<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1997
MOBILEMEDIA CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-26320 22-3253006
(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
65 Challenger Road, Ridgefield Park, New Jersey 07660
(Address of principal executive offices)
(Zip Code)
(201) 440-8400
(Registrant's telephone number, including area code)
--------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
INFORMATION TO BE INCLUDED IN THE REPORT
Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets.
Not Applicable.
Item 3. Bankruptcy or Receivership
Not Applicable
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events.
On June 30, 1997, MobileMedia Corporation (the
"Company"), MobileMedia Communications, Inc. ("MobileMedia
Communications") and all of the subsidiaries of MobileMedia
Communications filed with the United States Bankruptcy Court for the
District of Delaware (the "Bankruptcy Court") their monthly operating
report for the month ended May 31, 1997, which is attached hereto as
Exhibit 99.1.
Attached hereto as Exhibit 99.2 are the consolidated
financial statements of MobileMedia Communications as of and for the
year ended December 31, 1996, which financial statements are unaudited
and have not been prepared in accordance with generally accepted
accounting principles due to the Company's inability at the present
time to determine the amount of an impairment adjustment that would
be required pursuant to Statement of Financial Accounting Standard
No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." Management believes that the
amount of the impairment adjustment could be material.
Item 6. Resignations of Registrants Directors.
Not Applicable
Item 7. Financial Statements and Exhibits.
Not Applicable
Item 8. Change in Fiscal Year.
Not Applicable
<PAGE>
Pursuant to the requirements of the Securities Exchange
Act of 1934, as amended, the registrant has duly caused this
report to be signed on its behalf by the undersigned hereunto duly
authorized.
MOBILEMEDIA CORPORATION,
a Delaware corporation
Date: July 7, 1997 By: /s/ David R. Gibson
---------------------
David R. Gibson
Senior Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit Page
- ------- ----
Exhibit 99.1 -- Monthly Operating Report
Exhibit 99.2 -- Unaudited Consolidated Financial
Statements of MobileMedia
Communications, Inc.
<PAGE>
Exhibit 99.1
OFFICE OF THE U.S. TRUSTEE - REGION 3
MONTHLY OPERATING REPORT
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
Document Previously Explanation
Required Attachments: Attached Submitted Attached
1. Tax Receipts ( ) (X) (X)
2. Bank Statements ( ) ( ) (X)
3. Most recent filed Income Tax Return ( ) (X) ( )
4. Most recent Annual Financial Statements ( ) (X) ( )
prepared by accountant
IN ACCORDANCE WITH TITLE 28, SECTION 1746, OF THE UNITED STATES CODE, I DECLARE
UNDER PENALTY OF PERJURY THAT I HAVE EXAMINED THE FOLLOWING MONTHLY OPERATING
REPORT AND THE ACCOMPANYING ATTACHMENTS AND, TO THE BEST OF MY KNOWLEDGE, THESE
DOCUMENTS ARE TRUE, CORRECT AND COMPLETE.
RESPONSIBLE PARTY:
/s/ David R. Gibson Senior Vice President/Chief Financial Officer
- -------------------------------- ---------------------------------------------
SIGNATURE OF RESPONSIBLE PARTY TITLE
David R. Gibson June 30, 1997
- -------------------------------- ---------------------------------------------
PRINTED NAME OF RESPONSIBLE PARTY DATE
Page 1 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
ATTACHMENT
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
1. Payroll tax filings and payments are made by Automated Data Processing,
Inc. (an outside payroll processing company). Evidence of tax payments are
available upon request. Previously, the Debtors filed copies of such
evidence for the third quarter of 1996 with the US Trustee.
Please see the Status of Post Petition Taxes attached hereto for the
month's activity.
2. The Debtors have 63 bank accounts. In order to minimize costs to the
estate, the Debtors have included a GAAP Statement of Cash Flows in the
Monthly Operating Report. The Statement of Cash Flows replaces the listing
of cash receipts and disbursements, copies of the bank statements, and
bank account reconciliations.
Page 2 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
See Statement of Operations for reporting period attached.
Page 3 of 19
<PAGE>
HEADNOTES:
The closing of the Financial Statements of the Debtors for the year ended
December 31, 1996 has not been completed. Therefore, in addition to the
adjustments reflected below, the Financial Statements included in this Monthly
Operating Report do not reflect the effect of other adjustments for the year
ended December 31, 1996, which adjustments will be material.
The Debtors believe that there will be adjustments to their Accounts Receivable,
Inventory, Fixed Assets, Intangible Assets and Depreciation Expense. There will
also be adjustments to certain other accounts as a result of the Debtors' filing
for protection under Chapter 11 of the US Bankruptcy Code on January 30, 1997.
(1) The Company made adjustments to reflect the recording of an allowance for
estimated disparities between recorded revenues and collections in the amounts
of $2.0, $4.0 and $10.1 million in the months of May, April and March,
respectively. Of the $10.1 million adjustment in March, $6.7 million relates to
January and February 1997. Accordingly, results for the month of March 1997 are
not indicative of the Debtors' underlying performance during that month.
(2) Includes an adjustment of approximately $1.0 million to decrease Cost of
Products Sold during the first quarter of 1997. Such adjustment is offset by a
reduction in an Inventory reserve established as of December 31, 1996. See
Headnote 1 to the Consolidated Balance Sheets.
MobileMedia Corporation and Subsidiaries
Consolidated Statements of Operations
For the Months Ended May 31, 1997, April 30, 1997 and March 31, 1997
(Unaudited)
(in thousands)
May April March
1997 1997 1997
---- ---- ----
Paging Revenues
Service, Rents & Maintenance (1) $ 43,599 $ 42,597 $ 36,633
Equipment Sales
Product Sales 2,039 2,930 3,853
Cost of Products Sold 2,011 2,515 2,808 (2)
-------- -------- --------
Equipment Margin 28 415 1,045
Net Revenue 43,627 43,011 37,678
Operating Expense
Service, Rents & Maintenance 14,154 12,284 11,307
Selling 6,110 5,971 7,015
General Administration 15,518 17,458 16,795
-------- -------- --------
Operating Expense Before Depr. & Amort 35,782 35,713 35,117
EBITDA Before Restructuring Costs 7,845 7,298 2,561
Restructuring Costs 1,473 1,891 1,841
-------- -------- --------
EBITDA after Restructuring Costs 6,371 5,408 720
Depreciation 8,705 11,017 9,784
Amortization 9,232 9,232 9,233
-------- -------- --------
Total Depreciation and Amortization 17,938 20,250 19,017
Operating Loss (11,567) (14,842) (18,297)
Interest Expense 5,277 5,056 5,194
Other Expense 0 1 0
-------- -------- --------
Loss Before Income Tax Benefit (16,843) (19,898) (23,491)
Income Tax Benefit 0 0 0
-------- -------- --------
Net Loss ($16,843) ($19,898) ($23,491)
======== ======== ========
See Accompanying Notes
4 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
CONDENSED CONSOLIDATED BALANCE SHEET
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
See balance sheet attached.
Page 5 of 19
<PAGE>
HEADNOTES:
The closing of the Financial Statements of the Debtors for the year ended
December 31, 1996 has not been completed. Therefore, in addition to the
adjustments reflected below, the Financial Statements included in this Monthly
Operating Report do not reflect the effect of other adjustments for the year
ended December 31, 1996, which adjustments will be material.
The Debtors believe that there will be adjustments to their Accounts Receivable,
Inventory, Fixed Assets and Intangible Assets. There will also be adjustments to
certain other accounts as a result of the Debtors' filing for protection under
Chapter 11 of the US Bankruptcy Code on January 30, 1997.
(1) Reflects an approximate $1.0 million reduction in an Inventory allowance
established at December 31, 1996. See Headnote 2 to Consolidated Statements of
Operations.
(2) Reflects adjustments to previously reported Balance Sheet items for months
prior to May 1997, consisting of (i) an adjustment in March of approximately
$2.8 million to increase Accrued Expenses and Other Current Liabilities,
reflecting a review of accounts payable and the accrual of certain amounts as of
December 31, 1996, and a corresponding increase in Property and Equipment, Net,
(ii) an adjustment in April of approximately $0.8 million to decrease Accrued
Expenses and Other Current Liabilities, reflecting a review of accounts payable
and the accrual of certain amounts as of December 31, 1996, and a corresponding
decrease in Property and Equipment, Net, and (iii) an adjustment in April of
approximately $1.0 million to decrease Property and Equipment, Net, reflecting a
correction in the reporting of the April results, and a corresponding increase
in the Accumulated Deficit - Post Petition.
MobileMedia Corporation and Subsidiaries
Consolidated Balance Sheets
As of May 31, 1997, April 30, 1997 and March 31, 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
May 31 April 30 March 31
1997 1997 1997
---- ---- ----
Assets
<S> <C> <C> <C>
Current Assets:
Cash $ 5,150 $ 10,523 $ 14,444
Accounts Receivable, Net 89,019 89,704 94,742
Inventory 9,090 10,535 10,150 (1)
Prepaid Expenses 1,108 1,287 1,322
Other Current Assets 3,391 3,570 2,682
----------- ----------- -----------
Total Current Assets 107,758 115,619 123,340
Noncurrent Assets:
Property and Equipment, Net 330,422 336,348 (2) 342,992 (2)
Deferred Financing Fees, Net 26,815 27,369 27,923
Investment In Net Assets Of Equity Affiliate 2,208 2,180 2,152
Intangible Assets, Net 1,082,566 1,091,798 1,101,030
Other Assets 613 625 637
----------- ----------- -----------
Total Noncurrent Assets 1,442,624 1,458,319 1,474,733
Total Assets $ 1,550,382 $ 1,573,938 $ 1,598,073
=========== =========== ===========
Liability and Stockholders' Equity:
Liabilities Not Subject to Compromise:
DIP Credit Facility $ 15,000 $ 15,000 $ 20,000
Accrued Restructing Costs 4,162 3,410 2,560
Accrued Wages, Benefits and Payroll Taxes 5,089 6,731 5,995
Accounts Payable - Post Petition 8,173 5,236 5,266
Accrued Interest (Chase & DIP Facilities) 4,464 4,249 4,414
Accrued Expenses and Other Current Liabilities 35,365 38,938 (2) 33,900 (2)
Advance Billing and Customer Deposits 36,514 39,063 39,742
----------- ----------- -----------
Total Liabilities Not Subject To Compromise 108,768 112,628 111,877
Liabilities Subject to Compromise:
Accrued Wages, Benefits and Payroll Taxes 8,293 11,084 11,331
Chase Credit Facility 649,000 649,000 649,000
Notes Payable - 10 1/2% 174,125 174,125 174,125
Notes Payable - 9 3/8% 250,000 250,000 250,000
Notes Payable - Yampol 986 986 986
Notes Payable - Dial Page 12 1/4% 1,570 1,570 1,570
Accrued Interest on Notes Payable 20,761 20,759 20,757
Accounts Payable - Pre Petition 14,073 13,093 11,535
Accrued Expenses and Other Current Liabilities - Pre Petition 29,173 30,176 36,433
Other Liabilities 5,099 5,142 5,186
----------- ----------- -----------
Total Liabilities Subject To Compromise 1,153,081 1,155,935 1,160,923
Deferred Tax Liability 72,097 72,097 72,097
Stockholders' Equity
Class A Common Stock 39 39 39
Class B Common Stock 2 2 2
Additional Paid-In Capital 671,459 671,459 671,459
Accumulated Deficit - Pre Petition (370,814) (370,814) (370,815)
Accumulated Deficit - Post Petition (78,127) (61,285)(2) (41,387)
----------- ----------- -----------
Total Stockholders' Equity 222,559 239,401 259,299
Less:
Treasury Stock (6,123) (6,123) (6,123)
----------- ----------- -----------
Total Stockholders' Equity 216,436 233,278 253,176
Total Liabilities and Stockholders' Equity $ 1,550,381 $ 1,573,938 $ 1,598,073
=========== =========== ===========
</TABLE>
See Accompanying Notes
6 of 19
<PAGE>
Footnotes to the Financial Statements:
1. The closing of the Financial Statements of the Debtors for the year ended
December 31, 1996 has not been completed. Therefore, in addition to the
adjustments described herein, the Financial Statements included in this
Monthly Operating Report do not reflect the effect of other adjustments
for the year ended December 31, 1996, which adjustments will have a
material effect on the Debtors' financial position.
The Debtors believe that there will be adjustments to their Accounts
Receivable, Inventory, Fixed Assets, Intangible Assets and Depreciation
Expense. There may also be adjustments to certain other accounts as a
result of the Debtors' filing for protection under Chapter 11 of the US
Bankruptcy Code on January 30, 1997.
In March 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS
121"), which is effective for financial statements for fiscal years
beginning after December 15, 1995. Under certain circumstances, SFAS 121
requires companies to write down the carrying value of long-lived assets
recorded in the financial statements to the fair value of such assets. A
significant amount of the assets of the Company, which were acquired as a
result of the acquisitions of businesses, including the Dial Page and
MobileComm acquisitions, were recorded in accordance with principles of
purchase accounting at acquisition prices and constitute long-lived
assets. The Company has determined, and its independent auditors have
concurred, that SFAS 121 is applicable to the Company, and therefore the
Company may be required to write down the carrying value of its long-lived
assets to their fair value. The Company believes the amount of the write
down could be material: however, it is not possible at this time to
determine such amount. Since the Company cannot comply with SFAS 121 at
this time, it is unable to issue audited financial statements in
compliance with generally accepted accounting principles. Consequently,
the Company will not file its Report on Form 10-K or its other periodic
reports under the Securities Exchange Act of 1934, as amended.
Accordingly, the Company is unable to comply with the continued listing
requirements of the Nasdaq National Market and has requested that its
Common Stock be delisted. On June 3, 1997, the Company announced that it
had determined to delist its Class A common stock, par value $.001 per
share, which was traded on the Nasdaq National Market.
Page 7 of 19
<PAGE>
Footnotes to the Financial Statements (continued):
2. On January 30, 1997 (the "Filing Date"), MobileMedia Corporation (the
"Company"), MobileMedia Communications, Inc. ("MobileMedia
Communications") and all seventeen of MobileMedia Communications'
subsidiaries filed for protection under Chapter 11 of title 11 of the
United States Code (the "Bankruptcy Code"). The Debtors are operating as
debtors-in-possession ("DIP") and are subject to the jurisdiction of the
United States Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court").
The Court has authorized the debtors to pay certain pre-petition
creditors. These permitted pre-petition payments include (i) employee
salary and wages; (ii) certain employee benefits and travel expenses;
(iii) certain amounts owing to essential vendors; (iv) trust fund type
sales and use taxes; (v) trust fund payroll taxes; (vi) customer refunds;
and (vii) customer rewards.
3. Since the Filing Date, the Debtors have continued to manage their business
as debtors-in-possession under sections 1107 and 1108 of the Bankruptcy
Code. During the pendency of the Chapter 11 cases, the Bankruptcy Court
has jurisdiction over the assets and affairs of the Debtors, and their
continued operations are subject to the Bankruptcy Court's protection and
supervision. The Debtors have sought, obtained, and are in the process of
applying for, various orders from the Bankruptcy Court intended to
stabilize and reorganize their business and minimize any disruption caused
by the Chapter 11 cases.
4. The Consolidated Statements of Operations include: (a) adjustments to
reflect the recording of an allowance for estimated disparities between
recorded revenues and collections in the amounts of $2.0, $4.0 and $10.1
million for the months of May, April and March, respectively. Of the $10.1
million adjustment in March, $6.7 million relates to January and February
1997. Accordingly, results for the month of March 1997 are not indicative
of the Debtors' underlying performance during that month; and (b) an
adjustment made in March in the amount of approximately $1.0 million to
decrease Cost of Products Sold during the first quarter of 1997. Such
adjustment is offset by a reduction in an Inventory reserve established as
of December 31, 1996. See Headnote 1 to the Consolidated Balance Sheet.
Page 8 of 19
<PAGE>
Footnotes to the Financial Statements (continued):
5. The Consolidated Balance Sheets include the following adjustments: (a) in
March an approximate $1.0 million reduction in an Inventory reserve
established at December 31, 1996; and (b) adjustments to previously
reported Balance Sheet items for months prior to May 1997, consisting of
(i) an adjustment in March of approximately $2.8 million to increase
Accrued Expenses and Other Current Liabilities, reflecting a review of
accounts payable and the accrual of certain amounts at December 31, 1996,
and a corresponding increase in Property and Equipment, Net, (ii) an
adjustment in April of approximately $0.8 million to decrease Accrued
Expenses and Other Current Liabilities, reflecting a review of accounts
payable and the accrual of certain amounts at December 31, 1996, and a
corresponding decrease in Property and Equipment, Net, and (iii) an
adjustment in April of approximately $1.0 million to decrease Property and
Equipment, Net, reflecting a correction in the reporting of the April
results, and a corresponding increase in the Accumulated Deficit - Post
Petition. See Headnotes 1 and 2 to the Consolidated Balance Sheets.
6. During the month of February 1997, the Debtors drew down $45 million of
their DIP facility with The Chase Manhattan Bank, as agent for the lenders
thereunder (the "DIP Lenders"). During the months of March and April 1997,
the Debtors repaid $25 million and $5 million, respectively, of borrowings
under the DIP facility.
7. The Company is the second largest paging company in the U.S., with
approximately 4.1 million units in service at May 31, 1997, and offers
local, regional and national paging services to its subscribers. The
Company is reviewing its units in service to determine the number of units
which require removal from its billing system for which payment is
delinquent. The consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. The Company's business is
conducted primarily through the Company's principal operating subsidiary,
MobileMedia Communications, Inc. ("MobileMedia Communications") and its
subsidiaries. The Company markets its services primarily under the
"MobileComm" brand name. All significant intercompany accounts and
transactions have been eliminated.
8. As previously announced in its September 27, 1996 and October 21, 1996
releases, the Company discovered misrepresentations and other violations
which occurred during the licensing process for as many as 400 to 500, or
approximately 6% to 7%, of its approximately 8,000 local transmission
one-way paging stations. The Company caused an investigation to be
conducted by its outside counsel, and a comprehensive report regarding
these matters was provided to the Federal Communications Commission (the
"FCC") in the fall of 1996. In cooperation with the FCC, outside counsel's
investigation was expanded to examine all of the Company's paging
licenses, and the results of that investigation were submitted to the FCC
on November 8, 1996. As part of the cooperative process, the Company also
proposed to the FCC that a Consent Order be entered which would result,
among other things, in the return of certain local paging authorizations
then
Page 9 of 19
<PAGE>
Footnotes to the Financial Statements (continued):
held by the Company, the dismissal of certain pending applications for
paging authorizations, and the voluntary acceptance of a substantial
monetary forfeiture.
On January 13, 1997, the FCC issued a Public Notice relating to the status
of certain FCC authorizations held by the Company. Pursuant to the Public
Notice, the FCC announced that it had (i) automatically terminated
approximately 185 authorizations for paging facilities that were not
constructed by the expiration date of their construction permits and
remained unconstructed, (ii) dismissed approximately 94 applications for
fill-in sites around existing paging stations (which had been filed under
the so-called "40-mile rule") as defective because they were predicated
upon unconstructed facilities and (iii) automatically terminated
approximately 99 other authorizations for paging facilities that were
constructed after the expiration date of their construction permits. With
respect to the approximately 99 authorizations where the underlying
station was untimely constructed, the FCC granted the Company interim
operating authority subject to further action by the FCC.
On April 8, 1997, the FCC adopted an order commencing an administrative
hearing into the qualification of the Company to remain a licensee. The
order directs an Administrative Law Judge to take evidence and develop a
full factual record on directed issues concerning the Company's filing of
false forms and applications. The Company is permitted to operate their
licensed facilities and provide service to the public during the pendency
of the hearing. The FCC's order initiated a fact-finding and evaluative
hearing process to gather information with which to make a decision, but
would not be a final disposition of the FCC's action. An adverse outcome
of this proceeding could result in the loss of the Company's licenses or
substantial monetary fines, or both. Any such outcome would have a
material adverse effect on the Company's financial condition and results
of operations.
On April 23, 1997, the Company filed a motion with the FCC seeking a stay
of the hearing proceeding instituted by the FCC order entered April 7,
1997. The motion discusses the consequences either of a grant or a denial
of the motion to the Company and its debt and equity holders. The Company
filed a Current Report on Form 8-K with the SEC that includes a copy of
the motion. On May 2, 1991 the Administrative Law Judge denied the
Company's motion to stay the hearing. The Company subsequently sought an
appeal of the Administrative Law Judge's decision.
On June 6, 1997 the FCC issued an order staying the hearing proceeding.
The FCC order stays the hearing for ten months in order for the Company to
develop and consummate a plan of reorganization that provides for a change
of control of the Company and thus a transfer of the Company's FCC
licenses. Under the order, which is based on an FCC doctrine known as
Second Thursday, if there is a change of control that meets the conditions
of Second Thursday, the Company's FCC issues will be resolved by the
transfer of the Company's FCC licenses and the hearing will not proceed.
Page 10 of 19
<PAGE>
Footnotes to the Financial Statements (continued):
As noted in the order, the Company believes that a change in control will
happen under a reorganization plan that provides either for a conversion
of certain existing debt to equity, in which case existing MobileMedia
shares will be substantially diluted or eliminated, or a sale of the
Company.
The Company cannot be certain what monetary forfeitures or other further
actions the FCC may take in regard to this matter or the timing of any
such actions, but such actions could have a material adverse effect upon
the financial condition or operations of the Company.
Page 11 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
CONSOLIDATED STATEMENT OF CASH
RECEIPTS AND DISBURSEMENTS
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
The Debtors have 63 bank accounts. In order to minimize costs to the estate, the
Debtors have included a GAAP Statement of Cash Flows for the reporting period
which is attached. The Statement of Cash Flows replaces the listing of cash
receipts and disbursements, copies of the bank statements, and bank account
reconciliations.
Page 12 of 19
<PAGE>
HEADNOTES:
The closing of the Financial Statements of the Debtors for the year ended
December 31,1996 has not been completed. Therefore, the Financial Statements
included in this Monthly Operating Report do not reflect the effect of certain
adjustments for the year ended December 31, 1996, which adjustments will be
material.
The Debtors believe that there will be adjustments to their Accounts Receivable,
Inventory, Fixed Assets, Intangible Assets and Depreciation Expense. There
will also be adjustments to certain other accounts as a result of the Debtor's
filing for protection under Chapter 11 of the US Bankruptcy Code on January
30,1997.
The Consolidated Statement of Cash Flows should be read in conjunction with all
of the footnotes disclosed on pages 7 through 11 of this report. Results for the
month of March 1997 are not indicative of the Debtors' underlying performance
during that month.
MobileMedia Corporation and Subsidiaries
Consolidated Statements Of Cash Flows
For The Months Ended May 31, 1997, April 30, 1997, and March 31, 1997
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
May April March
1997 1997 1997
---- ---- ----
<S> <C> <C> <C>
Operating Activities
Net Loss ($16,843) ($19,898) ($23,492)
Adjustments To Reconcile Net Loss To Net Cash
Provided By (Used In) Operating Activities:
Depreciation And Amortization 17,938 20,250 19,017
Provision For Uncollectible Accounts And Returns 5,527 8,046 13,767
Undistributed Earnings Of Affiliate (28) (28) (64)
Deferred Financings Fees, Net 554 554 554
Change In Operating Assets and Liabilities:
Accounts Receivable (4,842) (3,008) (6,353)
Inventory 1,445 (386) (1,382)
Prepaid Expenses And Other Assets 358 (841) (78)
Accounts Payable, Accrued Expenses and Other (6,714) 762 20,903
-------- -------- --------
Net Cash Provided By (Used In) Operating Activities (2,605) 5,451 22,872
Investing Activities
Construction And Capital Expenditures,
Including Net Change In Pager Assets (2,768) (4,373) (3,972)
-------- -------- --------
Net Cash Used In Investing Activities (2,768) (4,373) (3,972)
Financing Activities
Repayments of DIP Credit Facility 0 (5,000) (25,000)
-------- -------- --------
Net Cash Provided By (Used In) Financing Activities 0 (5,000) (25,000)
Net Decrease In Cash And Cash Equivalents (5,374) (3,920) (6,101)
Cash And Cash Equivalents At Beginning of Period 10,523 14,444 20,545
-------- -------- --------
Cash And Cash Equivalents At End Of Period $ 5,150 $ 10,523 $ 14,444
======== ======== ========
</TABLE>
See Accompanying Notes
Page 13 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
STATEMENT OF ACCOUNTS RECEIVABLE AGING AND
AGING OF POSTPETITION ACCOUNTS PAYABLE
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ACCOUNTS RECEIVABLE AGING
- --------------------------------------------------------------------------------
$ 29,581,296 0 - 30 days old
---------------------------------------------------------------
25,182,961 31 - 60 days old
---------------------------------------------------------------
16,229,821 61 - 90 days old
---------------------------------------------------------------
64,947,604 91 + days old
---------------------------------------------------------------
135,941,682 TOTAL TRADE ACCOUNTS RECEIVABLE
---------------------------------------------------------------
(49,872,108) ALLOWANCE FOR UNCOLLECTIBLE ACCOUNTS
---------------------------------------------------------------
86,069,574 TRADE ACCOUNTS RECEIVABLE (NET)
---------------------------------------------------------------
2,949,245 OTHER NON-TRADE RECEIVABLES
---------------------------------------------------------------
$ 89,018,819 ACCOUNTS RECEIVABLE, NET
- --------------------------------------------------------------------------------
- ---------------------------------------
AGING OF POSTPETITION ACCOUNTS PAYABLE
- --------------------------------------------------------------------------------
0-30 31-60 61-90 91+
Days Days Days Days Total
- --------------------------------------------------------------------------------
ACCOUNTS PAYABLE $ 7,843,196 269,809 48,009 12,459 $ 8,173,473
- --------------------------------------------------------------------------------
Page 14 of 19
<PAGE>
OFFICE OF THE U.S. TRUSTEE - REGION 3
STATEMENT OF OPERATIONS, TAXES,
INSURANCE AND PERSONNEL
For the month ended May 31, 1997
Debtor Name: MobileMedia Corporation et al.
Case Number: 97-174 (PJW)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
STATUS OF POSTPETITION TAXES
- ------------------------------------------------------------------------------------------
BEGINNING AMOUNT ENDING
TAX WITHHELD AMOUNT TAX DELINQUENT
LIABILITY OR ACCRUED PAID LIABILITY TAXES
==========================================================================================
<S> <C> <C> <C> <C> <C>
FEDERAL
- ------------------------------------------------------------------------------------------
WITHHOLDING $ 0 $2,348,297 $2,348,297 $ 0 $ 0
- ------------------------------------------------------------------------------------------
FICA-EMPLOYEE 0 1,208,412 1,208,412 $ 0 $ 0
- ------------------------------------------------------------------------------------------
FICA-EMPLOYER 42,505 1,085,750 1,128,255 0 0
- ------------------------------------------------------------------------------------------
UNEMPLOYMENT 5,502 23,814 29,316 0 0
- ------------------------------------------------------------------------------------------
INCOME 0 0 0 0 0
- ------------------------------------------------------------------------------------------
TOTAL FEDERAL TAXES 48,007 4,666,273 4,714,280 0 0
- ------------------------------------------------------------------------------------------
STATE AND LOCAL
- ------------------------------------------------------------------------------------------
WITHHOLDING 0 397,130 397,130 0 0
- ------------------------------------------------------------------------------------------
SALES 969,242 228,752 627,730 570,264 0
- ------------------------------------------------------------------------------------------
UNEMPLOYMENT 49,964 169,770 219,734 0 0
- ------------------------------------------------------------------------------------------
REAL PROPERTY 1,032,055 321,359 0 1,353,414 0
- ------------------------------------------------------------------------------------------
OTHER 26,604 78,911 43,347 62,168 0
- ------------------------------------------------------------------------------------------
TOTAL STATE AND LOCAL 2,077,865 1,195,922 1,287,941 1,985,846 0
- ------------------------------------------------------------------------------------------
TOTAL TAXES $2,125,872 $5,862,195 $6,002,221 $1,985,846 $ 0
- ------------------------------------------------------------------------------------------
</TABLE>
Page 15 of 19
<PAGE>
- --------------------------------------------------------------------------------
PAYMENTS TO INSIDERS AND PROFESSIONALS
For the month ended May 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
INSIDERS
- --------------------------------------------------------------------------------------------
Payee Name Position Salary/Bonus/ Reimbursable
Auto Allowance Expenses Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alvarez & Marsal Chairman - Restructuring 0 0 0
Inc. - Joseph A.
Bondi
- --------------------------------------------------------------------------------------------
Boykin, Roberta Assistant Secretary $ 17,942 $ 0 $ 17,942
- --------------------------------------------------------------------------------------------
Burdette, H. Stephen Senior VP Corporate 39,782 7,779 47,561
Development and Acting
Senior VP Operations
- --------------------------------------------------------------------------------------------
Cross, Andrew Executive VP Sales and 25,500 5,097 30,597
Marketing
- --------------------------------------------------------------------------------------------
Grawert, Ron Chief Executive Officer 46,154 9,867 56,021
- --------------------------------------------------------------------------------------------
Gray, Patricia Secretary/Acting General 25,752 568 26,320
Counsel
- --------------------------------------------------------------------------------------------
Gross, Steven Senior VP Marketing 63,385 3,512 66,897
- --------------------------------------------------------------------------------------------
Hilson, Debra Assistant Secretary 7,418 1,843 9,261
- --------------------------------------------------------------------------------------------
Hughes, Curtis Assistant VP Mgmt. 20,949 482 21,431
Information Systems
- --------------------------------------------------------------------------------------------
Pascucci, James Assistant Treasurer 21,473 6,405 27,878
- --------------------------------------------------------------------------------------------
Pittsman, Santo Senior VP of 23,769 0 23,769
Administration and
Business Planning
- --------------------------------------------------------------------------------------------
Shea, Kevin Treasurer 39,792 0 39,792
- --------------------------------------------------------------------------------------------
Witsaman, Mark Senior VP and Chief 20,884 4,318 25,202
Technology Officer
- --------------------------------------------------------------------------------------------
TOTAL PAYMENTS TO INSIDERS $392,671
- --------------------------------------------------------------------------------------------
</TABLE>
Page 16 of 19
<PAGE>
PAYMENTS TO INSIDERS AND PROFESSIONALS (Continued)
For the month ended May 31, 1997
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
PROFESSIONALS
- ------------------------------------------------------------------------------------------------
Holdback
Date of and
Name and Relationship Court Invoices Invoices Invoice
Approval Received (1) Paid Balances
Due
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1. Ernst & Young - Auditor, Tax and 1/30/97 $ 0 $ 491,388 $ 226,113
Financial Consultants to Debtor
- ------------------------------------------------------------------------------------------------
2. Latham & Watkins - Counsel to 1/30/97 192,556 91,266 242,632
Debtor
- ------------------------------------------------------------------------------------------------
3. Alvarez & Marsal Inc. - Restructuring 1/30/97 246,403 129,951 301,343
Consultant to Debtor (2)
- ------------------------------------------------------------------------------------------------
4. Sidley & Austin - Bankruptcy 1/30/97 215,482 142,103 296,049
Counsel to Debtor
- ------------------------------------------------------------------------------------------------
5. Young, Conway, Stargate & Taylor - 1/30/97 0 0 0
Delaware Counsel to Debtor
- ------------------------------------------------------------------------------------------------
6. Wiley, Rein & Fielding - FCC 1/30/97 146,858 23,342 187,010
Counsel to Debtor
- ------------------------------------------------------------------------------------------------
7. Koteen & Naftalin - FCC Counsel to 6/11/97 0 0 0
Debtor
- ------------------------------------------------------------------------------------------------
8 Houlihan, Lokey, Howard & Zukin - 6/04/97 0 0 0
Advisors to the Creditors'
Committee
- ------------------------------------------------------------------------------------------------
9. Jones, Day, Reavis & Pogue - 4/03/97 17,833 19,647 25,101
Counsel to the Creditors'
Committee
- ------------------------------------------------------------------------------------------------
10. Morris, Nichols, Arsht & Tunnell - 4/03/97 0 0 0
Delaware Counsel to the Creditors'
Committee
- ------------------------------------------------------------------------------------------------
11. Paul, Weiss, Rifkind, Wharton & 4/25/97 37,804 0 47,126
Garrison - FCC Counsel to the
Creditors' Committee
- ------------------------------------------------------------------------------------------------
TOTAL PAYMENTS TO PROFESSIONALS $ 856,936 $ 897,697 $1,325,374
- ------------------------------------------------------------------------------------------------
</TABLE>
(1) Invoices received excludes invoices for fees and expenses through May 31,
1997 that were received by the Debtors subsequent to May 31, 1997.
(2) Includes fees and expenses for David R. Gibson, Senior Vice President and
Chief Financial Officer (effective June 24, 1997).
Page 17 of 19
<PAGE>
- --------------------------------------------------------------------------------
ADEQUATE PROTECTION PAYMENTS
For the month ended May 31, 1997
- --------------------------------------------------------------------------------
SCHEDULED AMOUNTS
MONTHLY PAID TOTAL
PAYMENTS DURING UNPAID
NAME OF CREDITOR DUE MONTH POSTPETITION
- --------------------------------------------------------------------------------
The Chase Manhattan Bank -(Interest) $ 4,592,482 $ 4,592,482* $ 0
- --------------------------------------------------------------------------------
* Payment made on 6/2/97.
- --------------------------------------------------------------------------------
QUESTIONNAIRE
For the month ended May 31, 1997 YES NO
- --------------------------------------------------------------------------------
1. Have any assets been sold or transferred outside the normal
course of business this reporting period? No
- --------------------------------------------------------------------------------
2. Have any funds been disbursed from any account other than a
debtor in possession account? No
- --------------------------------------------------------------------------------
3. Are any postpetition receivables (accounts, notes, or loans) due
from related parties? No
- --------------------------------------------------------------------------------
4. Have any payments been made of prepetition liabilities this
reporting period? Yes
- --------------------------------------------------------------------------------
5. Have any postpetition loans been received by the debtor from
any party? Yes
- --------------------------------------------------------------------------------
6. Are any postpetition payroll taxes past due? No
- --------------------------------------------------------------------------------
7. Are any postpetition state or federal income taxes past due? No
- --------------------------------------------------------------------------------
8. Are any postpetition real estate taxes past due? No
- --------------------------------------------------------------------------------
9. Are any postpetition taxes past due? No
- --------------------------------------------------------------------------------
10. Are any amounts owed to postpetition creditors past due? No
- --------------------------------------------------------------------------------
11. Have any prepetition taxes been paid during the
reporting period? Yes
- --------------------------------------------------------------------------------
12. Are any wage payments past due? No
- --------------------------------------------------------------------------------
If the answer to any of the above questions is "YES", provide a detailed
explanation of each item.
Item 4 & 11. The Court has authorized the Debtors to pay certain pre-petition
creditors. These permitted prepetition payments include (i)
employee salary and wages; (ii) certain employee benefits and
travel expenses; (iii) certain amounts owing to essential
vendors; (iv) trust fund type sales and use taxes; (v) trust
fund payroll taxes; (vi) customer refunds; and (vii) customer
rewards.
Item 5. During the month of February 1997, the Debtors drew down $45
million of their DIP facility with The Chase Manhattan Bank, as
agent for the lenders thereunder. During the months of March and
April 1997, the Debtors repaid $25 million and $5 million,
respectively, of borrowings under the DIP facility.
Page 18 of l9
<PAGE>
- --------------------------------------------------------------------------------
INSURANCE
For the month ended May 31,1997
- --------------------------------------------------------------------------------
There were no changes in insurance coverage for the reporting period.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PERSONNEL
For the month ended May 31, 1997
- --------------------------------------------------------------------------------
Full Time Part Time
- --------------------------------------------------------------------------------
1. Total number of employees at beginning of period 3,361 165
- --------------------------------------------------------------------------------
2. Number of employees hired during the period 39 10
- --------------------------------------------------------------------------------
3. Number of employees terminated or resigned during
the period (25) (20)
- --------------------------------------------------------------------------------
4. Total number of employees on payroll at end of period 3,375 155
- --------------------------------------------------------------------------------
Page 19 of 19
<PAGE>
Exhibit 99.2
MOBILEMEDIA COMMUNICATIONS, INC.
AND SUBSIDIARIES
Unaudited
Consolidated Balance Sheets as of
December 31, 1996 and 1995
Consolidated Statements of Operations, Changes in
Stockholder's Equity and Cash Flows for the Years ended
December 31, 1996, 1995 and 1994
Notes to Financial Statements
The accompanying unaudited financial statements as of December 31, 1996 and for
the year then ended have not been prepared in accordance with generally accepted
accounting principles due to the Company's inability at the present time to
determine the amount of an impairment adjustment that would be required pursuant
to Statement of Financial Accounting Standard No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."
The Company believes that the amount of the impairment adjustment could be
material. See Note 3 to the accompanying unaudited financial statements.
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets of MobileMedia Communications, Inc. and
Subsidiaries as of December 31, 1996 and 1995 ............................ F-2
Consolidated Statements of Operations of MobileMedia Communications,
Inc. and Subsidiaries for the years ended December 31, 1996,
1995 and 1994 ............................................................ F-3
Consolidated Statement of Changes in Stockholders' Equity of
MobileMedia Communications, Inc. and Subsidiaries for the years
ended December 31, 1996, 1995 and 1994 ................................... F-4
Consolidated Statements of Cash Flows of MobileMedia Communications,
Inc. and Subsidiaries for the years ended December 31, 1996, 1995
and 1994 ................................................................. F-5
Notes to Consolidated Financial Statements ................................. F-6
F-1
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollar amounts in thousands)
Unaudited
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
---- ----
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents ........................... $ 23,169 $ 5,835
Accounts receivable (less allowance for uncollectible
accounts of $56,189 and $5,214 at December 31,
1996 and 1995, respectively) ..................... 59,079 32,694
Inventories ............................................. 13,382 9,623
Prepaid expenses ........................................ 1,118 1,665
Other ................................................... 1,582 345
----------- -----------
Total current assets .................................... 98,330 50,162
Cash designated for the MobileComm Acquisition .......... -- 402,341
Investment in net assets of equity affiliate ........... 1,856 2,017
Property and equipment, net ............................ 326,382 194,543
Intangible assets, net ................................. 1,119,103 398,057
Other assets ............................................ 28,781 81,426
----------- -----------
Total assets ............................................ $ 1,574,452 $ 1,128,546
=========== ===========
Liabilities and Stockholder's equity
Current liabilities
Accounts payable .................................... $ 78,533 $ 41,797
Accrued expenses .................................... 54,634 17,315
Advance billings and customer deposits .............. 37,022 12,986
Current portion of long-term debt ................... 1,074,195 --
----------- -----------
Total current liabilities ............................... 1,244,384 72,098
Deferred tax liability .................................. 72,097 --
Long-term debt .......................................... -- 476,156
Other ................................................... 3,460 1,539
Commitments and contingencies
Stockholder's equity
Common stock (1 share, no par value, issued and
outstanding at December 31, 1996 and 1995) ......... -- --
Additional paid-in-capital ......................... 672,629 659,829
Accumulated deficit ................................ (418,118) (81,076)
----------- -----------
Total stockholder's equity .............................. 254,511 578,753
----------- -----------
Total liabilities and stockholder's equity .............. $ 1,574,452 $ 1,128,546
=========== ===========
</TABLE>
See accompanying notes.
F-2
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollar amounts in thousands)
Unaudited
Year ended December 31,
----------------------------------
1996 1995 1994
--------- --------- ----------
Revenues
Services, rents and maintenance .... $ 568,892 $ 220,745 $ 179,092
Product sales ...................... 71,818 32,251 24,057
--------- --------- ---------
Total revenues ....................... 640,710 252,996 203,149
Cost of products sold ................ (72,595) (26,885) (18,705)
--------- --------- ---------
568,115 226,111 184,444
Operating expenses
Services, rents and maintenance .... 144,050 59,800 46,339
Selling ............................ 96,817 45,203 32,939
General and administrative ......... 218,606 59,034 57,394
Restructuring costs ................ 4,256 -- --
Depreciation ....................... 136,437 50,399 49,717
Amortization ....................... 212,264 21,009 17,934
--------- --------- ---------
Total operating expenses ............. 812,430 235,445 204,323
--------- --------- ---------
Operating (loss) ..................... (244,315) (9,334) (19,879)
Other income (expense)
Interest expense, net .............. (92,795) (31,745) (18,237)
Gain on sale of assets ............. 68 1,049
--------- --------- ---------
Total other income (expense) ......... (92,727) (31,745) (17,188)
--------- --------- ---------
Loss before income taxes ............. (337,042) (41,079) (37,067)
Income taxes ......................... -- -- --
--------- --------- ---------
Net loss ............................ $(337,042) $ (41,079) $ (37,067)
========= ========= =========
See accompanying notes.
F-3
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(dollar amounts in thousands)
Unaudited
<TABLE>
<CAPTION>
Additional
Common Paid in Accumulated
Stock Capital Deficit Total
--------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at December 31, 1993 ........ $ 0 $141,497 (2,930) $ 138,567
Net loss ............................ (37,067) (37,067)
--------- -------- --------- ---------
Balance at December 31, 1994 ........ 0 141,497 (39,997) 101,500
Capital contribution by MobileMedia
Corporation ....................... 518,332 518,332
Net loss ............................ (41,079) (41,079)
--------- -------- --------- ---------
Balance at December 31, 1995 ........ 0 659,829 (81,076) 578,753
Capital contribution by MobileMedia
Corporation ....................... 12,800 12,800
Net loss ............................ (337,042) (337,042)
--------- -------- --------- ---------
Balance at December 31, 1996 ........ $ 0 $672,629 $(418,118) $ 254,511
========= ======== ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollar amounts in thousands)
Unaudited
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------
1996 1995 1994
------------ ----------- ---------
<S> <C> <C> <C>
Operating activities
Net loss .................................................. $ (337,042) $ (41,079) $(37,067)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization ........................... 348,701 71,408 67,651
Accretion of note payable discount ..................... 16,792 15,159 13,685
Gain on sale of assets .................................. (1,049)
Provision for uncollectible accounts ................... 64,135 4,259 6,002
Write-off of unamortized debt issuance costs ............ 5,391
Undistributed earnings of affiliate, net
of distributions ...................................... 161 (303)
Change in operating assets and liabilities:
Accounts receivable ..................................... (55,914) (17,595) (10,490)
Inventories ............................................. 2,433 (3,353) (6,103)
Prepaid expenses and other assets ...................... 11,403 133 811
Accounts payable, accrued expenses and other
liabilities ........................................... 5,163 9,829 20,341
----------- ----------- --------
Net cash provided by operating activities ............... 55,832 43,849 53,781
----------- ----------- --------
Investing activities:
Construction and capital expenditures, including net
changes in pager assets .............................. (160,489) (86,163) (65,574)
Investment in net assets of equity affiliates ............ (1,641)
Acquisition of businesses ............................... (866,460) (171,223) 2,052
MAP Mobile channel exchange agreement ................... (10,175)
Transaction costs ....................................... (930)
Cash paid to FCC for PCS license ........................ (42,935) (10,734)
Net proceeds from sale of assets ........................ 23,971
Other ................................................... (561) 337
----------- ----------- --------
Net cash used in investing activities .................... (1,026,949) (312,698) (50,878)
----------- ----------- --------
Financing activities:
Capital contribution from MobileMedia Corporation ...... 12,800 518,332
Proceed from sale of notes, net ......................... 245,863
Repayment of Dial Page notes ............................ (83,430)
Payment of debt issue costs ............................. (6,876) (22,721)
Borrowing from revolving credit facilities .............. 580,250 1,071,000 29,000
Repayments on revolving credit facilities ............... (1,057,250) (29,000)
Repayments of other debt ................................ (64)
----------- ----------- --------
Net cash provided by financing activities ................. 586,110 671,794 --
----------- ----------- --------
Net (decrease) increase in cash, cash equivalents and cash
designated for the MobileComm Acquisition .............. (385,007) 402,945 2,903
Cash and cash equivalents at beginning of period .......... 408,176 5,231 2,328
----------- ----------- --------
Cash and cash equivalents at end of period ............... $ 23,169 $ 408,176 $ 5,231
=========== =========== ========
</TABLE>
See accompanying notes.
F-5
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(dollar amounts in thousands)
1. Subsequent Event
On January 30, 1997 (the "Filing Date"), MobileMedia Communications,
Inc. and all of its subsidiaries (the "Company") and its parent, MobilMedia
Corporation ("MobileMedia"), filed voluntary petitions for relief under
Chapter 11 of the Bankruptcy Code (the "Filings"), in order to implement an
operational and financial restructuring. In connection with the filings, the
Company entered into a credit agreement, providing up to $200 million in
debtor-in-possession financing (the "DIP Credit Agreement"). The Company is
presently operating their business as debtors-in-possession subject to the
jurisdiction of the U.S. Bankruptcy Court for the District of Delaware (the
"Bankruptcy Court").
The cases initiated by the Filings are being jointly administered for
procedural purposes. During the pendency of the cases, the Bankruptcy Court
has jurisdiction over the assets and affairs of the Company, and their
continued operations are subject to the Bankruptcy Court's protection and
supervision. The Company is in the process of applying for, and in some cases
has obtained, various orders from the Bankruptcy Court intended to stabilize
its business and minimize any disruption caused by the Filings. To date, the
Bankruptcy Court has authorized the Company to pay certain pre-petition
creditors including employees and key suppliers, enter into the DIP Credit
Agreement, reject leases, engage professionals and enter into employment and
compensation agreements, among other things. The Company will continue to
file motions with the Bankruptcy Court as necessary and appropriate in the
operation of its business and the administration of the bankruptcy
proceedings.
By law, the Company has the exclusive right to propose and file a plan
of reorganization with the Bankruptcy Court for the 120 day period following
the Filing Date and, if so filed, an exclusive period of up to 180 days after
the Filing Date to solicit acceptances of such plan. The Company's exclusive
periods would have expired on May 29, 1997 and July 28, 1997, respectively.
The Company filed a motion, which was approved by the Bankruptcy Court, to
extend these exclusive periods to August 29, 1997 and October 30, 1997,
respectively.
Although the Company is authorized to operate its business as
debtors-in-possession, it may not engage in transactions outside the ordinary
course of business without first complying with the notice and hearing
provisions of the Bankruptcy Code and obtaining Bankruptcy Court approval.
The Company may rent, sell or lease its property in the ordinary course of
business.
An official unsecured creditors' committee has been appointed by the
United States Trustee and is acting in the Chapter 11 cases of the Company.
This committee (as well as other parties in interest) has the right to appear
and be heard on applications of the Company relating to certain business
transactions. The Company is required to pay certain expenses of the
committee, including legal and advisory fees, to the extent allowed by the
Bankruptcy Court.
Pursuant to the automatic stay created under Section 362 of the Bankruptcy
Code, during a Chapter 11 case, creditors and other parties in interest may not,
without Bankruptcy Court approval, among other things: (i) commence or continue
a judicial, administrative or other proceeding against the Company (a) which was
or could have been commenced prior to commencement of the Chapter 11 cases, or
(b) to recover a claim that arose prior to commencement of the cases; (ii)
enforce any pre-petition judgments against the Company; (iii) take any action to
obtain possession of property of the Company or to exercise control over
property of the Company or their estates; (iv) create, perfect or enforce any
lien against the property of the Company, (v) collect, assess or recover claims
against the Company that arose before the commencement of the cases; or (vi)
offset any debt owing to the Company that arose prior to the commencement of the
cases against a claim of such creditor or party-in-interest against the Company
that arose before the commencement of the cases. Consequently, the Company's
creditors are prohibited from attempting to collect pre-petition debts without
prior authorization the Bankruptcy Court. Creditors may, however, petition for
relief from the automatic stay.
F-6
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(dollar amount in thousands)
1. Subsequent Event - (Continued)
Under the Bankruptcy Code, the Company may elect to assume or reject real
estate leases, employment contracts, personal property leases, service contracts
and other unexpired executory pre-petition leases and contracts, subject to
Bankruptcy Court approval. Assumption of a contract requires the Company, among
other things, to cure all defaults under the contract, including payment of all
pre-petition liabilities. Rejection of a contract constitutes a breach of that
contract as of the moment immediately preceding the Chapter 11 filing and the
other party has the right to assert a general, unsecured claim against the
bankruptcy estate for damages arising out of such breach. These parties may also
seek to assert post-petition administrative claims against the Company to the
extent that the Company utilizes the collateral or services of such parties
subsequent to the commencement of the Chapter 11 proceedings. The Company cannot
presently determine or reasonably estimate the ultimate liability which may
result from the filing of claims for all leases and contracts which may be
rejected.
The Company must assume or reject real estate leases prior to September
30, 1997 (subject to any extensions which may be sought, if granted by the
Bankruptcy Court). The Company retains the option to assume or reject all other
employment contracts, personal property leases, service contracts and other
unexpired executory pre-petition leases and contracts (other than real estate
leases) until confirmation of a plan of reorganization. However, the parties to
executory contracts, including leases, with the Company may petition the
Bankruptcy Court to require the Company to assume or reject such contracts on a
date certain.
As noted above, the Company, as a debtor in possession, entered into
the DIP Credit Agreement with The Chase Manhattan Bank, as agent, and certain
other financial institutions (the "DIP Lenders") that provides for up to
$200 million of post petition, debtor in possession financing (the "DIP
Facility"). At a hearing on January 30, 1997, the Bankruptcy Court entered
an interim order approving the DIP Facility and allowed the Company to borrow
up to $70 million, subject to the Company entering into supply agreements
with certain Key Vendors. This condition being satisfied, the Company
borrowed $47 million to pay the pre-petition claims of the Key Vendors and to
make adequate assurance payments to the pre-petition bank lenders. On
February 19, 1997, the Bankruptcy Court entered a final order approving the
Company's DIP Facility which, by the terms of the DIP Agreement, provided
that credit availability under the DIP Facility would increase to $100
million. Subsequently, all $200 million of the DIP Facility became available
for borrowing on May 1, 1997, when the Company delivered to the DIP Lenders a
business plan satisfactory to the advisor to the DIP Lenders.
The Company is subject to certain financial and operating restrictions
customary to credit facilities of this type including a limitation on
periodic capital expenditures, minimum allowable periodic EBITDA and
retention of a turnaround professional. Additionally, the Company is required
to make monthly interest payments to the DIP Lenders and to the lenders under
the pre-petition $750 million credit facility. The DIP Facility bears
interest at a rate of LIBOR plus 250 basis points or Base Rate plus 150 basis
points, at the option of the Company. Loans outstanding under the DIP
Facility are to be paid in full on January 30, 1998 provided that if on or
before December 31, 1997 the Company (i) delivers to the Agent a
Reorganization Plan which is in form and substance satisfactory to at least
51% of the DIP Lenders which, among them, hold at least two-thirds of the
Commitments under the DIP Facility and (ii) files such Reorganization Plan
with the Bankruptcy Court, and no event of default shall be continuing then
the final maturity of the DIP Facility shall be extended to July 31, 1998. As
of June 30, 1997, outstanding borrowings under the DIP facility totaled $15
million.
Refer to Note 14 for a discussion of various FCC actions and a stay of a
previously announced FCC administrative hearing.
F-7
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
2. Basis of Presentation
The accompanying unaudited financial statements as of December 31, 1996
and for the year then ended have not been prepared in accordance with generally
accepted accounting principles due to the Company's inability at the present
time to determine the amount of an impairment adjustment that would be required
pursuant to Statement of Financial Accounting Standard No 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of." The Company believes that the amount of the impairment adjustment could
be material. See Note 3.
The consolidated financial statements at December 31, 1996 have been
prepared on a going concern basis which assumes continuity of operations and
realization of assets and liquidation of liabilities in the ordinary course of
business. As discussed herein, there are significant uncertainties relating to
the ability of the Company to continue as a going concern. The consolidated
financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts, or the amounts and
classification of liabilities that might be necessary as a result of the outcome
of the uncertainties discussed herein.
3. The Company and Summary of Significant Accounting Policies
The Company
The Company provides paging services in the United Stares, including most
of the largest metropolitan areas.
Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries (MobileMedia Communications of California,
Inc., MobileMedia Paging, Inc., MobileMedia DP Properties, Inc., Dial Page
Southeast, Inc., RadioCall Company of Virginia, Inc., MobileMedia PCS, Inc.,
MobileMedia Communications Corporation of America, MobileComm of Florida, Inc.,
MobileComm of Tennessee, Inc., MobileComm of the Midsouth, Inc., MobileComm
Nationwide Operations, Inc., MobileComm of the West, Inc., MobileComm of the
Northeast, Inc., MobileComm of the Southeast, Inc., MobileComm of the Southeast
Private Carrier Operations, Inc., MobileComm of the Southwest, Inc. and FWS
Radio, Inc.). All significant intercompany accounts and transactions have been
eliminated.
Cash Equivalents
The Company considers all highly-liquid securities with an original
maturity of less than three months to be cash equivalents.
Cash Designated for the MobileComm Acquisition
Unused proceeds of debt and stock offerings incurred for the purpose of
financing a portion of the costs of the MobileComm Acquisition (Note 4) are
presented as a long-term asset at December 31,1995 in the accompanying financial
statements.
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary cash investments
and accounts receivable. The Company places its temporary cash investments with
high-quality institutions and, by policy, limits the credit exposure to any one
institution. Although the Company faces significant credit risk from its
customers, which has been aggravated due to the Company's operating problems,
such risk does not result from a concentration of credit risk as a result of the
large number of customers which comprise the Company's customer base. The
Company generally does not require collateral or other security to support
customer receivables.
Inventories
The Company values inventories at the lower of cost or market value, with
cost being determined using the first-in, first-out method. Inventories consist
of pagers held specifically for resale by the Company.
F-8
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
3. The Company and Summary of Significant Accounting Policies - (Continued)
Revenue Recognition
The Company recognizes revenue under service, rent and maintenance
agreements with customers at the time the related services are performed.
Advance billings for services are deferred and recognized as revenue when
earned. The Company leases (as lessor) certain pagers under operating leases.
Substantially all of these leases are cancelable with 60 days notice. Sales of
pagers are recognized upon delivery.
Reclassifications
Certain 1995 financial statement items have been reclassified to conform
to the 1996 presentation. These items include the reclassification of certain
employee benefits from general and administrative expense into services, rents
and maintenance and selling expense, the reclassification of customer service
expenses from service, rents and maintenance expense into general and
administrative expense and the reclassification of income from equity affiliate
into service, rents and maintenance expense.
Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation.
Expenditures for maintenance are charged to expense as incurred.
Upon retirement of pagers, the cost and related accumulated depreciation
are removed from the accounts and the net book value, if any, is charged to
depreciation expense. Upon the sale of pagers, the net book value is charged to
costs of products sold.
Depreciation and amortization are computed using the straight-line method
over the following estimated useful lives:
Pagers ............................................ 4 years
Radio transmission equipment ...................... 10 years
Computer equipment ................................ 4 years
Furniture and fixtures ............................ 5 years
Leasehold improvements ............................ 1-10 years
Buildings ......................................... 30 years
Intangible Assets
Intangible assets consist primarily of customer lists, FCC licenses, a
non-competition agreement, software and the excess of consideration paid over
fair values of net assets acquired and are being amortized principally using the
straight-line method over periods ranging from 1 to 40 years.
F-9
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
3. The Company and Summary of Significant Accounting Policies - (Continued)
Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121
("SFAS 121"), "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" in the year ended December 31, 1995.
Under certain circumstances, SFAS 121 requires companies to write down the
carrying value of long-lived assets recorded in the financial statements to
the fair value of such assets. The Company has determined that the existence
of adverse business circumstances, such as the Company's bankruptcy, its
operating results for the 1996 fiscal year and the uncertainty associated
with the pending FCC proceeding, constitute indicators of impairment for
purposes of SFAS 121, that recognition of an impairment loss may be
appropriate and that the amount of such impairment loss could be material. At
December 31, 1996, more than 90% of the Company's total assets constitute
long-lived assets. The Company has concluded that, at the present time, it is
not possible to determine the amount of impairment pursuant to the SFAS 121,
and, accordingly, the Company's financial statements for the 1996 fiscal year
are not presented in accordance with generally accepted accounting principles.
Debt Issue Costs
Debt issue costs, which relate to the long term debt discussed in Note
8, are included with other assets in the accompanying balance sheets. Such
costs amounted to $26,584 at December 31, 1996 and $16,782 at December 31,
1995 and are being amortized on a straight line basis over the term of the
related debt.
Income Taxes
Income taxes are accounted for by the liability method in accordance with
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" (Statement No. 109).
4. Acquisitions and Divestitures
On January 4, 1996, the Company completed its acquisition of MobileComm,
BellSouth's paging and wireless messaging unit, and an associated nationwide
two-way narrowband 50/12.5 kHz PCS license, and BellSouth agreed to enter into a
two-year non-compete agreement and a five-year reseller agreement with the
Company (the "MobileComm Acquisition"). The aggregate consideration paid for the
MobileComm Acquisition (excluding fees and expenses and related financing costs)
was approximately $928,709.
The MobileComm Acquisition has been accounted for as a purchase
transaction in accordance with Accounting Principles Board Opinion No. 16 and,
accordingly, the financial statements for the periods subsequent to January 4,
1996 reflect the purchase price and transaction costs of $24,328, allocated to
tangible and intangible assets acquired and liabilities assumed based on their
preliminary estimated fair values as of January 4, 1996.
F-10
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
4. Acquisitions and Divestitures - (Continued)
The allocation of the purchase price is summarized as follows:
Current assets .................................... $ 55,301
Property and equipment ............................ 112,986
Intangible assets ................................. 934,269
Other assets ...................................... 143
Liabilities assumed ............................... (149,662)
---------
$ 953,037
=========
On August 31, 1995, the Company purchased the paging assets and messaging
services business (the "Paging Business") of Dial Page, Inc. ("Dial Page"),
including the capital stock of two wholly-owned Dial Page subsidiaries, and
assumed certain liabilities of the Paging Business (the "Dial Page
Acquisition"). The purchase price for the Paging Business was $187,396,
comprised of cash and the assumption by the Company of the aggregate principal
amount of and accrued interest on certain indebtedness of Dial Page.
The Company assigned its right to acquire the Paging Business to
MobileMedia DP Communications, Inc. ("MMDP"), a newly formed wholly-owned
subsidiary of MobileMedia. Upon the consummation of the Dial Page Acquisition,
MobileMedia effected a merger (the "Merger") of MMDP and MobileMedia
Communications with and into MobileMedia Merger, Inc., a wholly-owned subsidiary
of MobileMedia ("Merger Sub") formed to effect the Merger. Merger Sub changed
its name to MobileMedia Communications, Inc. in the Merger. In connection with
the Dial Page Acquisition, MMDP purchased $83.4 million outstanding principal
amount of the Dial Page 12 1/4% of Senior Notes due 2000 (the "Dial Page Notes")
at a purchase price of 107.625% of their principal amount plus a consent fee
equal to an additional 1.0% of their principal amount. Upon consummation of the
Dial Page Acquisition, the remaining $1.6 million of outstanding Dial Page Notes
became obligations of MMDP. The purchase of the Dial Page Notes resulted in
approximately $90.9 million of additional borrowings under MobileMedia
Communication's $300,000 secured credit facility (the "Former Credit Facility")
(See Note 8).
The Dial Page Acquisition has been accounted for as a purchase
transaction in accordance with Accounting Principles Board Opinion No. 16
and, accordingly, the financial statements for the periods subsequent to
August 31, 1995 reflect the purchase price, including bond tender premium and
consent, and fees of $7,444 and transaction costs of $5,339, allocated to
tangible and intangible assets acquired and liabilities assumed based on
their estimated fair value as of August 31, 1995.
The allocation of the purchase price is summarized as follows:
Current assets ............................... $ 3,441
Property and equipment ....................... 37,406
Intangible assets ............................ 167,101
Other assets ................................. 74
Liabilities assumed .......................... (7,843)
---------
$ 200,179
=========
F-11
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
4. Acquisitions and Divestitures - (Continued)
Results of operations for the year ended December 31, 1995 include results
of Dial Page subsequent to August 31, 1995. The following unaudited pro forma
information reflects the results of operations of the Company assuming the Dial
Page and MobileComm acquisitions had occurred as of January 1, 1995.
Year ended
December 31, 1995
-----------------
Net revenue ........................... $ 559,236
Net loss .............................. $(213,173)
On October 23, 1995, the Company completed the purchase of additional
capacity for its nationwide Private Carrier Paging channel for $10,175 from MAP
Mobile Communications, Inc.
In December 1994, the Company sold its Specialized Mobile Radio ("SMR")
assets for $25,031, realizing a gain of $1,049. During 1994, this business
contributed approximately 1.3% of the Company's consolidated revenue.
5. Property and Equipment
Property and equipment are summarized as follows:
December 31,
-----------------------------
1996 1995
------------ ------------
Pagers .............................. $ 271,068 $ 135,666
Radio transmission equipment ........ 196,138 81,304
Computer equipment .................. 25,334 11,262
Furniture and fixtures .............. 19,352 9,030
Leasehold improvements .............. 14,260 4,960
Construction in progress ............ 1,498 21,378
Land, buildings and other ........... 7,701 4,468
--------- ---------
535,351 268,068
Accumulated depreciation ............ 208,969 73,525
--------- ---------
Property and equipment, net ......... $ 326,382 $ 194,543
========= =========
F-12
<PAGE>
6. Intangible Assets
<TABLE>
<CAPTION>
December 31,
---------------------------------------------------------------------
1996 1995
---------------------------------- --------------------------------
Accumulated Accumulated
Cost Amortization Net Cost Amortization Net
---------- ------------ -------- -------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Customer lists ....................... $ 288,137 $102,735 $ 185,402 $141,187 $ 30,481 $ 110,706
FCC Licenses ......................... 774,731 22,757 751,974 241,457 5,223 236,234
Software ............................. 3,500 1,167 2,333 -- -- --
Non-competition agreement ............ 125,999 114,029 11,970 -- -- --
Excess of consideration paid over
fair value of net assets acquired .. 177,557 10,133 167,424 54,164 3,047 51,117
---------- -------- ---------- -------- -------- ---------
$1,369,924 $250,821 $1,119,103 $436,808 $ 38,751 $ 398,057
========== ======== ========== ======== ======== =========
</TABLE>
7. Accrued Expenses
Accrued expenses are summarized as follows:
December 31,
------------------------
1996 1995
---------- ----------
Accrued payroll and related expenses ... $ 7,568 $ 3,366
Accrued taxes .......................... 10,121 3,221
Accrued interest ....................... 31,443 4,929
Other accrued expenses ................. 5,502 5,799
------- -------
$54,634 $17,315
======= =======
F-13
<PAGE>
8. Long-Term Debt
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
December 31,
----------------------
1996 1995
---------- ---------
<S> <C> <C>
Revolving loan ........................................ $ 99,000
Term loan ............................................. 550,000 $ 68,750
10 1/2% Senior Subordinated Deferred Coupon Notes due
December 1, 2003 .................................... 172,628 155,836
9 3/8% Senior Subordinated Notes due November 1, 2007 . 250,000 250,000
Dial Page Notes (Notes 4) ............................. 1,570 1,570
Note Payable .......................................... 997 --
---------- --------
Total long-term debt ........................... $1,074,195 $476,156
========== ========
</TABLE>
As of December 31, 1996, the funded debt obligations of the Company
included:
1) A $750 million senior secured and guaranteed credit agreement (the
"Pre-Petition Credit Agreement") with a syndicate of lenders including The
Chase Manhattan Bank, as Agent. As of December 31, 1996 there was $649
million of loans outstanding under this facility consisting of two term loans
of $137.5 million and $412.5 million and loans under a revolving credit
facility totaling $99 million. This agreement was entered into on December
4, 1995, in connection with the financing of the MobileComm Acquisition.
During a portion of 1996 and continuing subsequent to the Filings, the
Company was in default under this agreement. As a result of such default,
the Company continues to have no borrowing capacity under this agreement.
Absent the aforementioned events of default and subsequent Filings, the
Pre-Petition Credit Agreement provided for two term loans of $412.5 million
and $137.5 million and revolving credit loans of up to $200 million. Loans
under these credit facilities bear interest at a rate of LIBOR plus 3% or ABR
plus 2%, at the Company's option. The terms of the Pre-petition Credit
Agreement call for periodic interest payments through final maturity, June
30, 2002, and for the payment of principal to commence on March 31, 1998 and
continue on a quarterly basis, in varying amounts through June 30, 2002.
2) In November 1995, concurrent with MobileMedia's second offering of Class
A Common Stock (See Note 13), the Company issued $250 million Senior
Subordinated Notes due November 1, 2007 (the "9 3/8% Notes"). These notes
bear interest at a rate of 9 3/8% payable semiannually on May 1 and November
1 of each year. On November 1, 1996, the Company did not make its scheduled
interest payment on its 9 3/8% Notes (See Note 1) which constituted an event
of default under this indenture. The note holders have not exercised any
rights or remedies afforded such holders (which rights include, but are not
limited to, acceleration of the stated maturity of the notes). Since the
Filings, any such right or remedy is subject to the automatic stay on
litigation created by the Bankruptcy Code.
F-14
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
Absent the aforementioned event of default, the indenture provided for
redemption of the 9 3/8% Notes at the option of the Company, in whole or in
part, at any time on or after November 1, 2000, at the redemption prices set
forth in the related indenture. Additionally, the Company is obligated to
repurchase the 9 3/8% Notes at stated prices upon a change in control of the
Company and the Company is also subject to certain covenants under the terms
of the indenture that, among other things, limit its ability to incur
indebtedness, pay dividends and sell assets.
3) In November 1993, the Company issued, at a discount, $210,000 of Senior
Subordinated Deferred Coupon Notes (the "Deferred Coupon Notes"). The
Deferred Coupon Notes accrete at a rate of 10.5%, compounded semiannually, to
an aggregate principal amount of $210,000 by December 1, 1998 after which
interest is paid in cash at a rate of 10.5% and is payable semiannually. By
virtue of the missed interest payments on the 9 3/8% Notes and the
Pre-Petition Credit Agreement an event of default has occurred under this
indenture. The note holders have not exercised any rights or remedies
afforded such holders (which rights include, but are not limited to,
acceleration of the stated maturity of the notes). Since the Filings, any
such right or remedy is subject to the automatic stay on litigation created
by the Bankruptcy Code.
Absent the aforementioned event of default, the Deferred Coupon Notes are
redeemable, in whole or in part, at the option of the Company at any time
after December 1, 1998 at redemption prices set forth in the Indenture.
Additionally, the Company is obligated to repurchase the Deferred Coupon
Notes at stated prices upon a change in control of the Company and the
Company is also subject to certain covenants under the terms of the Indenture
that, among other things, limit its ability to incur indebtedness, pay
dividends and sell assets.
Interest Expense on Long Term Debt
Interest paid during the year ended December 31, 1996, 1995 and 1994 was
$43,688, $9,828 and $3,724, respectively. Total interest cost incurred for
the year ended December 31, 1996 was $94,087, of which $1,292 was
capitalized. For the year ended December 31, 1995, total interest incurred
was $32,994, of which $1,249 was capitalized. Total interest cost incurred
includes a write-off of unamortized debt issue costs of $5,400 for the year
ended December 31, 1995.
Compliance
As of December 31, 1996, the Company is in breach of a number of negative
and affirmative covenants of the Pre-Petition Credit Agreement in addition to
the default in the payment of interest due during December 1996 on the
Pre-Petition Credit Agreement. Additionally, in November 1996, the Company
failed to make its semi-annual interest payment on the 9 3/8% Notes causing
an event of default thereunder and, by virtue of a cross default provision in
the Deferred Coupon Notes, an event of default also occurred under the
Deferred Coupon Notes.
F-15
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
On June 26, 1996, in anticipation of the issuance of at least $100
million of debt or preferred stock by MobileMedia on or before December 31,
1996 (the "Parent Issuance"), the Banks agreed, among other things, to revise
certain debt covenant ratios and to allow for dividend payments in respect of
such Parent Issuance. Due to adverse market conditions, the Parent Issuance
did not occur during the prescribed time frame causing an event of default
under the Pre-Petition Credit Agreement.
Additionally, since September 30, 1996, the Company has been in breach of
certain financial covenants under the Pre-Petition Credit Agreement. Each of
these breaches remained unwaived and uncured as of December 31, 1996 and
therefore each constitutes an event of default under the Pre-Petition Credit
Agreement.
The aforementioned covenant breaches as well as defaults in the payment
of under the Pre-Petition Credit Facility and the 9 3/8% Notes have caused
events of default under the the Pre-Petition Credit Agreement. In order to
conserve cash for operations, the semi-annual interest payment on the 9 3/8%
Notes was not made in November 1996 and in December 1996, the Company failed
to make schedule periodic interest payments under the Pre-Petition Credit
Agreement.
Prior Credit Agreement
On May 4, 1995, the Company entered into an agreement with The Chase
Manhattan Bank, N.A., as agent, to provide up to $300,000 in secured credit
facilities with a final maturity of June 2002. The Former Credit Facility
was guaranteed by the Company and was used to repay $76,000 in borrowings
under the Company's former $100,000 secured credit facility and to fund the
purchase of Federal Communications Commission licenses for a nationwide
two-way narrowband PCS network at a purchase price of $53,670.
9. Related Party Transactions
On February 8, 1995 MobileMedia called upon certain investors for an
additional $25,000 of capital which was required to be contributed to the
Company in exchange for 137,095 shares of Class A and 2,362,900 shares of
Class B common stock at $10 per share and warrants to purchase 51,014 shares
of Class A Common Stock. On June 13, 1995, the Company received the $25,000
from the exercise of such call.
F-16
<PAGE>
10. Income Taxes
The components of income tax benefit (expense) are as follows:
Year Ended December 31,
----------------------------
1996 1995 1994
------ ------ ------
Current
Federal ........... $ -- $ -- $ --
State and local ... -- -- --
------ ------ ------
-- -- --
Deferred: .........
Federal ........... -- -- --
State and local ... -- -- --
------ ------ ------
-- -- --
------ ------ ------
Total ... $ -- $ -- $ --
====== ====== ======
A reconciliation of income tax benefit and the amount computed by applying
the statutory federal income tax rate to loss before income taxes is as follows:
Year Ended December 31,
-----------------------------------
1996 1995 1994
-------- -------- --------
Tax benefit computed at federal
statutory rate ............ $ 116,840 $ 14,067 $ 12,147
Nondeductible amortization ....
Valuation allowance on federal
deferred tax assets ........ $(116,840) (14,067) (12,147)
Other .........................
-------- -------- --------
Total ............... $ -- $ -- $ --
======== ======== ========
The effect the valuation allowance shown above represents federal tax
effects on income from continuing operations.
F-17
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
UNAUDITED
(dollar amounts in thousands)
10. Income Taxes - (Continued)
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for federal and state income tax purposes. The
components of deferred tax liabilities are as follows:
<TABLE>
<CAPTION>
December 31,
-------------------
1996 1995
--------- --------
<S> <C> <C>
Deferred tax liabilities:
Difference in book and tax cost of intangible assets $ 83,776 $ 1,207
Other .............................................. 1,914 174
--------- --------
Tax deferred tax liabilities .......................... 85,690 1,381
Deferred tax assets:
Loss on discontinued operations .................... 3,137 4,692
Difference between book and tax basis of liabilities 21,694 576
Net operating loss carryforward .................... 85,326 32,589
Difference between book and tax basis of Fixed Assets 30,692 4,129
Other .............................................. 2,741 1,543
--------- --------
Total deferred assets ................................. 143,590 43,529
Valuation allowances for deferred tax assets .......... (129,997) (42,148)
--------- --------
Net deferred tax assets ............................... 13,593 1,381
--------- --------
Net deferred tax liabilities .......................... $ 72,097 $ --
========= ========
</TABLE>
As of December 31, 1996, the Company has available net operating loss
carryforwards for tax purposes of approximately $209,000 which expire in
years 2008 through 2011. Utilization of these losses may be limited under
Section 382 of the Internal Revenue Code.
The Company believes consummation of the public offering of 15,525,000
shares of Class A Common Stock on November 7, 1995 caused an ownership change
for the Company for purposes of Section 382 of the Code. As a result, the use
of the Company's pre-ownership change net operating loss carryforwards will
be limited annually by the Section 382 Limitation, which is estimated to be
approximately $40.0 million. If a second ownership change occurred subsequent
to November 7, 1995, which has not been determined, use of the Company's net
operating losses would be severely limited. Furthermore, the Company's
federal and state net operating losses may be reduced or otherwise limited as
a result of the reorganization of the Company during bankruptcy proceedings.
F-18
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
UNAUDITED
(dollar amounts in thousands)
11. Leases
Certain facilities and equipment used in operations are held under
operating leases. Rental expenses under operating leases were $44,574,
$14,983 and $12,966 for years ended December 31, 1996, 1995 and 1994,
respectively. At December 31, 1996, the aggregate minimum rental commitments
under noncancellable leases were as follows:
1997 .............................. $23,910
1998 .............................. 17,975
1999 .............................. 13,167
2000 .............................. 8,382
2001 .............................. 4,014
Thereafter ........................ 7,609
-------
$75,057
=======
12. Employee Benefit Plans
As of the date of the MPS Acquisition, all employees of MPS were
terminated. Concurrently, the Company adopted a retirement savings plan with
open enrollment for all former employees of MPS. The plan allows for all
employees who have been employed for one year and have at least 1,000 hours
of credited service to contribute and defer up to 15% of his or her
compensation. Effective February 1, 1996, the Company began a matching
contribution of 50% of the first 2% of the elected deferral plus an additional
25% of the next 4% of the elected deferral.
Employees of MobileComm and Dial Page who were hired by the Company were
eligible to participate in the Company's retirement savings plan based on their
recognized MobileComm and Dial Page service date. As of the date of the
MobileComm and Dial Page Acquisitions employees with one year and at least 1,000
hours of credited service were eligible to participate.
13. Common Stock, Stock Option Plans and Stock Warrants
On July 6 1995, MobileMedia issued an aggregate of 8,000,000 shares of
Class A Common Stock in a public offering at a price of $18.50 per share.
MobileMedia received net proceeds from the sale of approximately $137,975. In
addition, on July 25, 1995, the underwriters exercised their over-allotment
option to purchase an additional 800,000 shares of Class A Common Stock at the
initial public offering price. Accordingly, MobileMedia received additional net
proceeds of $13,910 for the over-allotment shares.
On November 13, 1995, MobileMedia issued an aggregate of 13,500,000 shares
of Class A Common Stock at a public offering price of $23.75 resulting in net
proceeds of approximately $308,755. In addition, the underwriters exercised
their over-allotment option to purchase an additional 2,025,000 shares of Class
A Common Stock at the public offering price resulting in additional net proceeds
of approximately $46,170.
F-l9
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
UNAUDITED
(dollar amounts in thousands)
13. Common Stock, Stock Option Plans and Stock Warrants - (Continued)
Non-Employee Directors
The Company adopted a stock option plan under which options to purchase
MobileMedia Class A Common Stock will be granted to the Company's non-employee
directors. The Board has authorized a total of 700,000 shares under this plan.
In connection with their election as directors, four individuals received
an initial option to purchase up to 28,000 shares each of Class A Common Stock
at an exercise price per share equal to $10.00. In 1995, two individuals also
received additional options to purchase up to 2,800 shares of Class A Common
Stock in 1,400 share increments at an exercise price per share equal to $10.00
and $26.38, respectively, and one individual received additional options to
purchase up to 1,400 shares of Class A Common Stock at an exercise price per
share of $11.43. In 1996, two individuals received additional options to
purchase 2,800 shares of Class A Common Stock in 1,400 share increments at an
exercise price per of $23.50 and $1.187, respectively. All exercise prices per
share were considered to be the fair market value at the date of grant.
Employees
The Company has elected to follow Accounting Principles Board Opinion
No. 25, "Accounting for Stock Issued to Employees" and related
interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation," requires use of option valuation
models that were not developed for use in valuing employee stock options.
Under APB 25, because the exercise price of the Company's employee stock
option equals the market price of the underlying stock on the date of grant,
no compensation expense is recognized. In light of the Company's current
circumstances, the pro forma effect of stock compensation expense pursuant to
SFAS No. 123 has not been calculated.
The Company has adopted the 1993 MobileMedia Corporation Stock Option Plan
(the "Option Plan") under which options to purchase shares of MobileMedia's
Class A Common Stock may be granted to officers and key employees of the
Company. A total of 2.1 million shares are issuable under the Option Plan.
Two types of options may be granted under the Option Plan: options
intended to qualify as incentive stock options under Section 422 of the Code,
and "non-qualified" stock options not specifically authorized or qualified for
favorable federal income tax treatment under the Code. The option exercise price
for incentive stock options granted under the Option Plan may not be less than
the fair market value (as defined in the Option Plan) of the Company's Class A
Common Stock on the date the option is granted. The exercise price of
non-qualified stock options may be set by the Board of Directors at a discount
from fair market value.
Certain current and former officers and key employees of the Company have
been granted both qualified and non-qualified options to purchase up to
1,638,230 and 1,372,683 shares of Class A Common Stock at December 31, 1996 and
1995, respectively, at exercise prices ranging from $6.81 to $10.00 per share.
Options exercisable at December 31, 1996 and 1995, totaled 862,926 and 714,679
shares, respectively.
F-20
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
UNAUDITED
(dollar amounts in thousands)
14. Commitments and Contingencies
The Company is party to a number of lawsuits and other matters arising in
the ordinary course of business.
As announced in its September 27, 1996 and October 21, 1996 press
releases, the Company discovered misrepresentations and other violations
which occurred during the licensing process for as many as 400 to 500, or
approximately 6% to 7%, of its approximately 8,000 local transmission one-way
paging stations. The Company caused an investigation to be conducted by its
outside counsel, and a comprehensive report regarding these matters was
provided to the FCC in the Fall of 1996. In cooperation with the FCC, outside
counsel's investigation was expanded to examine all of the Company's paging
licenses, and the results of that investigation were submitted to the FCC on
November 8, 1996. As part of the cooperative process, the Company proposed to
the FCC that a consent order be entered which would result, among other
things, in the return of certain local paging authorizations then held by the
Company, the dismissal of certain pending applications for paging
authorizations, and the voluntary acceptance of a substantial monetary
forfeiture.
On January 13, 1997, the FCC issued a Public Notice relating to the
status of certain FCC authorizations held by the Company. Pursuant to the
Public Notice, the FCC announced that it had (i) automatically terminated
approximately 185 authorizations for paging facilities that were not
constructed by the expiration date of their construction permits and remained
unconstructed, (ii) dismissed approximately 94 applications for fill-in sites
around existing paging stations which had been filed under the "40-mile
rule", as defective because they were predicated upon unconstructed
facilities and (iii) automatically terminated approximately 99 other
authorizations for paging facilities that were constructed after the
expiration date of their construction permits.
On April 8, 1997, the FCC adopted an order (the "Order") commencing an
administrative hearing to inquire into the qualification of the Company to
remain a licensee. The Order directed an administrative law judge (an "ALJ")
to take evidence and develop a full factual record on issues concerning the
Company's filing of false forms and applications in connection with its
applications for paging licenses. While the Order initiated a fact finding
and evaluative hearing process to gather information with which to make a
decision, this decision would not be a final disposition of the FCC's action.
On April 23, 1997, the Company filed a motion with the FCC seeking a
stay of the hearing proceedings instituted by the Order. The motion discussed
the consequences of a grant and a denial of the motion to the Company and its
debt and equity holders. On May 2, 1997, the ALJ denied the Company's motion
for stay. The Company then appealed the ALJ's decision. On June 6, 1997 the
FCC issued an order staying the hearing proceeding. The FCC order stays the
hearing for ten months in order for the Company to develop and consummate a
plan of reorganization that provides for a change of control of the Company
and thus a transfer of the Company's FCC licenses. Under the order, which is
based on an FCC doctrine known as Second Thursday, if there is a change of
control that meets the conditions of Second Thursday, the Company's FCC
issues will be resolved by the transfer of the Company's FCC licenses and the
hearing will not proceed.
F-21
<PAGE>
MOBILEMEDIA COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS- (Continued)
UNAUDITED
(dollar amounts in thousands)
14. Commitments and Contingencies - (Continued)
The Company is permitted to operate their licensed facilities and
provide service to the public during the pendency of the hearing proceeding.
The Company cannot be certain of the outcome of the process initiated by the
FCC's action. An adverse outcome of this proceeding could result in the loss
of the Company's licenses or substantial monetary fines, or both. Any such
outcome would have a material adverse effect on the company's financial
condition and results of operations.
Two securities class action lawsuits, seeking damages in an unspecified
amount, are currently pending in the United States District Court for the
District of New Jersey against the Company and several other defendants. The
first, Civil Action No. 96-4715 (JWB), is a consolidated class action on behalf
of purchasers of the Common Stock of the Company between August 1995 and October
1996 alleging claims arising under the Securities Exchange Act of 1934 as a
result of allegedly false and misleading statements or omissions in public
statements made by the Company. The case is a consolidation of four class action
lawsuits brought against the Company and various individuals between October
1996 and December 1996.
The second class action lawsuit, Civil Action No. 96-5723 (JWB), alleges
claims arising under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933
as a result of allegedly false and misleading statements or omissions in
offering documents distributed pursuant to the secondary offering of the
Company's Common Stock and 9 3/8% Notes in November 1995. These actions carry
with them the possibility of additional actions against the Company for
indemnification or contribution.
Like other pending legal proceedings, these suits have been "stayed" by
the Filings as to the Company. If the plaintiffs were to obtain relief from the
automatic stay, or if the Company emerges from bankruptcy with the suits
unresolved, the Company will defend these suits vigorously. Nevertheless, there
can be no assurance that, if adversely determined, the suits would not have an
adverse effect upon the financial condition of the Company.
Three former employees have agreements which provide an incentive payment
of up to $300 to each of them if the Company's EBITDA (excluding operations of
businesses acquired after MPS) for 1996 equals or exceeds $82,200 subject to
certain adjustments (the "1996 Target"), and of up to $1,000 to each of them if
the Company's EBITDA for 1998 (excluding operations of businesses acquired after
MPS) equals or exceeds $125,100, subject to certain adjustments (the "1998
Target"). Two current and three former employees have agreements which provide
for incentive payments of up to $150 to each of them if the Company (excluding
operations of businesses acquired after MPS) meets the 1996 Target and of up to
$300 to each of them if the Company (excluding operations of businesses acquired
after MPS) meets the 1998 Target.
15. Other Investments
On March 21, 1995, the Company purchased a 33% interest in Abacus
Communications Partners, L.P., a Delaware limited partnership, from Abacus
Business Services, Inc. for $1,641. Abacus Communications Partners, L.P., is the
Company's exclusive alphanumeric dispatch services provider. The investment has
been accounted for under the equity method in accordance with Accounting
Principles Board Opinion No. 18. Under the equity method, original investments
are recorded at cost and adjusted by the Company's share of undistributed
earnings or losses of the purchased company. The Company's share of income of
affiliate for the year ended December 31, 1996 was $210.
F-22
