<PAGE> 1
This Prospectus Supplement is filed under Rule 424(b)(3)
and relates to Registration Statement No. 33-91142
PROSPECTUS SUPPLEMENT
(to Prospectus Dated July 19, 1996)
PAGEMART WIRELESS, INC.
15% SENIOR DISCOUNT EXCHANGE NOTES DUE 2005
--------------------
RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein is the Form 10-Q
Quarterly Report of PageMart Wireless, Inc. for the quarterly period ended June
30, 1996.
--------------------
This Prospectus Supplement, together with the Prospectus, is to be used by
Morgan Stanley & Co. Incorporated in connection with offers and sales of the
above-referenced securities in marketing-making transactions at negotiated
prices related to prevailing market prices at the time of sale. Morgan Stanley
& Co. Incorporated may act as principal or agent in such transactions.
August 29, 1996
<PAGE> 2
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 JUNE 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
---------- ----------
COMMISSION FILE NO. 33-91142
PAGEMART WIRELESS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 75-2575229
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6688 N. CENTRAL EXPWY., SUITE 800
DALLAS, TEXAS 75206
(Address of principal executive offices) (Zip code)
(214) 750-5809
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
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
---------- ----------
As if August 1, 1996, there were 39,730,593 shares of the registrant's common
stock outstanding.
<PAGE> 3
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
INDEX TO FORM 10-Q
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION PAGE
----
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at December 31, 1995
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Statements of Operations for the
Three and Six Months Ended June 30, 1995 and 1996 . . . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the Six
Months Ended June 30, 1995 and 1996 . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . 17
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 17
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 17
</TABLE>
2
<PAGE> 4
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1996
------------ -------------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 26,973 $ 49,833
Accounts receivable, net 21,503 29,283
Inventories 11,179 15,990
Prepaid expenses and other current assets 2,880 2,815
------------ -------------
Total current assets 62,535 97,921
Restricted investments 500 -
Property and equipment, net 52,827 71,515
Narrowband licenses 133,065 133,065
Deferred debt issuance costs, net 8,436 7,500
Other assets 6,466 6,959
------------ -------------
Total assets $ 263,829 $ 316,960
============ =============
Liabilities and Stockholders' Equity (Deficit)
Current liabilities:
Accounts payable $ 23,094 $ 24,262
Current maturities of long-term debt 5,479 -
Deferred revenue 21,409 26,079
Other current liabilities 6,526 7,045
------------ -------------
Total current liabilities 56,508 57,386
Long-term debt 219,364 224,720
Commitments and contingencies
Stockholders' equity (deficit):
Common stock $.0001 par value per share, 75,000,000
shares authorized, 33,710,053 and 39,730,593 shares
issued at December 31, 1995 and June 30, 1996,
respectively 3 4
Additional paid-in capital 154,601 225,234
Accumulated deficit (166,090) (189,837)
Stock subscriptions receivable (557) (547)
------------ -------------
Total stockholders' equity (deficit) (12,043) 34,854
------------ -------------
Total liabilities and stockholders' equity (deficit) $ 263,829 $ 316,960
============ =============
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these financial statements.
3
<PAGE> 5
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Revenues:
Recurring revenue $ 23,387 $ 36,964
Equipment sales and activation fees 13,896 12,153
------------- -------------
Total revenues 37,283 49,117
Cost of equipment sold 15,294 14,641
Operating expenses:
Technical 6,141 8,833
Selling 9,216 10,464
General and administrative 10,067 13,043
Depreciation and amortization 3,091 4,942
------------- -------------
Total operating expenses 28,515 37,282
------------- -------------
Operating loss (6,526) (2,806)
Other (income) expense:
Interest expense 7,768 8,915
Interest income (541) (146)
Other 271 554
------------- -------------
Total other (income) expense 7,498 9,323
------------- -------------
Net loss $ (14,024) $ (12,129)
============= =============
Net loss per share
(primary and fully diluted) $ (0.42) $ (0.34)
Weighted average number
of shares outstanding
(primary and fully diluted) 33,108 35,633
<CAPTION>
Six Months Ended June 30,
----------------------------
1995 1996
------------- -------------
<S> <C> <C>
Revenues:
Recurring revenue $ 43,851 $ 70,707
Equipment sales and activation fees 26,135 26,955
------------- -------------
Total revenues 69,986 97,662
Cost of equipment sold 28,672 31,723
Operating expenses:
Technical 11,600 16,923
Selling 17,781 19,911
General and administrative 19,765 25,962
Depreciation and amortization 5,893 9,190
------------- -------------
Total operating expenses 55,039 71,986
------------- -------------
Operating loss (13,725) (6,047)
Other (income) expense:
Interest expense 14,428 17,316
Interest income (1,039) (365)
Other 608 749
------------- -------------
Total other (income) expense 13,997 17,700
------------- -------------
Net loss $ (27,722) $ (23,747)
============= =============
Net loss per share
(primary and fully diluted) $ (0.87) $ (0.68)
Weighted average number
of shares outstanding
(primary and fully diluted) 32,028 35,162
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these financial statements.
4
<PAGE> 6
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six months Ended June 30,
----------------------------
1995 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (27,722) $ (23,747)
Adjustments to reconcile net loss to
net cash provided by (used in) operating activities
Depreciation and amortization 5,893 9,190
Provision for bad debt 3,478 2,777
Accretion of discount on senior discount notes 12,409 14,904
Changes in certain assets and liabilities:
Increase in accounts receivable (3,448) (10,557)
(Increase) decrease in inventories 1,916 (4,811)
(Increase) decrease in prepaid expenses and other current assets (251) 65
(Increase) decrease in other assets, net 479 (135)
Increase in accounts payable 2,429 1,168
Increase in deferred revenue 4,507 4,670
Increase in other current liabilities 1,942 519
----------- -----------
Net cash provided by (used in) operating activities 1,632 (5,957)
----------- -----------
Cash flows from investing activities:
Purchase of narrowband licenses (74,079) -
Purchases of property and equipment, net (17,309) (27,197)
Release of restricted cash - 500
Other (181) (89)
----------- -----------
Net cash used in investing activities (91,569) (26,786)
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of common stock, net 29,578 70,500
Proceeds from issuance of common stock under
the stock option/stock issuance plan 6 134
Payment of stock subscriptions receivable - 10
Proceeds from issuance of senior discount notes, net 95,001 -
Deferred debt issuance costs incurred for Revolving Credit Agreement (1,274) (14)
Borrowings from vendor credit facilities 5,732 -
Payments on vendor credit facilities (1,933) (15,027)
----------- -----------
Net cash provided by financing activities 127,110 55,603
----------- -----------
Net increase in cash and cash equivalents 37,173 22,860
Cash and cash equivalents, beginning of period 14,507 26,973
----------- -----------
Cash and cash equivalents, end of period $ 51,680 $ 49,833
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 939 $ 1,034
Income taxes $ - $ -
</TABLE>
The accompanying notes to condensed consolidated financial statements
are an integral part of these financial statements.
5
<PAGE> 7
PAGEMART WIRELESS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
1. GENERAL
PageMart, Inc. ("PageMart") was incorporated as a Delaware corporation
on May 8, 1989 to provide wireless messaging products and services. In January
1995, PageMart effected a corporate reorganization pursuant to which PageMart
Nationwide, Inc., a Delaware corporation, became the holding company parent of
PageMart. In December 1995, the corporate name was changed from PageMart
Nationwide, Inc. to PageMart Wireless, Inc. ("Wireless"). Wireless and its
subsidiaries are referred to herein as the "Company." The consolidated
financial statements of the Company include the accounts of PageMart and
PageMart PCS, Inc., a wholly-owned subsidiary of Wireless ("PageMart PCS").
PageMart PCS holds certain narrowband personal communications services
licenses. The consolidated financial statements of PageMart include the
accounts of PageMart II, Inc., PageMart Operations, Inc., PageMart of
California, Inc., PageMart of Virginia, Inc. and PageMart International, Inc.
Each of these companies is a wholly-owned subsidiary of PageMart. PageMart II,
Inc. and PageMart Operations, Inc. hold certain Federal Communications
Commission licenses. PageMart International, Inc., which has had no
significant operations to date, holds certain investments in an international
venture in Canada. Other than these licenses and international investments,
the subsidiaries of PageMart have no significant assets or liabilities.
2. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared by the Company in accordance with generally accepted
accounting principles for interim financial information and are in the form
prescribed by the Securities and Exchange Commission in instructions to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. The interim unaudited financial
statements should be read in conjunction with the audited financial statements
of the Company for the year ended December 31, 1995. In the opinion of
management, all adjustments (consisting only of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three and six months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1996.
3. NET LOSS PER SHARE
Net loss per share amounts as reflected on the statements of
operations are based upon the weighted average number of common shares
outstanding. As required by the Securities and Exchange Commission rules, all
warrants, options and shares issued during the year immediately preceding the
initial public offering (see note 5) are assumed to be outstanding prior to the
closing of the initial public offering for all periods presented. Shares
issuable upon the exercise of stock options and warrants granted before the
year immediately preceding the initial public offering or after the closing of
the initial public offering were not included in the net loss per share
calculation as the effect from the exercise of those options would be
antidilutive.
4. LITIGATION
On July 8, 1994, an action against the Company was filed in the United
States District Court for the Eastern District of New York by Universal Contact
Communications Inc., a former reseller of the Company's wireless messaging
devices. The Company terminated the reseller relationship due to a monetary
default by the plaintiff. The Company subsequently contacted plaintiff's
customers in an effort to provide continued service directly through the
Company, and discontinued plaintiff's paging services. In the complaint,
plaintiff alleges, among other things, that the Company violated federal law by
making unsolicited advertisements, breached its contract with plaintiff,
slandered plaintiff, converted certain confidential information and trade
secrets, tortiously interfered with plaintiff's business and contractual
relations, and engaged in unfair competition. Plaintiff seeks, among other
things, compensatory damages of $500,000 with respect to each of the nine
causes of action included in the complaint, punitive damages of $5,000,000, and
various forms of injunctive relief. The Company is vigorously defending the
6
<PAGE> 8
action. In management's opinion, the ultimate outcome of this lawsuit is not
expected to have a material adverse effect on the results of operations or
financial condition of the Company.
5. INITIAL PUBLIC OFFERING
On June 19, 1996, the Company issued an aggregate of 6,000,000 shares
of Class A Common Stock in an initial public offering (the "Offering") at a
price of $13.00 per share. The Company received proceeds from the Offering of
approximately $70.5 million, after deducting underwriting discounts,
commissions, fees and expenses associated with the Offering. Upon receipt of
the net proceeds, the Company retired vendor debt of approximately $12.9
million and repaid approximately $11.9 million of loans outstanding under the
Company's revolving credit facility. The remaining proceeds are expected to be
used to fund the initial construction of the Company's narrowband personal
communications service transmission network and for general corporate purposes.
7
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
As used herein, references to "Wireless" will be deemed to be
references solely to PageMart Wireless, Inc., references to "PageMart" will be
deemed to be references to Wireless' principal operating subsidiary, PageMart,
Inc., and references to the "Company" will be deemed to be references to
Wireless and its subsidiaries. This discussion should be read in conjunction
with the PageMart Wireless, Inc. and subsidiaries condensed consolidated
financial statements and the notes thereto included elsewhere in this report.
When used in this discussion, the words 'estimate,' 'project' and
similar expressions are intended to identify forward-looking statements. Such
statements are subject to certain risks and uncertainties, including the timely
development and acceptance of new products, the impact of competitive products
and pricing, and those discussed below or in the Company's Form 10-K for the
year ended December 31, 1995, that could cause actual results to differ
materially from those projected. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof.
GENERAL
The Company has constructed and operates a wireless messaging and
communications network and provides paging and other one-way wireless messaging
services to its subscribers. In addition, the Company sells and distributes
wireless messaging equipment to subscribers, retailers and resellers. The
Company earns recurring revenues from each subscriber in the form of fixed
periodic fees and incurs substantial operating expenses in offering its
services, including technical, customer service and general and administrative
expenses. See "Management's Presentation of Results of Operations."
Since commencing operations in 1990, the Company has invested heavily
in its one-way wireless communications network and administrative
infrastructure in order to establish nationwide coverage, sales offices in
major metropolitan areas, customer service call centers and centralized
administrative support functions. The Company incurs substantial fixed
operating costs related to its one-way wireless communications infrastructure,
which is designed to serve a much larger subscriber base than the Company
currently serves in order to accommodate growth. In addition, the Company
incurs substantial costs associated with new subscriber additions. As a
result, the Company has generated significant net operating losses for each
year of its operations. See "Management's Presentation of Results of
Operations."
The Company's strategy is to expand its subscriber base as rapidly as
possible to increase cash flow through greater utilization of its nationwide
wireless communications network. From June 30, 1995 to June 30, 1996, the
number of domestic units in service increased from 1,008,683 to 1,524,297.
None of the Company's growth is attributable to acquisitions. Given its growth
strategy and the substantial associated selling and marketing expenses, the
Company expects to continue to generate operating losses in 1996 from its
one-way wireless communications business. In addition, the Company plans to
begin development and implementation of two-way wireless messaging services
during 1996 and 1997, and expects to incur additional operating losses during
the start-up phase for such services. The Company does not anticipate any
significant revenues from two-way services during 1996 or 1997; however, it
expects to generate significant revenues with respect to two-way services in
1998. The Company's ability to generate operating income is primarily
dependent on its ability to attain a sufficiently large installed subscriber
base that generates recurring revenues which offset the fixed operating costs
of its wireless networks, administration and selling and marketing expenses.
The Company intends to achieve this growth by promoting its customized paging
and other wireless messaging services through its national sales offices,
retail distribution channels, private brand strategic alliances with GTE
Corporation, Southwestern Bell Mobile Systems, AT&T Wireless Services,
Ameritech Mobile Services, Inc. and long distance reseller EXCEL
Telecommunications, Inc., and international expansion.
During the three months ended June 30, 1996, the Company's affiliate
PageMart Canada Limited ("PageMart Canada") added 1,637 subscribers. As a
result of its ownership interest in PageMart Canada, the Company's share of the
units in service of PageMart Canada was 760 units at June 30, 1996.
8
<PAGE> 10
Unlike most other paging carriers, the Company sells, rather than
leases, substantially all of the messaging equipment used by its subscribers.
As a result, the Company has much less capital invested in messaging equipment
than other paging carriers since it recoups a substantial portion of messaging
equipment costs upon sale to retailers and subscribers. This results in
significantly lower capital expenditures, depreciation and amortization than if
the Company leased such equipment to its subscribers. In addition, the
Company's financial results are much different from other paging carriers that
lease messaging equipment to subscribers because the Company recognizes the
cost of messaging equipment sold in connection with adding new subscribers at
the time of sale rather than capitalizing and depreciating the cost of
messaging equipment over periods ranging from three to five years as occurs
with paging carriers that lease messaging equipment to subscribers. In
addition, the Company's retail distribution strategy results in the recognition
of expenses associated with messaging equipment sales and other sales and
marketing expenses in advance of new subscribers being added to the base and
generating revenues (as retailers carry inventory).
The Company sells its messaging equipment through multiple
distribution channels, including direct sales, third-party resellers, private
brand strategic alliances and local and national retail stores. Selling and
marketing expenses are primarily attributable to compensation paid to the
Company's sales force, advertising and marketing costs and to losses resulting
from the fact that, for competitive and marketing reasons, the Company
generally sells each new unit for less than its acquisition cost. The
Company's accounting practices result in selling and marketing expenses,
including loss on sale of equipment, being recorded at the time a unit is sold.
Units sold by the Company during a given month may exceed units activated and
in service due to inventory stocking and distribution strategies of the
retailers. As a result, selling and marketing expenses per net subscriber
addition may fluctuate from period to period. In general, the Company
anticipates that, based on its recent experience, 90% of its units sold through
retail distribution channels will be activated and in service within 75 days of
shipment.
The Company derives its recurring revenue primarily from fixed
periodic fees for services that are not generally dependent on usage.
Consequently, the Company's ability to recoup its initial selling and marketing
costs, to meet operating expenses and to achieve profitability is dependent on
the average length of each customer's subscription period. As long as a
subscriber continues to utilize the Company's service, operating results
benefit from the recurring payments of the fixed fees without the incurrence of
additional selling expenses by the Company. Conversely, operating results are
adversely affected by customer disconnections. Each month a percentage of the
Company's existing customers have their service terminated for a variety of
reasons, including failure to pay, dissatisfaction with service and switching
to a competing service provider. The Company's average monthly disconnection
rates for the twelve months ended December 31, 1993, 1994, 1995 and June 30,
1996 were 3.7%, 3.4%, 2.5% and 2.2%, respectively.
Approximately 90% of the Company's average monthly revenue per unit
("ARPU") is attributable to fixed fees for airtime, coverage options and
features. A portion of the remainder of additional ARPU is dependent on usage.
RESULTS OF OPERATIONS
The Company's principal operations to date are its domestic one-way
wireless messaging division. The following discussion of results of operations
analyzes the results of the Company's one-way wireless messaging operations,
unless otherwise indicated.
Certain of the following financial information is presented on a per
unit basis. Management of the Company believes that such a presentation is
useful in understanding the Company's results because it is a meaningful
comparison period to period given the Company's growth rate and the significant
differences in the number of subscribers of other paging companies.
9
<PAGE> 11
THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND 1996
Units in Service
Units in service from domestic operations were 1,008,683 and 1,524,297
as of June 30, 1995 and 1996, respectively, representing an annual growth rate
of 51%. In addition, during the quarter ended June 30, 1996, PageMart Canada
added 1,637 subscribers. As a result of its ownership interest in PageMart
Canada, the Company's share of the units in service of PageMart Canada was 760
units at June 30, 1996. The Company has experienced strong growth in units in
service due primarily to the success of its sales and marketing strategies in
the direct sales, national retail and third-party reseller channels, as well as
from private brand strategic alliance programs.
Revenues
Revenues for the three and six months ended June 30, 1996 were $49.1
million and $97.7 million, respectively, compared to $37.3 million and $70.0
million for the three and six months ended June 30, 1995. Recurring revenues
for airtime, voicemail, and other services for the three and six months ended
June 30, 1996 were $37.0 million and $70.7 million, respectively, compared to
$23.4 million and $43.9 million for the comparable periods ended June 30, 1995.
Revenues from equipment sales and activation fees for the three and six months
ended June 30, 1996 were $12.2 million and $27.0 million, respectively,
compared to $13.9 million and $26.1 million for the comparable periods ended
June 30, 1995. The increases in recurring revenues and revenues from equipment
sales and activation fees were primarily due to the rapid growth in the number
of units in service. The increase in equipment sales during 1996 was somewhat
offset by a decline in the average price per unit sold. The Company expects
equipment prices per unit generally to remain constant or decline only slightly
as sales volumes increase.
The Company's ARPU was $8.28 and $8.50 in the second quarter of 1995
and 1996, respectively. In general, over the past twelve months the Company's
ARPU has increased primarily as a result of an increase in subscribers added
through retail and direct sales channels. In addition, a portion of the
increase in ARPU from the second quarter of 1995 to the second quarter of 1996
was due to a higher mix of multi-city, regional and nationwide services as well
as increased sales of other value-added services such as voicemail and toll
free numbers. Management anticipates that the Company's ARPU will decline in
the foreseeable future due to a higher mix of subscribers added through private
brand strategic alliance programs and third-party resellers, which yield lower
ARPU. ARPU is lower for subscribers added through third-party resellers and
private brand strategic alliances because these are generally high volume
customers that are charged reduced airtime rates. However, because third-party
resellers and private brand strategic alliance partners are responsible for
selling and marketing costs, billing, collection and other administrative costs
associated with end-users, the Company does not incur these costs with respect
to such subscribers.
Cost of Equipment Sold
The cost of equipment sold for the three and six months ended June 30,
1996 was $14.6 million and $31.7 million, respectively, compared to $15.3
million and $28.7 million for the three and six months ended June 30, 1995,
respectively. The change in 1996 was a combination of an increase in the
number of units sold combined with lower average pager prices paid to
suppliers. The Company expects pager costs generally to remain constant, with
only modest reductions in cost to the Company as a result of volume purchases.
Management anticipates that loss on equipment sold will increase on a per unit
basis for the foreseeable future due to increased competition.
Operating Expenses
Technical expenses were $8.8 million and $16.9 million for the three
and six months ended June 30, 1996, respectively, compared to $6.1 million and
$11.6 million for the comparable 1995 periods. The increase in 1996 resulted
primarily from the expansion of the Company's nationwide network
infrastructure, which resulted in greater expenses associated with the addition
of new transmitter sites, transmitter and terminal equipment and
telecommunications expenses. On an average monthly cost per unit in service
basis, technical expenses were $2.17 and $2.03 in the second quarter of 1995
and 1996, respectively, compared to $2.17 and $2.04 for the six months ended
June 30, 1995 and 1996, respectively. During the three and six months ended
June 30, 1996, the Company
10
<PAGE> 12
incurred $50,000 and $197,000, respectively, in technical expenses associated
with the development of its two-way wireless messaging services.
Selling expenses were $10.5 million and $19.9 million for the three
and six months ended June 30, 1996, respectively, compared to $9.2 million and
$17.8 million for the three and six months ended June 30, 1995, respectively.
The increase in 1996 resulted from greater marketing and advertising costs
related to the significant growth in units sold, as well as from increased
sales compensation because of the addition of sales personnel in new and
existing operating markets. During the six months ended June 30, 1995 and
1996, the Company added 235,953 and 284,273 net new domestic units in service,
respectively. Sales and marketing employees increased from 450 at June 30,
1995 to 531 at June 30, 1996. Management views the net loss on equipment sold
to be a component of selling and marketing expenses incurred to add new
subscribers. See "Management's Presentation of Results of Operations." Selling
and marketing expenses per net subscriber addition (including loss on equipment
sales) were $86 for both the six months ended June 30, 1995 and 1996. During
the three and six months ended June 30, 1996, the Company incurred $116,000 and
$242,000, respectively, in selling expenses associated with its international
operations.
General and administrative expenses (including costs associated with
customer service, field administration and corporate headquarters) for the
three and six months ended June 30, 1996 were $13.0 million and $26.0 million,
respectively, compared to $10.1 million and $19.8 million for the comparable
1995 periods. The increase was attributable to the Company's expansion of its
customer service call centers and continued expansion into new markets to
support the growing subscriber base which required additional office space,
administrative personnel and customer service representatives. The Company
increased the number of representatives in its customer service call centers
from 493 on June 30, 1995 to 561 on June 30, 1996, and believes its operates
one of the most extensive of such facilities in the paging industry. On an
average cost per month per unit in service basis, general and administrative
expenses were $3.56 and $3.00 in the second quarter of 1995 and 1996,
respectively, and $3.70 and $3.13 for the six months ended June 30, 1995 and
1996, respectively. The per unit decrease was a result of increased operating
efficiencies and economies of scale achieved through the growth of the
Company's subscriber base. During the six months ended June 30, 1996, the
Company incurred $127,000 in general and administrative expenses associated
with the development of its two-way wireless messaging services.
Depreciation and amortization for the three and six months ended June
30, 1996 were $4.9 million and $9.2 million, respectively, compared to $3.1
million and $5.9 million for the comparable periods ended June 30, 1995. The
increase in 1996 resulted from the expansion of the Company's network
infrastructure including transmitter and terminal equipment, as well as the
purchase and development of a new centralized administrative system during 1995
and the first half of 1996. As an average cost per month per unit in service,
depreciation and amortization was $1.09 and $1.14 in the second quarter of 1995
and 1996, respectively, and was $1.10 and $1.11 for the six months ended June
30, 1995 and 1996, respectively.
Interest Expense
Interest expense for the three and six months ended June 30, 1996 was
$8.9 million and $17.3 million, respectively, compared to $7.8 million and
$14.4 million for the comparable periods ended June 30, 1995. The increase in
1996 was primarily the result of increased interest expense related to the 12
1/4% Senior Discount Notes due 2003 issued by PageMart (the "12 1/4% Notes")
and the 15% Senior Discount Notes due 2005 issued by Wireless in January 1995
(the "15% Notes"). Interest expense related to the 12 1/4% Notes was $2.9
million and $3.3 million for the three months ended June 30, 1995 and 1996,
respectively, and was $5.7 million and $6.5 million for the six months ended
June 30, 1995 and 1996, respectively. Interest expense related to the 15%
Notes was $3.9 million and $4.5 million for the three months ended June 30,
1995 and 1996, respectively, and was $7.1 million and $8.9 million for the six
months ended June 30, 1995 and 1996, respectively.
Net Loss
The Company sustained net losses for the three and six months ended
June 30, 1996 of $12.1 million and $23.7 million, respectively, compared to
$14.0 million and $27.7 million for the three and six months ended June 30,
1995, respectively, principally due to the cost of funding the growth rate of
the Company's subscriber base which resulted in an increase in units sold,
selling and marketing expenses, operating expenses and interest expense.
11
<PAGE> 13
MANAGEMENT'S PRESENTATION OF RESULTS OF OPERATIONS
Comparison with GAAP Presentation
The Company's unaudited condensed consolidated financial statements
for the three and six months ended June 30, 1995 and 1996 included elsewhere in
this report, have been prepared in accordance with generally accepted
accounting principles ("GAAP"). For internal management purposes the Company
prepares statements of operations that are derived from the Company's GAAP
financial statements but are reordered in a format that management uses for its
internal review of the Company's performance and that management believes is
useful in understanding the Company's results.
Management believes that operating profit before selling expenses is a
meaningful indicator of the profitability of the Company's installed base of
units in service because it measures the recurring revenues received for
services less the costs (including depreciation and amortization) associated
with servicing that installed base. Operating profit before selling expenses
per subscriber per month for the Company's one-way operations has grown from
$.47 during the third quarter of 1994 to $2.35 during the second quarter of
1996 due primarily to the Company's increase in subscribers, operating
efficiency and resulting benefits in economies of scale.
In addition, selling and marketing expenses (including loss on
equipment sold) provide a measure of the costs associated with obtaining new
subscribers that the Company needs to generate the incremental recurring
revenue necessary to achieve profitability. Under the GAAP presentation,
recurring revenues and equipment and activation revenues are aggregated and are
not separately compared to the costs associated with each.
The items included in management's presentation of the results of
operations and their derivation from financial information presented in
accordance with GAAP are described below.
Recurring Revenues. Recurring revenues include periodic fees for
airtime, voicemail, customized coverage options, toll free numbers,
excess usage fees and other recurring revenues and fees associated
with the subscriber base. Recurring revenues do not include equipment
sales revenues or initial activation fees. Recurring revenues are the
same under both the management and GAAP presentations.
Technical Expenses. This item is the same under the management and
GAAP presentations.
General and Administrative Expenses. This item is the same under the
management and GAAP presentations.
Depreciation and Amortization. This item is the same under the
management and GAAP presentations.
Operating Profit Before Selling Expenses. Operating profit before
selling expenses under the management presentation is equal to
recurring revenues less technical expenses, general and administrative
expenses and depreciation and amortization. Operating profit before
selling expenses is not derived pursuant to GAAP.
Selling Expenses. Selling expenses under the management presentation
represent the cost to the Company of selling pagers and other
messaging units to a customer, and are equal to selling costs (sales
compensation, advertising, marketing, etc.) plus costs of units sold
less revenues from equipment sales and activation fees. As described
above, the Company sells rather than leases substantially all of the
one-way messaging equipment used by subscribers. Selling expenses
under the management presentation are not derived pursuant to GAAP.
Net loss on equipment sales is not included in the GAAP presentation
of selling expenses.
Operating Income (Loss). This item is the same under the management
and GAAP presentations.
EBITDA. EBITDA represents earnings (loss) before interest, taxes,
depreciation and amortization. EBITDA is a financial measure commonly
used in the paging industry. EBITDA is not derived pursuant to GAAP
and therefore should not be construed as an alternative to operating
income, as an alternative to cash flows from operating activities (as
determined in accordance with GAAP) or as a measure of liquidity. The
calculation of EBITDA does not include the commitments of the Company
for capital expenditures and payment of debt and should not be deemed
to represent funds available to the Company. In the fourth quarter of
1995, the Company's EBITDA from its one-way operations became positive
for the first time.
12
<PAGE> 14
Selected Quarterly Results of Operations
The table below sets forth management's presentation of results of
one-way domestic operations and other data on a quarterly basis for the eight
most recent fiscal quarters. This presentation should be read in conjunction
with the condensed consolidated financial statements of the Company and the
notes thereto included elsewhere in this report and the Company's quarterly
reports on Form 10-Q for the corresponding periods below, and should not be
considered in isolation or as an alternative to results of operations that are
presented in accordance with GAAP (in thousands, except other data).
<TABLE>
<CAPTION>
Three Months Ended
- -------------------------------------------------------------------------------------------------------------------------------
Sept. 30, Dec. 31, March 31, June 30, Sept. 30, Dec. 31, March 31, June 30,
1994 1994 1995 1995 1995 1995 1996 1996
---- ---- ---- ---- ---- ---- ---- -------
(Unaudited)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Recurring revenues $ 15,161 $ 17,902 $ 20,464 $ 23,387 $ 26,994 $ 30,658 $ 33,743 $ 36,964
Technical expenses 4,199 4,802 5,459 6,141 6,842 7,015 7,943 8,783
General and
administrative
expenses 7,961 8,886 9,698 10,067 11,350 12,243 12,792 13,043
Depreciation and
amortization 2,217 2,354 2,802 3,091 3,469 3,910 4,248 4,942
-------- -------- -------- ---------- ---------- ---------- ---------- ----------
Operating profit
before selling
expenses 784 1,860 2,505 4,088 5,333 7,490 8,760 10,196
Selling expenses (1) 9,580 11,732 9,704 10,614 10,889 11,181 11,601 12,836
-------- -------- -------- ---------- ---------- ---------- ---------- ----------
Operating income
(loss) $ (8,796) $ (9,872) $ (7,199) $ (6,526) $ (5,556) $ (3,691) $ (2,841) $ (2,640)
======== ======== ======== ========== ========== ========== ========== ==========
EBITDA $ (6,579) $ (7,518) $ (4,397) $ (3,435) $ (2,087) $ 219 $ 1,407 $ 2,302
======== ======== ======== ========== ========== ========== ========== ==========
OTHER DATA:
Units in service (2) 608,427 772,730 874,944 1,008,683 1,131,464 1,240,024 1,374,146 1,524,297
Net subscriber
additions 112,822 164,303 102,214 133,739 122,781 108,560 134,122 150,151
ARPU (3) $ 9.15 $ 8.64 $ 8.28 $ 8.28 $ 8.41 $ 8.62 $ 8.61 $ 8.50
Operating profit
before selling
expenses per
subscriber per
month (4) .47 .90 1.01 1.45 1.66 2.11 2.23 2.35
Selling expenses per
net subscriber
addition (1)(5) 85 71 95 79 89 103 86 85
Capital employed per
unit in service (6) 53 42 45 39 39 40 41 49
</TABLE>
(1) Includes loss on sale of equipment.
(2) Stated as of the end of each period.
(3) Calculated by dividing recurring revenues for the quarter by the
average number of units in service during that quarter. Stated as the
monthly average for the quarter.
(4) Calculated by dividing operating profit before selling expenses
(selling expenses include loss on sale of equipment) for the quarter
by the average number of units in service during that quarter. Stated
as the monthly average for the quarter.
(5) Calculated by dividing selling expenses, including loss on sale of
equipment, for the quarter by the net subscriber additions for the
quarter.
(6) Calculated by dividing total assets (excluding cash, narrowband
personal communications services ("NPCS") licenses and international
investments) minus current liabilities (excluding current maturities
of long-term debt) at the end of the period, by units in service at
the end of the period.
13
<PAGE> 15
Supplementary Information
The following table sets forth supplementary financial information
related to the Company's various operations (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1996
--------------------------------
PAGEMART PAGEMART PAGEMART
ONE-WAY TWO-WAY INTERNATIONAL(1) TOTAL
------- ------- ------------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 49,117 $ -- $ -- $ 49,117
Technical expense 8,783 50 -- 8,833
Selling expense 10,348 -- 116 10,464
General and administrative expense 13,043 -- -- 13,043
Operating loss ( 2,640) (50) (116) (2,806)
EBITDA 2,302 (50) (116) 2,136
Total assets 172,025 142,026 2,909 316,960
Capital expenditures 13,118 2,300 -- 15,418
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1996
------------------------------
PAGEMART PAGEMART PAGEMART
ONE-WAY TWO-WAY INTERNATIONAL(1) TOTAL
------- ------- ------------- -----
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues $ 97,662 $ -- $ -- $ 97,662
Technical expense 16,726 197 -- 16,923
Selling expense 19,669 -- 242 19,911
General and administrative expense 25,835 127 -- 25,962
Operating loss (5,481) (324) (242) (6,047)
EBITDA 3,709 (324) (242) 3,143
Total assets 172,025 142,026 2,909 316,960
Capital expenditures 24,674 2,523 -- 27,197
</TABLE>
(1) The Company accounts for its investments in Canada under the equity
method; consequently, the Company's share of losses from Canadian
operations are not included in operating loss.
SEASONALITY
Pager usage is slightly higher during the spring and summer
months, which is reflected in higher incremental usage fees earned by
the Company. The Company's retail sales are subject to seasonal
fluctuations that affect retail sales generally. Otherwise, the
Company's results are generally not significantly affected by seasonal
factors.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require substantial capital investment for
the development and installation of its wireless communications network, the
procurement of messaging equipment and expansion into new markets. To date,
these investments by the Company have been funded by the proceeds from the
issuance of common stock, preferred stock, the 12 1/4% Notes and the 15% Notes,
as well as borrowings under vendor financing agreements.
Capital expenditures for the six months ended June 30, 1996 were $27.2
million compared to $17.3 million for the six months ended June 30, 1995.
Capital expenditures for the six months ended June 30, 1996 include
14
<PAGE> 16
approximately $2.5 million related to the development of two-way messaging
services. The Company's expansion of its one-way wireless communications
network and related administrative facilities will require capital expenditures
for the remainder of 1996 currently estimated to be an additional $10 to 15
million. During December 1995, the Company committed to purchase $40 million
in network infrastructure equipment from a significant vendor from December 1,
1995 to October 31, 1999.
The Company's net cash used in operating activities for the six months
ended June 30, 1996 was $6.0 million compared to $1.6 million provided by
operating activities for the six months ended June 30, 1995. Net cash used in
investing activities was $26.8 million for the six months ended June 30, 1996
compared with $91.6 million for the comparable 1995 period. Of such $91.6
million used in investing activities, $74.1 million was for the acquisition of
NPCS licenses and the remainder was primarily for capital expenditures. Net
cash provided by financing activities, including borrowings and equity
issuances was $55.6 million for the six months ended June 30, 1996 compared
with $127.1 million for the six months ended June 30, 1995. Cash provided in
1995 resulted primarily from the $100.1 million of net proceeds from the
issuance of the 15% Notes and non-voting common stock in January 1995. Cash
provided in 1996 resulted primarily from $70.5 million of net proceeds received
in connection with the initial public offering of the Company's Class A Common
Stock (the "Offering"), offset partially by payments made on vendor credit
facilities. Long-term obligations, less current maturities, increased by
approximately $5.4 million during the six months ended June 30, 1996. The
increase resulted from the accretion of the 15% Notes and the 12 1/4% Notes,
partially offset by the payoff of vendor debt.
In June 1996, the Company sold an aggregate of 6.0 million shares of
Class A Common Stock in the Offering at a price to the public of $13 per share.
The Company received net proceeds of approximately $70.5 million of which
approximately $12.9 million was used to retire vendor debt and $11.9 million
was used to repay outstanding loans under the Company's revolving credit
facility.
As of June 30, 1996, the Company had no amounts outstanding under
vendor financing agreements and its indebtedness under the 12 1/4% Notes was
$101.2 million and its indebtedness under the 15% Notes was $123.5 million.
The 12 1/4% Notes, which are unsecured senior obligations of PageMart,
mature in 2003 and were issued at a substantial discount from their principal
amount at maturity. The accretion of original issue discount on the 12 1/4%
Notes will cause an increase in indebtedness from June 30, 1996 to November 1,
1998 of $35.3 million. From and after November 1, 1998, interest on the 12
1/4% Notes will be payable semiannually, in cash.
The 15% Notes, which are unsecured senior obligations of Wireless,
mature in 2005 and were issued at a substantial discount from their principal
amount at maturity. The accretion of original issue discount on the 15% Notes
will cause an increase in indebtedness from June 30, 1996 to February 1, 2000
of $83.8 million. From and after February 1, 2000, interest on the 15% Notes
will be payable semiannually, in cash.
In 1992, PageMart entered into an equipment lease with Glenayre
Technologies, Inc. (the "Vendor Lease Financing Agreement"), providing for the
financing of transmitter equipment. On June 28, 1996, the Company retired $8.8
million of debt outstanding under the Vendor Lease Financing Agreement, and the
Vendor Lease Financing Agreement was terminated.
In May 1994, PageMart entered into a vendor purchase financing
agreement with Motorola, Inc. (the "Vendor Purchase Financing Agreement"),
providing for the financing of transmitter equipment. On June 28, 1996, the
Company retired $4.1 million of debt outstanding under the Vendor Purchase
Financing Agreement, and the Vendor Purchase Financing Agreement was
terminated.
In May 1995, the Company entered into a four year Revolving Credit
Agreement (the "Revolving Credit Agreement") with BT Commercial Corporation, as
Agent, and Bankers Trust Company, as Issuing Bank, which provides for a $50
million revolving line of credit. As of June 30, 1996 there were no loans
outstanding under the Revolving Credit Agreement. The maximum amount available
under the Revolving Credit Agreement at any time is limited to a borrowing base
amount equal to the lesser of (i) 80% of eligible accounts receivable plus 50%
eligible inventory owned by Wireless, and (ii) an amount equal to the service
contribution (as defined in the Revolving
15
<PAGE> 17
Credit Agreement) of Wireless and its subsidiaries for the immediately
preceding three-month period times 4.0. As of June 30, 1996, the amount
available under the Revolving Credit Agreement was $29.0 million.
The indenture under which the 15% Notes were issued (the "15%
Indenture"), the indenture under which the 12 1/4% Notes were issued (the "12
1/4% Indenture") and the Revolving Credit Agreement contain certain restrictive
covenants that, among other things, limit the ability of the Company to incur
indebtedness, pay dividends, repurchase capital stock, engage in transactions
with stockholders and affiliates, create liens, sell assets, enter into leases
and engage in mergers and consolidations, and the Revolving Credit Agreement
requires the Company to maintain certain financial ratios and limits the
ability of the Company to make capital expenditures. In addition, the 12 1/4%
Indenture prohibits PageMart from paying any dividends or making other
distributions on its capital stock, making loans to Wireless, merging or
consolidating with Wireless or assuming or guaranteeing any obligations of
Wireless unless PageMart is in compliance with certain interest coverage ratios
and certain other requirements. PageMart may, however, sell its assets to
Wireless in transactions that are arm's length in nature. Wireless is
currently a holding company with no business or operations of its own. Because
all of Wireless's operations are conducted through its subsidiaries, Wireless's
cash flow and consequently its ability to service debt, is almost entirely
dependent upon the earnings of its subsidiaries and the distribution of those
earnings or upon loans or other payment of funds by those subsidiaries to
Wireless. Wireless's subsidiaries are separate and distinct legal entities and
have no obligation, contingent or otherwise, to pay any amounts due pursuant to
Wireless's obligations or to make any funds available therefor, whether by
dividends, loans or other payments. Until the maturity of the 12 1/4% Notes,
which mature on November 1, 2003, earlier repayment of such indebtedness or
compliance with the requirements of such debt instruments, Wireless will be
unable to use any amount of cash generated by the operations of PageMart and
its subsidiaries. However, currently Wireless does not have significant cash
requirements until August, 2000 when interest on the 15% Notes must be paid in
cash.
On November 15, 1995, the Company purchased through PageMart
International, Inc., 200,000 shares of voting common stock of PageMart Canada,
which represents 20% of the ownership of PageMart Canada. PageMart
International, Inc. also owns 33% of the voting common stock of the holding
company parent of PageMart Canada ("Canada Holding"), which owns the remaining
80% of the voting common stock of PageMart Canada. The Company's investment in
Canada Holding and PageMart Canada totals approximately $3.7 million.
As of June 30, 1996, the Company had approximately $49.8 million in
cash and cash equivalents. The Company's cash balances and borrowings
available under the Revolving Credit Agreement are expected to be sufficient to
fund the Company's one-way operations and related capital and debt service
requirements through 1997.
Significant additional financing will be required to complete the
construction of a transmission network for two-way services and other start-up
costs and selling and marketing expenses associated with the development and
implementation of two-way services. The Company anticipates investing $75 to
$100 million through fiscal 1997 to test and construct a two-way transmission
network. Thereafter, the Company anticipates that the two-way operations may
require up to $100 million of additional investment to substantially complete
the network buildout. The Company expects to lease rather than sell a portion
of its two-way messaging units. The Company expects to require additional
financing to complete the buildout which may include entering into joint
venture arrangements; however, there can be no assurance that sufficient
financing will be available to the Company. The Company's ability to incur
indebtedness is limited by the covenants contained in the 15% Indenture, the 12
1/4% Indenture and the Revolving Credit Agreement, and as a result any
additional financing may need to be equity financing.
Future revenues, costs, product mix and new product acceptance are all
influenced by a number of factors which are inherently uncertain and difficult
to predict. Therefore, no assurance can be given that financing for such
investments will be available. No assurance can be given that the Company's
strategy will be implemented as currently planned or that the Company's
operations will generate positive cash flows.
16
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various lawsuits arising in the normal
course of business. In management's opinion, the ultimate outcome of these
lawsuits will not have a material adverse effect on the Company's financial
position or results of operations.
On July 8, 1994, an action against the Company was filed in the United
States District Court for the Eastern District of New York by Universal Contact
Communications Inc., a former reseller of the Company's wireless messaging
devices. The Company terminated the reseller relationship due to a monetary
default by the plaintiff. The Company subsequently contacted plaintiff's
customers in an effort to provide continued service directly through the
Company, and discontinued plaintiff's paging services. In the complaint,
plaintiff alleges, among other things, that the Company violated federal law by
making unsolicited advertisements, breached its contract with plaintiff,
slandered plaintiff, converted certain confidential information and trade
secrets, tortiously interfered with plaintiff's business and contractual
relations, and engaged in unfair competition. Plaintiff seeks, among other
things, compensatory damages of $500,000 with respect to each of the nine
causes of action included in the complaint, punitive damages of $5,000,000, and
various forms of injunctive relief. The Company is vigorously defending the
action. In management's opinion, the ultimate outcome of this lawsuit is not
expected to have a material adverse effect on the results of operations or
financial condition of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
A Consent of Stockholders dated as of June 10, 1996 was executed by
certain stockholders holding an aggregate of 12,904,874 shares of the voting
common stock (representing 55% of the voting common stock of PageMart Wireless,
Inc.) approving the form of the Nonqualified Formula Stock Option Plan for
non-employee directors and the Employee Stock Purchase Plan for the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The exhibits listed on the accompanying index to exhibits are
filed as part of this quarterly report.
(b) Reports on Form 8-K
None.
17
<PAGE> 19
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THE
REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE
UNDERSIGNED THEREUNTO DULY AUTHORIZED.
PAGEMART WIRELESS, INC.
/S/ JOHN D. BELETIC
----------------------------------------
JOHN D. BELETIC
AUGUST 2, 1996 CHAIRMAN, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
/S/ G. CLAY MYERS
----------------------------------------
G. CLAY MYERS
AUGUST 2, 1996 VICE PRESIDENT, FINANCE,
CHIEF FINANCIAL OFFICER AND
TREASURER (PRINCIPAL FINANCIAL
AND CHIEF ACCOUNTING OFFICER)
18
<PAGE> 20
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------- --- -----------
<S> <C>
4.1 * Indenture dated as of October 19, 1993, between PageMart, Inc. and United States Trust Company
of New York, as Trustee, relating to the 12 1/4% Senior Discount Notes due 2003.
4.2 * Indenture dated as of January 17, 1995 between PageMart Nationwide, Inc. and United States
Trust Company of New York, as Trustee, relating to the 15% Senior Discount Notes due 2005.
10.1+ PageMart Wireless, Inc. Nonqualified Formula Stock Option Plan for Non-employee Directors.
10.2+ + PageMart Wireless, Inc. Employee Stock Purchase Plan
11.1 ** Statement regarding computation of per share loss for the three months ended June 30, 1996
11.2 ** Statement regarding computation of per share loss for the three months ended June 30, 1995
11.3 ** Statement regarding computation of per share loss for the six months ended June 30, 1996
11.4 ** Statement regarding computation of per share loss for the six months ended June 30, 1995
27.1 ** Financial Data Schedule.
</TABLE>
* Each of these exhibits is hereby incorporated by reference to the
Registration Statement of the Company on Form S-1, Registration No.
33-91142.
+ This exhibit is hereby incorporated by reference to the Registration
Statement of the Company on Form S-1 Registration No. 333-03012.
+ + This exhibit is hereby incorporated by reference to the Registration
Statement of the Company on Form S-8 filed on July 29, 1996.
** Filed herewith
19
<PAGE> 21
EXHIBIT 11.1
PAGEMART WIRELESS, INC.
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 13, 1996
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
---------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 537,414 99.55% 534,988
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
Impact of warrants, options and shares issued during
the year preceding the initial public offering 978,581 100.00% 978,581
---------- ----------
34,693,669 34,691,243
Weighted Average Shares Outstanding at 6/13/96 34,691,243
6/13/96 Shares Weighted at 74 days 28,210,461
<CAPTION>
THREE MONTHS ENDED JUNE 30, 1996
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
---------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 552,919 100.00% 552,919
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
---------- -------------
39,730,593 39,730,593
Weighted Average Shares Outstanding at 6/30/96 39,730,593
6/30/96 Shares Weighted at 17 days 7,422,199
WEIGHTED AVERAGE OF SHARES OUTSTANDING at 6/13/96 and 6/30/96 35,632,660
NET LOSS FOR NET LOSS PER SHARE $(12,129,000)
NET LOSS PER SHARE ($0.34)
============
</TABLE>
<PAGE> 22
EXHIBIT 11.2
PAGEMART WIRELESS, INC.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED JUNE 30, 1995
----------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
---------- ----------- -----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 479,992 99.77% 478,865
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 63.42% 2,742,147
Impact of warrants, options and shares issued
the year preceding the initial public offering 1,033,577 100.00% 1,033,577
---------- ------------
34,691,243 33,108,389
WEIGHTED AVERAGE SHARES OUTSTANDING 33,108,389
NET LOSS FOR NET LOSS PER SHARE ($14,024,000)
NET LOSS PER SHARE ($0.42)
============
</TABLE>
<PAGE> 23
EXHIBIT 11.3
PAGEMART WIRELESS, INC.
<TABLE>
<CAPTION>
YTD ENDED JUNE 13, 1996
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 537,414 99.47% 534,581
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
Impact of warrants, options and shares issued during
the year preceding the initial public offering 978,988 100.00% 978,988
---------- ----------
34,694,076 34,691,243
Weighted Average Shares Outstanding at 6/13/96 34,691,243
6/13/96 Shares Weighted at 165 days 31,450,852
<CAPTION>
YTD ENDED JUNE 30, 1996
--------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 552,919 100.00% 552,919
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 100.00% 4,323,874
1996 Common Stock Offering 6,000,000 100.00% 6,000,000
---------- ------------
39,730,593 39,730,593
Weighted Average Shares Outstanding at 6/30/96 39,730,593
6/30/96 Shares Weighted at 17 days 3,711,099
WEIGHTED AVERAGE OF SHARES OUTSTANDING at 6/13/96 and 6/30/96 35,161,952
NET LOSS FOR NET LOSS PER SHARE ($23,747,000)
NET LOSS PER SHARE ($0.68)
============
</TABLE>
<PAGE> 24
EXHIBIT 11.4
PAGEMART WIRELESS, INC.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1995
----------------------------------------
NUMBER PERCENT EQUIVALENT
OF SHARES OUTSTANDING SHARES
--------- ----------- ----------
<S> <C> <C> <C>
COMMON STOCK
From Founders' Stock 2,300,000 100.00% 2,300,000
Stock Options Exercised 479,992 99.55% 477,810
Preferred Stock Converted to Common Stock 15,310,943 100.00% 15,310,943
1994 Common Stock Offerings 11,242,857 100.00% 11,242,857
1995 Common Stock Offerings 4,323,874 38.47% 1,663,215
Impact of warrants, options and shares issued
the year preceding the initial public
offering 1,033,577 100.00% 1,033,577
---------- ------------
34,691,243 32,028,402
WEIGHTED AVERAGE SHARES OUTSTANDING 32,028,402
NET LOSS FOR NET LOSS PER SHARE ($27,722,000)
NET LOSS PER SHARE ($0.87)
============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S JUNE 30, 1996 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 49,833
<SECURITIES> 0
<RECEIVABLES> 34,338
<ALLOWANCES> 5,055
<INVENTORY> 15,990
<CURRENT-ASSETS> 97,921
<PP&E> 109,189
<DEPRECIATION> 37,674
<TOTAL-ASSETS> 316,960
<CURRENT-LIABILITIES> 57,386
<BONDS> 224,720
<COMMON> 4
0
0
<OTHER-SE> 34,850
<TOTAL-LIABILITY-AND-EQUITY> 316,960
<SALES> 26,955
<TOTAL-REVENUES> 97,662
<CGS> 31,723
<TOTAL-COSTS> 31,723
<OTHER-EXPENSES> 71,986
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,316
<INCOME-PRETAX> (23,747)
<INCOME-TAX> 0
<INCOME-CONTINUING> (23,747)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,747)
<EPS-PRIMARY> (0.68)
<EPS-DILUTED> (0.68)
</TABLE>
