<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1 TO CURRENT REPORT ON 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):
May 21, 1996
ARCH COMMUNICATIONS GROUP, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
0-23232 31-1358569
(Commission File Number) (IRS Employer Identification No.)
1800 West Park Drive, Suite 250, Westborough, MA 01581
(Address of principal executive offices) (Zip Code)
(508) 870-6700
Registrant's Telephone Number, Including Area Code
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
<PAGE> 2
Introductory Notes
------------------
On May 21, 1996, Arch Communications Enterprises, Inc. ("Enterprises"), a
wholly-owned subsidiary of Arch Communications Group, Inc. ("Arch"), acquired
all of the issued and outstanding capital stock and other equity interests (the
"Acquisition") of Westlink Holdings, Inc. ("Westlink") pursuant to a Stock
Purchase Agreement dated as of December 17, 1995 and amended as of March 18,
1996 and May 20, 1996. Immediately after the Acquisition, Westlink was merged
with and into Enterprises, as a result of which Westlink's operating
subsidiaries became direct or indirect subsidiaries of Enterprises.
On June 3, 1996, Arch filed a Current Report on Form 8-K to report the
Acquisition. The purpose of this Amendment No. 1 to Current Report on Form 8-K,
filed on Form 8-K/A, is to file the additional financial statements of Westlink
required by item 7(a) and file the pro forma financial statements required by
Item 7(b).
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Businesses Acquired
-------------------------------------------
The financial statements contained on pages F-47 through F-71 of
Arch's Registration Statement on Form S-3 (File No. 333-542) are
hereby incorporated by reference. The required additional
financial statements of Westlink are attached hereto on pages 8
through 11.
(b) Pro forma Financial Information
-------------------------------
The required pro forma financial statements are attached hereto
on pages 3 through 7.
(c) Exhibits - None.
--------
<PAGE> 3
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The accompanying unaudited pro forma combined condensed financial
statements give effect to Arch's acquisition of Westlink completed on May
21, 1996 and recent acquisitions of several paging businesses completed by Arch,
USA Mobile and Westlink, as follows:
Arch Acquisitions: Date Completed:
------------------ ---------------
Beta Tele-Page, Inc. ("Beta") May 1995
Data Transmission, Inc. ("DTI") May 1995
Groome Enterprises, Inc. ("Groome") February 1995
Professional Paging & Radio, Inc. ("ProPage") March 1995
USA Mobile Communications Holdings, Inc. ("USA Mobile") September 1995
Westlink May 1996
USA Mobile Acquisition:
-----------------------
PCI Holding Company, Inc. ("PCI") March 1995
Westlink Acquisition:
---------------------
Telecomm Systems, Inc. ("TSI") June 1995
For purposes of this pro forma presentation, the Arch Acquisitions, the USA
Mobile Acquisition and the Westlink Acquisition listed above are collectively
referred to as the "Acquisitions".
The accompanying unaudited pro forma combined condensed balance sheet at
March 31, 1996 combines the historical consolidated balance sheet of Arch and
the balance sheet of Westlink as if Arch's acquisition of Westlink had occurred
on March 31, 1996. The accompanying unaudited pro forma combined condensed
statement of operations for the year ended December 31, 1995 combines the
historical consolidated statement of operations of Arch and the statements of
operations of the Acquisitions as if the Acquisitions had occurred on January 1,
1995. The accompanying unaudited pro forma combined condensed statement of
operations for the three months ended March 31, 1996 combines the historical
consolidated statements of operations of Arch and of Westlink as if Arch's
acquisition of Westlink had occurred on January 1, 1996.
The unaudited pro forma combined condensed financial statements give effect
to the Acquisitions using the purchase method of accounting, are based upon a
preliminary allocation of the purchase prices and include the adjustments
described in the notes attached hereto. The aggregate consideration paid for the
Arch Acquisitions was $939.9 million, consisting of $446.5 million in cash,
7,599,525 shares of Arch common stock valued at $209.0 million and the
assumption of liabilities of $284.3 million. The allocation of the excess of the
purchase price over the book value of the net assets acquired in each of the
Acquisitions has been applied to intangible assets based on Arch's estimate of
the fair value of the net assets acquired. Such allocations of the purchase
prices may change upon final appraisal of the fair value of the net assets
acquired.
The unaudited pro forma combined condensed financial statements are presented
for illustrative purposes only and are not necessarily indicative of the
operating results or financial position that would have occurred if the
Acquisitions had been consummated on the dates indicated or of the future
operating results or financial position of Arch. The pro forma adjustments give
effect to available information and assumptions that Arch believes are
reasonable. The unaudited pro forma combined condensed financial statements
should be read in conjunction with Arch's historical consolidated financial
statements and other historical consolidated financial statements and the
notes thereto included elsewhere or incorporated by reference herein.
<PAGE> 4
<TABLE>
ARCH COMMUNICATIONS GROUP, INC.
PRO FORMA COMBINED CONDENSED BALANCE SHEET
March 31, 1996
(unaudited and in thousands)
<CAPTION>
Historical
--------------------------------
Pro Forma
Arch Westlink Adjustments Combined
---- -------- ----------- --------
<S> <C> <C> <C> <C>
ASSETS
Current assets $ 74,519 $ 14,203 $(35,000) (A) $ 53,722
--------- -------- -------- ----------
Property and equipment at cost:
Land, buildings and improvements 7,112 1,075 $ (138) (B) $ 8,049
Paging and computer equipment 218,172 50,101 (17,571) (B) 250,702
Furniture, fixtures and vehicles 8,069 7,662 (1,093) (B) 14,638
--------- -------- -------- ----------
233,353 58,838 (18,802) 273,389
Less accumulated depreciation and
amoritization 47,069 18,802 (18,802) (B) 47,069
--------- -------- --------- ----------
Property and equipment, net 186,284 40,036 - 226,320
--------- -------- -------- ----------
Intangible and other assets, net 573,432 125,089 220,257 (B) 918,778
--------- -------- -------- ----------
$ 834,235 $179,328 $185,257 $1,198,820
========= ======== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 49,815 $ 18,940 $ (5,125) (A) $ 63,630
Long-term debt, less current maturities 517,952 115,875 178,295 (A) 812,122
Deferred income taxes 21,140 - 56,600 (C) 77,740
--------- -------- -------- ----------
Total liabilities 588,907 134,815 229,770 953,492
--------- -------- -------- ----------
Redeemable preferred stock 3,460 16,350 (16,350) (D) 3,460
--------- -------- -------- ----------
Common stock 205 49 (49) (D) 205
Additional paid-in capital 349,178 46,186 (46,186) (D) 349,178
Stock warrants - 20,215 (20,215) (D) -
Accumulated deficit (107,515) (37,437) 37,437 (D) (107,515)
Note receivable from shareholder - (850) 850 (D) -
--------- -------- -------- ----------
Stockholders' equity 241,868 28,163 (28,163) 241,868
--------- -------- -------- ----------
$ 834,235 $179,328 $185,257 $1,198,820
========= ======== ======== ==========
</TABLE>
See accompanying notes to
unaudited pro forma combined condensed financial statements.
<PAGE> 5
<TABLE>
ARCH COMMUNICATIONS GROUP, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1995
(unaudited and in thousands)
<CAPTION>
Historical
-----------------------------------------------------------------------------------
USA Pro Forma
Arch Beta DTI Groome ProPage Mobile PCI Westlink TSI Adjustments Consolidated
---- ---- --- ------ ------- ------ --- -------- --- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Service, rental
and maintenance
revenues $138,466 $ 820 $1,380 $319 $ 381 $ 72,185 $1,244 $ 61,322 $6,288 $282,405
Product sales 24,132 191 144 52 132 9,996 65 4,481 365 - 39,558
-------- ------ ------ ---- ----- -------- ------ -------- ------ -------- --------
Total revenues 162,598 1,011 1,524 371 513 82,181 1,309 65,803 6,653 - 321,963
Cost of products
sold (20,789) (157) (111) (45) (136) (6,726) (39) (2,322) (454) - (30,779)
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
141,809 854 1,413 326 377 75,455 1,270 63,481 6,199 - 291,184
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Operating expenses:
Service, rental
& maintenance 29,673 120 426 46 27 13,875 323 13,543 971 - 59,004
Selling 24,502 71 101 45 15 11,916 137 8,283 980 - 46,050
General and
administrative 40,448 183 437 112 304 19,279 343 17,650 2,086 - 80,842
Depreciation and
amortization 60,205 176 185 7 32 29,239 142 35,139 1,541 $ 28,169 (E) 154,835
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Total
operating
expenses 154,828 550 1,149 210 378 74,309 945 74,615 5,578 28,169 340,731
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Operating income
(loss) (13,019) 304 264 116 (1) 1,146 325 (11,134) 621 (28,169) (49,547)
Interest expense (22,560) (99) (107) (1) - (19,249) (3) (10,444) (243) (30,138) (F) (82,844)
Equity in earnings
(loss) of affiliate (3,977) - - - - - - (1,483) - 3,977 (G) (1,483)
Non-operating income
(expense) - - - - - (7,844) 13 - (860) 8,581 (H) (110)
Interest income 38 5 6 - - 554 - 367 19 - 989
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Income (loss) before
income tax
(expense)/benefit (39,518) 210 163 115 (1) (25,393) 335 (22,694) (463) (45,749) (132,995)
Income tax
(expense)/benefit 4,600 - - - (1) 2,675 (112) - - 33,438 (I) (40,600)
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Income (loss) before
extraordinary item (34,918) 210 163 115 (2) (22,718) 223 - - (12,311) (92,395)
Extraordinary charge
from early
extinguishment of
debt (1,684) - - - - - - - - - (1,684)
-------- ----- ------ ---- ----- -------- ------ -------- ------ -------- --------
Net income (loss) $(36,602) $ 210 $ 163 $115 $ (2) $(22,718) $ 223 $(22,694) $ (463) $(12,311) $(94,079)
======== ===== ====== ==== ===== ======== ====== ======== ====== ======== ========
</TABLE>
See accompanying notes to
unaudited pro forma combined condensed financial statements.
<PAGE> 6
<TABLE>
ARCH COMMUNICATIONS GROUP, INC.
PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
Three Months Ended March 31, 1996
(unaudited and in thousands)
<CAPTION>
Historical
--------------------------------
Pro Forma
Arch Westlink Adjustments Consolidated
---- -------- ----------- ------------
<S> <C> <C> <C> <C>
Service, rental and maintenance revenues $ 58,333 $16,783 - $ 75,116
Product sales 8,838 1,079 - 9,917
-------- ------- ------- --------
Total revenues 67,171 17,862 - 85,033
Cost of products sold (6,545) (667) - (7,212)
-------- ------- ------- --------
60,626 17,195 - 77,821
-------- ------- ------- --------
Operating expenses:
Service, rental and maintenance 12,371 3,771 - 16,142
Selling 11,042 2,748 - 13,790
General and administrative 15,879 5,098 - 20,977
Depreciation and amortization 34,283 9,926 $ 2,714 (E) 46,923
-------- ------- ------- --------
Total operating expenses 73,575 21,543 2,714 97,832
-------- ------- ------- --------
Operating income (loss) (12,949) (4,348) (2,714) (20,011)
Interest expense, net (14,188) (2,084) (6,516) (F) (22,788)
Equity in earnings (loss) of affiliate - (271) - (271)
-------- ------- ------- --------
Income (loss) before income tax benefit (27,137) (6,703) (9,230) (43,070)
Income tax benefit 7,760 - 4,140 (I) 11,900
-------- ------- ------- --------
Net income (loss) $(19,377) $(6,703) $(5,090) $(31,170)
======== ======= ======= ========
</TABLE>
See accompanying notes to
unaudited pro forma combined condensed financial statements.
<PAGE> 7
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed financial statements are based
on the following assumptions and adjustments:
(A) A pro forma adjustment is made to reflect: (i) additional borrowings of
$294.2 million under Enterprises' credit facility; (ii) use of $35.0
million of available cash to fund a portion of the purchase price of
Westlink; and (iii) the repayment of $121.0 million of Westlink's existing
long-term debt.
(B) A pro forma adjustment is made to apply the excess of $329.2 million
(consisting of (i) the purchase price of $318.0 million, plus (ii)
estimated direct transaction costs of $11.2 million) over the fair value
of specific tangible assets acquired less liabilities assumed of Westlink
to intangible and other assets, net (consisting of FCC licenses, subscriber
lists and goodwill).
(C) A pro forma adjustment is made to record the tax effect of the difference
between book and tax bases of assets recorded in purchase accounting.
(D) A pro forma adjustment is made to eliminate the redeemable preferred stock
and stockholders' equity accounts of Westlink in accordance with purchase
accounting requirements.
(E) A pro forma adjustment is made to reflect additional depreciation and
amortization expense on the fair value of the assets acquired. Property
and equipment is depreciated over periods ranging from four to 20 years on
a straight-line basis and acquired intangible assets, consisting of FCC
licenses, subscriber lists, non-competition agreements and goodwill, are
amortized over various periods ranging from three to ten years. Such
depreciation and amortization expense may change upon final appraisal of
the fair value of the net assets acquired.
(F) A pro forma adjustment is made to reflect for the year ended December 31,
1995 and for the three months ended March 31, 1996 (i) the reversal of
$10.9 million and $2.1 million, respectively, of interest expense on debt
not assumed by Arch and (ii) an increase in interest expense of $41.0
million and $8.6 million, respectively, due to additional borrowings under
the Enterprises' credit facility, based on the 8.6% and 8.3% average rates
of interest, respectively, thereunder, to fund a portion of the purchase
prices of the Acquisitions and the issuance of senior discount notes in
March 1996 at an interest rate of 10.875%.
(G) A pro forma adjustment is made to reverse $4.0 million of equity in
earnings (loss) of USA Mobile, which represents Arch's pro rata share of
USA Mobile's net losses for the period of time from Arch's acquisition of
its initial 37% interest in USA Mobile on May 16, 1995 through the
completion of Arch's acquisition of USA Mobile on September 7, 1995.
(H) A pro forma adjustment is made to reverse $8.6 million of non-operating
expenses, consisting of (i) $7.7 million of legal and advisory fees and
retention bonuses and severance payments, which USA Mobile incurred in
connection with Arch's acquisition of USA Mobile, and (ii) $0.9 million of
legal and advisory fees which TSI incurred in connection with Westlink's
acquisition of TSI.
(I) A pro forma adjustment is made to reflect the tax benefit of operating
losses subsequent to January 1, 1995 which would have been available to
offset previously established deferred tax liabilities arising in purchase
accounting.
<PAGE> 8
<TABLE>
WESTLINK HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<CAPTION>
March 31, December 31,
1996 1995
---- ----
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 495 $ 398
Accounts receivable, less allowance for doubtful accounts of $346
and $292 at March 31, 1996 and December 31, 1995, respectively 10,398 9,007
Inventories 450 284
Prepaid expenses and other 2,860 1,479
-------- --------
Total current assets 14,203 11,168
-------- --------
Property and equipment:
Pagers and paging systems and equipment 45,952 41,974
Furniture and equipment 7,662 7,440
Leasehold improvements 1,075 1,045
Construction in progress 4,149 2,998
-------- --------
58,838 53,457
Less - Accumulated depreciation and amortization (18,802) (15,331)
-------- --------
40,036 38,126
-------- --------
Other assets:
Intangible assets, net of accumulated amortization of $39,534 and
$33,000 at March 31, 1996 and December 31, 1995, respectively 119,864 125,990
Investment in and advances to joint venture 4,646 4,740
Other assets 579 1,347
-------- --------
125,089 132,077
-------- --------
$179,328 $181,371
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 4,319 $ 3,173
Accrued liabilities 1,751 3,113
Deferred revenues 7,745 7,981
Current portion of long-term debt 5,125 4,000
-------- --------
Total current liabilities 18,940 18,267
-------- --------
Long-term debt 115,875 111,888
-------- --------
Redeemable preferred stock 16,350 15,900
-------- --------
Shareholders' equity:
Common stock, par value $.01 per share 49 49
Additional paid-in capital 46,186 46,636
Common stock warrants 20,215 20,215
Accumulated deficit (37,437) (30,734)
Note receivable from shareholder (850) (850)
-------- --------
28,163 35,316
-------- --------
$179,328 $181,371
======== ========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
<PAGE> 9
<TABLE>
WESTLINK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1996 and 1995
(unaudited and in thousands, except share and per share data)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Revenues:
Service, rental and maintenance $16,783 $13,694
Product sales 1,079 757
------- -------
Total revenues 17,862 14,451
Cost of products sold (667) (459)
------- -------
17,195 13,992
------- -------
Other expenses:
Service, rental and maintenance 3,771 3,144
Selling and marketing 2,748 1,695
General and administrative 5,098 4,218
Depreciation and amortization 9,926 3,927
------- -------
Total operating expenses 21,543 12,984
------- -------
Operating income (loss) (4,348) 1,008
Interest expense, net (2,084) (2,115)
Equity in earnings (loss) of affiliate (271) -
------- -------
Net income (loss) (6,703) (1,107)
Cumulative preferred dividends (450) -
------- -------
Net income (loss) to common shareholders $(7,153) $(1,107)
======= =======
Net income (loss) per common share $ (1.46) $ (0.23)
======= =======
Weighted average number of common shares
outstanding 4,911,904 4,911,904
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
<PAGE> 10
<TABLE>
WESTLINK HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1996 and 1995
(unaudited and in thousands)
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(6,703) $(1,107)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 9,926 3,927
Equity in loss of joint venture 271 --
Changes in operating assets and liabilities:
Accounts receivable (1,391) 1,136
Inventories (166) 69
Prepaid expenses and other (1,381) (153)
Accounts payable 583 (640)
Deferred revenues (236) (151)
Accrued liabilities (798) (74)
------- -------
Net cash provided by operating activities 105 3,007
------- -------
Cash flows from investing activities:
Capital expenditures, net (4,943) (2,375)
Investments in and advances to joint venture (177) (2,412)
------- -------
Net cash used in investing activities (5,120) (4,787)
------- -------
Cash flows from financing activities:
Proceeds from long-term debt 5,112 2,500
------- -------
Net increase in cash 97 720
Cash, beginning of period 398 661
------- -------
Cash, at end of period $ 495 $ 1,381
======= =======
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
<PAGE> 11
WESTLINK HOLDINGS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
<TABLE>
1. Intangible assets, net of accumulated amortization at March 31, 1996 and
December 31, 1995 were composed of the following (in thousands):
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(unaudited)
<S> <C> <C>
Customer lists $ 39,385 $ 42,833
Goodwill, FCC licenses and other 74,198 76,485
Deferred financing costs 2,833 2,958
Organization costs 3,448 3,714
-------- --------
$119,864 $125,990
======== ========
</TABLE>
<TABLE>
2. Long-Term Debt
Westlink has a secured credit agreement, dated June 30, 1994 and amended
March 23, 1995 and June 30, 1995 (the "Agreement"), with banks which
provides for a term loan and a revolving credit facility. Borrowings
outstanding under the Agreement are secured by substantially all of
Westlink's assets and its common stock. Amounts outstanding at March 31,
1996 and December 31, 1995 were as follows (in thousands):
<CAPTION>
March 31,1996 December 31, 1995
------------- -----------------
(unaudited)
<S> <C> <C>
Term loans, payable in quarterly installments,
commencing March 31, 1996 through June 30, 2002,
variable interest rate (9.75% and 10.125% at
March 31, 1996 and December 31, 1995, respectively) $ 89,000 $ 83,723
Revolving credit facility, expires December 31, 2002
Mandatory quarterly revolver reductions of $500,
$750, $1,250, and $5,000 for 1999, 2000, 2001, and
2002, respectively,variable interest rate (9.75%
and 10.125% at March 31, 1996 and December 31, 1995,
respectively) 32,000 32,165
-------- --------
121,000 115,888
Less: current maturities (5,125) (4,000)
-------- --------
$115,875 $111,888
======== ========
</TABLE>
All borrowings under the Agreement were repaid on May 21, 1996 in connection
with Arch's acquisition of Westlink on that date.
3. Net income (loss) per common share -- Net income (loss) per common share
is based on the weighted average number of common shares outstanding.
Shares of stock issuable pursuant to stock options have not been
considered, as their effect would be anti-dilutive.
<PAGE> 12
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ARCH COMMUNICATIONS GROUP, INC.
By: /s/ William A. Wilson
-----------------------------------
Date: August 5, 1996 William A. Wilson
Executive Vice President and
Chief Financial Officer
