-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TP0+cOtTfdZQBT0M1BVcb4wVxxqAbQYrUDjSXv6rpPxAk1mrQcUcMySvQux5ONKt joYOa8gm7V/a5jzBPzNlqw== 0000950133-96-001540.txt : 19960814 0000950133-96-001540.hdr.sgml : 19960814 ACCESSION NUMBER: 0000950133-96-001540 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960716 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19960813 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: METROCALL INC CENTRAL INDEX KEY: 0000906525 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 541215634 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-21924 FILM NUMBER: 96610263 BUSINESS ADDRESS: STREET 1: 6910 RICHMOND HWY CITY: ALEXANDRIA STATE: VA ZIP: 22306 BUSINESS PHONE: 7036606677 MAIL ADDRESS: STREET 1: 6910 RICHMOND HWY CITY: ALEXANDRIA STATE: VA ZIP: 22306 8-K 1 FORM 8-K DATED 7/16/96. 1 FORM 8-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 Date of Report (Date of earliest event reported): July 16, 1996 METROCALL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 0-21924 54-1215634 - ----------------------------- ------------------------ ------------------- (State or other jurisdiction (Commission File Number) (IRS Employer of incorporation) Identification No.) 6677 Richmond Highway, Alexandria, Virginia 22306 - -------------------------------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (703) 660-6677 Not Applicable ----------------------------- (Former name or former address, if changed since last report) 2 ITEM 2. ACQUISITIONS OR DISPOSITIONS OF ASSETS Parkway Paging, Inc. On July 16, 1996, Metrocall, Inc. ("Metrocall" or the "Company") completed a transaction pursuant to which the Company acquired substantially all of the assets of Parkway Paging, Inc. ("Parkway") for approximately $28.0 million, including $22.7 million cash and the assumption of substantially all Parkway's liabilities of $5.3 million. The acquisition of Parkway adds approximately 140,000 subscribers to Metrocall's customer base. These customers and the related infrastructure are located throughout the State of Texas, primarily concentrated in the Dallas/Ft. Worth market. The transaction will be accounted for as a purchase for financial reporting purposes. In connection with the acquisition, the Company refinanced approximately $5.2 million of indebtedness assumed in the Parkway transaction under its existing credit facility. Parkway operates multi-regional paging and wireless messaging networks in the United States, primarily in the State of Texas. The primary assets of Parkway include transmission equipment, subscriber paging units and licenses issued by the Federal Communications Commission. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS Financial Statements Report of Hutton, Patterson & Company, Independent Public Accountants Balance Sheets, December 31, 1995 and 1994 and March 20, 1996 and 1995 Statements of Income and Retained (Deficit) Earnings for the years ended December 31, 1995, 1994 and 1993 and the quarters ended March 20, 1996 and 1995 Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993 and the quarters ended March 20, 1996 and 1995 Notes to Financial Statements Pro Forma Financial Information Unaudited Pro Forma Condensed Combined Financial Data Unaudited Pro Forma Condensed Combined Balance Sheets as of March 31, 1996 Unaudited Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 1995 Unaudited Pro Forma Condensed Combined Statements of Operations for the three month period ended March 31, 1996 Notes to Unaudited Pro Forma Condensed Combined Financial Statements Exhibits Consent of Hutton, Patterson & Company, Independent Public Accountants 2 3 [HUTTON, PATTERSON & COMPANY LETTERHEAD] INDEPENDENT AUDITORS' REPORT To the Board of Directors and Stockholders Parkway Paging, Inc. Plano, Texas We have audited the balance sheets of Parkway Paging, Inc. as of December 31, 1995 and 1994, and the related statements of income and retained (deficit) earnings and cash flows for the years ended December 31, 1995, 1994 and 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Parkway Paging, Inc. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for the years ended December 31, 1995, 1994 and 1993, in conformity with generally accepted accounting principles. Hutton, Patterson & Company February 13, 1996 (except for Note M, as to which the date is June 18, 1996) Dallas, Texas F-1 4 PARKWAY PAGING, INC. BALANCE SHEETS DECEMBER 31, 1995 AND 1994 AND MARCH 20, 1996 AND 1995
UNAUDITED (NOTE M) ----------------------- MARCH 20, MARCH 20, 1995 1994 1996 1995 ---------- ---------- ---------- ---------- ASSETS CURRENT ASSETS Cash (Note A)......................................................... $ 7,103 $ 516,984 $ (17,233) $ 659,055 Accounts receivable (Note A).......................................... 628,473 511,094 877,522 685,124 Inventory (Note A).................................................... 403,879 704,530 920,640 427,536 Notes receivable, current (Notes B & J)............................... 9,920 22,032 10,120 19,276 Other receivables..................................................... 35,885 14,125 23,937 500 Prepaid taxes (Note I)................................................ 56,477 122,818 56,477 122,818 Deferred income tax asset (Note I).................................... 105,722 66,605 105,722 66,605 Prepaid expenses...................................................... 631 31,821 24,987 -- ---------- ---------- ---------- ---------- TOTAL CURRENT ASSETS........................................... 1,248,090 1,990,009 2,002,172 1,980,914 ---------- ---------- ---------- ---------- PAGERS HELD FOR LEASE OR SALE (net of accumulated depreciation of $292,203 and $440,511 at December 31, 1995 and 1994, respectively) (Notes A, F & G)...................................................... 257,349 180,956 245,579 161,725 ---------- ---------- ---------- ---------- PROPERTY AND EQUIPMENT (net of accumulated depreciation) (Notes A, C, F & G).................................................................. 3,078,019 2,515,488 2,839,069 2,621,602 OTHER ASSETS Long-term notes receivable (Notes B & J).............................. 57,613 67,023 54,497 64,617 Deferred income tax asset (Note I).................................... 17,102 13,078 17,102 13,078 Other (Note D)........................................................ 18,748 36,284 14,114 32,050 ---------- ---------- ---------- ---------- TOTAL OTHER ASSETS............................................. 93,463 116,385 85,713 109,745 ---------- ---------- ---------- ---------- $4,676,921 $4,802,838 $5,172,533 $4,873,986 ========== ========== ========== ========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable...................................................... $ 77,573 $ 313,811 96,213 59,942 Deferred revenue (Note A)............................................. 706,473 761,335 1,122,301 870,038 Accrued and other liabilities (Note E)................................ 92,738 107,804 85,521 29,636 Current maturities of notes payable (Note G).......................... 256,351 183,199 240,363 23,793 Current maturities of obligations under capital leases (Note F)....... 2,149,708 1,544,712 2,237,240 1,439,996 ---------- ---------- ---------- ---------- TOTAL CURRENT LIABILITIES...................................... 3,282,843 2,910,861 3,781,638 2,423,405 ---------- ---------- ---------- ---------- LONG-TERM DEBT Notes payable (Note G)................................................ 419,943 236,109 366,345 606,707 Obligations under capital leases (Note F)............................. 813,288 1,407,689 803,216 1,301,259 ---------- ---------- ---------- ---------- TOTAL LONG-TERM DEBT........................................... 1,233,231 1,643,798 1,169,561 1,907,966 ---------- ---------- ---------- ---------- TOTAL LIABILITIES.............................................. 4,516,074 4,554,659 4,951,199 4,331,371 ---------- ---------- ---------- ---------- COMMITMENTS AND CONTINGENCIES (Notes H, K and L)........................ -- -- -- -- STOCKHOLDERS' EQUITY (Note L) Common stock (10,000,000 shares authorized, 24,398 shares issued and outstanding, $1.00 par)............................................. 24,398 24,398 24,398 24,398 Additional paid-in capital............................................ 364,602 364,602 364,602 364,602 Retained (deficit) earnings........................................... (228,153) (140,821) (167,666) 153,615 ---------- ---------- ---------- ---------- TOTAL STOCKHOLDERS' EQUITY..................................... 160,847 248,179 221,334 542,615 ---------- ---------- ---------- ---------- $4,676,921 $4,802,838 $5,172,533 $4,873,986 ========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements. F-2 5 PARKWAY PAGING, INC. STATEMENTS OF INCOME AND RETAINED (DEFICIT) EARNINGS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE QUARTERS ENDED MARCH 20, 1996 AND 1995
UNAUDITED (NOTE M) --------------------------- MARCH 20, MARCH 20, 1995 1994 1993 1996 1995 ----------- ----------- ----------- ----------- ----------- REVENUES Service, rent and maintenance revenues...... $ 7,403,225 $ 5,218,774 $ 4,216,416 $ 1,646,473 $ 1,556,958 Product sales............................... 2,344,026 1,909,991 1,433,461 485,570 391,780 ----------- ----------- ----------- ----------- ----------- 9,747,251 7,128,765 5,649,877 2,132,043 1,948,738 Cost of products sold (Note A).............. (2,261,776) (1,892,906) (1,265,761) (324,750) (377,989) ----------- ----------- ----------- ----------- ----------- 7,485,475 5,235,859 4,384,116 1,807,293 1,570,749 ----------- ----------- ----------- ----------- ----------- OPERATING EXPENSES Service, rent and maintenance............... 2,329,764 1,674,627 1,068,198 583,453 428,477 Selling..................................... 1,113,808 712,554 412,138 221,066 242,887 General and administrative.................. 2,541,642 1,710,251 1,422,447 534,179 353,109 Depreciation and amortization............... 1,153,896 929,069 899,433 325,116 199,947 ----------- ----------- ----------- ----------- ----------- 7,139,110 5,026,501 3,802,216 1,663,814 1,224,420 ----------- ----------- ----------- ----------- ----------- INCOME FROM OPERATIONS........................ 346,365 209,358 581,900 143,479 346,329 ----------- ----------- ----------- ----------- ----------- OTHER (Loss) gain on disposal (Note A)............ (71,683) (65,748) -- 7,000 -- Interest expense (net of interest income of $9,278, $15,591 and $9,923 at December 31, 1995, 1994 and 1993, respectively......... (405,155) (359,299) (332,166) (89,992) (51,894) ----------- ----------- ----------- ----------- ----------- (476,838) (425,047) (332,166) (82,992) (51,894) ----------- ----------- ----------- ----------- ----------- NET (LOSS) INCOME BEFORE BENEFIT (PROVISION) FOR FEDERAL INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.... (130,473) (215,689) 249,734 60,487 294,435 BENEFIT (PROVISION) FOR FEDERAL INCOME TAXES (Note I).................................... 43,141 69,297 (78,025) -- -- ----------- ----------- ----------- ----------- ----------- NET (LOSS) INCOME BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.............. (87,332) (146,392) 171,709 60,487 294,435 CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE (Note I).......................... -- -- 51,996 -- -- ----------- ----------- ----------- ----------- ----------- NET (LOSS) INCOME............................. (87,332) (146,392) 223,705 60,487 294,435 RETAINED (DEFICIT) EARNINGS, beginning........ (140,821) 5,571 (218,134) (228,153) (140,821) ----------- ----------- ----------- ----------- ----------- RETAINED (DEFICIT) EARNINGS, ending........... $ (228,153) $ (140,821) $ 5,571 $ (167,666) $ 153,615 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-3 6 PARKWAY PAGING, INC. STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 AND THE QUARTERS ENDED MARCH 20, 1996 AND 1995
UNAUDITED (NOTE M) ----------------------- MARCH 20, MARCH 20, 1995 1994 1993 1996 1995 ----------- --------- --------- --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES Net (loss) income................................. $ (87,332) $(146,392) $ 223,705 60,487 294,435 Adjustments to reconcile net (loss) income to net cash provided by operating activities Depreciation and amortization................... 1,153,896 929,069 899,433 325,116 199,948 Deferred federal income tax credit.............. (43,141) (69,297) (10,385) -- -- Loss (gain) disposal............................ 71,683 65,748 -- (7,000) -- Changes in assets and liabilities (Increase) decrease in accounts receivable.... (117,379) 21,090 (457,525) (249,049) (174,030) Decrease (increase) in inventory.............. 300,651 (496,661) (170,169) (516,761) 276,994 Increase in other receivables................. (21,760) (10,036) (4,089) 11,948 13,625 Decrease (increase) in prepaid taxes.......... 66,341 (43,600) (79,218) -- -- Decrease (increase) in prepaid expenses....... 31,190 (31,821) -- (24,356) 31,821 (Increase) decrease in pagers held for lease or sale (Note A)............................ (145,073) 51,454 13,729 193 19,231 (Increase) decrease in deposits............... (1,001) (1,600) 5,102 -- (401) (Decrease) increase in accounts payable....... (236,238) 236,733 41,597 18,640 (253,869) (Decrease) increase in deferred revenue....... (54,862) 340,250 367,480 415,828 108,703 (Decrease) increase in accrued and other liabilities................................. (15,066) 14,745 39,036 (7,217) (78,168) ----------- ----------- ----------- ----------- ----------- Net cash flows provided by operating activities... 901,909 859,682 868,696 27,829 438,289 ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES Receipts on notes receivable...................... 21,522 25,875 15,425 2,916 5,162 Purchases of property and equipment............... (1,325,894) (782,849) (272,445) (69,955) (301,429) Proceeds on sale of fixed assets.................. 20,000 -- -- 7,000 -- ----------- ----------- ----------- ----------- ----------- Net cash flows used in investing activities....... (1,284,372) (756,974) (257,020) (60,039) (296,265) ----------- ----------- ----------- ----------- ----------- CASH FLOWS FROM FINANCING ACTIVITIES Additional obligations under capital leases for inventory....................................... 1,693,215 2,071,434 1,315,616 787,415 44,169 Payments on obligations under capital leases...... (2,077,619) (1,637,112) (1,466,779) (709,955) (255,315) Proceeds from bank loans.......................... 511,475 -- -- -- -- Payments on notes payable......................... (254,489) (281,302) (270,186) (69,586) 211,193 ----------- ----------- ----------- ----------- ----------- Net cash flows (used in) provided by financing activities...................................... (127,418) 153,020 (421,349) 7,874 47 ----------- ----------- ----------- ----------- ----------- NET (DECREASE) INCREASE IN CASH..................... (509,881) 255,728 190,327 (24,336) 142,071 CASH, beginning..................................... 516,984 261,256 70,929 7,103 516,984 ----------- ----------- ----------- ----------- ----------- CASH, ending........................................ $ 7,103 $ 516,984 $ 261,256 $ (17,233) $ 659,055 =========== =========== =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF CASH PAID FOR: Interest........................................ $ 417,258 $ 378,351 $ 334,307 $ 91,176 $ 54,526 ----------- ----------- ----------- ----------- ----------- Income taxes.................................... $ -- $ 43,600 $ 115,632 $ -- $ -- =========== =========== =========== =========== =========== SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES Acquisitions of pagers held for lease or sale and property and equipment through capital leases (Note F)............................... $ 395,000 $ 237,498 $ 767,574 $ 787,415 $ 44,169 =========== =========== =========== =========== =========== Acquisitions of property and equipment through notes payable (Notes G & J)................... $ -- $ -- $ 53,300 $ -- $ -- =========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. F-4 7 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS NOTE A -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES Organization Parkway Paging, Inc. (the Company) was formed on May 7, 1991, and incorporated in the state of Texas. Operations began on October 1, 1991. The Company was formed for the purpose of providing air time, leasing, wholesale and retail sales of pagers and pager repairs and service in the Dallas-Fort Worth Metroplex. During the year ended December 31, 1993, the Company expanded its services to include long distance and additional voice messaging services. The Company also purchased a tandem telephone switch which enabled the addition of the long distance service and will allow the Company to expand into the cellular telephone market and Local Exchange Carrier (LEC) billing. As discussed below, the Company acquired operations through an acquisition and merger of related companies. Parkway Communications, Inc. was formed in 1983 and has served the cellular, specialized mobile radio (SMR) and paging markets since its inception. In 1989, Parkway Communications, Inc. leased its assets to Parkway Paging I, Ltd. Prior to the merger, as described below, Parkway Communications, Inc. sold its cellular and SMR business to concentrate on the paging industry. The Company purchased the assets of Parkway Paging I, Ltd. (a partnership) through the issuance of 19,200 shares of common stock and the assumption of liabilities on October 1, 1991. The assets purchased were recorded at their estimated fair value at October 1, 1991, under the purchase method of accounting in accordance with generally accepted accounting principals. The value of the liabilities assumed and stock issued exceeded the estimated fair value of the assets by $71,665. This excess was recorded as goodwill. On October 1, 1991, the Company also affected a merger with Parkway Communications, Inc. and Business Paging, Inc. through the exchange of stock. The stockholders of Parkway Communications, Inc. and Business Paging, Inc. received 4,800 shares of stock in the Company in exchange for their stock in these two corporations. The assets, liabilities and equity of Parkway Communications, Inc. and Business Paging, Inc. were recorded at the book value as stated in the financial statements of these two corporations at September 30, 1991, under the pooling of interests method as prescribed under generally accepted accounting principals. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Property and Equipment Property and equipment are stated at cost. Expenditures for maintenance are charged to expense as incurred. Upon retirement of equipment, the cost and the related accumulated depreciation are removed from F-5 8 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE A -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) the accounts. Depreciation and amortization are computed using straight-line and accelerated methods based on the following estimated useful lives: Broadcast equipment.................................... 3 to 15 years Pagers held for lease or sale.......................... 3 years Alpha dispatch equipment............................... 5 years Pager repair equipment................................. 7 years Office equipment....................................... 3 to 10 years Leaseholds............................................. 7 to 39 years Automobiles............................................ 5 years
Reserve for Doubtful Accounts The Company's policy is to expense accounts receivable of doubtful collectibility after 75 days. Therefore, no reserve is provided. Inventory Inventory consists of pagers specifically purchased for resale and pager parts utilized for repair of damaged pagers. Inventory is stated at the lower of cost or market; cost being determined principally by use of the average-cost method. Pagers Held for Lease or Sale The Company purchases specific brands of pagers which are primarily leased to customers. These pagers are capitalized and depreciated in accordance with the Company's depreciation policies as described above. Although the majority of these pagers are leased, some are sold. Upon the sale of pagers, the cost of pagers and the related accumulated depreciation are removed from the accounts and the net book value is charged to costs of products sold. The proceeds on the sales of such pagers is included in product sales. The cost of pagers sold is removed from pagers held for lease or sale on a last-in-first-out basis. During the year ended December 31, 1994, the Company recorded the disposal of obsolete, missing and fully depreciated pagers. The loss on disposal totalled $65,748. During the year ended December 31, 1995, additional disposals were recorded resulting in a loss of $73,979. Intangible Assets Intangible assets consist of organization costs and goodwill. A portion of the goodwill is attributable to the purchase of Parkway Paging I, Ltd. as discussed previously. The remainder resulted from Parkway Communications, Inc. transactions and was transferred to the Company during the merger. All intangible assets are amortized over five years on a straight-line basis. Deferred Revenue Certain customers of the Company pay for services in advance. These advance payments are deferred and recognized as revenue when earned. During the year ended December 31, 1993, the Company purchased a new billing system which allows the Company to bill on the 20th of each month for the subsequent month's services. The Company records these advance billings as deferred revenue when billed and recognizes them as revenue in the month for which the services are to be provided. Advance payments for service are not refundable. F-6 9 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE A -- THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES -- (CONTINUED) Cash The Company maintains operating cash accounts with a financial institution in excess of federally insured limits. The amount that would be at risk in the event the institution is unable to continue business was $270,451 at December 31, 1995. NOTE B -- NOTES RECEIVABLE Notes receivable consist of the following at December 31:
1995 1994 ------- ------- Procom, Inc., receivable in monthly installments of $1,365, including interest at 13%, final payment due 9/17/95................................................ $ -- $12,872 Abner, Inc., receivable in monthly installments of $1,244, including interest at 8%, final payment due 7/11/01 (Note J)............................................... 67,533 76,183 ------- ------- 67,533 89,055 Current portion.......................................... 9,920 22,032 ------- ------- $57,613 $67,023 ======= =======
These notes receivable were acquired as a result of the business combinations described in NOTE A. Both arose in the ordinary course of business. NOTE C -- PROPERTY AND EQUIPMENT Property and equipment consist of the following at December 31:
1995 1994 ---------- ---------- Broadcast equipment......................................... $5,379,692 $4,069,529 Alpha dispatch equipment.................................... 41,398 73,502 Pager repair equipment...................................... 89,681 73,080 Office equipment............................................ 505,520 414,772 Leaseholds.................................................. 243,201 140,859 Automobiles................................................. 13,615 2,042 ---------- ---------- 6,273,107 4,773,784 Less accumulated depreciation and amortization............ 3,195,088 2,258,296 ---------- ---------- $3,078,019 $2,515,488 ========== ==========
F-7 10 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE D -- OTHER ASSETS Other assets consist of the following at December 31:
1995 1994 ------- ------- Goodwill......................................................... $88,765 $88,765 Less accumulated amortization.................................... 75,447 57,697 ------- ------- 13,318 31,068 ------- ------- Organization costs............................................... 3,927 3,927 Less accumulated amortization.................................... 3,207 2,421 ------- ------- 720 1,506 ------- ------- Deposits......................................................... 4,710 3,710 ------- ------- $18,748 $36,284 ======= =======
NOTE E -- ACCRUED AND OTHER LIABILITIES Accrued and other liabilities consist of the following at December 31:
1995 1994 ------- -------- Sales tax payable............................................... $34,193 $ 57,222 Interest payable................................................ 15,321 18,146 Payroll taxes payable........................................... 3,659 8,602 Accrued payroll................................................. 36,091 21,624 Customer deposits held.......................................... 586 850 Excise/use tax payable.......................................... 2,888 1,360 ------- -------- $92,738 $107,804 ======= ========
NOTE F -- OBLIGATIONS UNDER CAPITAL LEASES The Company is obligated under various capital leases which were incurred in the acquisition of pagers and other property and equipment. The following is a schedule, by years, of future minimum lease payments under capital leases with the present value of the net minimum lease payments: 1996............................................................. $2,346,744 1997............................................................. 639,409 1998............................................................. 183,297 1999............................................................. 66,296 2000............................................................. 49,790 ---------- Net minimum lease payments....................................... 3,285,536 Less amount representing interest................................ 322,540 ---------- Present value of net minimum lease payments...................... 2,962,966 Less current portion............................................. 2,149,708 ---------- $ 813,288 =========
F-8 11 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE F -- OBLIGATIONS UNDER CAPITAL LEASES -- (CONTINUED) The Company held the following assets under capital leases at December 31:
1995 1994 ---------- ---------- Pagers...................................................... $ 375,953 $ 256,751 Broadcast equipment......................................... 1,274,329 1,085,592 Pager repair equipment...................................... 14,608 14,608 ---------- ---------- 1,664,890 1,356,951 Less accumulated depreciation............................... 1,016,323 697,431 ---------- ---------- $ 648,567 $ 659,520 ========== ==========
In addition, the Company assumed capital leases related to pagers and broadcast equipment acquired in the business combinations described in Note A. Consequently, specific assets acquired subject to capital leases were not identified. The net book value of pagers and broadcast equipment acquired in the business combinations was $170,767 and $268,611 at December 31, 1995 and 1994, respectively. All assets acquired under capital leases are presented in the accompanying balance sheet as property and equipment and pagers held for lease or sale. NOTE G -- NOTES PAYABLE Notes payable consist of the following at December 31:
1995 1994 --------- --------- Note payable due in monthly installments of $2,917 through 6/6/97, with a final payment of $2,938 due on 7/6/97, plus interest at 8.75%, secured by equipment and stockholder's certificates of deposit and stock............................ $55,417 $87,500 Note payable due in monthly installments of $937 through 6/6/95, with a final payment of $879 due on 7/6/95, plus interest at 8.75%, secured by equipment and stockholder's certificates of deposit and stock............................ -- 5,560 Note payable due in monthly installments of $6,667 through 6/6/95, with a final payment of $6,715 due on 7/6/95, plus interest at 8.75%, secured by equipment and stockholder's certificates of deposit and stock............................ -- 40,000 Note payable due in monthly installments of $4,924 through 1/15/00, with a final payment of $4,968 due 2/15/00, plus interest at 10.5%, secured by equipment and stockholder's certificate of deposit and stock............................. 246,229 -- Note payable due in monthly installments of $3,600 through 3/15/00, with a final payment of $3,632 due 4/15/00, plus interest at 10.5%, secured by equipment and stockholder's certificate of deposit and stock............................. 187,200 -- Note payable due in monthly installments of $3,333 through 6/17/97, plus interest at 7.25%, secured by stockholder's certificates of deposit................................................... 60,134 100,134 Note payable, Shareholder, due in monthly installments of $2,084, including interest at 12%, maturing 6/26/97 (NOTE J), unsecured.................................................... 38,973 53,786
F-9 12 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
1995 1994 --------- --------- NOTE G -- NOTES PAYABLE -- (CONTINUED) Note payable, Shareholder, due in monthly installments of $1,335, including interest at 12%, maturing 9/17/95 (Note J), unsecured.................................................... -- 11,433 Note payable, Shareholder, due in monthly installments of $2,224, including interest at 12%, maturing 11/21/97 (Note J), unsecured.................................................... 45,014 65,418 Note payable, Shareholder, due in monthly installments of $1,112, including interest at 12%, maturing 12/27/97 (Note J), unsecured.................................................... 26,074 33,486 Note payable, Shareholders, due in five annual installments beginning 1/1/94, including interest at 10% (Note J), unsecured.................................................... 17,253 21,991 --------- --------- 676,294 419,308 Less current maturities........................................ 256,351 183,199 --------- --------- $419,943 $236,109 ======== ========
Maturities of notes payable over the next five years are as follows: 1996.............................................. $256,351 1997.............................................. 193,322 1998.............................................. 108,602 1999.............................................. 102,295 2000.............................................. 15,724 -------- $676,294 ========
The Company established a line of credit during the year ended December 31, 1995, providing for maximum borrowings of $300,000. Interest is due at the bank's stated prime plus 1%. The line of credit is guaranteed by certain shareholders who are officers of the Company. At December 31, 1995, there were no draws on the line of credit. NOTE H -- COMMITMENTS AND CONTINGENCIES The Company leases office space and equipment under noncancellable operating leases. At December 31, 1995, the Company was obligated under these leases as follows: 1996.............................................. $315,664 1997.............................................. 223,435 1998.............................................. 166,249 1999.............................................. 85,485 2000.............................................. 32,573 Thereafter........................................ -- -------- $823,406 ========
Rental expense under operating leases was $543,433, $358,312 and $279,427 for the years ended December 31, 1995, 1994 and 1993, respectively. The Company purchases pagers from three major suppliers. A significant portion are purchased from NEC (Note J). However, due to competition and technological advances, management believes that the F-10 13 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE H -- COMMITMENTS AND CONTINGENCIES -- (CONTINUED) failure of any of these suppliers to perform on future purchase agreements would have no materially adverse effect on the Company. NOTE I -- FEDERAL INCOME TAXES Effective January 1, 1993, the Company adopted Financial Accounting Standard No. 109. The cumulative effect of the adoption was the recognition of a deferred tax asset in the amount of $51,996 which resulted from net operating losses available to offset taxable income. The related deferred tax credit is included in net income for the year ended December 31, 1993. The utilization of these net operating losses resulted in a reduction of the deferred tax asset during 1993. The temporary differences giving rise to the deferred tax asset consist of net operating losses and limitations on the deductibility of goodwill for tax purposes. For book purposes, goodwill is amortized over five years, for tax purposes, goodwill is amortized over fifteen years. The Company acquired $235,394 of net operating losses available to offset future tax liabilities in the merger with Business Paging, Inc. (Note A). A portion of these losses was utilized in 1991 and 1992. During the year ended December 31, 1993, the Company used the remaining $118,531 of net operating losses acquired. The deferred tax asset consists of the following at December 31:
1995 1994 -------- ------- Current-net operating loss.............................. $105,722 $66,605 Noncurrent-goodwill amortization........................ 17,102 13,078 -------- ------- $122,824 $79,683 ======== =======
No valuation allowance has been provided because based upon the weight of available evidence it is more likely than not that the deferred tax asset will be realized. The benefit (provision) for federal income taxes at December 31, consists of the following:
1995 1994 1993 ------- ------- -------- Taxes currently payable...................... $ -- $ -- $(82,642) Deferred Cumulative effect of adoption of SFAS 109..................................... -- -- (51,996) Goodwill amortization...................... 4,024 2,692 10,385 Net operating loss......................... 39,117 66,605 46,228 ------- ------- -------- $43,141 $69,297 $(78,025) ======= ======= ========
The Company made estimated tax payments of $43,600 during the year ended December 31, 1994, and had alternative minimum tax credits from December 31, 1992 and 1993, of $26,779 and $29,698, respectively. In addition, overpayments of $22,851 for the year ended December 31, 1993, were applied to 1994 taxes. Due to a net operating loss of $197,193 for federal income tax purposes, there were no federal income taxes due at December 31, 1994. This resulted in an overpayment of $122,818. Of this balance, $56,477 represented alternative minimum tax credits which may be applied against regular tax in future years when regular tax exceeds alternative minimum tax. These credits may be carried forward indefinitely. These credits remain available at December 31, 1995. The Company has net operating losses available to offset future taxable income of $310,949 which begin to expire in 2009. Due to the significant change in ownership subsequent to year end (NOTE L), the availability of these net operating losses is severely limited by the Internal Revenue Code. The extent of the limitation has not been determined. F-11 14 PARKWAY PAGING, INC. NOTES TO FINANCIAL STATEMENTS -- (CONTINUED) NOTE J -- RELATED PARTY TRANSACTIONS The Company has notes payable to Ray Windle and Windle & Windle, shareholders, as described in Note G. At December 31, 1994, the Company owed Ray Windle and Windle & Windle $119,204 and $44,919, respectively. At December 31, 1995, the balances were $83,987 and $26,074, respectively. The Company also has a note payable to a group of shareholders as described in Note G. The balance at December 31, 1995 and 1994, was $17,253 and $21,991, respectively. All loans from shareholders relate to the acquisition of property and equipment and the business acquisitions described in Note A. George Bush, president of the Company, owned a building which was leased to the Company. Rent of $56,292 was paid to George Bush during 1993. During the year ended December 31, 1994, Mr. Bush sold the building to another entity, 1200 Commerce, which is owned by various shareholders of the Company. Rent of $23,455 was paid to George Bush during 1994. For the years ended December 31, 1995 and 1994, rent of $83,890 and $36,764 was paid to 1200 Commerce. Shareholders of the Company own 100% of Abner, Inc. The Company paid Abner, Inc. $74,280 in rental for radio towers during 1995. Rental of $68,280 was paid to Abner, Inc. for each of the years ended December 31, 1994 and 1993. In addition, the Company held a note receivable from Abner, Inc. in the amount of $67,533 and $76,183 at December 31, 1995 and 1994, respectively, as discussed in Note B. Several shareholders of the Company are officers of NEC. During the years ended December 31, 1995, 1994 and 1993, the Company purchased pagers and parts from NEC totalling approximately $1,852,748, $1,906,000 and $987,000, respectively. In addition, the Company owed NEC $2,039,690 and $1,786,676 for obligations under capital leases at December 31, 1995 and 1994, respectively. The Company also sells pagers to an agent who is a director of the Company. During the year ended December 31, 1995 and 1994, total sales to this agent were $630,809 and $345,335, respectively. Sales in prior years were insignificant. NOTE K -- RETIREMENT PLAN Effective September 1, 1995, the Company adopted a 401(k) Pension and Profit Sharing Plan (the Plan) covering substantially all of its employees. Under the provisions of the Plan, employees may contribute up to 10% of their gross wages. The Company may make discretionary contributions to the Plan, but has elected not to do so for the year ended December 31, 1995. NOTE L -- SUBSEQUENT EVENT Subsequent to December 31, 1995, the Company entered into an agreement of merger with Metrocall, Inc. and PPI Acquisition Corp. The agreement provides that as of the date of closing, all issued and outstanding shares of the Company common stock shall be converted in the aggregate into the right to receive cash and shares of Metrocall, Inc. common stock. The purchase price includes payment of a liability equivalent to 5% of the net proceeds of the merger, as calculated by the Board of Directors of the Company, to certain officers of the Company. NOTE M -- UNAUDITED FINANCIAL STATEMENTS The balance sheets of Parkway Paging, Inc. as of March 20, 1996 and 1995, and the related statements of income and retained earnings and cash flow for the quarters then ended have been prepared by the Company without audit. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (which include only normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the quarters ended March 20, 1996 and 1995, are not necessarily indicative of the results that may be expected for the full year. F-12 15 UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA The following pro forma condensed combined balance sheet gives effect to the Parkway Acquisition as if it had occurred on March 31, 1996. The unaudited pro forma condensed combined statements of operations for the three month period ended March 31, 1996 and for the year ended December 31, 1995, give effect to the Parkway Acquisition as if it had occurred on January 1, 1995. The purchase price was adjusted in the accompanying pro forma statements based upon Parkway's financial performance for the three month period ended March 31, 1996. Accordingly, the actual consideration paid by Metrocall was different. The Parkway Acquisition will be accounted for by the purchase method of accounting. The purchase price has been allocated on a preliminary basis to the assets to be acquired based upon the estimated value of such assets. The final allocation of intangible assets will be based upon appraised values. This information should be read in conjunction with the notes included herein, the Metrocall Consolidated Financial Statements, and the Parkway Financial Statements (include herewith). The unaudited pro forma condensed combined financial data do not purport to represent what the combined company's results of operations or financial position actually would have been had such transaction and event occurred on the dates specified, or to project the combined company's results of operations or financial position for any future period or date. The pro forma adjustments are based upon available information and certain adjustments that management of Metrocall believes are reasonable. In the opinion of management of Metrocall, all adjustments have been made that are necessary to present the unaudited pro forma condensed combined data. 16 UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET AS OF MARCH 31, 1996 (IN THOUSANDS) ASSETS
HISTORICAL PRO FORMA --------------------------- PRO FORMA COMBINED METROCALL PARKWAY(A) ADJUSTMENTS COMPANY ---------- ----------- ----------- --------- CURRENT ASSETS: Cash, cash equivalents and short term investments $115,150 $ - $(24,645) $ 90,505 Accounts receivable, net 9,345 902 - 10,247 Inventory - 920 (920) (C) - Prepaid expenses and other current assets 1,750 197 - 1,947 --------- ------- --------- --------- Total current assets 126,245 2,019 (24,645) 102,699 PROPERTY AND EQUIPMENT, NET 82,955 3,085 920 (C) 86,960 INTANGIBLES, net 127,802 - 34,920 (D) 162,722 OTHER ASSETS 292 86 (26) (E) 352 --------- ------- --------- --------- Total Assets $337,294 $5,190 $ 10,249 $352,733 ========= ======= ========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term obligations $ 260 $2,478 $(2,478) (F) $ 260 Accounts payable and accrued expenses 21,046 199 493 (G) 21,738 Deferred revenues and subscriber deposits 2,561 1,122 - 3,683 --------- ------- --------- --------- Total current liabilities 23,867 3,799 (1,985) 25,681 LONG-TERM OBLIGATIONS 153,735 1,170 2,478 (F) 157,383 DEFERRED INCOME TAXES 11,642 - 9,977 (H) 21,619 MINORITY INTEREST 501 - - 501 --------- ------- --------- --------- Total liabilities 189,745 4,969 10,470 205,184 TOTAL STOCKHOLDER'S EQUITY 147,549 221 (221) (I) 147,549 --------- ------- --------- --------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $337,294 $5,190 $10,249 $352,733 ========= ======= ========= =========
See accompanying notes A-L to this unaudited statement. 17 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA --------------------------- PRO FORMA COMBINED METROCALL PARKWAY(A) ADJUSTMENTS COMPANY ------------ ----------- -------------- ------------- SERVICE, RENT AND MAINTENANCE REVENUE $ 92,160 $7,403 $ - $ 99,563 PRODUCT SALES 18,699 2,344 - 21,043 --------- ------- ------- --------- Total revenues 110,859 9,747 - 120,606 NET BOOK VALUE OF PRODUCTS SOLD (15,527) (2,262) - (17,789) --------- ------- ------- --------- 95,332 7,485 - 102,817 SERVICE, RENT AND MAINTENANCE EXPENSE 27,258 2,330 - 29,588 SELLING, MARKETING, GENERAL AND ADMINISTRATIVE 40,303 3,655 - 43,958 DEPRECIATION AND AMORTIZATION 31,504 1,153 2,594 (J) 35,251 OTHER 2,050 - - 2,050 --------- ------- ------- --------- Total operating expenses 101,115 7,138 2,594 110,847 --------- ------- ------- --------- (LOSS) INCOME FROM OPERATIONS (5,783) 347 (2,594) (8,030) INTEREST EXPENSE AND OTHER, net (10,522) (477) (204) (K) (11,203) --------- ------- ------- --------- (Loss) income before taxes (16,305) (130) (2,798) (19,233) BENEFIT FOR TAXES 595 43 871 (L) 1,509 --------- ------- ------- --------- (Loss) income before extraordinary item (15,710) (87) (1,927) (17,724) EXTRAORDINARY ITEM (4,392) - - (4,392) --------- ------- ------- --------- Net (loss) income $ (20,102) $ (87) $(1,927) $(22,116) ========= ======= ======= ========= NET LOSS PER COMMON SHARE BEFORE EXTRAORDINARY ITEM $ (1.34) $(1.52) EXTRAORDINARY ITEM, net of income tax benefit (0.38) (0.38) --------- --------- NET LOSS PER SHARE $ (1.72) (1.90) --------- --------- SHARES USED IN COMPUTING NET LOSS PER SHARE 11,668 11,668 ========= =========
See accompanying notes A-L to this unaudited statement. 18 UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1996 (IN THOUSANDS, EXCEPT PER SHARE DATA)
HISTORICAL PRO FORMA --------------------------- PRO FORMA COMBINED METROCALL PARKWAY(A) ADJUSTMENTS COMPANY ------------ ----------- -------------- ------------ SERVICE, RENT AND MAINTENANCE REVENUE $23,750 $1,646 $ - $25,396 PRODUCT SALES 6,189 486 - 6,675 --------- ------- ------ -------- Total revenues 29,939 2,132 - 32,071 NET BOOK VALUE OF PRODUCTS SOLD (4,650) (325) - (4,975) --------- ------- ------ -------- 25,289 1,807 - 27,096 SERVICE, RENT AND MAINTENANCE EXPENSE 8,193 583 - 8,776 SELLING, MARKETING, GENERAL AND ADMINISTRATIVE 10,375 755 - 11,130 DEPRECIATION AND AMORTIZATION 11,491 325 649 (J) 12,465 --------- ------- ------ -------- Total operating expenses 30,059 1,663 649 32,371 --------- ------- ------ -------- (LOSS) INCOME FROM OPERATIONS (4,770) 144 (649) (5,275) INTEREST EXPENSE AND OTHER, net (2,855) (83) (51) (K) (2,989) --------- ------- ------ -------- Net income (loss) before taxes (7,625) 61 (700) (8,264) (PROVISION) BENEFIT FOR TAXES (64) - 218 (L) 154 --------- ------- ------ -------- Net income (loss) $(7,689) $ 61 $(482) $(8,110) ========= ======= ====== ======== NET LOSS PER SHARE $ (0.53) $ (0.55) ========= ======== SHARES USED IN COMPUTING NET LOSS PER SHARE 14,626 14,626 ========= ========
See accompanying notes A-L to this unaudited statement. 19 NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS (A) Historical Parkway financial statements are as of March 20, 1996, for the 11 week period ending March 20, 1996, and the year-ended December 31, 1995. (B) Reflects estimated cash payments to Parkway shareholders of approximately $24.6 million after adjustment for liabilities assumed. (C) Reflects the reclassification of pagers held for resale or future rental, from inventory to furniture and equipment to conform accounting practices to those of Metrocall. (D) Reflects fair values assigned to intangible assets acquired which consist of the following (in thousands): FCC license $17,460 Subscriber lists 7,483 Goodwill 9,977 ------- $34,920 =======
(E) Reflects primarily the deferred tax asset of Parkway for which no value has been assigned in the pro forma statements. (F) Reclassifies current maturities of long-term obligations to noncurrent pursuant to the terms of Metrocall s financing arrangements. (G) Reflects estimated accruals for costs of closing acquired duplicate facilities, and estimated severance for planned terminations of acquired employees. (H) The Parkway Acquisition is structured as a stock purchase. The deferred income tax liability represents the tax effect of the difference between the amounts allocated to assets acquired and their tax basis. (I) Adjusts for the historical equity amounts of Parkway. (J) Reflects incremental depreciation and amortization based upon the preliminary allocation of depreciable and amortizable assets and assumed useful lives of 5 years for subscriber lists and 25 years for FCC licenses and goodwill. (K) Represents the estimated incremental interest at a rate of 8.25 percent that would have been incurred assuming that Parkway was acquired on January 1, 1995. (L) Represents the tax benefit resulting from the amortization of acquired intangibles for Parkway assuming an effective income tax rate of 40 percent. 20 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned duly authorized. METROCALL, INC. /s/ Vincent D. Kelly ----------------------------------- Vincent D. Kelly Chief Financial Officer, Treasurer and Vice President Date: August 13, 1996 3 EX-23.1 2 CONSENT OF HUTTON, PATTERSON & COMPANY 1 CONSENT OF INDEPENDENT ACCOUNTANTS As independent public accountants we hereby consent to the use of our report dated February 13, 1996, relating to the financial statements of Parkway Paging, Inc. (and to all references to our firm) included in or made a part of this Form 8K. /s/ HUTTON, PATTERSON & COMPANY - --------------------------------- Hutton, Patterson & Company Dallas, Texas August 13, 1996 -----END PRIVACY-ENHANCED MESSAGE-----