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QUARTERLY REPORT UNDER SECTION 13 0R 15 (D)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended September 30, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from
______________ to _____________
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Commission File Number 0-23232
ARCH COMMUNICATIONS GROUP, INC.
(Exact name of Registrant as specified in its Charter)
DELAWARE 31-1358569
(State of incorporation) (I.R.S. Employer Identification No.)
1800 WEST PARK DRIVE, SUITE 250
WESTBOROUGH, MASSACHUSETTS 01581
(address of principal executive offices) (Zip Code)
(508) 870-6700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months or for such shorter period that the Registrant was
required to file such reports, and (2) has been subject to such filing
requirements for the past 90 days. Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 20,664,628 shares of the
Company's Common Stock ($.01 par value) were outstanding as of November 12,
1996.
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ARCH COMMUNICATIONS GROUP, INC.
QUARTERLY REPORT ON FORM 10-Q
INDEX
PART I. FINANCIAL INFORMATION Page
--------------------- ----
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of September 30, 1996
and December 31, 1995 3
Consolidated Condensed Statements of Operations for the
Three and Nine Months Ended September 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
PART II. OTHER INFORMATION 17
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Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
--------------------
ARCH COMMUNICATIONS GROUP, INC.
<TABLE>
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and equivalents $ 4,384 $ 3,643
Accounts receivable, net 26,066 14,278
Inventories 14,768 11,801
Prepaid expenses and other 6,615 3,949
---------- --------
Total current assets 51,833 33,671
---------- --------
Property and equipment, at cost 344,803 205,636
Less accumulated depreciation and amortization (80,367) (36,390)
---------- --------
Property and equipment, net 264,436 169,246
---------- --------
Intangible and other assets, net 875,035 582,459
---------- --------
$1,191,304 $785,376
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 48 $ 166
Accounts payable 32,370 22,463
Accrued expenses 11,631 8,947
Accrued interest 8,539 7,845
Customer deposits 7,035 5,258
Deferred revenue 7,347 4,493
---------- --------
Total current liabilities 66,970 49,172
---------- --------
Long-term debt, less current maturities 884,882 457,044
---------- --------
Deferred income taxes 52,817 28,900
---------- --------
Redeemable preferred stock 3,628 3,376
---------- --------
Stockholders' equity:
Common stock-$.01 par 207 197
Additional paid-in capital 350,075 334,825
Accumulated deficit (167,275) (88,138)
---------- --------
Total stockholders' equity 183,007 246,884
---------- --------
$1,191,304 $785,376
========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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ARCH COMMUNICATIONS GROUP, INC.
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except share and per share amounts)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------------- -----------------------------
1996 1995 1996 1995
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Service, rental and maintenance
revenues $ 81,628 $ 34,746 $ 209,661 $ 82,326
Product sales 9,258 5,608 27,379 14,878
----------- ----------- ----------- -----------
Total revenues 90,886 40,354 237,040 97,204
Cost of products sold (6,167) (4,810) (19,733) (13,150)
----------- ----------- ----------- -----------
84,719 35,544 217,307 84,054
----------- ----------- ----------- -----------
Operating expenses:
Service, rental and maintenance 18,137 7,749 45,480 18,049
Selling 14,097 5,981 37,843 14,838
General and administrative 23,324 10,201 58,465 25,222
Depreciation and amortization 52,808 13,655 130,936 28,497
----------- ----------- ----------- -----------
Total operating expenses 108,366 37,586 272,724 86,606
----------- ----------- ----------- -----------
Operating income (loss) (23,647) (2,042) (55,417) (2,552)
Interest expense, net (21,814) (5,922) (53,355) (10,574)
Equity in earnings (loss) of affiliate (808) (3,977) (1,192) (3,977)
----------- ----------- ----------- -----------
Income (loss) before income tax benefit
and extraordinary charge (46,269) (11,941) (109,964) (17,103)
Benefit from income taxes 14,091 - 32,731 -
----------- ----------- ----------- -----------
Income (loss) before extraordinary
charge (32,178) (11,941) (77,233) (17,103)
Extraordinary charge from early
extinguishment of debt - - (1,904) (1,684)
----------- ----------- ----------- -----------
Net income (loss) (32,178) (11,941) (79,137) (18,787)
Accretion of redeemable preferred stock (84) - (252) -
----------- ----------- ----------- -----------
Net loss to common stockholders $ (32,262) $ (11,941) $ (79,389) $ (18,787)
=========== =========== =========== ===========
Net income (loss) per common share
before extraordinary charge $ (1.56) $ (0.90) $ (3.81) $ (1.49)
Extraordinary charge per common share - - (0.09) (0.15)
----------- ----------- ----------- -----------
Net income (loss) per common share $ (1.56) $ (0.90) $ (3.90) $ (1.64)
=========== =========== =========== ===========
Weighted average number of common
shares outstanding 20,643,979 13,229,938 20,373,860 11,484,862
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
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ARCH COMMUNICATIONS GROUP, INC.
<TABLE>
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
<CAPTION>
Nine Months Ended September 30,
-------------------------------
1996 1995
--------- ---------
<S> <C> <C>
Net cash provided by operating activities $ 31,212 $ 8,700
--------- ---------
Cash flows used for investing activities:
Additions to property and equipment, net (109,518) (21,640)
Additions to intangible and other assets (21,239) (24,290)
Acquisitions of paging companies, net of cash acquired (326,453) (121,886)
--------- ---------
Net cash used for investing activities (457,210) (167,816)
--------- ---------
Cash flows from financing activities:
Issuance of long-term debt 650,500 174,617
Repayment of long-term debt (225,152) (63,653)
Net proceeds from sale of common stock 1,391 46,546
--------- ---------
Net cash provided by financing activities 426,739 157,510
--------- ---------
Net increase (decrease) in cash and equivalents 741 (1,606)
Cash and equivalents, beginning of period 3,643 2,351
--------- ---------
Cash and equivalents, end of period $ 4,384 $ 745
========= =========
Supplemental disclosure:
Interest paid $ 36,120 $ 8,241
Issuance of common stock for acquisition of paging company - $ 6,913
Issuance of common stock for convertible debentures $ 14,121 $ 6,890
Accretion of redeemable preferred stock $ 252 $ -
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(unaudited)
(a) Preparation of Interim Financial Statements - The consolidated
condensed financial statements of Arch Communications Group, Inc. ("Arch" or the
"Company") have been prepared in accordance with the rules and regulations of
the Securities and Exchange Commission. The financial information included
herein, other than the consolidated condensed balance sheet as of December 31,
1995, has been prepared by management without audit by independent accountants
who do not express an opinion thereon. The consolidated condensed balance sheet
at December 31, 1995 has been derived from, but does not include all the
disclosures contained in, the audited consolidated financial statements for the
year ended December 31, 1995. In the opinion of management, all of these
unaudited statements include all adjustments and accruals consisting only of
normal recurring accrual adjustments which are necessary for a fair presentation
of the results of all interim periods reported herein. These consolidated
condensed financial statements should be read in conjunction with the
consolidated financial statements and accompanying notes included in Arch's
Annual Report on Form 10-K for the year ended December 31, 1995. The results of
operations for the periods presented are not necessarily indicative of the
results that may be expected for a full year.
(b) Cash Equivalents - Cash equivalents include short-term,
interest-bearing instruments purchased with remaining maturities of three months
or less. The carrying amount approximates fair value due to the relatively short
period to maturity of these instruments.
(c) Inventories - Inventories consist of new pagers which are held
specifically for resale. Inventories are stated at the lower of cost or market,
with cost determined on a first-in, first-out basis.
<TABLE>
(d) Intangible and Other Assets - Intangible and other assets, net of
accumulated amortization, are composed of the following (in thousands):
<CAPTION>
September 30, December 31,
1996 1995
------------- ------------
(unaudited)
<S> <C> <C>
Goodwill $370,476 $283,814
Purchased FCC licenses 339,825 174,533
Purchased subscriber lists 124,898 96,686
Non-competition agreements 4,275 5,321
Deferred financing costs 13,820 6,012
Investment in PCS Development Corporation 6,500 6,500
Investment in Benbow PCS Ventures, Inc. 3,465 -
Other 11,776 9,593
-------- --------
$875,035 $582,459
======== ========
</TABLE>
In connection with Arch's May 1996 acquisition of Westlink Holdings,
Inc. ("Westlink") (see Note e), Arch acquired Westlink's 49.9% share of the
capital stock of Benbow PCS Ventures, Inc. ("Benbow"). Benbow has exclusive
rights to a 50KHz outbound/12.5KHz inbound narrowband personal communications
license in each of the central and western regions of the United States. Arch
has agreed, to the extent funds are not available to Benbow from other sources,
to advance Benbow sufficient funds to build out its narrowband personal
communications system. Accordingly, Arch's investment in Benbow is accounted for
under the equity method whereby 100% of Benbow's losses since the acquisition
date of Westlink are recognized in Arch's accompanying consolidated statements
of operations under the caption equity in earnings (loss) of affiliate.
(e) Acquisitions - On May 21, 1996, Arch completed its acquisition of
all the outstanding capital stock of Westlink for $325.3 million in cash,
including direct transaction costs. The fair values of assets acquired and
liabilities assumed (including deferred income taxes arising in purchase
accounting) amounted to $394.1 million and $68.8 million, respectively. Arch
financed its acquisition of Westlink with borrowings under the Arch Enterprises
Credit Facility (see Note f) and with proceeds from Arch's March 1996 offering
of Senior Discount Notes (see Note g).
6
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ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
On September 7, 1995, Arch completed its acquisition of USA Mobile
Communications Holdings, Inc. ("USA Mobile"). Arch is treated as the acquirer in
the transaction for accounting and financial reporting purposes. The aggregate
consideration paid or exchanged in the transaction was $582.2 million,
consisting of cash paid of $88.9 million, including direct transaction costs,
7,599,493 shares of Arch common stock valued at $209.0 million and the
assumption of liabilities of $284.3 million, including $241.2 million of
long-term debt.
<TABLE>
During 1995, Arch completed five acquisitions of paging companies, in
addition to the USA Mobile acquisition, for purchase prices aggregating
approximately $43.0 million, consisting of cash of $36.1 million and 395,000
shares of Arch common stock valued at $6.9 million. Goodwill resulting from the
acquisitions is being amortized over a ten-year period using the straight-line
method. These acquisitions have been accounted for as purchases, and the results
of their operations have been included in the consolidated financial statements
from the dates of the respective acquisitions. The following unaudited pro forma
summary presents the consolidated results of operations as if the acquisitions
completed during 1995 and 1996 (through September 30, 1996) had occurred on
January 1, 1995, after giving effect to certain adjustments, including primarily
depreciation and amortization of acquired assets and interest expense on
acquisition debt. These pro forma results for the nine months ended September
30, 1996 and 1995 do not purport to be indicative of what would have occurred
had the acquisitions been made on January 1, 1995, or of results that may occur
in the future.
<CAPTION>
Nine Months Ended
September 30,
1996 1995
-------- --------
(in thousands, except per share amounts)
<S> <C> <C>
Total revenues $264,570 $230,360
Net income (loss) (94,823) (82,890)
Net income (loss) per common share (4.67) (4.49)
</TABLE>
(f) Senior Debt - On June 25, 1996, Arch Communications Enterprises,
Inc. ("Arch Enterprises"), a wholly-owned subsidiary of Arch, entered into an
amended and restated credit agreement (the "Credit Agreement") with a group of
banks and financial institutions who have agreed, subject to certain terms and
conditions set forth in the agreement, to provide (i) a $250 million, seven-year
reducing revolver facility (the "Arch Enterprises Revolver"), (ii) a $150
million, seven-year term loan (the "Tranche A Term Loan"), and (iii) a $100
million, eight-year term loan (the "Tranche B Term Loan"). The Arch Enterprises
Revolver, Tranche A Term Loan and Tranche B Term Loan are collectively referred
to as the Arch Enterprises Credit Facility. Arch and the operating subsidiaries
of Arch Enterprises have guaranteed all obligations under the Arch Enterprises
Credit Facility.
The extinguishment of the prior credit facility resulted in an
extraordinary charge of $1.9 million. This charge represents the write-off of
unamortized deferred financing costs.
Availability under the Arch Enterprises Revolver is subject to
scheduled mandatory reductions commencing on December 31, 1999. The Tranche A
Term Loan and the Tranche B Term Loan will be amortized in quarterly
installments commencing on March 31, 1998. Availability under the Arch
Enterprises Credit Facility is reduced to the extent that Arch Enterprises
receives proceeds, above a specified limit, from the sale of assets outside the
ordinary course of business or insurance proceeds that are not used to repair or
replace damaged property. The Arch Enterprises Revolver is permanently reduced
to the extent that the cash flow of Arch Enterprises exceeds certain levels.
Borrowings under the Arch Enterprises Revolver and the Tranche A Term
Loan bear interest based on a reference rate equal to either (i) the bank's
Alternate Base Rate, or (ii) the bank's LIBOR rate, in each case plus a margin
which is based on the ratio of total debt to annualized operating cash flow.
Borrowings under the Tranche B Term Loan bear interest at either the bank's
Alternate Base Rate plus 1.75%, or the bank's LIBOR rate plus 3.00%. Arch
Enterprises is required to maintain interest rate protection on at least 50% of
outstanding borrowings. At September 30, 1996, Arch Enterprises had outstanding
borrowings of $311.5 million under the Arch Enterprises Credit Facility at a
weighted average annual interest rate of 8.4%.
7
<PAGE> 8
ARCH COMMUNICATIONS GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(unaudited)
The Credit Agreement requires payment of a fee of .375% to .5% per
annum on the daily average available revolving commitment, depending on the
ratio of total debt to annualized operating cash flow, and an annual agency fee
of $50,000.
The Arch Enterprises Credit Facility is secured by all of the assets of
the operating subsidiaries of Arch Enterprises and the pledge of all of the
stock of Arch's direct and indirect subsidiaries.
The Credit Agreement contains restrictions that limit, among other
things, additional indebtedness and encumbrances on assets; mergers and sales of
assets; repurchase or redemption of capital stock; capital expenditures;
acquisitions that exceed certain dollar limitations without the lenders prior
approval; and prepayment of indebtedness other than indebtedness under the Arch
Enterprises Credit Facility. The Credit Agreement also, in effect, prohibits the
payment of cash dividends. Additionally, the Credit Agreement requires that Arch
Enterprises meet certain financial covenants, including covenants with respect
to ratios of cash flow to fixed charges, cash flow to debt service, cash flow to
interest service and total indebtedness to cash flow. As of September 30, 1996,
Arch Enterprises was in compliance with the covenants of the Credit Agreement.
(g) Senior Discount Notes Due 2008 - On March 12, 1996, Arch completed
a public offering of 10 7/8% Senior Discount Notes due 2008 (the "Senior
Discount Notes") in the aggregate principal amount at maturity of $467.4 million
($275.0 million initial accreted value). Interest does not accrue on the Senior
Discount Notes prior to March 15, 2001. Commencing September 15, 2001, interest
on the Senior Discount Notes is payable semi-annually at an annual rate of
10 7/8%. The $266.1 million net proceeds from the issuance of the Senior
Discount Notes, after deducting underwriting discounts and commissions and
offering expenses, were used principally to fund a portion of the purchase
price of Arch's acquisition of Westlink (see Note e). Prior to the completion
of the Westlink acquisition, Arch used $225.0 million of the net proceeds to
repay existing indebtedness under Arch's credit facilities with the remainder
primarily invested in short-term, interest-bearing instruments.
(h) Convertible Subordinated Debentures - On March 6, 1996, the holders
of $14.1 million principal amount of Arch's 6 3/4% Convertible Subordinated
Debentures due 2003 ("Arch Convertible Debentures") elected to convert their
Arch Convertible Debentures into Arch common stock at a conversion price of
$16.75 per share and received approximately 843,000 shares of Arch common stock
together with a $1.6 million cash premium.
(i) Net Income (Loss) Per Common Share - Net income (loss) per common
share is based on the weighted average number of common shares outstanding for
each period presented. Shares of stock issuable pursuant to stock options and
upon conversion of the Arch Convertible Debentures have not been considered as
their effect would be antidilutive.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS
------------------------------------------------
This Form 10-Q contains various forward-looking statements which
involve risks and uncertainties. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes", "anticipates", "plans", "expects" and similar expressions are
intended to identify forward-looking statements. There are a number of important
factors that could cause the Company's actual results to differ materially from
those indicated or suggested by such forward-looking statements. These factors
include, without limitation, those set forth below under the caption "Factors
Affecting Future Operating Results".
RESULTS OF OPERATIONS
Total revenues increased to $90.9 million (a 125.2% increase), and
$237.0 million (a 143.9% increase) in the three and nine months ended September
30, 1996, respectively, from $40.4 million and $97.2 million in the three and
nine months ended September 30, 1995, respectively. Net revenues (total revenues
less cost of products sold) increased to $84.7 million (a 138.3% increase) and
$217.3 million (a 158.5% increase) in the three and nine months ended September
30, 1996, respectively, from $35.5 million and $84.1 million in the three and
nine months ended September 30, 1995, respectively. Service, rental and
maintenance revenues, which consist primarily of recurring revenues associated
with the sale or lease of pagers, increased to $81.6 million (a 134.9% increase)
and $209.7 million a (154.7% increase) in the three and nine months ended
September 30, 1996, respectively, from $34.7 million and $82.3 million in the
three and nine months ended September 30, 1995, respectively. These increases in
revenues were due primarily to the increase in the number of pagers in service
from 1,854,000 at September 30, 1995 to 3,077,000 at September 30, 1996.
Acquisitions of paging companies added 474,000 pagers in service, with the
remaining 749,000 pagers added through internal growth. Maintenance revenues
represented less than 10% of total service, rental and maintenance revenues in
the three and nine months ended September 30, 1996 and 1995. Arch does not
differentiate between service and rental revenues. Product sales, less cost of
products sold, increased to $3.1 million (a 287.3% increase) and $7.6 million (a
342.5% increase) in the three and nine months ended September 30, 1996,
respectively, from $0.8 million and $1.7 million in the three and nine months
ended September 30, 1995, respectively, as a result of a greater number of pager
unit sales.
Service, rental and maintenance expenses, which consist primarily of
telephone line and site rental expenses, increased to $18.1 million (21.4% of
net revenues) and $45.5 million (20.9% of net revenues) in the three and nine
months ended September 30, 1996, respectively, from $7.7 million (21.8% of net
revenues) and $18.0 million (21.5% of net revenues) in the three and nine months
ended September 30, 1995, respectively. The increases in absolute dollars were
due primarily to increased expenses associated with system expansions and the
provision of paging services to a greater number of subscribers. The decreases
as a percentage of net revenues resulted from the increase in Arch's subscriber
base described above. As existing paging systems become more populated through
the addition of new subscribers, the fixed costs of operating these paging
systems are spread over a greater subscriber base. Annualized service, rental
and maintenance expenses per subscriber decreased to $24 in the three and nine
months ended September 30, 1996, from $29 and $31 in the corresponding 1995
periods.
Selling expenses increased to $14.1 million (16.6% of net revenues) and
$37.8 million (17.4% of net revenues) in the three and nine months ended
September 30, 1996, respectively, from $6.0 million (16.8% of net revenues) and
$14.8 million (17.7% of net revenues) in the three and nine months ended
September 30, 1995, respectively. The increases in selling expenses were due to
the addition of sales personnel to support continued growth in the subscriber
base, as the number of net new pagers in service resulting from internal growth
increased by 142.7% and 179.0% from the three and nine months ended September
30, 1995 to the three and nine months ended September 30, 1996, respectively.
Arch's selling cost per net new pager in service decreased to $65 and $63 in the
three and nine months ended September 30, 1996, respectively, from $67 and $69
in the three and nine months ended September 30, 1995, respectively. Most
selling expenses are directly related to the number of net new subscribers
added. Therefore, such expenses may increase in the future if pagers in service
are added at a more rapid rate than in the past.
9
<PAGE> 10
General and administrative expenses increased to $23.3 million (27.5%
of net revenues) and $58.5 million (26.9% of net revenues) in the three and nine
months ended September 30, 1996, respectively, from $10.2 million (28.7% of net
revenues) and $25.2 million (30.0% of net revenues) in the three and nine months
ended September 30, 1995, respectively. The increases in absolute dollars were
due primarily to increased expenses associated with supporting more pagers in
service.
Depreciation and amortization expenses increased to $52.8 million and
$130.9 million in the three and nine months ended September 30, 1996,
respectively, from $13.7 million and $28.5 million in the three and nine months
ended September 30, 1995, respectively. These expenses principally reflect
Arch's acquisitions of paging businesses, accounted for as purchases, as well as
continued investment in pagers and other system expansion equipment to support
continued growth. As a result of its acquisition of Westlink, which was
accounted for under the purchase method of accounting, Arch expects its
depreciation and amortization expenses to increase by approximately $50 million
annually through the year ending December 31, 2003.
Operating loss increased to $23.6 million and $55.4 million in the
three and nine months ended September 30, 1996, respectively, from $2.0 million
and $2.6 million in the three and nine months ended September 30, 1995,
respectively, as a result of the factors outlined above.
Net interest expense increased to $21.8 million and $53.4 million in
the three and nine months ended September 30, 1996, respectively, from $5.9
million and $10.6 million in the three and nine months ended September 30, 1995,
respectively. The increases were attributable to an increase in Arch's
outstanding debt. Arch expects its future interest expense to increase
significantly as a result of the additional debt incurred in connection with its
May 1996 Westlink acquisition and other acquisitions.
During the three and nine months ended September 30, 1996, the Company
recognized an income tax benefit of $14.1 million and $32.7 million,
respectively, representing the tax benefit of operating losses which were
available to offset previously established deferred tax liabilities arising from
the Company's acquisitions of USA Mobile in September 1995 and Westlink in May
1996. The Company expects to recognize the $52.8 million balance of such tax
benefit through the year ending December 31, 1997.
In May 1996 and 1995, Arch recognized an extraordinary charge of $1.9
million and $1.7 million, respectively, representing the write-off of
unamortized deferred financing costs associated with the prepayment of
indebtedness under separate prior credit facilities.
Net loss increased to $32.2 million and $79.1 million in the three and
nine months ended September 30, 1996, respectively, from $11.9 million and $18.8
million in the three and nine months ended September 30, 1995, respectively, as
a result of the factors outlined above. The increases in depreciation and
amortization expenses attributable to the Company's May 1996 acquisition of
Westlink, as described above, will increase the Company's future net losses (or
decrease its future net income, if any).
Earnings before interest, taxes, depreciation and amortization
("EBITDA") increased 151.1% to $29.2 million (34.4% of net revenues) and 191.1%
to $75.5 million (34.8% of net revenues) in the three and nine months ended
September 30, 1996, respectively, from $11.6 million (32.7% of net revenues) and
$25.9 million (30.9% of net revenues) in the three and nine months ended
September 30, 1995, respectively, as a result of the factors outlined above.
EBITDA is a standard measure of financial performance in the paging industry and
is also one of the financial measures used to calculate whether Arch and its
subsidiaries are in compliance with the covenants under their respective debt
agreements, but should not be construed as an alternative to operating income or
cash flows from operating activities as determined in accordance with generally
accepted accounting principles. EBITDA does not reflect income tax benefit,
equity in earnings (loss) of affiliate, interest expense and extraordinary
charge.
LIQUIDITY AND CAPITAL RESOURCES
Arch's business strategy requires the availability of substantial funds
to finance the expansion of existing operations, to fund capital expenditures
for pagers and paging system equipment, to finance acquisitions and to service
debt.
10
<PAGE> 11
CAPITAL EXPENDITURES AND COMMITMENTS
Excluding acquisitions of paging companies, Arch's capital expenditures
increased from $45.9 million in the nine months ended September 30, 1995 to
$130.8 million (inclusive of $15.3 million of deferred financing costs incurred
in connection with the Senior Discount Notes and the Arch Enterprises Credit
Facility) in the nine months ended September 30, 1996. To date, Arch has funded
its capital expenditures with net cash provided by operating activities, the
issuance of equity securities and the incurrence of debt.
Arch currently anticipates capital expenditures of approximately $150
million to $160 million in total for the year ending December 31, 1996,
primarily for the purchase of pagers and paging system equipment. Such amounts
are subject to change based on the Company's internal growth rate and
acquisition activity during 1996. Arch believes that it will have sufficient
cash available from operations and credit facilities to fund these expenditures.
RECENT ACQUISITIONS
On May 21, 1996, Arch completed its acquisition of Westlink for
approximately $325.3 million in cash, including direct transaction costs. The
acquisition was financed with borrowings under the Arch Enterprises Credit
Facility and from the proceeds of Arch's Senior Discount Notes Offering
completed in March 1996. See Note e to the Company's Consolidated Condensed
Financial Statements.
On September 7, 1995, Arch Communications Group, Inc., a Delaware
corporation ("Old Arch"), completed its acquisition of USA Mobile, a Delaware
corporation, through the merger (the "Merger") of Old Arch with and into USA
Mobile, which simultaneously changed its name to Arch Communications Group, Inc.
The consideration for Arch's acquisition of USA Mobile was $582.2 million,
consisting of $88.9 million in cash (including direct transaction costs),
7,599,493 shares of common stock valued at $209.0 million on the date of
completion and the assumption of liabilities of $284.3 million, including $241.2
million of long-term debt. In accordance with generally accepted accounting
principles, Old Arch was treated as the acquirer in the Merger for accounting
and financial reporting purposes, and the Company reports the historical
financial statements of Old Arch as the historical financial statements of the
Company. As used herein, unless the context otherwise requires, the terms "Arch"
or the "Company" refer to Arch Communications Group, Inc. from and after the
Merger and Old Arch prior to the Merger, in each case together with its
wholly-owned direct and indirect subsidiaries, and the term "USA Mobile" refers
to USA Mobile Communications Holdings, Inc. prior to the Merger together with
its wholly-owned direct and indirect subsidiaries.
During 1995, the Company also completed five additional acquisitions
for aggregate consideration of $36.1 million in cash plus the issuance of
395,000 shares of common stock valued at $6.9 million on the date of completion.
See Note e to the Company's Consolidated Condensed Financial Statements.
The Company has pursued and intends to continue to pursue acquisitions
of paging businesses as part of its growth strategy. As a result, the Company
evaluates acquisition opportunities on an ongoing basis and from time to time is
engaged in discussions with respect to possible acquisitions.
SOURCES OF FUNDS
Arch's net cash provided by operating activities was $31.2 million and
$8.7 million in the nine months ended September 30, 1996 and 1995, respectively.
On February 7, 1996, the Company commenced an offer (the "Conversion
Offer") to pay a cash premium of $110 for each $1,000 principal amount of the
Arch Convertible Debentures converted into common stock at $16.75 per share.
Effective upon the expiration of the Conversion Offer on March 6, 1996, the
Company accepted for conversion $14.1 million in principal amount of Arch
Convertible Debentures in exchange for an aggregate of approximately 843,000
shares of common stock and $1.6 million in cash.
11
<PAGE> 12
On March 12, 1996, Arch completed a public offering of 10 7/8% Senior
Discount Notes due 2008 (the "Senior Discount Notes") generating net proceeds of
$266.1 million, net of underwriting discounts and commissions and offering
expenses. The Senior Discount Notes will accrete to a principal amount of $467.4
million at March 15, 2001. Commencing September 15, 2001, interest on the Senior
Discount Notes is payable semi-annually at an annual rate of 10 7/8%. The net
proceeds from the issuance of the Senior Discount Notes were used principally to
fund a portion of the purchase price of Arch's acquisition of Westlink on May
21, 1996. Prior to completion of the Westlink acquisition, Arch used $225.0
million of the net proceeds to repay existing indebtedness under the Arch
Enterprises Credit Facility and the USA Mobile II Credit Facility with the
remainder primarily invested in short-term, interest-bearing instruments.
CREDIT FACILITIES
Arch Enterprises Credit Facility - On June 25, 1996, Arch Enterprises
entered into an amended and restated credit agreement (the "Credit Agreement")
with a group of banks and financial institutions who have agreed, subject to
certain terms and conditions set forth in the agreement, to provide (i) a $250
million, seven-year reducing revolver facility (the "Arch Enterprises
Revolver"), (ii) a $150 million, seven-year term loan (the "Tranche A Term
Loan"), and (iii) a $100 million, eight-year term loan (the "Tranche B Term
Loan"). The Arch Enterprises Revolver, Tranche A Term Loan and Tranche B Term
Loan are collectively referred to as the Arch Enterprises Credit Facility. Arch
and the operating subsidiaries of Arch Enterprises have guaranteed all
obligations under the Arch Enterprises Credit Facility.
The extinguishment of the prior credit facility resulted in an
extraordinary charge of $1.9 million. This charge represents the write-off of
unamortized deferred financing costs.
Availability under the Arch Enterprises Revolver is subject to
scheduled mandatory reductions commencing on December 31, 1999. The Tranche A
Term Loan and the Tranche B Term Loan will be amortized in quarterly
installments commencing on March 31, 1998. Availability under the Arch
Enterprises Credit Facility is reduced to the extent that Arch Enterprises
receives proceeds, above a specified limit, from the sale of assets outside the
ordinary course of business or insurance proceeds that are not used to repair or
replace damaged property. Availability is also reduced to the extent that the
cash flow of Arch Enterprises exceeds certain levels.
Borrowings under the Arch Enterprises Revolver and the Tranche A Term
Loan bear interest based on a reference rate equal to either (i) the bank's
Alternate Base Rate, or (ii) the bank's LIBOR rate, in each case plus a margin
which is based on the ratio of total debt to annualized operating cash flow.
Borrowings under the Tranche B Term Loan bear interest at either the bank's
Alternate Base Rate plus 1.75%, or the bank's LIBOR rate plus 3.00%. Arch
Enterprises is required to maintain interest rate protection on at least 50% of
outstanding borrowings. At September 30, 1996, Arch Enterprises had outstanding
borrowings of $311.5 million under the Arch Enterprises Credit Facility at a
weighted average annual interest rate of 8.4%.
The Credit Agreement requires payment of a fee of .375% to .5% per
annum on the daily average available revolving commitment, depending on the
ratio of total debt to annualized operating cash flow, and an annual agency fee
of $50,000.
The Arch Enterprises Credit Facility is secured by all of the assets of
the operating subsidiaries of Arch Enterprises and the pledge of all of the
stock of Arch's direct and indirect subsidiaries.
The Credit Agreement contains restrictions that limit, among other
things, additional indebtedness and encumbrances on assets; mergers and sales of
assets; repurchase or redemption of capital stock; capital expenditures;
acquisitions that exceed certain dollar limitations without the lenders prior
approval; and prepayment of indebtedness other than indebtedness under the Arch
Enterprises Credit Facility. The Credit Agreement also, in effect, prohibits the
payment of cash dividends. Additionally, the Credit Agreement requires that Arch
Enterprises meet certain financial covenants, including covenants with respect
to ratios of cash flow to fixed charges, cash flow to debt service, cash flow to
interest service and total indebtedness to cash flow. As of September 30, 1996,
Arch Enterprises was in compliance with the covenants of the Credit Agreement.
12
<PAGE> 13
USA Mobile II Facility. USA Mobile Communications, Inc. II, a
wholly-owned subsidiary of Arch ("USA Mobile II"), and the direct subsidiaries
of USA Mobile II (the "USA Mobile II Borrowing Subsidiaries") are parties to a
Credit Agreement dated September 8, 1995, as amended, with the Bank and other
lenders establishing the USA Mobile II Credit Facility.
Under the USA Mobile II Credit Facility, the Bank and the other lenders
have agreed to advance up to $60 million to the USA Mobile II Borrowing
Subsidiaries for working capital purposes under a reducing revolving credit
facility, subject to annual reductions commencing December 31, 1998, with a
final maturity of December 31, 2000. Upon the closing of the USA Mobile II
Credit Facility, the bank and the other lenders did not require the
contemporaneous grant of a security interest in the assets of USA Mobile II and
its subsidiaries but they have reserved the right to require such a security
interest upon the occurrence of certain triggering events. Arch and USA Mobile
II have guaranteed the obligations of the USA Mobile II Borrowing Subsidiaries
under the USA Mobile II Credit Facility. Arch's guarantee is secured by the
pledge of the stock of Arch Enterprises and USA Mobile II. In October 1996, USA
Mobile II exercised its option to increase the size of the USA Mobile II Credit
Facility from $50 million to $60 million.
Obligations under the USA Mobile II Credit Facility bear interest at
either (i) the bank's alternative reference rate or (ii) the Bank's
reserve-adjusted LIBOR rate, in each case plus a margin keyed to the ratio of
USA Mobile II's total indebtedness to annualized operating cash flow from time
to time. The margin applicable to alternative reference rate loans ranges from
1.375% to 2.00%. The margin applicable to LIBOR rate loans ranges from 2.625% to
3.25%. Interest is payable quarterly in arrears. The USA Mobile II Borrowing
Subsidiaries are required to pay an annual commitment fee of 0.50% of the
average daily unused portion on the USA Mobile II Credit Facility, payable
quarterly in arrears, and an annual agency fee.
The obligation of the Bank and the other lenders to provide advances
under the USA Mobile II Credit Facility is subject to the fulfillment of certain
conditions, including the absence of a material adverse change in the financial
condition, operations, prospects or property of USA Mobile II and its
subsidiaries, taken as a whole, or of Arch, USA Mobile II and its subsidiaries,
taken as a whole.
The covenants under the USA Mobile II Credit Facility limit the ability
of USA Mobile II and its subsidiaries to pay dividends to Arch and the ability
of Arch to pay dividends to its stockholders. In addition, the USA Mobile II
Credit Facility imposes limitations on the incurrence of indebtedness, whether
secured or unsecured, on acquisitions, mergers and investments, and on the sale
of assets. The USA Mobile II Credit Facility also contains various financial
covenants that require USA Mobile II and its subsidiaries to meet certain
specified financial ratios, including a fixed charge coverage ratio, a pro forma
debt service coverage ratio, an interest coverage ratio and a leverage ratio.
As of September 30, 1996, $43.5 million was outstanding under the USA
Mobile II Credit Facility. At September 30, 1996, such advances bore interest at
an average annual rate of 8.5%. At October 31, 1996, $16.5 million was
available under the USA Mobile II Credit Facility.
FUTURE CAPITAL NEEDS
Arch believes that its capital needs for the foreseeable future will be
funded with borrowings under current and future credit facilities, net cash
provided by operations and, depending on the Company's needs and market
conditions, possible sales of equity securities.
FACTORS AFFECTING FUTURE OPERATING RESULTS
The following important factors, among others, could cause the
Company's actual operating results to differ materially from those indicated or
suggested by forward-looking statements made in this Form 10-Q or presented
elsewhere by the Company's management from time to time.
13
<PAGE> 14
INDEBTEDNESS AND HIGH DEGREE OF LEVERAGE
The Company is highly leveraged. At September 30, 1996, the Company had
total debt and total assets of $884.9 million and $1,191.3 million,
respectively. The ability of the Company to make payments of principal and
interest on its indebtedness will be dependent upon the Company's subsidiaries
achieving and sustaining levels of performance in the future that will permit
such subsidiaries to pay sufficient dividends, distributions or fees to the
Company. Many factors, some of which will be beyond the Company's control, such
as prevailing economic conditions, will affect the performance of the Company
and its subsidiaries. In addition, covenants imposed by the current and future
credit facilities and other indebtedness of the Company and its subsidiaries
will restrict the ability of the Company and its subsidiaries to incur
additional indebtedness and prohibit certain activities and may limit other
aspects of the Company's operations. There can be no assurance that the Company
or its subsidiaries will be able to generate sufficient cash flow to cover
required interest and principal payments on their current and future
indebtedness. If the Company is unable to meet interest and principal payments
in the future, it may, depending upon the circumstances which then exist, seek
additional equity or debt financing, attempt to refinance its existing
indebtedness or sell all or part of its business or assets to raise funds to
repay its indebtedness. There can be no assurance that sufficient equity or debt
financing will be available or, if available, that it will be on terms
acceptable to the Company, that the Company will be able to refinance its
existing indebtedness or that sufficient funds could be raised through asset
sales. The Company's high degree of leverage may have important consequences for
the Company, including: (i) the ability of the Company and its subsidiaries to
obtain additional financing for acquisitions, working capital, capital
expenditures or other purposes, if necessary, may be impaired or such financing
may not be on favorable terms; (ii) a substantial portion of the cash flow of
the Company's subsidiaries will be used to pay interest expense, which will
reduce the funds which would otherwise be available for operations and future
business opportunities; (iii) the Company may be more highly leveraged than its
competitors which may place it at a competitive disadvantage; and (iv) the
Company's high degree of leverage will make it more vulnerable to a downturn in
its business or the economy generally.
FUTURE CAPITAL NEEDS
The Company's business strategy requires the availability of
substantial funds to finance the continued development and future growth and
expansion of its operations, including future possible acquisitions. The amount
of capital required by the Company will depend upon a number of factors,
including subscriber growth, technological developments, marketing and sales
expenses, competitive conditions, acquisition strategy and acquisition
opportunities. No assurance can be given that additional equity or debt
financing will be available to the Company on acceptable terms, if at all. The
unavailability of sufficient financing when needed would have a material adverse
effect on the Company.
HISTORY OF LOSSES
The Company has not reported any net income since its inception. The
Company reported net losses of $79.4 million, $36.6 million, $3.3 million and
$5.1 million in the nine months ended September 30, 1996, the year ended
December 31, 1995, the four months ended December 31, 1994 and the year ended
August 31, 1994, respectively. These net losses have resulted principally from
(i) substantial depreciation and amortization expenses, primarily related to
assets acquired through the acquisition of paging companies, and (ii) interest
expense on debt incurred primarily to finance acquisitions of paging operations
and other costs of growth. Substantial and increased amounts of debt are
expected to be outstanding for the foreseeable future, which will result in
significant additional interest expense which could have a substantial negative
impact on the Company. The Company expects to continue to report net losses for
the foreseeable future. The Company also expects that its depreciation and
amortization expenses will increase by approximately $50 million annually
through the year ending December 31, 2003 as a result of its May 1996
acquisition of Westlink. Such increased depreciation and amortization expenses
will increase the Company's future net losses (or decrease its future net
income, if any).
14
<PAGE> 15
GROWTH AND ACQUISITION STRATEGY
The Company has pursued and intends to continue to pursue acquisitions
of paging businesses as well as the continued internal growth of the Company's
paging business. The process of integrating acquired paging businesses may
involve unforeseen difficulties and may require a disproportionate amount of the
time and attention of the Company's management and the financial and other
resources of the Company. No assurance can be given that suitable additional
acquisitions can be identified, financed and completed on acceptable terms, or
that the Company's future acquisitions will be successful. Implementation of the
Company's growth strategies will be subject to numerous other contingencies
beyond the control of the Company, including general and regional economic
conditions, interest rates, competition, changes in regulation or technology and
the ability to attract and retain skilled employees. Accordingly, no assurance
can be given that the Company's growth strategies will prove effective or that
the goals of the Company will be achieved.
DEPENDENCE ON KEY PERSONNEL
The success of the Company will be dependent, to a significant extent,
upon the continued services of a relatively small group of executive personnel.
The Company does not have employment agreements with any of its current
executive officers, although all current executive officers have entered into
non-competition agreements with the Company. The loss or unavailability of one
or more of its executive officers or the inability to attract or retain key
employees in the future could have an adverse effect upon the Company's
operations.
COMPETITION AND TECHNOLOGICAL CHANGE
The Company faces competition from other paging service providers in
all markets in which it operates as well as from certain competitors who hold
nationwide licenses. The Company believes that competition for paging
subscribers is based on quality of service, geographic coverage and price and
that the Company generally competes effectively based on these factors. Monthly
fees for basic paging services have, in general, declined since the Company
commenced operations in September 1986, due in part to competitive conditions,
and the Company may face significant price-based competition in the future which
could adversely affect the Company. Some of the Company's competitors possess
greater financial, technical and other resources than the Company. A trend
towards increasing consolidation in the paging industry in particular and the
wireless communications industry in general in recent years has led to
competition from increasingly larger and better capitalized competitors. If any
of such competitors were to devote additional resources to the paging business
or focus its strategy on the Company's markets, the Company's results of
operations could be adversely affected. A variety of wireless two-way
communication technologies currently are in use or under development. Although
such technologies generally are higher priced than paging services or not widely
available, technological improvements could result in increased capacity and
efficiency for wireless two-way communication and, accordingly, could result in
increased competition for the Company. Two-way service providers also could
elect to provide paging service as an adjunct to their primary services. Future
technological advances in the telecommunications industry could increase new
services or products competitive with the paging services provided by the
Company or could require the Company to reduce the price of its paging services
or incur additional capital expenditures to meet competitive requirements.
Recent and proposed regulatory changes by the FCC are aimed at encouraging such
technological advances and new services. Entities offering service on wireless
two-way communications technology, including cellular telephones and specialized
mobile radio services, also compete with the paging services that the Company
provides. There can be no assurance that the Company will be able to compete
successfully with its current and future competitors in the paging business or
with competitors offering alternative communication technologies.
SUBSCRIBER TURNOVER
The results of operations of wireless messaging service providers, such
as the Company, can be significantly affected by subscriber cancellations. The
sales and marketing costs associated with attracting new subscribers are
substantial relative to the costs of providing service to existing customers.
Because the paging business is characterized by high fixed costs, disconnections
directly and adversely affect operating cash flow. An increase in its subscriber
cancellation rate may adversely affect the Company's results of operations.
15
<PAGE> 16
DEPENDENCE ON SUPPLIERS
The Company does not manufacture any of the pagers used in its paging
operations. The Company buys pagers primarily from Motorola, Inc. ("Motorola")
and NEC America, Inc. ("NEC") and therefore is dependent on such manufacturers
to obtain sufficient pager inventory for new subscriber and replacement needs.
In addition, the Company purchases terminals and transmitters primarily from
Glenayre Technologies, Inc. ("Glenayre") and Motorola and thus is dependent on
such manufacturers for sufficient terminals and transmitters to meet its
expansion and replacement requirements. To date, the Company has not experienced
significant delays in obtaining pagers, terminals or transmitters, but there can
be no assurance that the Company will not experience such delays in the future.
The Company has never had a purchase agreement with Glenayre or NEC. The
Company's most recent one-year purchase agreement with Motorola expired on
December 31,1995 and the Company is in the process of negotiating a new
agreement with Motorola. Although Motorola has in the past entered into a new
agreement with the Company annually, there can be no assurance that Motorola
will enter into a new agreement with the Company or that the terms and
conditions of a new agreement will be as favorable to the Company as under past
agreements with Motorola. Although the Company believes that sufficient
alternative sources of pagers, terminals and transmitters exist, there can be no
assurance that the Company would not be adversely affected if it were unable to
obtain these items from current supply sources or on terms comparable to
existing terms.
GOVERNMENT REGULATION, FOREIGN OWNERSHIP AND POSSIBLE REDEMPTION
The paging operations of the Company are subject to regulation by the
FCC and various state regulatory agencies. There can be no assurance that those
agencies will not propose or adopt regulations or take actions that would have a
material adverse effect on the Company's business. Changes in regulation of the
Company's paging business or the allocation of radio spectrum for services that
compete with the Company's business could adversely affect the Company's results
of operations. For example, the FCC has proposed adopting a market area
licensing scheme and the ability of Arch to make major modifications to its
current paging systems may be affected during the transition to the market area
licensing process. In addition, some aspects of the recently enacted
Telecommunications Act of 1996 could have a beneficial effect on Arch's
business, but other provisions may place additional burdens upon Arch or subject
Arch to increased competition. The Communications Act of 1934, as amended,
limits foreign ownership of entities that hold certain licenses from the FCC.
Because the Company, through its subsidiaries, holds FCC licenses, in general,
no more than 25% of the Company's stock can be owned or voted by aliens or their
representatives, a foreign government or its representative or a foreign
corporation, the Company's Restated Certificate of Incorporation permits the
redemption of shares of the Company's capital stock from foreign stockholders
where necessary to protect the Company's regulatory licenses, but such
redemption would be subject to the availability of capital to the Company and
any restrictions contained in the debt instruments of the Company and under
Delaware law. The failure to redeem such shares promptly could jeopardize the
Company's FCC licenses.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
On April 4, 1995, a stockholder of USA Mobile filed a complaint
entitled Newman v. Fuellhart, et. al., in the Court of Chancery of
the State of Delaware in and for New Castle County, C.A. No.
14179. The action, which was purportedly brought as a class action
on behalf of all stockholders of USA Mobile, named USA Mobile and
certain directors and executive officers of USA Mobile as
defendants, and requested that the court enjoin Arch's acquisition
of USA Mobile and order unspecified damages and costs. The
complaint alleged, among other things, that the price to be paid
by Arch for its acquisition of USA Mobile was inadequate, that
certain agreements entered into in connection with Arch's
acquisition of USA Mobile would act as impediments to USA Mobile's
stockholders receiving the highest price available and that the
individual defendants would be in breach of their fiduciary duties
if Arch's acquisition of USA Mobile was consummated. In December
1994, the same plaintiff had filed a purported class action
complaint against the same defendants alleging breaches of
fiduciary duty because of purported conflicts of interests by the
defendants in rejecting Metrocall, Inc.'s proposal to acquire USA
Mobile for $13.00 of Metrocall, Inc. common stock per share of USA
Mobile stock. The court did not enjoin Arch's acquisition of USA
Mobile and Arch succeeded to these lawsuits. The first lawsuit was
dismissed without prejudice in March 1996. Arch believes that the
remaining lawsuit is without merit and intends to defend it
vigorously.
Arch, from time to time, is also involved in lawsuits arising in
the normal course of business. Arch believes that its currently
pending lawsuits will not have a material adverse effect on Arch.
ITEM 2. CHANGES IN SECURITIES
---------------------
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
ITEM 5. OTHER INFORMATION
-----------------
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
None.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report on Form 10-Q for the quarter ended
September 30, 1996, to be signed on its behalf by the undersigned thereunto duly
authorized.
ARCH COMMUNICATIONS GROUP, INC.
Dated: November 14, 1996 By: /s/ William A. Wilson
-----------------------------------
William A. Wilson
Executive Vice President and
Chief Financial Officer
18
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