<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 0-21924
METROCALL, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 54 - 1215634
------------------------------------ ------------------------------------
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
6677 RICHMOND HIGHWAY, ALEXANDRIA, VIRGINIA 22306
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (703) 660-6677
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT
WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES [ X ] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S
CLASSES OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE:
CLASS OUTSTANDING AT MAY 1, 1997
------------------------------ ------------------------------
COMMON STOCK, $.01 PAR VALUE 25,052,513
<PAGE> 2
METROCALL, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<CAPTION>
PAGE
NUMBER
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets, December 31, 1996
and March 31, 1997 3
Condensed Consolidated Statements of Operations for the three months ended
March 31, 1996 and 1997 4
Condensed Consolidated Statement of Stockholders' Equity for the three months
ended March 31, 1997 5
Condensed Consolidated Statements of Cash Flows for the three months ended
March 31, 1996 and 1997 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 12
Item 3. Not Applicable
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Items 3-4 None or Not Applicable 21
Item 5. Asset Disposition 21
Item 6. Exhibits and Reports on Form 8-K 22
SIGNATURES 25
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share and Per Share Information)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
ASSETS 1996 1997
----------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 10,917 $ 12,861
Accounts receivable, less allowance for doubtful accounts of
$2,961 as of December 31, 1996 and $2,574 as of March 31, 1997 25,796 28,974
Prepaid expenses and other current assets 5,681 5,174
----------------- -----------------
Total current assets 42,394 47,009
----------------- -----------------
PROPERTY AND EQUIPMENT:
Land, buildings and leasehold improvements 12,694 15,352
Furniture, office equipment and vehicles 29,742 33,135
Paging and plant equipment 188,236 194,517
Less - Accumulated depreciation and amortization (77,260) (85,530)
----------------- -----------------
153,412 157,474
----------------- -----------------
INTANGIBLE ASSETS, net of accumulated amortization of
approximately $20,926 as of December 31, 1996 and $28,295
as of March 31, 1997 452,639 449,216
OTHER ASSETS 3,023 1,871
----------------- -----------------
TOTAL ASSETS $ 651,468 $ 655,570
================= =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt $ 700 $ 875
Accounts payable 17,194 16,079
Accrued expenses and other current liabilities 18,940 19,897
Deferred revenues and subscriber deposits 12,827 14,037
----------------- -----------------
Total current liabilities 49,661 50,888
----------------- -----------------
CAPITAL LEASE OBLIGATIONS, net of current portion 3,244 4,992
CREDIT FACILITY AND OTHER LONG-TERM DEBT, less current
maturities 171,314 181,208
SENIOR SUBORDINATED NOTES, due 2005 and 2007 152,534 152,534
DEFERRED INCOME TAX LIABILITY 76,687 76,620
MINORITY INTEREST IN PARTNERSHIP 499 499
----------------- -----------------
Total liabilities 453,939 466,741
----------------- -----------------
SERIES A CONVERTIBLE PREFERRED STOCK, 14% cumulative;
par value $.01 per share; 810,000 shares authorized; 159,600 shares
issued and outstanding as of December 31, 1996 and March 31, 1997,
and a liquidation preference of $40,598 and $41,995 at December 31,
1996 and March 31, 1997, respectively 31,231 32,791
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, par value $.01 per share; authorized
1,000,000 shares; none issued and outstanding - -
Common stock, par value $.01 per share; authorized 33,500,000
shares; 24,521,135 and 25,050,617 shares issued and outstanding
as of December 31, 1996 and March 31, 1997, respectively 245 251
Additional paid-in capital 262,827 265,869
Accumulated deficit (96,774) (110,082)
----------------- -----------------
Total stockholders' equity 166,298 156,038
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 651,468 $ 655,570
================= =================
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Share and Per Share Information)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
----------------------------------
1996 1997
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<S> <C> <C>
REVENUES:
Service, rent and maintenance revenues $ 23,750 $ 58,515
Product sales 6,189 8,238
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Total revenues 29,939 66,753
Net book value of products sold (4,650) (6,157)
------------- -------------
25,289 60,596
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OPERATING EXPENSES:
Service, rent and maintenance expenses 8,193 16,418
Selling and marketing 4,593 11,912
General and administrative 5,782 15,976
Depreciation and amortization 11,491 20,718
------------- -------------
30,059 65,024
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Loss from operations (4,770) (4,428)
INTEREST EXPENSE (4,209) (8,040)
INTEREST AND OTHER INCOME (EXPENSE) 1,354 (83)
------------- -------------
LOSS BEFORE INCOME TAX (PROVISION) BENEFIT (7,625) (12,551)
INCOME TAX (PROVISION) BENEFIT (64) 803
------------- -------------
Net loss (7,689) (11,748)
PREFERRED DIVIDENDS 0 (1,560)
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Loss attributable to common shareholders $ (7,689) $ (13,308)
============= =============
LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS $ (0.53) $ (0.54)
============= =============
WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING 14,626,255 24,858,397
============= =============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(In Thousands, Except Share Information)
<TABLE>
<CAPTION>
Common Stock
--------------------------- Additional
Shares Paid-in Accumulated
Outstanding Par Value Capital Deficit Total
------------- ----------- ----------- ------------- ----------
<S> <C> <C> <C> <C> <C>
BALANCE, December 31, 1996 24,521,135 $ 245 $262,827 $ (96,774) $166,298
Issuance of shares in employee stock
purchase plan 35,203 1 143 - 144
Issuance of common stock in the
acquisition of Radio and Communications
Consultants, Inc. and Advanced Cellular
Telephone, Inc. 494,279 5 2,899 - 2,904
Preferred dividends - - - (1,560) (1,560)
Net loss - - - (11,748) (11,748)
------------- ---------- ----------- ------------ ----------
BALANCE, March 31, 1997 25,050,617 $ 251 $265,869 $(110,082) $156,038
============= ========== =========== ============ ==========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
METROCALL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------------------
1996 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (7,689) $ (11,748)
Adjustments to reconcile net loss to net cash
provided by operating activities-
Depreciation and amortization 11,491 20,718
Amortization of debt financing costs 72 248
Decrease in deferred income taxes (172) (1,320)
Cash provided by (used in) changes in assets and liabilities:
Accounts receivable 440 (2,977)
Prepaid expenses and other current assets 158 506
Accounts payable 261 (1,115)
Accrued expenses and other current assets 3,729 758
Deferred revenues and subscriber deposits 611 1,210
------------ ------------
Net cash provided by operating activities 8,901 6,280
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisitions, net of cash acquired - (798)
Purchases of property and equipment, net (16,889) (14,458)
Additions to intangibles (400) (81)
Other 24 1,152
------------ ------------
Net cash used in investing activities (17,265) (14,185)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt - 10,000
Principal payments on long-term debt (60) (295)
Net proceeds from issuance of common stock - 144
------------ ------------
Net cash (used in) provided by financing activities (60) 9,849
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (8,424) 1,944
CASH AND CASH EQUIVALENTS, beginning of period 123,574 10,917
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 115,150 $ 12,861
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash payments for interest $ 317 $ 1,314
Cash payments for income taxes $ - $ 517
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
1. ORGANIZATION AND RISK FACTORS
Metrocall, Inc. ("Metrocall" or the "Company"), provides local,
regional and nationwide paging and other wireless messaging services. The
Company's selling efforts are concentrated in 32 markets in five operating
regions: (i) the Northeast (Massachusetts through Delaware), (ii) the
Mid-Atlantic (Maryland, Virginia and the Washington, D. C. metropolitan area),
(iii) the Southeast (including Virginia, the Carolinas, Georgia, Florida,
Alabama, Louisiana, Mississippi and Tennessee), (iv) the Southwest (primarily
Texas) and (v) the West (primarily California, Nevada and Arizona). Through
its Nationwide Network, the Company provides coverage to over 1,000 cities
representing the top 100 Standard Metropolitan Statistical Areas.
Risks and Other Important Factors
The Company sustained net losses of $2.4 million, $20.1 million, $49.1
million, and $11.7 million each of the years ended December 31, 1994, 1995,
1996 and the quarter ended March 31, 1997, respectively. The Company's loss
from operations for the quarter ended March 31, 1997 was $4.4 million. In
addition, at March 31, 1997, the Company had an accumulated deficit of $110.1
million and a deficit in working capital of $3.9 million. The Company's losses
from operations and its net losses are expected to continue for additional
periods in the future. There can be no assurance that the Company's operations
will become profitable.
The Company's operations require the availability of substantial funds
to finance the maintenance and growth of its existing paging operations and
customer base, development and construction of future wireless communications
networks, expansion into new markets, and the acquisition of other wireless
communications companies. At March 31, 1997, the Company had incurred
approximately $339.6 million in long-term debt and capital leases. Amounts
available under the Company's credit facility are subject to certain financial
covenants and other restrictions such that as of March 31, 1997, approximately
$51.0 million of additional borrowings were available to the Company under its
credit facility. The Company's ability to borrow additional amounts in the
future is dependent on its ability to comply with the provisions of its credit
facility. On May 1, 1997, the Company increased borrowings outstanding under
its credit facility by $10.0 million.
The Company is also subject to certain additional risks and
uncertainties including, but not limited to, changes in technology, business
integration, competition, regulatory, legal and subscriber turnover.
2. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have
been prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and include, in
the opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of interim period results.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations. The
Company believes, however, that its disclosures are adequate to make the
information presented not misleading. These condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's 1996 Annual Report on
Form 10-K, as amended. The results of operations for the three-month period
ended March 31, 1997, are not necessarily indicative of the results to be
expected for the full year.
7
<PAGE> 8
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
3. SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation
of Financial Statements
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Revenue Recognition
The Company recognizes revenue under service, rental and maintenance
agreements with customers as the related services are performed. Sales of
equipment are recognized upon delivery.
Cash and Cash Equivalents
Cash and cash equivalents include short-term, highly liquid
investments purchased with original maturities of three months or less.
Property and Equipment
Property and equipment are carried at cost. Depreciation is computed
using the straight-line method over the following estimated useful lives.
<TABLE>
<CAPTION>
YEARS
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<S> <C>
Buildings and leasehold improvements 10-31
Furniture and office equipment 5-10
Vehicles 3-5
Subscriber paging equipment 3-5
Transmission and plant equipment 5-12
</TABLE>
The net book value of lost pagers is charged to depreciation expense.
New pagers are depreciated using the half-year convention upon acquisition.
Betterments to acquired pagers are charged to depreciation expense.
Long-Lived Assets
Long-lived assets and identifiable intangibles to be held and used are
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount should be addressed. Impairment is measured by
comparing the book value to the estimated undiscounted future cash flows
expected to result from use of the assets and their eventual disposition. At
March 31, 1997, the market value of the Company's common stock was $4.125 per
share and the net book value was $6.23 per share. However, the Company has
determined that there has been no permanent impairment in the carrying value of
long-lived assets reflected in the accompanying balance sheet.
Effective July 1, 1996, the Company changed the estimated useful lives
of certain intangibles acquired in 1994, including goodwill and regulatory
licenses issued by the Federal Communications Commission ("FCC") recorded in
the acquisitions of FirstPAGE USA, Inc. and MetroPaging, Inc. from 40 years to
15 years for goodwill and from 40 years to 25 years for FCC licenses. The
impact of these changes was to increase amortization expense for the quarter
ended March 31, 1997 by approximately $650,000.
8
<PAGE> 9
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
4. LOSS PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS
Loss per share attributable to common stockholders for the quarters
ended March 31, 1996 and 1997, is based upon the weighted-average number of
common equivalent shares outstanding during the period. The effect of
outstanding options and warrants on loss per share attributable to common
stockholders for the quarters ended March 31, 1996 and 1997, is not included
because such options and warrants would be antidilutive.
New Accounting Pronouncement
On March 3, 1997, the Financial Accounting Standards Board released Statement
No. 128, "Earnings Per Share." Statement 128 requires dual presentation of
basic and diluted earnings per share on the face of the income statement for
all periods presented. Basic earnings per share excludes dilution and is
computed by dividing income available to common stockholders by the
weighted-average number of common shares outstanding for the period. Diluted
earnings per share reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted earnings per share is computed
similarly to fully diluted earnings per share pursuant to Accounting Principles
Bulletin No. 15. Statement 128 is effective for reporting periods ending after
December 15, 1997, and when adopted, it will require restatement of prior
periods' earnings per share.
Since the effect of outstanding options and warrants is antidilutive,
they have been excluded from the Company's computation of net loss per share.
Accordingly, management does not believe that Statement 128 will have an impact
upon historical net loss per share as reported.
5. ACQUISITION
On February 5, 1997, the Company acquired 100% of the outstanding
common stock of Radio and Communications Consultants, Inc. and Advanced
Cellular Telephone, Inc. (collectively, "RCC") by means of a merger of
Metrocall of Shreveport, Inc., a wholly owned subsidiary of Metrocall formed to
effect the RCC merger, with RCC. The merger was financed through the issuance
of 494,279 shares of the Company's common stock, approximately $800,000 in
cash and assumed liabilities of approximately $200,000. The Company also
recorded a deferred tax liability of approximately $1.3 million in connection
with this transaction. The RCC acquisition has been accounted for as a purchase
for financial accounting purposes. The purchase price for the RCC acquisition
has been allocated on a preliminary basis as follows (in thousands):
6. STOCK AND STOCK RIGHTS
Capital Stock
The authorized capital stock of Metrocall consists of 33,500,000
shares of common stock, par value $.01 per share and 1,000,000 shares of
preferred stock, par value $0.01 per share, of which 810,000 shares have been
designated as Series A Convertible Preferred Stock and 9,000 shares will be
designated Series B Convertible Preferred Stock ("Series B Preferred Stock").
On May 7, 1997, Metrocall's stockholders approved an increase in the authorized
number of shares of common stock to 60,000,000 shares.
Series A Preferred
On November 15, 1996, the Company issued 159,600 shares of Series A
Convertible Preferred Stock ("Series A Preferred"), together with warrants,
discussed below, for $250 per share or $39.9 million. Each share of Series A
Preferred has a stated value of $250 per share and has a liquidation preference
over shares of the Company's common stock equal to the stated value. The
Series A Preferred carries a dividend of 14% of the stated value per year,
payable semiannually in cash or in additional shares of Series A Preferred, at
the Company's option. Prefered dividends accrued for the quarter ended March
31, 1997 were approximately $1.4 million. Accrued but unpaid dividends were
approximately $2.1 million at March 31, 1997.
9
<PAGE> 10
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
6. STOCK AND STOCK RIGHTS (CONTINUED)
Series A Preferred (continued)
In connection with the Series A Preferred, the Company issued warrants
to purchase the Company's common stock. Each warrant represents the right of
the holder to purchase 18.266 shares of common stock or an aggregate of
2,915,254 shares. The exercise price is $7.40 per share. The warrants expire
November 15, 2001. The total value allocated to the warrants for financial
reporting purposes, $7.9 million or $2.70 per share, is being accreted over the
term of the Series A Preferred as preferred dividends or approximately $160,000
for the quarter ended March 31,1997.
Series B Preferred Stock
In connection with the Page America transaction (see Note 8), the
Board of Directors has authorized the designation of 9,000 shares of preferred
stock as Series B Preferred Stock. Each share of Series B Preferred Stock will
have a stated value of $10,000 per share and a liquidation preference, which is
junior to the Series A Preferred Stock but senior to the shares of Metrocall
common stock, equal to its stated value. The Series B Preferred Stock will
carry a dividend of 14% of the stated value per year, payable semiannually in
cash or in additional shares of Series B Preferred Stock, at the Company's
option. The Company has agreed to issue 1,500 shares of Series B Preferred
Stock pursuant to the Amended Page America Agreement (see Note 8).
Stock Option Plans
At December 31, 1996, 1,747,002 options were issued and outstanding
with a weighted-average exercise price of approximately $8.18 per share,
expiring on various dates ranging from 2003 through 2006. On February 5, 1997,
the Compensation Committee of the Board of Directors approved a change in the
exercise price for substantially all outstanding options for current employees,
officers and directors. The new exercise price was $6.00 per share, the fair
market value on the date of the change.
During the quarter ended March 31, 1997, the Board of Directors
approved grants of options to purchase 391,500 shares of Metrocall common stock
to current officers, employees and directors with an exercise price of $6.00
per share, a price equal to or greater than the fair market value on the date
of grant.
Employee Stock Purchase Plan
On May 1, 1996, the stockholders of the Company approved the
Metrocall, Inc. Employee Stock Purchase Plan (the "Stock Purchase Plan"), which
offers eligible employees the opportunity to purchase an aggregate of 300,000
shares of Metrocall common stock through payroll deductions. Each eligible
employee may elect to purchase shares of Metrocall common stock at the lesser
of 85% of the fair market value of Metrocall common stock on either the first
or last trading day for each payroll deduction period. On January 1, 1997, the
Company issued 35,203 shares of Company common stock under the Stock Purchase
Plan with a purchase price of approximately $4.14 per share.
10
<PAGE> 11
METROCALL, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
7. COMMITMENTS AND CONTINGENCIES
Legal and Regulatory Matters
The Company is subject to certain legal and regulatory matters in the
normal course of business. In the opinion of management, the outcome of such
assertions will not have a material adverse effect on the financial position or
results of operations of the Company.
In April 1996, the Company entered into an agreement to purchase
certain of the assets of Source One Wireless, Inc. ("Source One") and placed
$1 million cash in escrow. On June 26, 1996, the Company advised Source One
that Source One had failed to meet certain conditions to completion of the
transaction and terminated the agreement. On September 20, 1996, Source One
filed an action in the Circuit Court of Cook County, Illinois, claiming that
the Company had breached the agreement and seeking specific performance of the
purchase agreement or unspecified damages in excess of $80 million. The
Company intends to vigorously defend the claims in this action and believes it
has meritorious defenses to this action. The Company has denied the claim and
asserted affirmative defenses and counterclaims based on misrepresentations and
breaches of contract by Source One. The matter is now in discovery, which is
scheduled to be completed by the end of October 1997; trial is not expected
before January 1998.
8. PENDING ACQUISITION
On April 22, 1996, the Company signed a definitive acquisition
agreement (the "Page America Agreement") with Page America Group, Inc. of
Hackensack, New Jersey ("Page America"). The Page America Agreement was
subsequently amended and restated on January 30, 1997 and further amended on
March 28, 1997 (the "Amended Page America Agreement"). Pursuant to the Amended
Page America Agreement, as subsequently modified (i) Metrocall will acquire
substantially all of the assets and assume substantially all of Page America's
accounts payable and certain obligations under various office and equipment
leases and (ii) Page America will receive (a) $25 million in cash subject to
reduction for amounts payable for pagers provided by the Company, (b)1,500
shares of Series B Convertible Preferred Stock with a stated value of $15
million, (c) 762,960 shares of the Company's common stock and (d) additional
shares of the Company's common stock or Series B Convertible Prefered Stock
having a value equal to $15 million subject to certain adjustments.
Consummation of the Page America acquisition is subject to a number of
conditions including, but not limited to, receipt of all necessary regulatory
approvals and approval by the Page America stockholders. There can be no
assurance that such approvals will be obtained. The pending transaction, if
consummated, will be accounted for as a purchase for financial reporting
purposes. The Company expects to finance the cash portion of the purchase
price with borrowings under its credit facility.
9. SUBSEQUENT EVENT
On May 9, 1997, the Company completed the sale of the assets of the
telemessaging business acquired in the merger with A+ Network in November 1996
pursuant to the terms of an Asset Purchase Agreement (the "Purchase Agreement")
between Metrocall and Procommunications, Inc. dated April 30, 1997. Pursuant
to the terms of the Purchase Agreement, the Company received proceeds totaling
$10.3 million in cash, net of a cash escrow of $700,000. For the quarter ended
March 31, 1997, the telemessaging business generated net revenues of
approximately $2.8 million and operating income of approximately $363,000.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and
results of operations of the Company should be read in conjunction with the
financial statements and the notes thereto which appear elsewhere in this
quarterly report and its annual report on Form 10-K, as amended, for the year
ended December 31, 1996.
All statements contained herein that are not historical facts,
including but not limited to, statements regarding anticipated future capital
requirements, the Company's future development plans, the Company's ability to
obtain additional debt, equity or other financing, and the Company's ability to
generate cash from operations and further savings from existing operations, are
based on current expectations. These statements are forward looking in nature
and involve a number of risks and uncertainties. Actual results may differ
materially. Among the factors that could cause actual results to differ
materially are the following: the availability of sufficient capital to finance
the Company's business plan on terms satisfactory to the Company; competitive
factors, such as the introduction of new technologies and competitors into the
paging and wireless communications industry; pricing pressures which could
affect demand for the Company's services; changes in labor, equipment and
capital costs; future acquisitions and strategic partnerships; general business
and economic conditions; and the other risk factors described from time to time
in the Company's reports filed with the Securities and Exchange Commission.
The Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995 and, as such, speak only as of the
date made.
OVERVIEW
Metrocall is the fifth largest paging company in the United States
based on number of subscribers, with 2,227,564 pagers in service at March 31,
1997. For the quarter ended March 31, 1997, the Company added 85,213
subscribers to its base of pagers in service. On February 5, 1997, the Company
completed the acquisition of Radio and Communications Consultants, Inc. and
Advanced Cellular Telephone, Inc. (collectively, "RCC"), affiliated paging
companies operating in the Shreveport, Louisiana market. The results of
operations for the three months ended March 31, 1997 reflect the results of
operations of companies acquired throughout 1996 including Parkway Paging, Inc.
("Parkway") Satellite Paging and Message Network (collectively, "Satellite") and
A+ Network, Inc. ("A+ Network")(collectively, the "1996 Acquisitions"), as
well as RCC from the date of acquisition. The definitions below relate to
management's discussion of the Company's results of operations that follows.
Service, rent and maintenance revenues: include primarily
monthly, quarterly, semi-annually and annually billed
recurring revenue, not generally dependent on usage, charged
to subscribers for paging and related services such as voice
mail and pager repair and replacement. Service, rent and
maintenance revenues also include revenues derived from
telemessaging, cellular and long distance services.
Net revenues: include service, rent and maintenance revenues
and sales of customer owned and maintained ("COAM") pagers
less net book value of products sold.
Service, rent and maintenance expenses: include costs related
to the management, operation and maintenance of the Company's
network systems and customer support centers.
Selling and marketing expenses: include salaries, commissions
and administrative costs for the Company's sales force and
related marketing and advertising expenses.
General and administrative expenses: include executive
management, accounting, office telephone, repairs and
maintenance, management information systems and employee
benefits.
The Company derives the majority of its revenues from fixed, periodic
(usually monthly) fees, generally not dependent on usage, charged to
subscribers for paging services. While a subscriber continues to use the
Company's service,
12
<PAGE> 13
operating results benefit from this recurring revenue stream with minimal
requirements for incremental selling expenses or other fixed costs. The
Company's total revenues have increased by approximately 123% to $66.8 million
for the quarter ended March 31, 1997 from $29.9 million for the quarter ended
March 31, 1996. Overall, subscribers have increased by approximately 120% to
more than 2.2 million at March 31, 1997 from 1.0 million at March 31, 1996.
The Company's average monthly paging service, rent and maintenance
revenues per unit ("ARPU") for the three-month periods ended March 31, 1996
("1996") and March 31, 1997 ("1997") was $8.11 and $8.31, respectively. For
the three month period ended December 31, 1996, pro forma as if the acquisition
of A+ Network had occurred on or before October 1, 1996, ARPU is estimated to
have been $8.21. The increase in ARPU from 1996 to 1997 is primarily related
to the merger with A+ Network in November 1996, the changing distribution mix,
and enhanced paging services. ARPU for the A+ Network markets averaged
slightly more than $10.00 per month during the fourth quarter of 1996 causing
an increase in the weighted-average ARPU for the combined company after the
merger. In order to capitalize on the anticipated growth of the paging and
wireless messaging industries, the Company has expanded its channels of
distribution to include Company-owned and operated retail stores, strategic
partnerships and alliances, franchises and internet sales among others; with
each focusing on the sale rather than lease of pagers. These channels tend to
have higher ARPU's than typical third-party resellers who purchase service in
quantity at wholesale rates. Furthermore, the Company has been successful in
marketing enhanced services, such as nationwide paging services and voice mail,
to its subscriber base, as well as branded customer service and billing
services for the Company's strategic partners and franchisees.
The Company's growth and expansion into new markets, whether internal
or through acquisitions, require significant capital investment for the
installation of paging equipment and technical infrastructure. The Company
also purchases pagers for that portion of its subscriber base that leases
equipment from the Company. During the quarter ended March 31, 1997 the
Company's capital expenditures totaled $14.5 million including approximately
$8.5 million for pagers, representing an increase in pagers on hand and net
increases and maintenance to the rental pager base.
The Company's focus is now on integrating its 1996 acquisitions and
increasing the utilization of it networks constructed during 1996. As a result
of the completion of the Company's nationwide network and an emphasis on
distribution channels through which pagers are sold rather than leased, capital
expenditures are expected to be reduced for the year ending December 31, 1997.
The combination of growing revenues and EBITDA along with reduced levels of
capital expenditures should result in improving leverage ratios and access to
capital in future periods. While the Company currently has no outstanding
commitments, other than the agreement to acquire the assets of Page America
Group Inc., discussed below, the Company will continue to evaluate strategic
acquisition targets in the future. Potential future acquisitions would be
evaluated on significant strategic opportunities such as geographic coverage
and regulatory licenses and other factors including overall valuation,
consideration and availability of financing.
The Company's long-term strategy is to continue to expand its business
by providing paging and other wireless communications services to an
increasingly broad base of subscribers throughout the United States, while
increasing total revenues and EBITDA and de-emphasizing that portion of the
business which has historically leased pagers. The Company believes that
increases in revenues from the sale of pagers and service revenue from
providing paging service to such pagers will more that make up for the losses
of rental revenues derived from leasing pagers, which has increasingly involved
high volume, lower margin transactions. The Company is seeking to increase its
base of subscribers by expanding its operations in existing, contiguous and
other markets, through start-up operations and internal growth.
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<PAGE> 14
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated the
percentage of net revenues represented by certain items in the Company's
Condensed Consolidated Statements of Operations.
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1997
------------- -------------
<S> <C> <C>
REVENUES:
Service, rent and maintenance 93.9 % 96.6 %
Product sales 24.5 13.6
------------- -------------
Total revenues 118.4 110.2
Net book value of products sold (18.4) (10.2)
------------- -------------
100.0 100.0
OPERATING EXPENSES:
Service, rent and maintenance expenses 32.4 27.1
Selling and marketing 18.2 19.7
General and administrative 22.9 26.4
Depreciation and amortization 45.4 34.2
------------- -------------
Total operating expenses 118.9 107.4
------------- -------------
Loss from operations (18.9) (7.4)
INTEREST AND OTHER INCOME (EXPENSE) 5.4 (0.1)
INTEREST EXPENSE (16.6) (13.3)
------------- -------------
LOSS BEFORE INCOME TAX (PROVISION) BENEFIT (30.1) (20.8)
INCOME TAX (PROVISION) BENEFIT (0.3) 1.3
------------- -------------
Net loss (30.4) (19.5)
PREFERRED DIVIDENDS - (2.6)
------------- -------------
Loss attributable to common stockholders (30.4)% (22.1)%
============= =============
Units in service (end of period) 1,009,548 2,227,564
EBITDA (in thousands)(1) $ 6,721 $ 16,290
Ratio of EBITDA to net revenues(1) 26.6 % 26.9 %
ARPU(2) $ 8.11 $ 8.31
Average monthly operating cost per unit(3) $ 6.34 $ 6.43
</TABLE>
(1) EBITDA (earnings before interest, taxes, depreciation and
amortization), while not a measure under generally accepted accounting
principles ("GAAP"), is a standard measure of financial performance in
the paging industry; EBITDA should not be considered in isolation or
as an alternative to net income (loss), income (loss) from operations,
cash flows from operating activities or any other measure of
performance under GAAP. EBITDA is, however, an approximation of the
primary financial measure by which the Company's covenants are
calculated under its indenture relating to its senior subordinated
notes and its credit facility. See "--Liquidity and Capital
Resources" for a discussion of significant capital requirements and
commitments.
(2) ARPU (average monthly paging revenue per unit) is calculated by
dividing (a) paging service, rent and maintenance revenues for the
period by (b) the average number of units in service for the period.
The calculation of ARPU excludes revenues derived from non-paging
services such as telemessaging, long distance and cellular telephone.
(3) Average monthly operating expense per unit is calculated by dividing
(a) total recurring paging operating expenses before depreciation and
amortization for the period by (b) the average number of units in
service for the period. The calculation of average monthly operating
expense per unit excludes costs associated with the telemessaging
operations.
THREE MONTHS ENDED MARCH 31, 1997 COMPARED WITH 1996
Total revenues increased approximately $36.9 million, or approximately
123%, from $29.9 million for 1996 to $66.8 million for 1997. Net revenues
increased approximately $35.3 million, or 140%, from $25.3 million in 1996 to
$60.6 million in 1997. The increase is attributable to greater service revenues
due to the growth of pagers in service from 1,009,548 at March 31, 1996, to
2,227,564 at March 31, 1997. Acquisition completed in 1996 added approximately
900,000 subscribers to the Company's subscriber base. Furthermore, the RCC
acquisition in February 1997 added approximately 12,000 subscribers. Operations
of acquired companies are included in the results of operations from their
respective acquisition dates. ARPU for paging services increased from $8.11
per unit in 1996 to $8.31 per unit in 1997 due to the merger with A+ Network
in November 1996, the changing distribution mix, and enhanced paging services
discussed above. Pro forma ARPU for the quarter ended December 31, 1996,
assuming the A+ Network acquisition was completed as of October 1, 1996, was
estimated to be $8.21 per unit. Factors affecting ARPU in future periods
include distribution mix of new
14
<PAGE> 15
subscribers, competition and new technologies, among others. There can be no
assurance that ARPU will not decline in future periods.
Product sales increased $2.0 million from $6.2 million in 1996 to $8.2
million in 1997 and decreased as a percentage of net revenues from 24.5% in
1996 to 13.6% in 1997. Net book value of products sold increased
approximately $1.5 million from $4.7 million in 1996 to $6.2 million in 1997
principally due to the increase in product sales, partially offset by increased
depreciation expense. The gross margin on products sold increased from 24.9%
in 1996 to 25.3% in 1997.
Overall, the Company experienced an increase in average monthly
operating costs per unit in service (operating costs per unit before
depreciation and amortization) from 1996 to 1997. Average monthly operating
cost per unit increased from $6.34 per unit for 1996 to $6.43 per unit
(excluding operating costs associated with non-paging operations, primarily
telemessaging) for 1997. Each operating expense is discussed separately below.
Service, rent and maintenance expenses increased approximately $8.2
million from $8.2 million in 1996 to $16.4 million in 1997 and decreased as a
percentage of net revenues from 32.4% in 1996 to 27.1% in 1997. The overall
increase in service, rent and maintenance expense is attributable to the
acquisitions of Parkway Paging ($0.6 million), Satellite ($0.8 million) and A+
Network ($5.0 million) completed in 1996. Additional increases are
attributable to increased third-party carrier costs ($0.5 million), increased
site rental costs ($0.7 million) and increased personnel costs ($0.3 million).
Service, rent and maintenance expense per unit has decreased from $2.80 per
unit per month in 1996 to $2.35 per unit per month in 1997.
Selling and marketing expenses increased approximately $7.3 million
from $4.6 million in 1996 to $11.9 million in 1997 and increased as a
percentage of net revenues from 18.2% in 1996 to 19.7% in 1997. The increase
in selling and marketing expenses is primarily associated with the companies
acquired in 1996, which added 20 new sales offices and approximately 80 retail
locations. Selling and marketing expenses attributed to the acquired companies
are Parkway Paging ($0.5 million), Satellite ($0.3 million), and A+ Network
($5.1 million). Additional increases are associated with the increased sales
staff and related costs ($0.9 million) and increased advertising and promotion
costs ($0.5 million). Monthly selling and marketing expense per unit has
increased from $1.57 per unit in 1996 to $1.79 per unit in 1997, due primarily
to increasing the Company's sales force as a result of acquisitions in new
geographic areas for the Company. Selling and marketing expenses may increase
as a percentage of net revenues as the Company continues to increase its
presence in existing markets and expand geographic coverage.
General and administrative expenses increased $10.2 million from $5.8
million in 1996 compared to $16.0 million in 1997, and increased as a
percentage of net revenues from 22.9% in 1996 to 26.4% in 1997. General and
administrative expenses attributed to the acquired companies are Parkway Paging
($0.2 million), Satellite ($0.4 million), and A+ Network ($6.8 million).
General and administrative expenses also increased due to increased expenses
for collection activities ($0.4 million), additional operational personnel
($1.2 million), and taxes and licenses ($0.3 million). Monthly general and
administrative expense per unit has increased from $1.97 per unit in 1996 to
$2.28 per unit in 1997. On a per unit basis, general and administrative
expenses are expected to decline as additional synergies are gained from the
Company's 1996 and 1997 acquisitions.
Depreciation and amortization increased approximately $9.2 million
from $11.5 million in 1996 to $20.7 million in 1997, and decreased as a
percentage of net revenues from 45.4% to 34.2% in 1996 and 1997, respectively.
The increase in total depreciation expense resulted primarily from depreciation
on subscriber paging equipment ($6.0 million) and on other plant and operating
equipment ($1.6 million). Amortization increased substantially during 1997 due
to the amortization of goodwill and other intangibles recorded in the 1996 and
1997 acquisitions. Effective July 1, 1996, the Company changed the estimated
useful lives of certain intangibles acquired in 1994, including goodwill and
regulatory licenses issued by the FCC from 40 years to 15 years for goodwill
and from 40 years to 25 years for FCC licenses. The impact of these changes
was to increase amortization expense for 1997 by approximately $650,000.
Interest expense increased approximately $3.8 million, from $4.2
million in 1996 to $8.0 million in 1997. Interest expense increased due to
higher average level of debt during 1997 primarily associated with the
financing of the 1996 Acquisitions.
Net loss increased $4.0 million in 1997 from approximately $7.7
million in 1996 to $11.7 million primarily due to the overall increase in
interest expense. Net losses are expected to continue in future periods.
15
<PAGE> 16
In November 1996, the Company issued 159,600 shares of Series A
Convertible Preferred Stock ("Series A Preferred") with a stated value of $250
per share for total proceeds of $39.9 million. The Series A Preferred bears
dividends at 14% of the stated value per year. Dividends on the Series A
Preferred may be paid in either cash or additional shares of Series A
Preferred, at the Company's option. Dividends accrued during 1997 were
approximately $1.4 million.
Loss attributable to common stockholders increased $5.6 million from
$7.7 million in 1996 to $13.3 million in 1997 primarily due to increased
interest expense ($3.8 million) and preferred dividends ($1.6 million).
EBITDA increased approximately $9.6 million to $16.3 million in 1997
from $6.7 million in 1996. As a percentage of net revenues, EBITDA increased
from 26.6% in 1996 to 26.9% in 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require the availability of substantial funds
to finance the growth of its existing operations and customer base, development
and construction of future wireless communications networks, expansion into new
markets, and the acquisition of other wireless communications companies.
Further cash requirements include debt service, working capital and general
corporate requirements.
The Company has financed its internal growth in 1997 through its
operating cash flow, available cash on hand and, to a limited extent,
borrowings under the Company's credit facility. Net cash provided by operating
activities decreased from $8.9 million to $6.3 million for the quarters ended
March 31, 1996 and 1997, respectively, primarily due to the increase in
interest expense for 1997.
At March 31, 1997, the Company had a working capital deficit of
approximately $3.9 million. The Company has experienced such deficits in
prior periods and such deficits are likely to continue. Pursuant to the Page
America acquisition, the Company will assume certain current liabilities of
Page America which may result in a significant increase in the Company's working
capital deficit. The Company attempts, whenever possible, to finance its
growth through operating cash flow and available cash balances rather than
incurring additional indebtedness. As a result, purchases of noncurrent
assets, including pagers and other network and transmission equipment, may be
financed with current liabilities (e.g. accounts payable), causing a deficit in
working capital. The Company currently has sufficient borrowing capacity
available under its credit facility, discussed below, to fund the working
capital deficit at March 31, 1997.
Cash flow used in investing activities were primarily to fund
purchases of property and equipment. Capital expenditures were approximately
$16.9 million and $14.5 million or the quarters ended March 31, 1996 and 1997,
respectively. Capital expenditures for the 1997 quarter included approximately
$8.5 million for pagers, representing increases in pagers on hand and net
increases and maintenance to the rental subscriber base. The balance of capital
expenditures included $2.2 million for information systems and computer related
equipment, $2.1 million for network construction and development and $1.7 for
general purchases including leasehold improvements and office equipment.
Cash flows provided by financing activities for the quarter ended
March 31, 1997, included borrowings under the Company's credit facility of
$10.0 million primarily to fund working capital requirements and capital
expenditures. Total capital expenditures for the year ending December 31, 1997
are estimated to be approximately $60 million primarily for the acquisition of
pagers, paging and transmission equipment and information systems enhancement.
This estimate does not include the cash consideration to be paid in the Page
America acquisition, or the related transaction costs, but does include
estimated capital expenditures related to the Page America assets after the
acquisition. The Company expects that its capital expenditures for the year
ending December 31, 1997, will be financed through a combination of operating
cash flow and borrowings. Projected capital expenditures are subject to change
based on the Company's internal growth, general business and economic
conditions and competitive pressures. Future cash requirements include debt
service costs, primarily interest.
16
<PAGE> 17
There are no significant principal payments required under the Company's debt
agreements during the year ending 1997. Additionally, dividends on the
Company's Series A Preferred accrue at a rate of 14% of the stated value
($39.9 million) per year. Dividends on the Series A Preferred may be paid in
either cash or additional shares of Series A Preferred, at the Company's
option. However, under certain circumstances, as defined in the certificate of
designation, the dividend rate may increase to 16% per year. Further, Metrocall
is required to redeem all outstanding shares of Series A Preferred (including
dividend shares) in November 2008 unless the holders have previously converted
such shares to common stock. Accrued but unpaid dividends at March 31, 1997,
were approximately $2.1 million. On May 7, 1997, the Board of Directors
authorized the payment of accrued dividends on the Series A Preferred in
additional shares of Series A Preferred.
In January 1996, the Company completed a management reorganization.
Under the reorganization, the Company's Chairman of the Board was replaced and
the Company's Chief Executive Officer resigned. Severance and other separation
costs for the former Chairman and former Chief Executive Officer were accrued
and recorded as a management reorganization charge in 1995. Additionally,
certain nonsales employees were terminated and related severance costs were
included in the 1995 management reorganization charge. As of March 31, 1997,
the balance of accrued but unpaid severance costs included in the accompanying
balance sheet was approximately $450,000.
SENIOR SECURED CREDIT FACILITY
During 1996, the Company amended and restated the loan agreement
governing the Company's existing credit facility. Subject to certain
conditions set forth in the new agreement, the Company may borrow up to $350
million under two loan facilities. The first facility ("Facility A") is a $225
million reducing revolving credit facility and the second ("Facility B") is a
$125 million reducing credit facility (together Facility A and Facility B are
referred to as the "Credit Facility"). The Credit Facility has a term of eight
years and is secured by substantially all the assets of the Company. Required
quarterly principal repayments begin on March 31, 2000 and continue through
December 31, 2004. At March 31, 1997, a total of approximately $179.9 million
was outstanding under the Credit Facility. Pursuant to the terms of the loan
agreement, at March 31, 1997, total additional borrowings available to the
Company under the credit facility were approximately $51 million. On May 1,
1997, the Company increased its borrowings under the Credit Facility by $10
million primarily to fund working capital requirements.
The Credit Facility contains various covenants that, among other
restrictions, require the Company to maintain certain financial ratios,
including total debt to annualized operating cash flow (not to exceed 6.0 to
1.0 from January 1, 1997 to December 31, 1997, and declining thereafter),
senior debt to annualized operating cash flow, annualized operating cash flow
to pro forma debt service, total sources of cash to total uses to cash, and
operating cash flow to interest expense (in each case, as such terms are
defined in the agreement relating to the Credit Facility). The Credit Facility
also requires the Company to raise additional equity (approximately
$10,000,000) if its ratio of cash flow to interest expense is less than 2.0 to
1.0 for the quarter ending June 30, 1997. For the quarter ended March 31,1997,
the ratio of cash flow to interest expense was 2.07 to 1.0. The covenants
also limit additional indebtedness and future mergers and acquisitions (other
than the pending transaction with Page America discussed below) without the
approval of the lenders, and restrict the payment of cash dividends and other
stockholder distributions by the Company during the term of the Credit
Facility. The Credit Facility also prohibits certain changes in ownership
control of the Company as defined, during the term of the Credit Facility.
Management believes that funds generated by the Company's operations,
together with those available under its Credit Facility, will be sufficient to
meet cash requirements for the pending acquisition of Page America, to finance
estimated capital expenditure requirements, and to fund the Company's existing
operations for the foreseeable future. While the Company has no current
outstanding commitments, other than the agreement to acquire the assets of Page
America, discussed below, the Company will continue to evaluate strategic
acquisition targets in the future. Potential future acquisitions would be
evaluated on significant strategic opportunities such as geographic coverage
and regulatory licenses and other factors including overall valuation,
consideration and availability of financing. Such potential acquisitions may
result in substantial capital requirements for which additional financing may
be required. No assurance can be given that such additional financing would be
available on terms satisfactory to the Company.
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<PAGE> 18
PENDING ACQUISITION
On April 22, 1996, the Company signed a definitive acquisition
agreement (the "Page America Agreement") with Page America Group, Inc. of
Hackensack, New Jersey ("Page America"). The Page America Agreement was
subsequently amended and restated on January 30, 1997 and further amended on
March 28, 1997 (the "Amended Page America Agreement"). Pursuant to the Amended
Page America Agreement, as subsequently modified (i) Metrocall will acquire
substantially all of the assets and assume substantially all of Page America's
accounts payable and certain obligations under various office and equipment
leases and (ii) Page America will receive (a) $25 million in cash subject to
reduction for amounts payable for pagers provided by the Company, (b)1,500
shares of Series B Convertible Preferred Stock with a stated value of $15
million, (c) 762,960 shares of the Company's common stock and (d) additional
shares of the Company's common stock or Series B Convertible Prefered Stock
having a value equal to $15 million subject to certain adjustments.
Consummation of the Page America acquisition is subject to a number of
conditions including, but not limited to, receipt of all necessary regulatory
approvals and approval by the Page America stockholders. There can be no
assurance that such approvals will be obtained. The pending transaction, if
consummated, will be accounted for as a purchase for financial reporting
purposes. The Company expects to finance the cash portion of the purchase
price with borrowings under its Credit Facility.
ADDITIONAL FACTORS AFFECTING FUTURE OPERATING RESULTS AND FINANCIAL CONDITION
The ability of the Company to meet its debt service and other
obligations will be dependent upon the future performance of the Company and
its cash flows from operations, which will be subject to financial, business
and other factors, certain of which are beyond its control, such as prevailing
economic conditions. Management believes that funds generated from the
Company's operations and funds available under its Credit Facility will be
sufficient to meet projected capital expenditures and debt service requirements
and to fund the Company's operations for the foreseeable future. Although
management has no further obligation to do so (other than Page America
discussed above), it plans to continue to expand its geographic service areas
through internal growth and will continue to evaluate potential strategic
acquisition targets in the future which may result in substantial capital
requirements for which additional financing may be required. No assurance can
be given that such additional financing would be available on terms
satisfactory to the Company. Additionally, the following important factors,
among others, could cause the Company's operating results and financial
condition to differ materially from those indicated or suggested by forward
looking statements made in this quarterly report.
Substantial Indebtedness
At December 31, 1996, the Company had outstanding approximately $339.6
million in long-term debt consisting of bank loans, senior subordinated notes,
mortgage indebtedness and capital leases, and expects to incur additional
indebtedness in connection with the Page America acquisition. The Company
increased its borrowings outstanding under its Credit Facility by $10.0 million
in May 1997. Additionally, the Company expects to incur additional
indebtedness (in the form of draws under the Company's senior secured credit
facility) to meet working capital needs and other purposes. This substantial
indebtedness, along with the net losses and working capital deficits sustained
by the Company in recent periods, will have consequences for the Company,
including the following: (i) the ability of the Company to obtain additional
financing for working capital, capital expenditures, debt service requirements
or other purposes may be impaired; (ii) a substantial portion of the Company's
cash flow from operations will be required to be dedicated to the payment of
the Company's interest expense; (iii) indebtedness under the Credit
Facility bears interest at floating rates, which will cause the Company to be
vulnerable to increases in interest rates; (iv) the Company may be more highly
leveraged than companies with which it competes, which may place it at a
competitive disadvantage; and (v) the Company may be more vulnerable in the
event of a downturn in its business or in general economic conditions. In
addition, the ability of the Company to access borrowings under its credit
facility and to meet its debt service and other obligations (including
compliance with financial covenants) will be dependent upon the future
performance of the Company and its cash flows from operations, which will be
subject to financial, business and other factors, certain of which are beyond
its control, such as prevailing economic conditions. No assurance can be
given that, in the event the Company were to require additional financing, such
additional financing would be available on terms permitted by agreements
relating to existing indebtedness or otherwise satisfactory to Metrocall.
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<PAGE> 19
Possible Impact of Competition and Technological Change
The Company faces competition from other paging companies in all
markets in which it operates. The wireless communications industry is a highly
competitive industry, with price being one of the primary means of
differentiation among providers of numeric messaging services which account for
the substantial majority of the Company's revenues. Companies in the industry
also compete on the basis of coverage area, enhanced services, transmission
quality, system reliability and customer service. Certain of Metrocall's
competitors possess greater financial, technical, marketing and other resources
that Metrocall. In addition, other entities offering wireless two-way
communications technology, including cellular telephone, specialized mobile
radio services and personal communications services, compete with the paging
services provided by Metrocall. There can be no assurance that additional
competitors will not enter markets served by Metrocall or that Metrocall will
be able to compete successfully. In this regard, certain long distance
carriers have or have announced their intention to market paging services
jointly with other telecommunications services.
The wireless communications industry is characterized by rapid
technological change. Future technological advances in the wireless
communications industry could create new services or products competitive with
the paging and wireless messaging services provided or to be developed by
Metrocall. Recent and proposed regulatory changes by the Federal
Communications Commission ("FCC") are aimed at encouraging such services and
products.
In particular, in 1994 the FCC began auctioning licenses for new
personal communications services ("PCS"). The FCC's rules also provide for the
private use of PCS spectrum on an unlicensed basis. PCS will involve a network
of small, low-powered transceivers placed throughout a neighborhood, business
complex, community or metropolitan area to provide customers with mobile voice
and data communications. There are two types of PCS, narrowband and broadband.
Narrowband PCS is expected to provide enhanced or advanced paging and messaging
capabilities, such as "acknowledgment paging" or "talk-back" paging. Several
PCS systems are currently operational. Additionally, other existing or
prospective radio services have potential to compete with Metrocall. For
example, the FCC has authorized non-geostationary mobile satellite service
systems in several frequency bands, and has initiated proceedings to consider
making additional licenses in some of those bands available. Licensees of
those satellite services (some of whom have already launched satellites) are
permitted to offer signaling and other mobile services that could compete with
terrestrial paging companies. A recent FCC decision will allow land mobile
licensees in the 220-222 MHz band to offer commercial paging services. The FCC
has also initiated a rule making proceeding proposing to allow Multiple Address
Systems, a fixed microwave service in various 900 MHz frequency bands, to offer
mobile services. Any of these services may compete directly or indirectly with
Metrocall.
Moreover, changes in technology could lower the cost of competitive
services and products to a level where Metrocall's services and products would
become less competitive or to where Metrocall would be required to reduce the
prices of its services and products. There can be no assurance that Metrocall
will be able to develop or introduce new services and products to remain
competitive or that Metrocall will not be adversely affected in the event of
such technological developments.
Technological changes also may affect the value of the pagers owned by
Metrocall and leased to its subscribers. If Metrocall's subscribers requested
more technologically advanced pagers, Metrocall could incur additional capital
expenditures if it were required to replace pagers to its subscribers.
History of Net Losses
Metrocall has sustained net losses of $2.4 million, $20.1 million and
$49.1 million for the years ended December 31, 1994, 1995 and 1996 and $11.7
million for the quarter ended March 31, 1997. No assurance can be given that
losses can be reversed in the future. In addition, at December 31, 1996,
Metrocall's accumulated deficit was $110.1 million and Metrocall had a deficit
in working capital of $3.9 million. Metrocall's business requires substantial
funds for capital expenditures and acquisitions that result in significant
depreciation and amortization charges. Additionally, substantial levels of
borrowing, which will result in significant interest expense, are expected to
be outstanding in the foreseeable future. Accordingly, net losses are expected
to continue to be
19
<PAGE> 20
incurred in the future. There can be no assurance that Metrocall will be able
to operate profitably at any time in the future.
Litigation
In April 1996, the Company entered into an agreement to purchase
certain of the assets of Source One Wireless, Inc. ("Source One") and places
$1 million cash in escrow. On June 26, 1996, the Company advised Source One
that Source One had failed to meet certain conditions to completion of the
transaction and terminated the agreement. On September 20, 1996, Source One
filed an action in the Circuit Court of Cook County, Illinois claiming that the
Company had breached the agreement and seeking specific performance of the
purchase agreement of unspecified damages in excess of $80 million. The
Company intends to vigorously defend the claims in this action and believes it
has meritorious defenses to this action. The Company has denied the claim and
asserted affirmative defenses and counterclaims based on misrepresentations and
breaches of contract by Source One. The matter is now in discovery, which is
scheduled to be completed by the end of October 1997; trial is not expected
before January 1998.
Subscriber Turnover
The results of operations of paging service providers, such as
Metrocall, can be significantly affected by subscriber cancellations and by
subscribers who switch their service to other carriers. Metrocall's average
monthly subscriber turnover rate for the quarter ended March 31, 1997 was
approximately 2.1%. In order to realize net growth in subscribers,
disconnected subscribers must be replaced and new subscribers must be added.
The sales and marketing costs associated with attracting new subscribers are
substantial relative to the costs of providing service to existing customers.
Because Metrocall's business is characterized by high fixed costs,
disconnections directly and adversely affect Metrocall's results of operations.
An increase in its subscriber cancellation rate may adversely affect
Metrocall's results of operations.
Potential for Change in Regulatory Environment
Metrocall's paging operations are subject to regulation by the FCC
and, to a lesser extent, by various state regulatory agencies. There can be no
assurance that those agencies will not adopt regulations or take actions that
would have a material adverse effect on the business of Metrocall. Changes in
regulation of Metrocall's paging business or the allocation of radio spectrum
for services that compete with Metrocall's business could adversely affect
Metrocall's results of operations. For example, the FCC is currently engaged
in a rule making proceeding whereby it proposes to issue paging licenses on a
wide-area basis by competitive bidding. Although, Metrocall believes that the
proposed rule changes may simplify Metrocall's regulatory compliance burdens,
particularly regarding adding or relocating transmitter sites, those rule
changes may also increase Metrocall's costs of obtaining paging licenses.
Intangible Assets
Intangible assets, net of accumulated amortization, have increased
significantly since March 31, 1996 primarily as a result of the Company's 1996
acquisitions of Parkway, Satellite and A+ Network. At March 31, 1997, the
Company's total assets of approximately $655.6 million included net intangible
assets of approximately $449.2 million. Intangible assets include state
certificates and FCC licenses, customer lists, debt financing cost, goodwill
and certain other intangibles, The Company will record, for financial
reporting purposes, additional intangible assets in connection with its
acquisition of the assets of Page America. Long-lived assets and identifiable
intangibles to be held and used are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount should be addressed.
Impairment is measured by comparing the book value to the estimated
undiscounted future cash flows expected to result from use of the assets and
their eventual disposition The Company's estimates of anticipated gross
revenues, the remaining estimated lives of tangible and intangible assets, or
both could be reduced significantly in the future due to changes in technology,
regulation, available financing and competitive pressures in any of the
Company's individual markets. As a result, the carrying amount of long-lived
assets and intangible assets including goodwill could be reduced materially in
the future.
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is subject to certain legal and regulatory matters in the
normal course of business. In the opinion of management, the outcome
of such assertions will not have a material adverse effect on the
financial position or the results of operations of the Company.
In April 1996, the Company entered into an agreement to purchase
certain of the assets of Source One Wireless, Inc. ("Source One") and
placed $1 million cash in escrow. On June 26, 1996, the Company
advised Source One that Source One had failed to meet certain
conditions to completion of the transaction and terminated the
agreement. On September 20, 1996, Source One filed an action in the
Circuit Court of Cook County, Illinois claiming that the Company had
breached the agreement and seeking specific performance of the
purchase agreement or unspecified damages in excess of $80 million.
The Company intends to vigorously defend the claims in this action
and believes it has meritorious defenses to this action. The Company
has denied the claim and asserted affirmative defenses and
counterclaims based on misrepresentations and breaches of contract by
Source One. The matter is now in discovery, which is scheduled to be
completed by the end of October 1997; trial is not expected before
January 1998.
ITEM 2. CHANGES IN SECURITIES
Unregistered Securities. On February 7, 1997, the Company
issued 494,279 shares of its Common Stock and paid approximately
$800,000 in cash to complete the acquisition of Radio & Communication
Consultants, Inc. and Advanced Cellular Telephone, Inc.
(collectively, "RCC"). The Shares of Common Stock were issued to
Leroy Faith, Sr., Eddie Ray Faith, Donald Dewayne Faith, and Leroy
Faith, Jr., the stockholders of RCC (the "Selling Stockholders").
Because the securities were issued in a transaction involving a
public offering, the sale was exempt from registration pursuant to
Section 4(2) of the Securities Act of 1933, as amended (the
"Securities Act"). On April 4, 1997, the Company filed a Registration
Statement under the Securities Act on Form S-3 to register for
resale the 494,279 shares of Common Stock held by the Selling
Stockholders.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
On May 9, 1997, the Company completed the sale of the assets of
the telemessaging business acquired in the merger with A+ Network in
November 1996 pursuant to the terms of an Asset Purchase Agreement
(the "Purchase Agreement") between Metrocall and Procommunications,
Inc. dated April 30, 1997. Pursuant to the terms of the Purchase
Agreement, the Company received proceeds totaling $10.3 million in
cash, net of a cash escrow of $700,000. For the quarter ended March
31, 1997, the telemessaging business generated net revenues of
approximately $2.8 million and operating income of approximately
$363,000.
21
<PAGE> 22
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K.
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
2.1 Amended and Restated Asset Purchase Agreement by and among Page America Group, Inc.,
Page America of New York, Inc., Page America of Illinois, Inc., Page America Communications
of Indiana, Inc., Page America of Pennsylvania, Inc. (collectively "Page America") and
Metrocall, Inc. ("Metrocall") dated as of January 30, 1997. (a)
2.2 Amendment to Asset Purchase Agreement by and among page America and Metrocall dated
as of March 28, 1997. (a)
3.1 Amended and Restated Certificate of Incorporation of Metrocall (the "Certificate"), as amended.
3.2 Certificate of Amendment to the Certificate dated May 8, 1997.
3.3 Fifth Amended and Restated Bylaws of Metrocall. (o)
4.1 Indenture, including form of 10 3/8% Senior Subordinated Notes due 2007. (b)
4.2 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated Notes due 2005 ("A+ Notes")
dated October 24, 1995. (l)
4.3 First Supplemental Indenture dated November 14, 1996, for A+ Notes. (o)
4.4 Second Supplemental Indenture dated November 14, 1996, for A+ Notes. (o)
10.1 Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall, Inc. and
A+ Network, Inc. (c)
10.2 Amendment to Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall,
Inc., and A+ Network, Inc. (d)
10.3 Shareholders' Option and Sale Agreement dated as of May 16, 1996, between Metrocall, Inc.
and certain shareholders of A+ Network, Inc. listed therein. (c)
10.4 Metrocall Stockholders Voting Agreement dated as of May 16 ,1996, between A+ Network,
Inc. and certain stockholders of Metrocall, Inc., listed therein. (c)
10.5 Agreement dated May 16, 1996, among Metrocall, Inc. and Ray D. Russenberger and Elliott
H. Singer regarding voting for director. (c)
10.6 Employment Agreement between Metrocall, Inc. and Vincent D. Kelly. (d)
10.7 Employment Agreement between Metrocall, Inc. and William L. Collins, III. (d)
10.8 Employment Agreement between Metrocall, Inc. and Steven D. Jacoby. (d)
10.9 Agreement and Plan of Merger entered into effective the 26th date of April, 1996 between
A+ Network, Inc. ("ACOM"), a Louisiana corporation to be formed as a wholly-owned
subsidiary of ACOM, Radio and Communications Consultants, Inc., Advanced Cellular
Telephone, Inc., Leroy Faith Sr. and Eddie Ray Faith, DeWayne Faith and Leroy Faith Jr. (d)
10.10 Non-disclosure/No Conflict Agreement dated May 16, 1996 between Metrocall, Inc. and
Ray D. Russenberger. (c)
10.11 Non-disclosure/No Conflict Agreement dated May 16, 1996 between Metrocall, Inc. and
Elliott H. Singer. (c)
10.12 Employment Agreement dated May 16, 1996, between Metrocall, Inc. and Charles A.
Emling. (c)
10.13 Change of Control Agreement between Metrocall, Inc. and Vincent D. Kelly. (d)
10.14 Change of Control Agreement between Metrocall, Inc. and William L. Collins, III. (d)
10.15 Change of Control Agreement between Metrocall, Inc. and Steven D. Jacoby. (d)
10.16 Agreement of Merger by and among Metrocall, Inc., PPI Acquisition Corp., Parkway Paging,
Inc. certain shareholders of Parkway Paging, Inc., and George W. Bush, dated February 26,
1996. (e)
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
10.17 Assets Purchase by and among O.R. Estman, Inc., d/b/a Satellite Paging, Dana Paging, Inc.,
d/b/a Message Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D. Bloomgren and
Metrocall, Inc., dated February 28, 1996. (A portion of this Exhibit has been omitted
pursuant to a request for confidential treatment. The omitted material has been filed
separately with the Commission.) (e)
10.18 Amendment to Asset Purchase Agreement dated as of August 30, 1996, by and among
O.R. Estman, Inc., d/b/a Satellite Paging, Dana Paging, Inc., d/b/a Message Network, Bertram
M. Wachtel, Edward R. Davalos and Kevan D. Bloomgren, and Metrocall, Inc. (f)
10.19 Amended and Restated 1993 Stock Option Plan of Metrocall. (g)
10.20 Directors' Stock Option Plan, as amended. (h)
10.21 Metrocall 1996 Stock Option Plan, as amended. (h)
10.23 Metrocall Employee Stock Purchase Plan. (n)
10.24 Deed of Lease between Douglas and Joyce Jemal, as landlord, and Metrocall, as tenant dated
April 14, 1994. (i)
10.25 Lease Agreement dated December 20, 1983, between a predecessor of Metrocall and Beacon
Communications Associates, Ltd. (j)
10.26 Tax Indemnification Agreement by and among Metrocall, Harry L. Brock, Jr., Christopher
A. Kidd, Vincent D. Kelly and Suzanne S. Brock. (d)
10.27 Metrocall Savings and Retirement Plan, as amended and restated, dated April 1, 1995. (c)
10.28 Amended and Restated Loan Agreement among Metrocall, Inc., the Toronto-Dominion
Bank and the First National Bank of Boston, with the Toronto-Dominion Bank as "Doc-
umentation Agent," the First National Bank of Boston as "Syndication Agent," the Toronto
Dominion Bank and the First National Bank of Boston as "Managing Agents," and Toronto-
Dominion (Texas), Inc. as "Administrative Agent". (k)
10.30 Variable Common Rights Agreement between Metrocall, Inc. and First Union National Bank
of Virginia, Rights Agent, dated as of November 15, 1996, including Form of Certificate re-
presenting Variable Common Rights. (p)
10.31 Unit Purchase Agreement dated as of November 15, 1996, among Metrocall, Inc. and Certain
Purchasers. (m)
10.32 Warrant Agreement dated as of November 15, 1996, between Metrocall, Inc. and the First
National Bank of Boston, Warrant Agent. (m)
11.1 Statement re computation of per share earnings.
21.1 Subsidiaries of Metrocall, Inc. (o)
27.1 Financial Data Schedule.
</TABLE>
------------------------
(a) Incorporated by reference to Metrocall's Registration
Statement on Form S-4, as amended (File No. 333-21231),
initially filed with the Commission on February 5, 1997.
(b) Incorporated by reference to Metrocall's Registration
Statement on Form S-1, as amended (File No. 33-96042),
filed with the Commission on September 27, 1995.
(c) Incorporated by reference to Metrocall, Inc. Tender Offer
Statement on Schedule 14D-1, filed with the Commission on
May 22, 1996.
(d) Incorporated by reference to Metrocall's Registration
Statement on Form S-4, as amended (File No. 333-06919),
filed with the Commission on June 27, 1996.
(e) Incorporated by reference to Metrocall's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996, filed
with the Commission on May 15, 1996.
(f) Incorporated by reference to Metrocall's Periodic Report
on Form 8-K filed with the Commission on September 13,
1996, as amended October 1, 1996.
(g) Incorporated by reference to Metrocall's Annual Report on
Form 10-K/A, as amended, for the year ended December 31,
1993, filed with the Commission on July 21, 1994.
(h) Incorporated by reference to Metrocall's Proxy Statement
filed for the Annual Meeting of Stockholders to be held on
May 7, 1997.
23
<PAGE> 24
(i) Incorporated by reference to Metrocall's Quarterly Report
on Form 10-Q for the quarter ended September 30, 1994,
filed with the Commission on November 14, 1994.
(j) Incorporated by reference to Metrocall's Registration
Statement on Form S-1, as amended (File No. 33-63886),
filed with the Commission on July 12, 1993.
(k) Incorporated by reference to Metrocall's Registration
Statement on Form S-3, as amended (File No. 333-13123),
filed with the Commission on October 1, 1996.
(l) Incorporated by reference to the Registration Statement on
Form S-1 of A+ Communications, Inc. as amended (File No.
33-95208), filed with the Commission on September 18,
1995.
(m) Incorporated by reference to Metrocall's Current Report on
Form 8-K filed with the Commission on November 21, 1996.
(n) Incorporated by reference to Metrocall's Proxy Statement
filed for the Annual Meeting of Stockholders to be held on
May 1, 1996.
(o) Incorporated by reference to Metrocall's Annual Report on
Form 10-K for the year ended December 31, 1996, filed with
the Commission on March 31, 1997.
(p) Incorporated by reference to Metrocall's Annual Report on
Form 10-K/A for the year ended December 31, 1996, filed
with the Commission on May 9, 1997.
(b) REPORTS ON FORM 8-K
A report dated January 7, 1997 regarding the delisting and
deregistration of the Senior Subordinated Notes of A+ Network, Inc.
filed with the Commission on January 9, 1997.
An amended report dated November 15, 1997 regarding the merger of
Metrocall, Inc. and A+ Network, Inc., including financial statements
of A+ Network for the interim period as of and for the nine months
ended September 30, 1996, together with pro forma financial
information, filed with the Commission on January 27, 1997.
A report dated January 31, 1997, regarding the Amendment to the Page
America Asset Purchase Agreement and the closing of acquisitions of
Radio and Commissions Consultants, Inc. and Advanced Cellular
Telephone, Inc. filed with the Commission on February 24, 1997.
24
<PAGE> 25
SIGNATURES
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 thereunto duly authorized.
Date: May 15, 1997 METROCALL, INC.
/s/ Vincent D. Kelly
-------------------------------
Vincent D. Kelly
Chief Financial Officer, Treasurer
and Executive Vice President
25
<PAGE> 26
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
-------- -------------------
<S> <C>
2.1 Amended and Restated Asset Purchase Agreement by and among Page America Group, Inc.,
Page America of New York, Inc., Page America of Illinois, Inc., Page America Communications
of Indiana, Inc., Page America of Pennsylvania, Inc. (collectively "Page America") and
Metrocall, Inc. ("Metrocall") dated as of January 30, 1997. (a)
2.2 Amendment to Asset Purchase Agreement by and among page America and Metrocall dated
as of March 28, 1997. (a)
3.1 Amended and Restated Certificate of Incorporation of Metrocall (the "Certificate") as amended.
3.2 Certificate of Amendment to the Certificate dated May 8, 1997.
3.3 Fifth Amended and Restated Bylaws of Metrocall. (o)
4.1 Indenture, including form of 10 3/8% Senior Subordinated Notes due 2007. (b)
4.2 Indenture for A+ Network, Inc. 11 7/8% Senior Subordinated Notes due 2005 ("A+ Notes")
dated October 24, 1995. (l)
4.3 First Supplemental Indenture dated November 14, 1996, for A+ Notes. (o)
4.4 Second Supplemental Indenture dated November 14, 1996, for A+ Notes. (o)
10.1 Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall, Inc. and
A+ Network, Inc. (c)
10.2 Amendment to Agreement and Plan of Merger dated as of May 16, 1996, between Metrocall,
Inc., and A+ Network, Inc. (d)
10.3 Shareholders' Option and Sale Agreement dated as of May 16, 1996, between Metrocall, Inc.
and certain shareholders of A+ Network, Inc. listed therein. (c)
10.4 Metrocall Stockholders Voting Agreement dated as of May 16 ,1996, between A+ Network,
Inc. and certain stockholders of Metrocall, Inc., listed therein. (c)
10.5 Agreement dated May 16, 1996, among Metrocall, Inc. and Ray D. Russenberger and Elliott
H. Singer regarding voting for director. (c)
10.6 Employment Agreement between Metrocall, Inc. and Vincent D. Kelly. (d)
10.7 Employment Agreement between Metrocall, Inc. and William L. Collins, III. (d)
10.8 Employment Agreement between Metrocall, Inc. and Steven D. Jacoby. (d)
10.9 Agreement and Plan of Merger entered into effective the 26th date of April, 1996 between
A+ Network, Inc. ("ACOM"), a Louisiana corporation to be formed as a wholly-owned
subsidiary of ACOM, Radio and Communications Consultants, Inc., Advanced Cellular
Telephone, Inc., Leroy Faith Sr. and Eddie Ray Faith, DeWayne Faith and Leroy Faith Jr. (d)
10.10 Non-disclosure/No Conflict Agreement dated May 16, 1996 between Metrocall, Inc. and
Ray D. Russenberger. (c)
10.11 Non-disclosure/No Conflict Agreement dated May 16, 1996 between Metrocall, Inc. and
Elliott H. Singer. (c)
10.12 Employment Agreement dated May 16, 1996, between Metrocall, Inc. and Charles A.
Emling. (c)
10.13 Change of Control Agreement between Metrocall, Inc. and Vincent D. Kelly. (d)
10.14 Change of Control Agreement between Metrocall, Inc. and William L. Collins, III. (d)
10.15 Change of Control Agreement between Metrocall, Inc. and Steven D. Jacoby. (d)
10.16 Agreement of Merger by and among Metrocall, Inc., PPI Acquisition Corp., Parkway Paging,
Inc. certain shareholders of Parkway Paging, Inc., and George W. Bush, dated February 26,
1996. (e)
10.17 Assets Purchase by and among O.R. Estman, Inc., d/b/a Satellite Paging, Dana Paging, Inc.,
d/b/a Message Network, Bertram M. Wachtel, Edward R. Davalos, Kevan D. Bloomgren and
Metrocall, Inc., dated February 28, 1996. (A portion of this Exhibit has been omitted
pursuant to a request for confidential treatment. The omitted material has been filed
separately with the Commission.) (e)
</TABLE>
<PAGE> 27
<TABLE>
<CAPTION>
Exhibit
Number Exhibit Description
------- -------------------
<S> <C>
10.18 Amendment to Asset Purchase Agreement dated as of August 30, 1996, by and among
O.R. Estman, Inc., d/b/a Satellite Paging, Dana Paging, Inc., d/b/a Message Network, Bertram
M. Wachtel, Edward R. Davalos and Kevan D. Bloomgren, and Metrocall, Inc. (f)
10.19 Amended and Restated 1993 Stock Option Plan of Metrocall. (g)
10.20 Directors' Stock Option Plan, as amended. (h)
10.21 Metrocall 1996 Stock Option Plan, as amended. (h)
10.23 Metrocall Employee Stock Purchase Plan. (n)
10.24 Deed of Lease between Douglas and Joyce Jemal, as landlord, and Metrocall, as tenant dated
April 14, 1994. (i)
10.25 Lease Agreement dated December 20, 1983, between a predecessor of Metrocall and Beacon
Communications Associates, Ltd. (j)
10.26 Tax Indemnification Agreement by and among Metrocall, Harry L. Brock, Jr., Christopher
A. Kidd, Vincent D. Kelly and Suzanne S. Brock. (d)
10.27 Metrocall Savings and Retirement Plan, as amended and restated, dated April 1, 1995. (c)
10.28 Amended and Restated Loan Agreement among Metrocall, Inc., the Toronto-Dominion
Bank and the First National Bank of Boston, with the Toronto-Dominion Bank as "Doc-
umentation Agent," the First National Bank of Boston as "Syndication Agent," the Toronto
Dominion Bank and the First National Bank of Boston as "Managing Agents," and Toronto-
Dominion (Texas), Inc. as "Administrative Agent". (k)
10.30 Variable Common Rights Agreement between Metrocall, Inc. and First Union National Bank
of Virginia, Rights Agent, dated as of November 15, 1996, including Form of Certificate re-
presenting Variable Common Rights. (p)
10.31 Unit Purchase Agreement dated as of November 15, 1996, among Metrocall, Inc. and Certain
Purchasers. (m)
10.32 Warrant Agreement dated as of November 15, 1996, between Metrocall, Inc. and the First
National Bank of Boston, Warrant Agent. (m)
11.1 Statement re computation of per share earnings.
21.1 Subsidiaries of Metrocall, Inc. (o)
27.1 Financial Data Schedule.
</TABLE>
----------------------
(a) Incorporated by reference to Metrocall's Registration
Statement on Form S-4, as amended (File No.
333-21231), initially filed with the Commission on
February 5, 1997.
(b) Incorporated by reference to Metrocall's Registration
Statement on Form S-1, as amended (File No. 33-96042),
filed with the Commission on September 27, 1995.
(c) Incorporated by reference to Metrocall, Inc. Tender
Offer Statement on Schedule 14D-1, filed with the
Commission on May 22, 1996.
(d) Incorporated by reference to Metrocall's Registration
Statement on Form S-4, as amended (File No.
333-06919), filed with the Commission on June 27,
1996.
(e) Incorporated by reference to Metrocall's Quarterly
Report on Form 10-Q for the quarter ended March 31,
1996, filed with the Commission on May 15, 1996.
(f) Incorporated by reference to Metrocall's Periodic
Report on Form 8-K filed with the Commission on
September 13, 1996, as amended October 1, 1996.
(g) Incorporated by reference to Metrocall's Annual Report
on Form 10-K/A, as amended, for the year ended
December 31, 1993, filed with the Commission on July
21, 1994.
(h) Incorporated by reference to Metrocall's Proxy
Statement filed for the Annual Meeting of Stockholders
to be held on May 7, 1997.
(i) Incorporated by reference to Metrocall's Quarterly
Report on Form 10-Q for the quarter ended September
30, 1994, filed with the Commission on November 14,
1994.
(j) Incorporated by reference to Metrocall's Registration
Statement on Form S-1, as amended (File No. 33-63886),
filed with the Commission on July 12, 1993.
(k) Incorporated by reference to Metrocall's Registration
Statement on Form S-3, as amended
<PAGE> 28
(File No. 333-13123), filed with the Commission on
October 1, 1996.
(l) Incorporated by reference to the Registration
Statement on Form S-1 of A+ Communications, Inc. as
amended (File No. 33-95208), filed with the Commission
on September 18, 1995.
(m) Incorporated by reference to Metrocall's Current
Report on Form 8-K filed with the Commission on
November 21, 1996.
(n) Incorporated by reference to Metrocall's Proxy
Statement filed for the Annual Meeting of Stockholders
to be held on May 1, 1996.
(o) Incorporated by reference to Metrocall's Annual Report
on Form 10-K for the year ended December 31, 1996,
filed with the Commission on March 31, 1997.
(p) Incorporated by reference to Metrocall's Annual Report
on Form 10-K/A for the year ended December 31, 1996,
filed with the Commission on May 9, 1997.
<PAGE> 1
EXHIBIT 3.1
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
METROCALL, INC.,
AS AMENDED
Metrocall, Inc., a corporation organized and existing under
the laws of the State of Delaware (the "Corporation"), hereby certifies as
follow:
FIRST: The name of the Corporation is Metrocall, Inc. The
Corporation was originally incorporated under the name Metrocall of Delaware,
Inc., and the original Certificate of Incorporation of the Corporation was
filed with the Secretary of State of the State of Delaware on October 26, 1982.
SECOND: This Amended and Restated Certificate of
Incorporation was duly adopted in accordance with Sections 242 and 245 of the
General Corporation Law of the State of Delaware (the "Delaware General
Corporation Law"), and was duly adopted by the holders of all of the
outstanding Common Stock of the Corporation, acting by written consent pursuant
to Section 228(d) of the Delaware General Corporation Law, and restates and
integrates and further amends the provisions of the Certificate of
Incorporation of the Corporation, as heretofore amended.
THIRD: The text of the Certificate of Incorporation of the
Corporation as heretofore amended hereby is restated and amended to read in its
entirety as follows:
1. NAME.
The name of this corporation is Metrocall, Inc.
2. REGISTERED OFFICE AND AGENT.
The registered office of the Corporation shall be located at
32 Loockerman Square, Suite L-100, Dover, Delaware 19901 in the County of Kent.
The registered agent of the Corporation at such address shall be United States
Corporation Company.
3. PURPOSE AND POWERS.
The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the Delaware General
Corporation Law. The Corporation shall have all power necessary or helpful to
engage in such acts and activities.
<PAGE> 2
4. CAPITAL STOCK.
4.1. Authorized Shares.
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 61,000,000 shares, of which
1,000,000 shares shall be Preferred Stock, having a par value of $0.01 per
share ("Preferred Stock") and 60,000,000 shall be classified as shares of
Common Stock, par value $0.01 per share ("Common Stock"). The Board of
Directors is expressly authorized to provide for the classification and
reclassification of any unissued shares of Preferred Stock or Common Stock and
the issuance thereof in one or more classes or series without the approval of
the stockholders of the Corporation.
4.2. Common Stock.
(a) Relative Rights.
The Common Stock shall be subject to all of the rights,
privileges, preferences and priorities of the Preferred Stock as set forth in
the certificate of designations filed to establish the respective series of
Preferred Stock. Each share of Common Stock shall have the same relative rights
as and be identical in all respects to all the other shares of Common Stock.
(b) Voting Rights.
Each holder of shares of Common Stock shall be entitled to
attend all special and annual meetings of the stockholders of the Corporation
and, share for share and without regard to class, together with the holders of
all other classes of stock entitled to attend such meetings and to vote (except
any class or series of stock having special voting rights), to cast one vote
for each outstanding share of Common Stock so held upon any matter or thing
(including, without limitation, the election of one or more directors) properly
considered and acted upon by the stockholders, except as otherwise provided in
this Amended and Restated Certificate of Incorporation or by applicable law.
(c) Dividends.
Whenever there shall have been paid, or declared and set
aside for payment, to the holders of shares of any class of stock having
preference over the Common Stock as to the payment of dividends, the full
amount of dividends and of sinking fund or retirement payments, if any, to
which such holders are respectively entitled in preference to the Common Stock,
then the holders of record of the Common Stock and any class or series of stock
entitled to participate therewith as to dividends, shall be entitled to receive
dividends, when, as, and if declared by the Board of Directors, out of any
assets legally available for the payment of dividends thereon.
2
<PAGE> 3
(d) Dissolution, Liquidation, Winding Up.
In the event of any dissolution, liquidation or winding up of
the Corporation, whether voluntary or involuntary, the holders of record of the
Common Stock then outstanding, and all holders of any class or series of stock
entitled to participate therewith in whole or in part, as to distribution of
assets, shall become entitled to participate in the distribution of any assets
of the Corporation remaining after the Corporation shall have paid, or set
aside for payment, to the holders of any class of stock having preference over
the Common Stock in the event of dissolution, liquidation or winding up, the
full preferential amounts (if any) to which they are entitled, and shall have
paid or provided for payment of all debts and liabilities of the Corporation.
4.3. Preferred Stock.
(a) Issuance, Designations, Powers, Etc.
The Board of Directors expressly is authorized, subject to
limitations prescribed by the Delaware General Corporation Law and the
provisions of this Amended and Restated Certificate of Incorporation, to
provide, by resolution and by filing a certificate of designations pursuant to
the Delaware General Corporation Law, for the issuance from time to time of the
shares of Preferred Stock in one or more series, to establish from time to time
the number of shares to be included in each such series, and to fix the
designation, powers, preferences and other rights of the shares of each such
series and to fix the qualifications, limitations and restrictions thereon,
including, but without limiting the generality of the foregoing, the following:
(i) the number of shares constituting that series
and the distinctive designation of that series;
(ii) the dividend rate on the shares of that series,
whether dividends shall be cumulative, and, if so, from which date or dates,
and the relative rights of priority, if any, of payment of dividends on shares
of that series;
(iii) whether that series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the terms of such
voting rights;
(iv) whether that series shall have conversion
privileges, and, if so, the terms and conditions of such conversion, including
provision for adjustment of the conversion rate in such events as the Board of
Directors shall determine;
(v) whether or not the shares of that series shall
be redeemable, and, if so, the terms and conditions of such redemption,
including the dates upon or after which they shall be redeemable, and the
amount per share payable in case of redemption, which amount may vary under
different conditions and at different redemption dates;
(vi) whether that series shall have a sinking fund
for the redemption or purchase of shares of that series, and, if so, the terms
and amount of such sinking fund;
3
<PAGE> 4
(vii) the rights of the shares of that series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, and the relative rights of priority, if any, of payment of shares
of that series; and
(viii) any other relative powers, preferences, and
rights of that series, and qualifications, limitations or restrictions on that
series.
(b) Dissolutions, Liquidation, Winding Up.
In the event of any liquidation, dissolution or winding up of
the Corporation, whether voluntary or involuntary, the holders of Preferred
Stock of each series shall be entitled to receive only such amount or amounts
as shall have been fixed by the certificate of designations or by the
resolution or resolutions of the Board of Directors providing for the issuance
of such series.
4.4. Adjustments of Authorized Stock.
Except as provided to the contrary in the provisions
establishing a class or series of stock, the amount of the authorized stock of
the Corporation of any class or classes may be increased or decreased (but not
below the number then outstanding) by the affirmative vote of a majority of the
directors then in office, whether or not a quorum.
4.5. Restrictions on Foreign Ownership of Shares.
(a) No shares of stock of any class or series outstanding at
any time shall be owned of record or beneficially by a person (as defined in
Section 4.5(c) hereof) whose ownership thereof would constitute a violation of
Section 310(a) or 310(b) of the Communications Act of 1934, as amended, or any
similar or successor federal statutes.
(b) The Corporation may, in its sole discretion, redeem any
outstanding shares of stock of any class or series which are owned in violation
of Section 4.5(a) hereof. Shares redeemed by the Corporation under this Section
4.5(b) may be redeemed for cash, property or rights, at the lesser of (i) the
fair market value at the time of the redemption or (ii) the holder's purchase
price, provided the holder purchased such shares within a year prior to the
redemption. The Board of Directors shall have sole discretion to determine
whether shares are owned in violation of Section 4.5(a) hereof, the fair market
value of any shares to be redeemed, and the value of any non-cash consideration
to be provided for such shares in any such redemption.
(c) For purposes of this Section 4.5, "person" shall mean an
individual, a partnership, a corporation, a trust, a joint venture, an
unincorporated organization, a government or any department or agency thereof
or any other legal entity.
4
<PAGE> 5
5. BOARD OF DIRECTORS.
5.1. Classification.
Except as otherwise provided in this Amended and Restated
Certificate of Incorporation or a certificate of designations relating to the
rights of the holders of any class or series of Preferred Stock, voting
separately by class or series, to elect additional directors under specified
circumstances, the number of directors of the Corporation shall be as fixed
from time to time by or pursuant to the Bylaws of the Corporation. The
directors, other than those who may be elected by the holders of any class or
series of Preferred Stock voting separately by class or series, shall be
classified, with respect to the time for which they severally hold office, into
three classes, Class I, Class II and Class III, which shall be as nearly equal
in number as possible, and shall be adjusted from time to time in the manner
specified in the Bylaws of the Corporation to maintain such proportionality.
Each initial director in Class I shall hold office for a term expiring at the
1996 annual meeting of stockholders, each initial director in Class II shall
hold office initially for a term expiring at the 1995 annual meeting of
stockholders, and each initial director in Class III shall hold office for a
term expiring at the 1994 annual meeting of stockholders. Notwithstanding the
foregoing provisions of this Section 5.1, each director shall serve until such
director's successor is duly elected and qualified or until such director's
earlier death, resignation or removal. At each annual meeting of stockholders,
the successors to the class of directors whose term expires at that meeting
shall be elected to hold office for a term expiring at the annual meeting of
stockholders held in the third year following the year of their election and
until their successors have been duly elected and qualified or until any such
director's earlier death, resignation or removal.
5.2. Removal.
(a) Except as otherwise provided pursuant to the provisions
of this Amended and Restated Certificate of Incorporation or a certificate of
designations relating to the rights of the holders of any class or series of
Preferred Stock, voting separately by class or series, to elect directors under
specified circumstances, any director or directors may be removed from office
at any time, but only for cause (as defined in Section 5.2(b) hereof) and only
by the affirmative vote, at a special meeting of the stockholders called for
such a purpose, of not less than 66-2/3% of the total number of votes of the
then outstanding shares of stock of the Corporation entitled to vote generally
in the election of directors, voting together as a single class, but only if
notice of such proposal was contained in the notice of such meeting. At least
30 days prior to such special meeting of stockholders, written notice shall be
sent to the director or directors whose removal will be considered at such
meeting. Any vacancy in the Board of Directors resulting from any such removal
or otherwise shall be filled only by vote of a majority of the directors then
in office, although less than a quorum, and any directors so chosen shall hold
office until the next election of the class for which such directors shall have
been chosen and until their successors shall be elected and qualified or until
any such director's earlier death, resignation or removal.
(b) For purposes of this Section 5.2, "cause" shall mean (i)
conduct as a director of the Corporation or any subsidiary involving dishonesty
of a material nature or (ii) criminal
5
<PAGE> 6
conduct (other than minor infractions and traffic violations) that relates to
the performance of the director's duties as a director of the Corporation or
any subsidiary.
5.3. Change of Authorized Number.
In the event of any increase or decrease in the authorized
number of directors, the newly created or eliminated directorships resulting
from such increase or decrease shall be apportioned by the Board of Directors
among the three classes of directors so as to maintain such classes as nearly
equal as possible. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
5.4. Directors Elected by Holders of Preferred Stock.
Notwithstanding the foregoing, whenever the holders of any
one or more classes or series of Preferred Stock issued by the Corporation
shall have the right, voting separately by class or series, to elect directors
at an annual or special meeting of stockholders, the election, term of office,
filling of vacancies and other features of such directorships shall be governed
by the terms of this Amended and Restated Certificate of Incorporation or a
certificate of designations applicable thereto, and such directors so elected
shall not be divided into classes pursuant to this Section 5 unless expressly
provided by the certificate of designations.
5.5. Limitation of Liability.
No director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, provided that this provision shall not eliminate
or limit the liability of a director (a) for any breach of the director's duty
of loyalty to the Corporation or its stockholders; (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law; (c) for the types of liability set forth in Section 174 of
the Delaware General Corporation Law; or (d) for any transaction from which the
director received any improper personal benefit. Any repeal or modification of
this Section 5.5 by the stockholders of the Corporation shall be prospective
only, and shall not adversely affect any right or protection of a director of
the Corporation existing at the time of such repeal or modification with
respect to acts or omissions occurring prior to such repeal or modification.
6. INDEMNIFICATION.
To the extent permitted by law, the Corporation shall fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was a director or officer of the Corporation, or is or was
serving at the request of the Corporation as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding,
6
<PAGE> 7
To the extent permitted by law, the Corporation may fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was an employee or agent of the Corporation, or is or was
serving at the request of the Corporation as an employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding.
The Corporation may advance expenses (including attorneys'
fees) incurred by a director or officer in advance of the final disposition of
such action, suit or proceeding upon the receipt of an undertaking by or on
behalf of the director or officer to repay such amount if it shall ultimately
be determined that such director or officer is not entitled to indemnification.
The Corporation may advance expenses (including attorneys' fees) incurred by an
employee or agent in advance of the final disposition of such action, suit or
proceeding upon such terms and conditions, if any, as the Board of Directors
deems appropriate.
7. ACTIONS BY STOCKHOLDERS.
Any action required or permitted to be taken by the
stockholders of the Corporation must be effected at a duly called annual or
special meeting of stockholders, and may not be effected by any consent in
writing by such stockholders, unless such consent is unanimous.
8. SPECIAL MEETINGS.
Special meetings of the stockholders may be called at any
time but only by (a) the chairman of the board of the Corporation, (b) a
majority of the directors in office, although less than a quorum, or (c) the
holders of not less than 35% of the total number of votes of the then
outstanding shares of stock of the Corporation entitled to vote generally in
the election of directors, voting together as a single class.
9. CRITERIA FOR EVALUATING CERTAIN OFFERS.
The Board of Directors, when evaluating any offer of another
party to (a) make a tender or exchange offer for any equity security of the
Corporation, (b) merge or consolidate the Corporation with another institution,
or (c) purchase or otherwise acquire all or substantially all of the properties
and assets of the Corporation, shall, in connection with the exercise of its
judgment in determining what is in the best interests of the Corporation and
its stockholders, be authorized, to give due consideration to any such factors
as the Board of Directors determines to be relevant, including, without
limitation:
(i) the interests of the stockholders of the
Corporation;
(ii) whether the proposed transaction might violate
federal or state laws;
7
<PAGE> 8
(iii) the consideration being offered in the
proposed transaction, in relation to the then current market price for the
outstanding capital stock of the Corporation, the market price for the capital
stock of the Corporation over a period of years, the estimated price that might
be achieved in a negotiated sale of the Corporation as a whole or in part or
through orderly liquidation, the premiums over market price for the securities
of other corporations in similar transactions, current political, economic and
other factors bearing on securities prices and the Corporation's financial
condition and estimated future value as an independent entity; and
(iv) the social, legal and economic effects upon
employees, suppliers, subscribers and others having similar relationships with
the Corporation, and the communities in which the Corporation conducts it
business.
In connection with any such evaluation, the Board of Directors is authorized to
conduct such investigations and engage in such legal proceedings as the Board
of Directors may determine.
10. ANTI-GREENMAIL.
Any direct or indirect purchase or other acquisition by the
Corporation of any capital stock of the Corporation from any Significant
Stockholder (as hereinafter defined) who has been the beneficial owner (as
hereinafter defined) of such capital stock for less than two years prior to the
date of such purchase or other acquisition shall, except as hereinafter
expressly provided, require the affirmative vote of the holders of at least a
majority of the total number of outstanding shares of capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, excluding in calculating such affirmative vote and
the total number of outstanding shares all capital stock beneficially owned by
such Significant Stockholder. Such affirmative vote shall be required
notwithstanding the fact that no vote may be required or that a lesser
percentage may be specified, by law, but no such affirmative vote shall be
required with respect to (a) any purchase or other acquisition of capital stock
of the Corporation made as part of a tender or exchange offer by the
Corporation to purchase capital stock of the Corporation on the same terms from
all holders of the same class of capital stock and complying with the
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder, (b) any purchase of capital stock of the
Corporation which the Board of Directors shall determine to be necessary
pursuant to Section 4.5 of this Amended and Restated Certificate of
Incorporation, (c) any purchase or other acquisition of capital stock of the
Corporation on the same terms from all holders of such class of capital stock
in accordance with the terms and conditions of any stock option or employee
benefit plan of the Corporation, or (d) any purchase of capital stock of the
Corporation, where the Board of Directors has determined that the purchase
price per share of the capital stock does not exceed the fair market value of
the capital stock. Such fair market value shall be equal to the average closing
price or the mean of the bid and asked prices of a share of capital stock for
the 20 trading days immediately preceding the execution of a definitive
agreement to purchase the capital stock from a Significant Stockholder.
For purposes of this Section 10, "Significant Stockholder"
shall mean any person (other than the Corporation or any corporation of which a
majority of any class of capital stock of the Corporation is owned, directly or
indirectly, by the Corporation) that is the beneficial owner,
8
<PAGE> 9
directly or indirectly, of five percent or more of the voting power of the
outstanding capital stock of the Corporation.
For purposes of this Section 10, "Beneficial Owner," when
used with respect to any capital stock of the Corporation, means any person
that:
(i) individually or with any of its Affiliates (as
hereinafter defined), beneficially owns capital stock directly or indirectly;
(ii) individually or with any of its Affiliates,
has (a) the right to acquire capital stock (whether such right is exercisable
immediately or only after passage of time) pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise; (b) the right to vote or
direct the voting of capital stock pursuant to any agreement, arrangement or
understanding; or (c) the right to dispose of or to direct the disposition of
capital stock pursuant to any agreement, arrangement or understanding; or
(iii) individually or with any of its Affiliates,
has any agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of capital stock with any other person that
beneficially owns, or whose Affiliates beneficially own, directly or
indirectly, such shares of capital stock.
For purposes of this Section 10, "Affiliate" shall mean a
person that directly or indirectly through one or more intermediaries controls,
or is controlled by, or is under common control with, a specified person.
11. COMPROMISE OR ARRANGEMENT CLAUSE.
Whenever a compromise or arrangement is proposed between the
Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under
Section 291 of the Delaware General Corporation Law or on the application of
trustees in dissolution or of any receiver or receivers appointed for the
Corporation under Section 279 of the Delaware General Corporation Law order a
meeting of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, to be summoned in
such manner as the said court directs. If a majority in number representing
three fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of the Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding an all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders of the Corporation, as the case may be, and also on the
Corporation.
9
<PAGE> 10
12. AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION.
Notwithstanding any other provisions of this Amended and
Restated Certificate of Incorporation or the Bylaws of the Corporation (and
notwithstanding the fact that a lesser percentage may be specified by law, this
Amended and Restated Certificate of Incorporation or the Bylaws of the
Corporation), the affirmative vote of 66-2/3% of the total number of votes of
the then outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of directors, voting together as a single class,
shall be required to amend or repeal, or to adopt any provision inconsistent
with the purpose or intent of Sections 5, 7, 8, 9, and 10 hereof, and this
Section 12. Notice of any such proposed amendment, repeal or adoption shall be
contained in the notice of the meeting at which it is to be considered. Subject
to the provisions set forth herein, the Corporation reserves the right to
amend, alter, repeal or rescind any provision contained in this Amended and
Restated Certificate of Incorporation in the manner now or hereafter prescribed
by law.
13. AMENDMENT OF BYLAWS.
In furtherance and not in limitation of the powers conferred
by the Delaware General Corporation Law, the Board of Directors is expressly
authorized and empowered to adopt, amend and repeal the Bylaws of the
Corporation, subject to the right of the stockholders entitled to vote with
respect thereto to amend or repeal Bylaws adopted by the Board of Directors as
provided for in this Amended and Restated Certificate of Incorporation or in
the Bylaws of the Corporation.
IN WITNESS WHEREOF, Metrocall, Inc. has caused this Amended
and Restated Certificate of Incorporation to be executed on its behalf on July
12, 1993.
METROCALL, INC.
By: /s/ Harry L. Brock, Jr.
------------------------
Harry L. Brock, Jr.
President
Attest:
/s/ Suzanne S. Brock
- ----------------------------
Suzanne S. Brock
Secretary
10
<PAGE> 1
EXHIBIT 3.2
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
METROCALL, INC.
I, the undersigned, being the Assistant Secretary of METROCALL, INC.,
a corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware,
DO HEREBY CERTIFY:
FIRST: That the Board of Directors of the Corporation duly adopted the
following amendment to the Amended and Restated Certificate of Incorporation
which amends Article 4.1 thereof to read in its entirety as follows:
4.1 Authorized Shares.
The total number of shares of all classes of stock that the
Corporation shall have the authority to issue is 61,000,000
shares, of which 1,000,000 shares shall be Preferred Stock,
having a par value of $0.01 per share (the "Preferred Stock")
and 60,000,000 shall be classified as shares of Common Stock,
par value $0.01 per share ("Common Stock"). The Board of
Directors is expressly authorized to provide for the
classification and reclassification of any unissued shares of
Preferred Stock or Common Stock and the issuance thereof in
one or more classes or series without the approval of the
stockholders of the Corporation.
SECOND: That the amendment has been consented to and authorized by the
holders of a majority of the issued and outstanding stock entitled to vote in
accordance with the provisions of Section 242 of the General Corporation Law of
the State of Delaware.
THIRD: That the aforesaid amendment was duly adopted in accordance
with the applicable provisions of Section 242 of the General Corporation Law of
the State of Delaware.
<PAGE> 2
IN WITNESS WHEREOF, I have signed this certificate this 8th day of
May, 1997.
/s/ SHIRLEY B. WHITE
----------------------------
Shirley B. White
Assistant Secretary
<PAGE> 1
METROCALL, INC.
STATEMENT RE COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
For the Quarter ended March 31,
-------------------------------
1996 1997
------------ ------------
<S> <C> <C>
Net loss $ (7,689) $ (11,748)
Preferred dividends - (1,560)
------------ ------------
Net loss attributable to common stockholders $ (7,689) $ (13,308)
============ ============
Weighted-average shares outstanding:
Shares outstanding, beginning of period 14,626,255 24,521,135
Shares issued in acquisitions - 302,059
Shares issued for exercise of stock options - -
Shares issued in employee stock purchase plan - 35,203
------------ ------------
Weighted-average shares outstanding 14,626,255 24,858,397
============ ============
Loss per share attributable to common stockholders $ (0.53) $ (0.54)
============ ============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 12,861
<SECURITIES> 0
<RECEIVABLES> 31,548
<ALLOWANCES> 2,574
<INVENTORY> 0
<CURRENT-ASSETS> 47,009
<PP&E> 243,004
<DEPRECIATION> 85,530
<TOTAL-ASSETS> 655,570
<CURRENT-LIABILITIES> 50,888
<BONDS> 338,734
32,791
0
<COMMON> 251
<OTHER-SE> 155,787
<TOTAL-LIABILITY-AND-EQUITY> 655,570
<SALES> 8,238
<TOTAL-REVENUES> 66,753
<CGS> 6,157
<TOTAL-COSTS> 65,024
<OTHER-EXPENSES> 83
<LOSS-PROVISION> 2,283
<INTEREST-EXPENSE> 8,040
<INCOME-PRETAX> (12,551)
<INCOME-TAX> (803)
<INCOME-CONTINUING> (11,748)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,308)
<EPS-PRIMARY> (0.54)
<EPS-DILUTED> 0
</TABLE>
