carrier"), All City Communication Company,
Inc. ("All City"), Metropolitan Houston Paging Services, Inc.
("Metropolitan"), Americom Paging Corporation ("Americom"), Gold
Coast Paging, Inc. ("Gold Coast"), Lewis Paging, Inc. ("Lewis"),
Paging and Cellular of Texas, a Sole Proprietorship ("Paging &
Cellular"), Apple Communication, Inc. ("Apple"), Sun, Signet
Raleigh, Page One, AGR, Total, Williams and Nationwide.
The Pro Forma Condensed Consolidated Statements of Operations include
reasonable estimates of costs and expenses which will be incurred by the Company
in connection with the operation of Signet, Carrier, All City, Metropolitan,
Americom, Gold Coast, Lewis, Paging & Cellular, Apple, Sun, Signet Raleigh, Page
One, AGR, Total, Williams and Nationwide. The pro forma condensed consolidated
financial statements should be read in conjunction with the historical
consolidated financial statements of the Registrant.
Attached hereto as Exhibit 99.1 are pro forma condensed consolidated
financial statements and notes thereto of the Company and its completed and
pending acquisitions.
<PAGE>
(c) EXHIBITS.
Pro Forma Condensed Consolidated Financial Statements of ProNet Inc.:
99.1 Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1995 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for
the year ended December 31, 1995 (unaudited)
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities 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: April 4, 1996
<PAGE>
INDEX TO EXHIBITS
Pro Forma Condensed Consolidated Financial Statements of ProNet Inc.:
99.1 Pro Forma Condensed Consolidated Balance Sheet as of
December 31, 1995 (unaudited)
Pro Forma Condensed Consolidated Statement of Operations for the
year ended December 31, 1995 (unaudited)
<PAGE>
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Since January 1995, the Company has completed the acquisitions of all of
the outstanding capital stock of Metropolitan, Apple, Page One, AGR, Total
and Williams and substantially all of the paging assets of Signet, Carrier,
All City, Americom, Lewis, Gold Coast, Paging & Cellular, Sun and Signet
Raleigh (collectively, the "Completed Acquisitions"). The Company has signed
a definitive agreement to acquire the outstanding capital stock of
Nationwide. The combination of the Completed Acquisitions and Nationwide 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 Sun, Signet Raleigh, Page One, AGR,
Total, Williams and Nationwide as if the acquisitions had occurred on
December 31, 1995. The accompanying unaudited pro forma condensed statement
of operations of the Company for the year ended December 31, 1995 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, 1995, 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 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 DECEMBER 31, 1995
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
SIGNET
PRONET SUN RALEIGH PAGE ONE AGR TOTAL
------------ ---------- ---------- ---------- --------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Current Assets . . . . . . . . $ 22,153 $ 420 $ 89 $ 34 $ 241 $ 143
Equipment
Pagers. . . . . . . . . . . . 36,789 548 1,779 269 25 106
Communications
equipment. . . . . . . . . . 26,051 1,969 437 -- -- 34
Security systems'
equipment . . . . . . . . . . 11,866 -- -- -- -- --
Office and other . . . . . . . 7,179 44 306 1,950 879 191
---------- -------- -------- ------- -------- -------
81,885 2,561 2,522 2,219 904 331
Less allowance for
depreciation. . . . . . . . . 34,203 1,713 1,533 1,044 418 152
---------- -------- -------- ------- -------- -------
47,682 848 989 1,175 486 179
Goodwill and other assets,
net . . . . . . . . . . . . . 117,134 498 -- -- 20 4
---------- -------- -------- ------- -------- -------
TOTAL ASSETS . . . . . . . . . $ 186,969 $ 1,766 $ 1,078 $ 1,209 $ 747 $ 326
---------- -------- -------- ------- -------- -------
---------- -------- -------- ------- -------- -------
<CAPTION>
PRO FORMA PRO FORMA
WILLIAMS NATIONWIDE ADJUSTMENTS INDEX CONSOLIDATED
----------- ----------- ----------- -------- -------------
<S> <C> <C> <C> <C> <C>
Current Assets . . . . . . . . $ 311 $ 218 $ (7,845) (A),(C) $ 15,764
Equipment
Pagers. . . . . . . . . . . . 297 517 (178) (A) 40,152
Communications
equipment. . . . . . . . . . 406 1,002 (1,819) (A) 28,080
Security systems'
equipment . . . . . . . . . . -- -- -- 11,866
Office and other . . . . . . . -- 101 (2,509) (A) 8,141
---------- -------- -------- ------- --------
703 1,620 (4,506) 88,239
Less allowance for
depreciation. . . . . . . . . 567 406 (5,833) (A) 34,203
---------- -------- -------- ------- --------
136 1,214 1,327 54,036
Goodwill and other assets,
net . . . . . . . . . . . . . 176 25 48,463 (A),(B) 166,320
(C)
---------- -------- -------- ------- --------
TOTAL ASSETS . . . . . . . . . $ 623 $ 1,457 $ 41,945 $236,120
---------- -------- -------- ------- --------
---------- -------- -------- ------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
SIGNET
PRONET SUN RALEIGH PAGE ONE AGR TOTAL
----------- --------- --------- ---------- -------- ---------
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Current liabilities. . . . . . $ 18,911 $ 325 $ 300 $ 1,678 $ 532 $ 212
Long-term debt, less current
maturities. . . . . . . . . . 99,319 -- 443 -- 524 124
Deferred tax liabilities . . . 688 -- -- -- -- --
Deferred payments. . . . . . . 18,495 -- -- -- -- --
Shareholders' equity (deficit) 49,556 1,441 335 (469) (309) (10)
---------- -------- -------- ------- -------- --------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 186,969 $ 1,766 $ 1,078 $ 1,209 $ 747 $ 326
---------- -------- -------- ------- -------- --------
---------- -------- -------- ------- -------- --------
<CAPTION>
PRO FORMA PRO FORMA
WILLIAMS NATIONWIDE ADJUSTMENTS INDEX CONSOLIDATED
----------- ---------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Current liabilities. . . . . . $ 470 $ 610 $(2,674) (A) $ 20,364
Long-term debt, less current
maturities. . . . . . . . . . 177 1,193 27,464 (A),(C) 129,244
Deferred tax liabilities -- -- -- 688
Deferred payments. . . . . . . -- -- 5,660 (C) 24,155
Shareholders' equity (deficit) (24) (346) 11,495 (A),(C) 61,669
--------- ------- ------- ------- --------
TOTAL LIABILITIES AND $ 623 $ 1,457 $41,945 $236,120
SHAREHOLDERS' EQUITY . . . .
--------- ------- ------- ------- --------
--------- ------- ------- ------- --------
</TABLE>
SEE ACCOMPANYING NOTES TO UNAUDITED PRO FRORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS.
<PAGE>
PRONET INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
TWELVE MONTHS TWO MONTHS THREE MONTHS FOUR MONTHS
ENDED DEC. 31, ENDED FEB. 28, ENDED MARCH 31, ENDED APRIL 30,
1995 1995 1995 1995
------------- ------------- -------------- -------------------------------
PRONET SIGNET CARRIER METROPOLITAN ALL CITY
------------- ------------- -------------- -------------- -------------
(in thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Service revenues...................... $ 56,108 $ 872 $ 532 $ 1,870 $ 1,139
Product sales......................... 10,036 109 197 50 47
------------- ------------- ------------- ------------- -------------
Total revenues...................... 66,144 981 729 1,920 1,186
Cost of products sold................. (9,421) (109) (179) (54) --
------------- ------------- ------------- ------------- -------------
56,723 872 550 1,866 1,186
COST OF SERVICES........................ 14,396 273 59 514 272
GROSS MARGIN.......................... 42,327 599 491 1,352 914
EXPENSES
Sales, general and administrative..... 23,935 367 286 592 511
Depreciation and amortization......... 18,662 17 54 215 292
------------- ------------- ------------- ------------- -------------
42,597 384 340 807 803
------------- ------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) (270) 215 151 545 111
OTHER INCOME (EXPENSE)
Interest expense...................... (8,640) (54) (26) -- (528)
Interest and other income............. 1,291 2 1 20 --
------------- ------------- ------------- ------------- -------------
(7,349) (52) (25) 20 (528)
INCOME (LOSS) BEFORE
INCOME TAXES...................... (7,619) 163 126 565 (417)
Provision for income taxes............ 78 -- 1 192 --
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS)................... $ (7,697) $ 163 $ 125 $ 373 $ (417)
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
<CAPTION>
NINE MONTHS
ENDED SEPT. 30,
SIX MONTHS EIGHT MONTHS 1995 ELEVEN MONTHS
ENDED JUNE 30, ENDED AUGUST 31, --------------- ENDED NOV. 30,
1995 1995 1995
------------- ------------------------------- PAGING & --------------
AMERICOM GOLD COAST LEWIS CELLULAR APPLE
------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
REVENUES
Service revenues...................... $ 1,810 $ 427 $ 932 $ 3,016 $ 4,358
Product sales......................... 430 -- 780 1,161 846
------------- ------------- ------------- ------------- -------------
Total revenues...................... 2,240 427 1,712 4,177 5,204
Cost of products sold................. (371) -- (490) (887) (1,153)
------------- ------------- ------------- ------------- -------------
1,869 427 1,222 3,290 4,051
COST OF SERVICES........................ 259 99 48 1,078 395
GROSS MARGIN.......................... 1,610 328 1,174 2,212 3,656
EXPENSES
Sales, general and administrative..... 782 160 650 1,122 2,861
Depreciation and amortization......... 209 51 88 492 96
------------- ------------- ------------- ------------- -------------
991 211 738 1,614 2,957
------------- ------------- ------------- ------------- -------------
OPERATING INCOME (LOSS) 619 117 436 598 699
OTHER INCOME (EXPENSE)
Interest expense...................... (4) -- (4) (300) --
Interest and other income............. 97 -- 20 13 --
------------- ------------- ------------- ------------- -------------
93 -- 16 (287) --
INCOME (LOSS) BEFORE
INCOME TAXES...................... 712 117 452 311 699
Provision for income taxes............ -- -- -- -- --
------------- ------------- ------------- ------------- -------------
NET INCOME (LOSS)................... $ 712 $ 117 $ 452 $ 311 $ 699
------------- ------------- ------------- ------------- -------------
------------- ------------- ------------- ------------- -------------
<CAPTION>
Year Ended December 31, 1995
----------------------------------------------------------------------------------
Signet Page
Sun Raleigh One AGR Total Williams Nationwide
---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Service revenues...................... $ 1,528 $ 2,900 $ 4,864 $ 2,377 $ 784 $ 1,039 $ 3,108
Product sales......................... 246 146 722 72 322 165 2,173
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues...................... 1,774 3,046 5,586 2,449 1,106 1,204 5,281
Cost of products sold................. (286) (123) (1,216) (772) (442) (101) (2,775)
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,488 2,923 4,370 1,677 664 1,103 2,506
COST OF SERVICES........................ 445 700 776 247 313 153 659
GROSS MARGIN.......................... 1,043 2,223 3,594 1,430 351 950 1,847
EXPENSES
Sales, general and administrative..... 1,102 1,479 3,142 1,510 528 900 1,944
Depreciation and amortization......... 425 419 360 187 17 98 99
---------- ---------- ---------- ---------- ---------- ---------- ----------
1,527 1,898 3,502 1,697 545 998 2,043
---------- ---------- ---------- ---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (484) 325 92 (267) (194) (48) (196)
OTHER INCOME (EXPENSE)
Interest expense...................... -- (78) (123) (68) (13) (54) (113)
Interest and other income............. -- 48 1 8 90 39 --
---------- ---------- ---------- ---------- ---------- ---------- ----------
-- (30) (122) (60) 77 (15) (113)
INCOME (LOSS) BEFORE
INCOME TAXES...................... (484) 295 (30) (327) (117) (63) (309)
Provision for income taxes............ -- -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ---------- ----------
NET INCOME (LOSS)................... $ (484) $ 295 $ (30) $ (327) $ (117) $ (63) $ (309)
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS INDEX CONSOLIDATED
----------- ---------- ------------
<S> <C> <C> <C>
REVENUES
Service revenues...................... $ (192) (D) $ 87,472
Product sales......................... -- 17,502
---------- ---------- ----------
Total revenues...................... (192) 104,974
Cost of products sold................. -- (18,379)
---------- ---------- ----------
(192) 86,595
COST OF SERVICES........................ 20,686
GROSS MARGIN.......................... (192) 65,909
EXPENSES
Sales, general and administrative..... (2,283) (E) 39,588
Depreciation and amortization......... 6,427 (F) 28,208
---------- ---------- ----------
4,144 67,796
---------- ---------- ----------
OPERATING INCOME (LOSS) (4,336) (1,887)
OTHER INCOME (EXPENSE)
Interest expense...................... (6,069) (G) (16,074)
Interest and other income............. -- 1,630
---------- ---------- ----------
(6,069) (14,444)
INCOME (LOSS) BEFORE
INCOME TAXES...................... (10,405) (16,331)
Provision for income taxes............ -- (H) 271
---------- ---------- ----------
NET INCOME (LOSS)................... $ (10,405) $ (16,602)
---------- ---------- ----------
---------- ---------- ----------
</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, 1995, the Company purchased substantially all of the paging
assets of Signet for approximately $9.0 million, comprised of approximately
$4.8 million paid 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 paid in cash at closing and a deferred payment of
approximately $3.0 million. Effective May 1, 1995, the Company completed the
acquisition of all the outstanding capital stock of Metropolitan for
approximately $21.0 million paid in cash at closing. Also effective May 1,
1995, the Company completed the purchase of substantially all of the paging
assets of All City for approximately $6.4 million, comprised of approximately
$6.0 million paid in cash at closing and a $350,000 deferred payment.
Effective 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 paid 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 paid in
cash at closing and a $2.1 million deferred payment. Also on September 1,
1995, the Company completed the purchase of substantially all of the paging
assets of Gold Coast for approximately $2.3 million paid in cash at closing.
Effective October 1, 1995, the Company completed the acquisition of
substantially all of the paging assets of Paging & Cellular for
approximately $9.5 million paid in cash at closing. On December 1, 1995, the
Company completed the acquisition of all of the outstanding capital stock of
Apple for approximately $13.0 million, comprised of approximately $8.5
million paid in cash and approximately $4.5 million in stock at closing.
Effective December 31, 1995, the Company acquired substantially all of the
paging assets of Sun for approximately $2.3 million paid in cash at closing.
Effective January 1, 1996, the Company completed two acquisitions. The
Company acquired substantially all of the paging assets of Signet Raleigh for
approximately $8.7 million, comprised of approximately $4.7 million paid in
cash at closing and delivery of $3.2 million in common stock of the Company
at closing and a $800,000 deferred payment. Also, the Company completed the
purchase of substantially all of the outstanding capital stock of Page One
for approximately $19.7 million, comprised of approximately $14.8 million
paid in cash at closing and a $4.9 million deferred payment. Effective
February 1, 1996, the Company completed three additional acquisitions. The
Company acquired all of the outstanding capital stock of AGR for
approximately $6.5 million paid in cash at closing, Total for approximately
$2.2 million, comprised of approximately $400,000 paid in cash and $1.8
million in common stock of the Company at closing, and Williams for $2.7
million paid in cash at closing. In addition, upon the final grant of
certain licenses, the Company would pay an additional $1.5 million for AGR
and $400,000 for Total. These acquisitions were accounted for as purchases
and were financed with the proceeds of the Notes or borrowings under the
Company's credit facility. The results of operations for Signet, Carrier,
Metropolitan, All City, Americom, Lewis, Gold Coast, Paging & Cellular and
Apple 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 December 31, 1995 includes these acquisitions.
On January 9, 1996, the Company signed a definitive agreement to
purchase the outstanding capital stock of Nationwide for an amount to be
determined based upon the terms of the agreement. This transaction is subject
to various conditions and approvals. Nationwide will be accounted for as a
purchase and the Company anticipates the acquisition will be funded with
borrowings under the Company's credit facility.
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.
The unaudited pro forma condensed financial statements reflect the
transactions as though the Acquisitions had been acquired at the beginning of
the periods presented. The Company and the Acquisitions, except for Gold Coast,
operated on a December 31 fiscal year basis. Gold Coast operated on a June 30
fiscal year basis. The respective results of operations for Signet, Carrier,
All City, Metropolitan, Americom, Gold Coast, Lewis, Paging & Cellular and Apple
from the date of acquisition were combined with the actual results of operations
of the Company, Sun, Signet Raleigh, Page One, AGR, Total, Williams and
Nationwide for the year ended December 31, 1995, to determine the pro forma
results of operations for the year ended December 31, 1995.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The accompanying pro forma condensed consolidated balance sheet as of
December 31, 1995, has been prepared as if the Sun, Signet Raleigh, Page One,
AGR, Total, Williams and Nationwide acquisitions had occurred on that date and
reflects the following adjustments:
(A) Pro forma adjustments are made to reflect the fair value of those
assets and liabilities that were acquired as a result of the Sun, Signet
Raleigh, Page One, AGR, Total, Williams and Nationwide acquisitions. The
Company did not acquire cash or assume certain trade payables, certain
accrued expenses or existing long-term debt. The following is a detail of
these adjustments (in thousands):
<TABLE>
<CAPTION>
DR CR
----- -----
<S> <C> <C>
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . 2,461
Allowance for depreciation . . . . . . . . . . . . . . . . . . . 5,833
Current liabilities. . . . . . . . . . . . . . . . . . . . . . . 2,674
Shareholders' equity (deficit) . . . . . . . . . . . . . . . . . 618
Current assets . . . . . . . . . . . . . . . . . . . . . . . . . 107
Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,506
Goodwill and other assets . . . . . . . . . . . . . . . . . . . 721
Investments in Sun, Signet Raleigh, Page One, AGR,
Total, Williams and Nationwide . . . . . . . . . . . . . . . . 6,252
</TABLE>
To reflect the allocation of the purchase price of Sun, Signet
Raleigh, Page One, AGR, Total, Williams and Nationwide and to reflect reductions
in certain assets and liabilities not acquired by the Company.
(B) Pro forma adjustments are 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 definitive agreements. The following is a detail of these
adjustments (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Goodwill and other assets. . . . . . . . . . . . . . . . . . . . 49,445
Investments in Sun, Signet Raleigh, Page One, AGR,
Total, Williams and Nationwide. . . . . . . . . . . . . . . 49,445
</TABLE>
To record goodwill and noncompetition agreements related to the
acquisitions of Sun, Signet Raleigh, Page One, AGR, Total, Williams and
Nationwide.
(C) Pro forma adjustments are made to (i) record the use of cash, the
borrowings under the Company's credit facility and the issuance of the
Company's common stock and (ii) record the incurrence of deferred payments
of $5.7 million in connection with the acquisitions of Signet Raleigh and
Page One. All deferred payments are classified as long-term liabilities
since the Company has the option to make the deferred payments in cash with
funds available from the proceeds of the Company's credit facility or in
shares of the Company's common stock. The following is a detail of these
adjustments (in thousands):
<TABLE>
<CAPTION>
<S> <C> <C>
Investments in Sun, Signet Raleigh, Page One, AGR,
Total, Williams and Nationwide . . . . . . . . . . . . . . . . 55,697
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . 29,925
Deferred payments . . . . . . . . . . . . . . . . . . . . . . 5,660
Shareholders' equity (deficit) . . . . . . . . . . . . . . . 12,113
Current assets. . . . . . . . . . . . . . . . . . . . . . . . 7,738
Goodwill and other assets . . . . . . . . . . . . . . . . . . 261
</TABLE>
To record the purchases of Sun, Signet Raleigh, Page One, AGR, Total,
Williams and Nationwide.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
The following is a summary of the fair value assigned to the assets and
liabilities acquired from Sun, Signet Raleigh, Page One, AGR, Total, Williams
and Nationwide (in thousands):
<TABLE>
<CAPTION>
HISTORICAL COST
---------------------------------------------------------------------
SIGNET PAGE FAIR
SUN RALEIGH ONE AGR TOTAL WILLIAMS NATIONWIDE SUBTOTAL ADJUSTMENTS VALUE
------ ------- ------ ------ ------ -------- ---------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Current assets . . . . .$ 420 $ 89 $ 34 $ 241 $ 143 $ 311 $ 218 $ 1,456 $ (107) $ 1,349
Equipment
Pagers . . . . . . . . 548 1,779 269 25 106 297 517 3,541 (178) 3,363
Communications
equipment . . . . . . 1,969 437 -- -- 34 406 1,002 3,848 (1,819) 2,029
Office and other . . . 44 306 1,950 879 191 -- 101 3,471 (2,509) 962
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
2,561 2,522 2,219 904 331 703 1,620 10,860 (4,506) 6,354
Less allowance
for depreciation . . . 1,713 1,533 1,044 418 152 567 406 5,833 (5,833) --
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
848 989 1,175 486 179 136 1,214 5,027 1,327 6,354
Goodwill, net . . . . . -- -- -- -- -- -- -- -- 49,445 49,445
Other assets, net. . . . 498 -- -- 20 4 176 25 723 (721) 2
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
Total assets . . . . . . 1,766 1,078 1,209 747 326 623 1,457 7,206 49,944 57,150
Current liabilities. . . 325 300 1,678 532 212 470 610 4,127 (2,674) 1,453
Long-term debt . . . . . -- 443 -- 524 124 177 1,193 2,461 (2,461) --
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
Net assets . . . . . . .$1,441 $ 335 $ (469) $ (309) $ (10) $ (24) $ (346) $ 618 $ 55,079 $ 55,697
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
------ ------ ------ ------ ------ ------- ------ ------- -------- --------
</TABLE>
The accompanying pro forma condensed consolidated statement of operations
for the year ended December 31, 1995 has 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 service
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, Carrier, All City, Metropolitan, Lewis, Paging &
Cellular, Apple, Sun, Signet Raleigh, Page One, AGR, Total, Williams and
Nationwide 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.
(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
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 Company's credit
facility. Pro forma adjustments reflect (i) the reversals of interest
expense of $1.4 million for the year ended December 31, 1995 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% and $29.9 million in borrowings on the Company's credit facility
at an assumed annual rate based on 90 day LIBOR plus an applicable margin.
Interest expense on the deferred payments is provided as required by the
definitive agreements or letters of intent.
<PAGE>
PRONET INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
(H) At December 31, 1995, the Company had net operating loss
carryforwards of $11.0 million for income tax purposes that expire in years
2005 through 2011. The Company anticipates that the current year operating
loss may not be realizable within the statutory time frame. Therefore, no
pro forma adjustments were made to reflect any current or future tax
benefit.
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.
