<PAGE> 1
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities and Exchange Act of 1934
Date of Report (Date of earliest event reported): November 15, 1996
METROCALL, INC.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
Delaware 0-21924 54-1215634
--------------------------------- ---------------------------- -------------------
<S> <C> <C>
(State or other jurisdicion (Commission File Number) (IRS Employer
of incorporation) Identification No.)
</TABLE>
6677 Richmond Highway, Alexandria, Virginia 22306
-------------------------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 660-6677
Not Applicable
-------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE> 2
ITEM 2. ACQUISITIONS OR DISPOSITIONS OF ASSETS
A+ Network, Inc.
As reported on a Form 8-K filed with the Securities and Exchange
Commission on November 15, 1996, Metrocall, Inc. ("Metrocall" or the "Company")
completed its previously reported merger with A+ Network, Inc. ("A+ Network")
on November 15, 1996 pursuant to the terms of the Agreement and Plan of Merger
between Metrocall, Inc. and A+ Network, Inc. dated May 16, 1996, as amended.
The merger of Metrocall and A+ Network was approved by each company's
stockholders on November 6, 1996.
2
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
The financial statements required by Item 7 with respect to the A+ Network
merger and filed with this report are identified below. Financial statements
otherwise required to be filed herewith by Regulation S-X have been previously
filed and therefore have been omitted pursuant to General Instruction B.3. of
Form 8-K.
FINANCIAL STATEMENTS
A+ NETWORK, INC. (UNAUDITED)
Consolidated Balance Sheet, September 30, 1996
Consolidated Statements of Operations Nine Months Ended September 30, 1996 and
1995 (Unaudited)
Consolidated Statements of Cash Flows Nine Months Ended September 30, 1996 and
1995 (Unaudited)
Notes to Consolidated Financial Statements
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Combined Financial Data
Unaudited Pro Forma Condensed Combined Balance Sheets as of September 30, 1996
Unaudited Pro Forma Condensed Combined Statements of Operations for the Year
Ended December 31, 1995
Unaudited Pro Forma Condensed Combined Statements of Operations for the Nine
Months Ended September 30, 1996
Notes to Unaudited Pro Forma Condensed Combined Financial Statements
3
<PAGE> 4
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned duly authorized.
METROCALL, INC.
/s/ Vincent D. Kelly
---------------------------------------
Vincent D. Kelly
Chief Financial Officer, Treasurer
and Vice President
Date: January 29, 1997
4
<PAGE> 5
INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS AND PRO FORMA
FINANCIAL INFORMATION
<TABLE>
<S> <C>
A+ NETWORK, INC. (UNAUDITED)
Consolidated Balance Sheet, September 30, 1996 F-1
Consolidated Statements of Operations Nine Months Ended September 30, 1996
and 1995 (Unaudited) F-2
Consolidated Statements of Cash Flows Nine Months Ended September 30, 1996
and 1995 (Unaudited) F-3
Notes to Consolidated Financial Statements F-4
PRO FORMA FINANCIAL INFORMATION (UNAUDITED)
Pro Forma Condensed Combined Financial Data F-6
Unaudited Pro Forma Condensed Combined Balance Sheets as of
September 30, 1996 F-7
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Year Ended December 31, 1995 F-8
Unaudited Pro Forma Condensed Combined Statements of Operations
for the Nine Months Ended September 30, 1996 F-9
Notes to Unaudited Pro Forma Condensed Combined Financial Statements F-10
</TABLE>
<PAGE> 6
A+ NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30,
1996
-------------
ASSETS (Unaudited)
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,677,977
Short term investments 18,199,211
Accounts receivable - trade (net of allowance for doubtful accounts) 12,008,071
Inventory 10,961,386
Prepaid expenses 803,050
Other current assets 2,330,102
------------
Total current assets 45,979,797
EQUIPMENT AND FIXTURES - Net 63,212,455
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED - Net 58,344,990
INTANGIBLE AND OTHER ASSETS - Net 42,593,830
------------
TOTAL $210,131,072
============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $6,015,347
Accrued payroll related costs 2,411,586
Accrued liabilities 7,496,412
Deferred revenue and customer deposits 7,163,254
------------
Total current liabilities 23,086,599
LONG-TERM DEBT 124,849,114
DEFERRED TAXES 818,243
STOCKHOLDERS' EQUITY:
Preferred stock - $.01 par value; 1,500,000 shares authorized;
issued and outstanding, none -
Common stock - $.01 par value; 30,000,000 shares authorized;
10,888,583 and 10,263,255 shares issued and outstanding
at September 30, 1996 and December 31, 1995, respectively 108,886
Additional paid-in capital 99,060,874
Accumulated deficit (37,792,644)
------------
Total stockholders' equity 61,377,116
------------
TOTAL $210,131,072
============
</TABLE>
See notes to consolidated financial statements.
F-1
<PAGE> 7
A+ NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------
1996 1995
----------- -----------
<S> <C> <C>
REVENUES:
Mobile communication services $58,564,689 $27,292,437
Equipment sales 4,553,595 2,394,307
Telemessaging services 8,749,152 8,549,523
----------- -----------
Total revenues 71,867,436 38,236,267
Cost of sales (6,450,824) (5,462,694)
----------- -----------
65,416,612 32,773,573
COSTS AND EXPENSES:
Operating expenses - exclusive of depreciation
and amortization 14,338,037 7,680,768
Depreciation and amortization 20,628,360 9,498,170
Selling 12,942,167 7,529,833
General and administrative 23,589,243 14,991,006
Restructuring charges 395,815 -
----------- -----------
71,893,622 39,699,777
OPERATING LOSS (6,477,010) (6,926,204)
INTEREST EXPENSE (11,352,469) (1,379,476)
INTEREST INCOME 1,259,487 -
----------- -----------
NET LOSS ($16,569,992) ($8,305,680)
=========== ===========
LOSS PER SHARE ($1.57) ($1.38)
=========== ===========
AVERAGE NUMBER OF SHARES
OUTSTANDING (in thousands) 10,530 6,016
=========== ===========
</TABLE>
See notes to consolidated financial statements.
F-2
<PAGE> 8
A+ NETWORK, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended
September 30,
---------------------------
1996 1995
----------- -----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ($16,569,992) ($ 8,305,680)
Adjustments to reconcile net loss to cash (used in)
provided by operating activities:
Depreciation and amortization 20,628,360 9,498,170
Provision for losses on accounts receivable 2,517,268 1,221,621
Amortization of debt discount 36,878 ---
Loss on sale of equipment 6,057 ---
Changes in assets and liabilities:
Increase in accounts receivable (3,473,336) (1,374,477)
(Increase) decrease in inventory (6,518,129) 815,108
(Increase) decrease in prepaid expenses (36,582) 157,510
Increase in other current assets (1,586,490) (20,110)
Decrease increase in accounts payable 1,033,481 724,592
Increase in accrued payroll related costs 502,861 17,295
Increase in accrued liabilities 3,438,999 356,133
Increase in deferred revenue and customer deposits 880,393 412,459
----------- -----------
Net cash provided by operating activities 859,768 3,502,621
INVESTING ACTIVITIES:
Acquisition of business, net of cash acquired (13,611,053) ---
Net decrease in short-term investments 24,951,914 ---
Purchase of South Central Bell paging assets --- (1,232,061)
Purchase of equipment (27,978,659) (7,112,899)
Proceeds from sale of equipment 1,645,742 ---
Investments in consortium and other --- (2,145,469)
Reduction in (payment of) intangible and other assets 2,460,908 (423,268)
----------- -----------
Net cash used in investing activities (12,531,148) (10,913,697)
FINANCING ACTIVITIES:
Proceeds of long-term debt --- 24,155,000
Repayment of long-term debt (42,168) (17,028,389)
Proceeds from sale of common stock 891,087 889,356
----------- -----------
Net cash provided by financing activities 848,919 8,015,967
----------- -----------
(Decrease) increase in cash and cash equivalents (10,822,461) 604,891
CASH AND CASH EQUIVALENTS, beginning of period 12,500,438 254,880
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 1,677,977 $ 859,771
=========== ===========
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest $ 7,726,669 $ 1,289,276
=========== ===========
SUPPLEMENTAL SCHEDULE OF NONCASH
INVESTING AND FINANCING ACTIVITIES:
Acquisition of business:
Long-term debt $ 753,031 ---
Common stock $ 7,591,974 ---
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 9
A+ NETWORK, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
UNAUDITED INTERIM INFORMATION. The unaudited interim consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, which management considers necessary for a fair
presentation of the financial position and results of operations. The results
of operations for the three months and nine months ended September 30, 1996,
are not necessarily indicative of the results that may be expected for a full
year.
CERTAIN RECLASSIFICATIONS. Certain amounts have been reclassified in
the consolidated statement of operations for the three months and nine months
ended September 30, 1995 and the consolidated balance sheet as of December 31,
1995 to conform with the presentation in 1996.
EMPLOYEE STOCK BASED TRANSACTIONS. The Company will continue to apply
Accounting Principles Board Opinion No. 25 for the measurement and recognition
of employee stock based transactions, and will follow the disclosure
requirements of Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation."
2. ACQUISITIONS
During the first nine months of 1996, certain assets of four paging companies
and all of the outstanding common stock of a fifth company were acquired for
$13,611,053 in cash (including acquisition related expenses and net of cash
acquired), $753,031 in notes payable and 568,687 shares of common
stock valued at $7,591,974. The acquisitions were accounted for as purchases.
Accordingly, the aggregate purchase prices were allocated to specific assets
and liabilities based upon their fair market value at the date of acquisition.
The excess of the purchase price over the estimated fair market value of net
assets acquired ("goodwill") of $11,713,292 is being amortized on a
straight-line basis over 15 years. The results of operations of these
companies have been included in the Consolidated Statements of Operations from
the date of acquisition.
3. REORGANIZATION EXPENSE
In the first quarter of 1996, the Company recorded restructuring charges of
$396,000, representing the expected costs of employee separations.
F-4
<PAGE> 10
4. MERGER WITH METROCALL, INC.
On November 6, 1996 the Company's shareholders approved the Agreement and Plan
of Merger between the Company and Metrocall, Inc. ("Metrocall") of Alexandria,
Virginia pursuant to which the Company will be merged into Metrocall, with
Metrocall to be the surviving corporation. Pursuant to a tender offer and a
Shareholders' Option and Sale Agreement, Metrocall purchased approximately
40.0% of the Company's common stock on September 24, 1996. The closing of the
Merger is expected to occur by November 15, 1996.
F-5
<PAGE> 11
PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(UNAUDITED)
The following unaudited pro forma condensed combined balance sheet under
the heading "Pro Forma Metrocall" gives effect to the acquisition of the equity
interest in A+ Network (to the extent not held at September 30, 1996) for
approximately 8,556,000 shares of Metrocall Common Stock at $5.25 per share, an
equal number of VCRs which have no current value, direct acquisition costs of
approximately $8.2 million and the assumption of $125 million of A+ Network debt
as if the acquisition had occurred on September 30, 1996. The pro forma
condensed combined balance sheet under the heading "Pro Forma Combined Company"
gives effect to (a) the issuance of $39.9 million liquidation value of Series A
Convertible Redeemable Preferred Stock consummated prior to the acquisition of
A+ Network and (b) the refinancing of A+ Network's $125 million of long-term
debt for approximately $127.47 million.
The unaudited pro forma condensed combined statements of operations for the
nine month period ended September 30, 1996 and for the year ended December 31,
1995 under the heading "Pro Forma Metrocall," give effect to the acquisitions
of Parkway Paging, Inc. ("Parkway") and Satellite Paging and Message Network
("Satellite") and the A+ Network Merger and the merger of Network Paging
Corporation into A+ Communications, Inc. on October 24, 1995. The issuance of
$39.9 million of Series A Convertible Redeemable Preferred Stock and the
refinancing of A+ Network's long-term debt as described above are shown under
the heading "Pro Forma Combined Company."
Each of the acquisitions will be accounted for by the purchase method of
accounting. The purchase prices have been allocated on a preliminary basis to
the assets to be acquired based upon the estimated value of such assets. The
final allocation of intangible assets will be based upon appraised values.
This information should be read in conjunction with the notes included
herein and the financial statements of Parkway and Satellite, previously filed.
The unaudited pro forma condensed combined financial data do not purport
to represent what Metrocall's results of operations or financial position
actually would have been had such transactions and events occurred on the dates
specified, or to project Metrocall's results of operations or financial
position for any future period or date. The pro forma adjustments are based
upon available information and certain adjustments that management of Metrocall
believes are reasonable. In the opinion of management of Metrocall, all
adjustments have been made that are necessary to present the unaudited pro
forma condensed combined data.
F-6
<PAGE> 12
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 1996
(in Thousands)
<TABLE>
<CAPTION>
PREFERRED
HISTORICAL STOCK
--------------------- PRO PRO ISSUANCE PRO FORMA
A+ FORMA FORMA AND DEBT COMBINED
METROCALL NETWORK ADJUSTMENTS METROCALL REFINANCING(F) COMPANY
--------- -------- ----------- --------- -------------- ---------
ASSETS
<S> <C> <C> <C> <C> <C> <C>
Current assets:
Cash, cash equivalents and short term
investments.......................... $ 10,243 $ 19,877 $ -- $ 30,120 $ -- $ 30,120
Accounts receivable, net............... 11,090 12,008 -- 23,098 -- 23,098
Inventory.............................. -- 10,961 (10,961)(A) -- -- --
Prepaid expenses and other current
assets............................... 1,985 3,134 -- 5,119 -- 5,119
-------- -------- ---------- -------- ----------- --------
Total current assets................. 23,318 45,980 (10,961) 58,337 -- 58,337
Furniture and equipment, net............. 105,449 63,212 10,961(A) 179,622 -- 179,622
Intangibles, net......................... 257,533 100,939 91,131(B) 449,603 -- 449,603
Equity investments....................... 24,823 -- (24,548)(B) 275 -- 275
Other assets............................. 1,380 -- -- 1,380 -- 1,380
-------- -------- ---------- -------- ----------- --------
Total assets..................... $412,503 $210,131 $ 66,583 $689,217 $ -- $689,217
======== ======== ========== ======== =========== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C> <C> <C> <C> <C>
Current liabilities:
Current maturities of long-term
obligations.......................... $ 276 $ -- $ -- $ 276 $ -- $ 276
Accounts payable and accrued
expenses............................. 19,234 15,924 8,184(C) 43,342 (13,400) 29,942
Obligation under tender offer.......... -- -- -- -- -- --
Deferred revenues and subscriber
deposits............................. 3,008 7,163 -- 10,171 -- 10,171
Other current liabilities.............. 13,482 -- -- 13,482 -- 13,482
-------- -------- ---------- -------- ----------- --------
Total current liabilities............ 36,000 23,087 8,184 67,271 (13,400) 53,871
Capital lease obligation................. 3,747 -- -- 3,747 -- 3,747
Long-term obligations.................... 217,900 124,849 -- 342,749 (22,530) 320,219
Deferred income taxes.................... 21,993 818 72,643(D) 95,454 -- 95,454
Minority interest........................ 500 -- -- 500 -- 500
-------- -------- ---------- -------- ----------- --------
Total liabilities.................... 280,140 148,754 80,827 509,721 (35,930) 473,791
Redeemable preferred stock............... -- -- -- -- 38,400 38,400
Total stockholders' equity............... 132,363 61,377 (14,244)(E) 179,496 (2,470) 177,026
-------- -------- ---------- -------- ----------- --------
Total liabilities, redeemable preferred
stock and stockholders' equity......... $412,503 $210,131 $ 66,583 $689,217 $ -- $689,217
======== ======== ========== ======== =========== ========
</TABLE>
See accompanying notes to this unaudited statement.
F-7
<PAGE> 13
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
HISTORICAL
--------------------------------- PRO FORMA A+ PRO FORMA PRO FORMA
METROCALL PARKWAY SATELLITE NETWORK(G) ADJUSTMENTS METROCALL
--------- ------- --------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service, rent & maintenance revenue...... $ 92,160 $7,403 $10,723 $ 77,698 $ -- $187,984
Product sales............................ 18,699 2,344 1,369 8,345 -- 30,757
-------- ------ -------- ----------- ---------- --------
Total revenues................... 110,859 9,747 12,092 86,043 -- 218,741
Net book value of products sold.......... (15,527) (2,262) (1,557) (11,944) -- (31,290)
-------- ------ -------- ----------- ---------- --------
95,332 7,485 10,535 74,099 -- 187,451
Service, rent & maintenance expense...... 27,258 2,330 3,918 16,758 -- 50,264
Selling, marketing, general and
administrative......................... 40,303 3,655 4,281 45,872 (930)(H) 93,181
Depreciation & amortization.............. 31,504 1,153 1,064 25,052 17,563 (I) 76,336
Other.................................... 2,050 -- 404 -- -- 2,454
-------- ------ -------- ----------- ---------- --------
Total operating expenses......... 101,115 7,138 9,667 87,682 16,633 222,235
-------- ------ -------- ----------- ---------- --------
(Loss) income from operations............ (5,783) 347 868 (13,583) (16,633) (34,784)
Interest expense, net.................... (10,522) (477) (740) (14,589) (3,971)(J) (30,299)
-------- ------ -------- ----------- ---------- --------
Net (loss) income before taxes... (16,305) (130) 128 (28,172) (20,604) (65,083)
Benefit (provision) for taxes............ 595 43 -- -- 3,742 (K) 4,380
-------- ------ -------- ----------- ---------- --------
Net (loss) income before
extraordinary item............. (15,710) (87) 128 (28,172) (16,862) (60,703)
Extraordinary item....................... (4,392) -- 5,928 (607) -- 929
-------- ------ -------- ----------- ---------- --------
Net (loss) income................ (20,102) (87) 6,056 (28,779) (16,862) (59,774)
Preferred dividends...................... -- -- -- -- (5,586)(L) (5,586)
-------- ------ -------- ----------- ---------- --------
Loss attributable to common
stockholders........................... $(20,102) $ (87) $ 6,056 $ (28,779) $ (22,448) $(65,360)
======== ====== ======= =========== ========== ========
Net loss from continuing operations
attributable to common stockholders.... $ (1.35) $ (3.00)
Extraordinary item, net of income tax
benefit................................ (0.37) 0.04
-------- --------
Net loss per share attributable to common
stockholders........................... $ (1.72) $ (2.96)
======== ========
Shares used in computing net loss per
share.................................. 11,668 22,103
======== ========
</TABLE>
See accompanying notes to this unaudited statement.
F-8
<PAGE> 14
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(In Thousands Except Per Share Data)
<TABLE>
<CAPTION>
PRO
HISTORICAL FORMA PRO
--------------------------------------- A+ FORMA PRO FORMA
METROCALL PARKWAY(M) SATELLITE(M) NETWORK(G) ADJUSTMENTS METROCALL
--------- ---------- ------------ ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Service, rent & maintenance
revenue......................... $ 79,453 $ 5,302 $ 6,564 $ 67,313 $ -- $158,632
Product sales..................... 19,155 860 801 4,554 -- 25,370
-------- --------- ---------- ---------- ---------- --------
Total revenues............ 98,608 6,162 7,365 71,867 -- 184,002
Net book value of products sold... (15,546) (934) (805) (6,451) -- (23,736)
-------- --------- ---------- ---------- ---------- --------
83,062 5,228 6,560 65,416 -- 160,266
Service, rent & maintenance
expense......................... 26,297 1,417 2,418 14,338 -- 44,470
Selling, marketing, general and
administrative.................. 36,361 2,305 2,449 36,531 (560)(H) 77,086
Depreciation & amortization....... 40,385 586 447 20,628 12,163 (I) 74,209
Other............................. -- -- 12 396 -- 408
-------- --------- ---------- ---------- ---------- --------
Total operating
expenses................ 103,043 4,308 5,326 71,893 11,603 196,173
-------- --------- ---------- ---------- ---------- --------
(Loss) income from operations..... (19,981) 920 1,234 (6,477) (11,603) (35,907)
Interest expenses, net............ (10,836) (274) (713) (10,093) 267 (J) (21,649)
Minority interest in loss of
investments..................... (2,422) -- -- -- 2,211 (N) (211)
-------- --------- ---------- ---------- ---------- --------
Net (loss) income before
taxes....................... (33,239) 646 521 (16,570) (9,125) (57,767)
Benefit (provision) for taxes..... 279 (229) -- -- 4,821 (K) 4,871
-------- --------- ---------- ---------- ---------- --------
Net (loss) income............. (32,960) 417 521 (16,570) (4,304) (52,896)
Preferred Dividends............... -- -- -- -- (4,190)(L) (4,190)
-------- --------- ---------- ---------- ---------- --------
Net loss attributable to common
stockholders.................... $(32,960) $ 417 $ 521 $(16,570) $ (8,494) $(57,086)
======== ========= ========== ========== ========== ========
Net loss per share attributable to
common stockholders............. $ (2.23) $ (2.28)
======== ========
Shares used in computing net loss
per share....................... 14,806 25,066
======== ========
</TABLE>
See accompanying notes to this unaudited statement.
F-9
<PAGE> 15
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
The pro forma condensed combined financial statements assume a per share
price of $5.00 for the Company Common Stock to be issued in connection with the
Page America acquisition ("Acquisition"). The purchase price ultimately will be
based upon the trading price of Company Common Stock on the closing date of the
acquisition. The purchase price and allocations of all acquisitions are subject
to change, which may be material, based upon a variety of factors including
actual share price at closing of acquisition, financial performance prior to
closing of the company to be acquired, and asset appraisals.
(A) Reflects the reclassification of pagers held for resale or future
rental, from inventory to furniture and equipment to conform accounting
practices to those of Metrocall.
(B) Reflects fair values assigned to intangible assets acquired which
consist of the following (in thousands):
<TABLE>
<CAPTION>
A+
---------
<S> <C>
FCC Licenses................................................... $ 122,191
Subscriber Lists............................................... 54,511
Non-Compete Agreements......................................... 1,950
Goodwill....................................................... 73,461
Less: Historical Investment by Metrocall....................... (60,043)
Less: Historical Intangibles................................... (100,939)
---------
$ 91,131
=========
</TABLE>
On June 30, 1996, the Company purchased approximately 40% of the
outstanding common stock of A+ Network for approximately $91.8 million plus
direct acquisition costs which were reflected on the Company's balance sheet as
equity investment in A+ Network of $26.8 million and goodwill of $65.0 million.
During the third quarter the Company recognized a loss of $2.2 million related
to its investment in A+ Network under the equity method of accounting. This loss
reduced the equity investment to approximately $24.5 million as of September 30,
1996.
(C) Reflects estimated accruals for direct acquisition costs together with
estimated accruals for costs of closing acquired duplicate facilities, estimated
severance for planned terminations of acquired employees and share registration
rights.
(D) The merger with A+ Network is structured as a tax free reorganization.
The deferred income tax liability represents the tax effect on the difference
between the amounts allocated to assets acquired and their tax basis.
(E) Reflects the shares of Metrocall Common Stock and VCRs expected to be
issued for these acquisitions, less historical equity amounts. The accompanying
statements also include the expected issuance of approximately 450,000 shares of
Metrocall Common Stock for pending acquisitions of A+ Network. Historical
financial statements for these A+ Network acquisitions have not been included in
the accompanying pro forma statements as they are not significant. The
accompanying statements do not reflect the exchange of approximately 468,000
options as part of the A+ Network acquisition.
(F) Reflects application of proceeds from $39.9 million private placement
of convertible redeemable preferred stock by the Company prior to closing the A+
Network merger less related costs of $1.5 million. Of the $38.4 million in net
proceeds related to this placement, $25.0 million is used to reduce long-term
obligations while $13.4 million is used to reduce accounts payable and accrued
expenses. Also reflects the purchase of $125.0 million of notes (the "Notes")
issued by A+ Network for $127.47 million ($126.22 million offer consideration
and payment for consents to modify indenture and $1.25 million of estimated
accrued interest, fees and expenses related to refinancing the A+ Notes) with
debt under the New Credit Facility.
F-10
<PAGE> 16
(G) On October 24, 1995, A+ Network acquired Network Paging Corp.
("Network") in a merger (the "A+/Network Merger") for approximately $12.0
million in cash, common stock valued at $50.8 million and incurred related
expenses of approximately $3.1 million. At the same time, A+ Communications sold
$125.0 million of the A+ Notes. The acquisition was accounted for using the
purchase method. The following gives effect to the acquisition by A+
Communications and the sale of the A+ Notes as if they had occurred on January
1, 1995.
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA PRO FORMA
A+NETWORK NETWORK(1) ADJUSTMENTS A+ NETWORK
---------- ---------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Service, rent and maintenance revenue....... $ 53,308 $ 24,390 $ -- $ 77,698
Product sales............................... 4,024 4,321 -- 8,345
--------- --------- ---------- ----------
Total revenues...................... 57,332 28,711 -- 86,043
Net book value of products sold............. 7,878 4,066 -- 11,944
--------- --------- ---------- ----------
49,454 24,645 -- 74,099
Service, rent and maintenance expenses...... 11,584 5,533 (359)(2) 16,758
Selling, general and administrative......... 32,503 19,424 (38)(2) 45,872
(1,498)(2)
147 (3)
(4,666)(4)
Depreciation and amortization............... 14,835 3,026 7,191 (5) 25,052
Reorganization.............................. 669 -- (669)(6) --
--------- --------- ---------- ----------
Total operating expenses............ 59,591 27,983 108 87,682
--------- --------- ---------- ----------
Loss from operations........................ (10,137) (3,338) (108) (13,583)
Interest expense, net....................... (3,708) (760) (10,121)(7) (14,589)
--------- --------- ---------- ----------
Loss before income taxes and
extraordinary item........................ (13,845) (4,098) (10,229) (28,172)
Income taxes................................ -- (707) 707 (8) --
--------- --------- ---------- ---------
Loss before extraordinary item.............. (13,845) (4,805) (9,522) (28,172)
Extraordinary item.......................... (607) -- -- (607)
--------- --------- ---------- ---------
Net loss.................................... $(14,452) $ (4,805) $ (9,522) $ (28,779)
========= ========= ========== =========
</TABLE>
-----------------------
(1) Historical Network financial statements are presented for the period
from January 1, 1995 through October 24, 1995.
(2) Adjustment to eliminate specific operating and nonrecurring expenses
that would not have been incurred had the A+/Network Merger occurred
on January 1, 1995. Such savings are specifically identified as
follows (in thousands):
<TABLE>
<S> <C>
Reduction in long distance telephone charges.................... $ 267
Redundant paging terminals and related telephone expenses....... 92
Redundant yellow page advertising expense....................... 38
Salary costs of personnel not to be retained by A+/Network based
on analysis of A+/Network staffing requirements............... 1,498
------
Total................................................... $1,895
======
</TABLE>
(3) Adjustment to provide for changes in compensation of certain
executive officers pertaining to employment contracts entered into
at the time the A+/Network Merger closed.
(4) Adjustment to eliminate compensation costs that would not have been
incurred had the A+/Network Merger occurred on January 1, 1995.
(5) To record amortization expense related to intangibles for the period
from January 1, 1995 to October 24, 1995 net of $304,000 in
historical amortization expense for intangibles recorded by Network
before the A+/Network Merger.
(6) To give effect to elimination of the non-recurring reorganization
expenses incurred by A+ Network as a result of the A+/Network Merger.
(7) Reflects interest expense on the A+ Notes at 11 7/8% (plus
amortization of debt issuance costs of approximately $4.6 million and
discount of $907,500) net of interest expense ($5,270,000) applicable
to all existing long-term debt which was repaid with the proceeds
from the sale of the A+ Notes.
(8) Adjustment to reverse the income tax provision applicable to
Network, as its taxable income would be offset by A+ Network's net
operating losses for income tax purposes had the A+/Network Merger
occurred on January 1, 1995.
(H) Reflects the elimination of certain executive salaries for Parkway and
Satellite executives terminated upon completion of the respective acquisitions
in July and August of 1996.
F-11
<PAGE> 17
(I) Reflects incremental depreciation and amortization based upon the
preliminary allocation of depreciable and amortizable assets and assumed useful
lives of 5 years for subscriber lists, 25 years for FCC licenses and 15 years
for goodwill. The $1.9 million assigned to non-compete agreements in conjunction
with the A+ Network merger will be amortized over 3 years.
(J) Represents the estimated incremental interest at a rate of 8.00% that
would have been incurred assuming all acquisitions were completed on January 1,
1995.
Also reflects the estimated incremental savings from the refinancing of
$125.0 million of A+ Notes at a rate of 11.875% for $127.47 million ($126.22
million offer consideration and payment for consents to modify indenture and
$1.25 million estimated accrued interest, fees and expenses related to
refinancing) with debt under the New Credit Facility at a rate of 8.00% that
would have occurred assuming the refinancing was completed on January 1, 1995.
(K) Represents the tax benefit resulting from the amortization of acquired
intangibles for A+ Network and Parkway assuming an effective tax rate of 40%.
(L) Represents dividend payment on $39.9 million private placement of
Series A Convertible Redeemable Preferred Stock bearing interest at 14% per
annum.
(M) Historical statements for Parkway and Satellite in 1996 are through
July 16 and August 30, respectively, which are the dates the acquisitions with
the Company were completed. Subsequent to completion of the acquisitions all
financial reporting data is included in historic Metrocall data.
(N) Represents elimination of Metrocall's portion of A+ Network's net loss
(40%) as accounted for under the equity method.
F-12
