Please note: only 2,500 VoiceNow customers!
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Tuesday July 29 8:28 AM EDT
Company Press Release
Source: Paging Network, Inc.
PageNet Reports Record-Setting Second Quarter Performance
DALLAS, July 29 /PRNewswire/ -- Paging Network, Inc. (Nasdaq:PAGE) today announced strong results for the second quarter, ended June 30, 1997, reporting record net revenues, operating cash flow and operating cash flow margins for its domestic paging business and record net revenues and operating cash flow for its consolidated operations. The company also announced it had achieved operating cash flow in excess of capital expenditures in its core domestic business, a major objective for the company in 1997.
Second Quarter Highlights
(in thousands, except margins & units)
Domestic International(b) Consolidated Growth
1997 1996 1997 1996 1997 1996 Rate
Net Revenues $203,733 $171,974 $1,689 $81 $205,422 $172,055 19.4%
Operating Cash
Flow
Core 78,927 64,568 (1,776)(2,064) 77,151 62,504 23.4%
VoiceNow(a) (2,127) --- --- --- (2,127) --- ---
Total 76,800 64,568 (1,776)(2,064) 75,024 62,504 20.0%
Operating Cash
Flow Margins
Core 38.7% 37.5% (b) (b) 37.6% 36.3% ---
VoiceNow(a) (a) (a) --- --- (a) (a) ---
Total 37.7% 37.5% (b) (b) 36.5% 36.3% ---
Net Gains in
Units in
Service 513,383 574,885 24,766 6,341 538,149 581,226 (7.4%)
Total Units in
Service 9,981,537 7,875,423 76,404 6,341 10,057,941 7,881,764 27.6%
(a) PageNet's Voice-Now service commenced February 1997. Certain figures are not meaningful at this time. (b) PageNet's international operations commenced in April 1996. Certain figures are not meaningful at this time.
Net revenues (revenues from services, rent and maintenance plus product sales less cost of products sold) from the company's core domestic paging operations totaled $203,712,000, an 18.5 percent increase over the $171,974,000 for the corresponding quarter of 1996. Operating cash flow totaled $78,927,000, a 22.2 percent increase over the $64,568,000 for the second quarter of 1996. Operating cash flow margins for the core domestic paging business were 38.7 percent in the second quarter of 1997, compared to 37.5 percent in the corresponding quarter of 1996. For the total domestic business, including start-up losses from VoiceNow(R), net revenues were $203,733,000, operating cash flow reached $76,800,000 and operating cash flow margins were 37.7 percent. The 1997 results for both the core and total domestic business represent the best in the company's history. The company reported operating cash flow in excess of capital expenditures for its core domestic business of $17,627,000, a $34,435,000 improvement over the prior year period, when capital expenditures had exceeded operating cash flow by $16,808,000.
``We are extremely pleased with our domestic core operating performance for the quarter, especially with the significant progress we've made in producing operating cash flow in excess of capital expenditures for our core domestic paging business and doing so in advance of our internal expectations,'' said Glenn W. Marschel, president and chief executive officer. ``While the timing of capital expenditures may cause results to vary quarter to quarter, we expect our core domestic operating cash flow to continue to exceed the capital required for that business in subsequent quarters. We expect continued growth in operating cash flow and improving operating cash flow margins in the core domestic business. Our company's focus is on these financial measurements. We are on track to achieve core operating cash flow in excess of capital expenditures and interest associated with that business in 1998.''
The company also announced its aim is to keep its leverage ratio, defined as domestic debt divided by most recent quarter annualized domestic operating cash flow, below 5.5 times for the remainder of 1997 and 1998, barring any unforeseen business events.
``We've achieved these results because of programs and procedures we've implemented to better manage and control our operations and the outstanding efforts of all of our employees,'' noted Mr. Marschel.
Consolidated net revenues for the period totaled $205,422,000, a 19.4 percent increase over the $172,055,000 for the corresponding quarter of 1996. Consolidated operating cash flow totaled $75,024,000, an increase of 20.0 percent over the $62,504,000 for the second quarter of 1996. Both 1997 figures represent the best results in the company's history. Consolidated operating cash flow margins for the 1997 second quarter were 36.5 percent, compared to 36.3 percent for the prior year second quarter. As expected, the 1997 second quarter results include operating cash flow start-up losses of $2,127,000 from VoiceNow(R) and $1,776,000 from the company's international operations.
During the quarter the company added 538,149 pagers to service, including 109,380 alphanumeric and 2,474 VoiceNow pagers. The total pagers in service at the end of the 1997 second period was 10,057,941, a 27.6 percent increase over the 7,881,764 pagers in service at the end of the second quarter of 1996.
The company's monthly churn rate in its domestic direct channel for the second quarter of 1997 was 2.0 percent, compared to 2.4 percent in the second quarter of 1996. The rate is the lowest in the company's history.
``The growth of our alphanumeric product continues to be exceptionally strong,'' said Mr. Marschel. ``Our total alpha units in service totaled 1,076,731, an 86% increase over our 1996 second quarter alpha numeric subscriber base. We clearly are the industry leader in this category. Our unmatched spectrum advantage positions us extremely well to take advantage of this market demand.
``Our VoiceNow results, to date, are disappointing,'' said Mr. Marschel. ``As you know, we have already modified our strategy based on our early learning. We now know the size of the coverage area in the test markets where we are open today, and customer concerns with the weight and size of the pager are sales impediments. Therefore, we intend to open the Chicago market in September, however, no other cities will be opened until the sales in the test markets produce economically viable financial results.''
Net loss for the second quarter of 1997 was $50,463,000, or $0.49 per share, including an extraordinary charge of $15,544,000, or $0.15 per share, to redeem all of its outstanding $200 million 11.75% Senior Subordinated Notes on May 14, 1997. The 11.75% Notes were redeemed to achieve an annual interest cost savings of approximately $8 million per year for five years based on current interest rates. The 1997 results were also impacted by a previously announced shortening of the depreciation lives for pagers and the commencement of amortization of the licenses for spectrum. As a result of these changes, depreciation and amortization expense increased approximately $10 million, or $0.10 per share, during the second quarter of 1997. Net loss for the second quarter of 1996 was $18,532,000, or $0.18 per share.
Six Month Highlights
(in thousands, except margins & units)
Domestic International(b) Consolidated Growth
1997 1996 1997 1996 1997 1996 Rate
Net Revenues $396,435 $334,995 $2,878 $81 $399,313 $335,076 19.2%
Operating Cash
Flow
Core 151,743 125,911 (3,867)(2,344) 147,876 123,567 19.7%
VoiceNow(a) (8,572) --- --- --- (8,572) --- ---
Total 143,171 125,911 (3,867)(2,344) 139,304 123,567 12.7%
Operating Cash
Flow Margins
Core 38.3% 37.6% (b) (b) 37.0% 36.9% ---
VoiceNow(a) (a) (a) --- --- (a) (a) ---
Total 36.1% 37.6% (b) (b) 34.9% 36.9% ---
Net Gains in
Units in
Service 1,015,002 1,137,516 40,206 6,341 1,055,208 1,143,857 (7.8%)
Total Units in
Service 9,981,537 7,875,423 76,404 6,341 10,057,941 7,881,764 27.6%
(a) PageNet's VoiceNow service commenced February 1997. Certain figures are not meaningful at this time. (b) PageNet's international operations commenced in April 1996. Certain figures are not meaningful at this time.
Net revenues from the company's core domestic paging operations for the six months ended June 30, 1997, totaled $396,413,000, an 18.3 percent increase over the $334,995,000 for the first six months of 1996. Operating cash flow for the 1997 six-month period totaled $151,743,000, a 2O.5 percent increase over the $125,911,000 for the corresponding period of 1996. Operating cash flow margins for the core domestic paging business were 38.3 percent in the first six months of l997, compared to 37.6 percent in the corresponding period of l996. All 1997 figures represent record results. In the company's domestic operations, which include the impact of VoiceNow, net revenues were $396,435,000 and operating cash flow was $143,171,000. Both figures represent six-month records. First-half domestic operating cash flow margins reached 36.1 percent.
Consolidated net revenues for the 1997 six-month period totaled $399,313,000, a 19.2 percent increase over the $335,076,000 for the corresponding period of 1996. Consolidated operating cash flow for the first six months of 1997 totaled $139,304,000, an increase of 12.7 percent over the $123,567,000 for the first six months of l996. Both l997 figures represent record results. Consolidated operating cash flow margins for the 1997 six- month period were 34.9 percent, compared to 36.9 percent for the prior year first six months. As expected, these results are impacted by operating cash flow start-up losses of $8,572,000 from VoiceNow and $3,867,000 from the company's international operations.
During the six months ended June 30, 1997, the company added 1,055,208 pagers to service.
Net loss for the 1997 six-month period was $90,377,000, or $0.88 per share, including an extraordinary charge of $15,544,000, or $0.15 per share, to redeem all of its outstanding $200 million 11.75% Senior Subordinated Notes on May 14, 1997. The 1997 results were also impacted by a previously announced shortening of the depreciation lives for pagers and the commencement of amortization of the licenses for spectrum. As a result of these changes, depreciation and amortization expense increased approximately $18 million, or $0.18 per share, during the first six months of 1997. Net loss for the six- month period of 1996 was $30,638,000, or $0.30 per share.
PageNet is the world's largest and fastest-growing wireless messaging company, providing service through 95 sales and service offices and approximately 9,000 resellers and affiliates. PageNet provides alphanumeric and numeric messaging services, with local, regional and nationwide coverage options. The company is the exclusive wireless provider of CNN News, sports and stock headlines.
Safe Harbor Statement Under the Private Securities and Litigation Reform Act of 1995 The statements contained in this release which are not historical facts,
such as those concerning future performance and new product offerings, are
forward-looking statements that are subject to risks and uncertainties and
could differ materially from those set forth in the forward-looking
statements. Among the factors that could cause actual future results to
differ materially are competitive pressures, growth rates, market conditions,
timing and techniques used in marketing by third-party distributors and
acceptance of PageNet's services in the marketplace.
VoiceNow is a registered trademark of Paging Network, Inc.
Consolidated Statements of Operations
(unaudited)
(in thousands, except share, per share and pagers in service information)
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
Services, rent and
maintenance revenues $200,561 $167,036 $389,441 $325,811
Product sales 33,666 32,143 70,034 59,741
Total revenues 234,227 199,179 459,475 385,552
Cost of products sold (28,805) (27,124) (60,162) (50,476)
Net revenues 205,422 172,055 399,313 335,076
Operating expenses:
Services, rent and
maintenance 42,653 35,910 83,595 69,561
Selling 25,427 20,570 53,698 39,081
General and
administrative 62,318 53,071 122,716 102,867
Depreciation and
amortization 71,860 51,517 138,928 96,855
Total operating
expenses 202,258 161,068 398,937 308,364
Operating income 3,164 10,987 376 26,712
Interest expense (38,281) (29,907) (75,860) (59,642)
Interest income 561 519 1,306 2,538
Equity in loss of an
unconsolidated
subsidiary (363) (131) (655) (246)
Total other income
(expense) (38,083) (29,519) (75,209) (57,350)
Loss before
extraordinary item (34,919) (18,532) (74,833) (30,638)
Extraordinary item (15,544) --- (15,544) ---
Net loss $(50,463) $(18,532) $(90,377) $(30,638)
Net loss per share:
Loss before
extraordinary
item $ (0.34) $ (0.18) $ (0.73) $ (0.30)
Extraordinary item (0.15) --- (0.15) ---
Net loss $ (0.49) $ (0.18) $ (0.88) $ (0.30)
Number of shares
outstanding 102,621,077 102,534,887 102,621,077 102,534,887
Selected Data by Segment
Three Months Ended June 30,
(in thousands except percentages, ratio & pager information)
Advanced
Core Messaging Total Domestic
1997 1996 1997 1996 1997 1996
Net Revenues $203,712 $171,974 $21 --- $203,733 $171,974
Growth over
prior year 18.5% 33.0% N/A --- 18.5% 33.0%
Operating expenses:
Services, rent
and maintenance 41,445 35,482 411 --- 41,856 35,482
Selling 22,932 20,080 1,707 --- 24,639 20,080
General and
administrative 60,408 51,844 30 --- 60,438 51,844
Depreciation and
amortization 67,174 50,737 2,540 --- 69,714 50,737
Total operating
expenses 191,959 158,143 4,688 --- 196,647 158,143
Operating income 11,753 13,831 (4,667) --- 7,086 13,831
Operating cash
flow 78,927 64,568 (2,127) --- 76,800 64,568
Growth over
prior year 22.2% 40.3% N/A --- 18.9% 40.3%
Operating cash
flow margins 38.7% 37.5% N/A --- 37.7% 37.5%
Capital expenditures
Pagers 37,076 36,184 412 --- 37,488 36,184
Infrastructure 24,224 45,192 41,861 7,417 66,085 52,609
Total capital
expenditures 61,300 81,376 42,273 7,417 103,573 88,793
Licenses --- --- 19,070 7,550 19,070 7,550
Cash flow before
interest 17,627 (16,808)(44,400) (7,417) (26,773) (24,225)
Interest (24,617) (22,606)(13,515) (6,045) (38,123) (28,651)
Free cash flow (6,990) (39,414)(57,915) (13,462) (64,905) (52,876)
Long-term debt 1,074,518 918,730 593,685 255,520 1,668,203 1,174,250
Leverage
ratio(a) 3.40 3.56 N/A N/A 5.43 4.55
Pagers in
service 9,978,879 7,875,423 2,658 --- 9,981,537 7,875,423
Growth over
last year 26.7% 45.4% N/A --- 26.7% 45.4%
Selected Data by Segment
Three Months Ended June 30,
(in thousands except percentages, ratio & pager information)
International Consolidated
1997 1996 1997 1996
Net Revenues $1,689 $81 $205,422 $172,055
Growth over prior year N/A --- 19.4% 33.1%
Operating expenses:
Services, rent and
maintenance 797 428 42,653 35,910
Selling 788 490 25,427 20,570
General and
administrative 1,880 1,227 62,318 53,071
Depreciation and
amortization 2,146 780 71,860 51,517
Total operating expenses5,611 2,925 202,258 161,068
Operating income (3,922) (2,844) 3,164 10,987
Operating cash flow (1,776) (2,064) 75,024 62,504
Growth ever prior year 14.0% N/A 20.0% 35.8%
Operating cash flow
margins (105.1%) N/A 36.5% 36.3%
Capital expenditures
Pagers 1,887 1,500 39,375 37,684
Infrastructure 304 1,414 66,389 54,023
Total capital
expenditures 2,191 2,914 105,764 91,707
Licenses --- --- 19,070 7,550
Cash flow before
interest (3,967) (4,978) (30,740) (29,203)
Interest (412) (737) (37,720) (29,388)
Free cash flow (3,555) (5,715) (68,460) (58,591)
Long-term debt 34,395 21,266 1,702,598 1,195,516
Leverage ratio(a) --- --- --- ---
Pagers in service 76,404 6,341 10,057,941 7,881,764
Growth over last year N/A --- 27.6% 45.5%
(a) Total domestic debt divided by most recent quarter domestic operating cash flow annualized
Selected Data by Segment
Six Months Ended June 30,
(in thousands except percentages, ratio & pager information)
Core Advanced Messaging Total Domestic
1997 1996 1997 1996 1997 1996
Net revenues $396,413 $334,995 $22 --- $396,435 $334,995
Growth over
prior year 18.3% 33.6% N/A --- 18.3% 33.6%
Operating Expenses:
Services, rent
and maintenance 80,663 69,133 1,419 --- 82,082 69,133
Selling 45,011 38,591 7,145 --- 52,156 38,591
General and
administrative 118,996 101,360 30 --- 119,026 101,360
Depreciation and
amortization 132,762 96,072 2,540 --- 135,302 96,072
Total operating
expenses 377,432 305,156 11,134 --- 388,566 305,156
Operating Income 18,981 29,839 (11,112) --- 7,869 29,839
Operating cash
flow 151,743 125,911 (8,572) --- 143,171 125,911
Growth over
prior year 20.5% 41.8% N/A --- 13.7% 41.8%
Operating cash
flow margins 38.3% 37.6% N/A --- 36.1% 37.6%
Capital expenditures
Pagers 85,621 105,663 572 --- 86,193 105,663
Infrastructure 56,821 67,314 62,684 10,108 119,505 77,422
Total capital
expenditures 142,442 172,977 63,256 10,108 205,698 183,085
Licenses --- --- 66,305 7,550 66,305 7,550
Cash flow before
interest 9,301 (47,066) (71,828)(10,108) (62,527) (57,174)
Interest (49,891) (44,647) (24,763)(11,720) (74,654) (56,367)
Free cash flow (40,590) (91,713) (96,591)(21,828) (137,181)(113,541)
Selected Data by Segment
Six Months Ended June 30,
(in thousands except percentages, ratio & pager information)
International Consolidated
1997 1996 1997 1996
Net revenues $ 2,878 $ 81 $399,313 $335,076
Growth over
prior year N/A --- 19.2% 33.6%
Operating Expenses:
Services, rent
and maintenance 1,513 428 83,595 69,561
Selling 1,542 490 53,698 39,081
General and
administrative 3,690 1,507 122,716 102,867
Depreciation and
amortization 3,626 783 138,928 96,855
Total operating
expenses 10,371 3,208 398,937 308,364
Operating Income (7,493) (3,127) 376 26,712
Operating cash
flow (3,867) (2,344) 139,304 123,567
Growth over prior
year (65.0%) N/A 12.7% 39.1%
Operating cash flow
margins (134.4%) N/A 34.9% 36.9%
Capital expenditures
Pagers 2,540 1,799 88,733 107,462
Infrastructure 516 6,456 120,021 83,878
Total capital
expenditures 3,056 8,255 208,754 191,340
Licenses --- --- 66,305 7,550
Cash flow before
interest (6,923) (10,599) (69,450) (67,773)
Interest 100 (737) (74,554) (57,104)
Free cash flow (6,823) (11,336) (144,004) (124,877)
Subscriber Highlights
Net Gains Q2 97 Total Q2 96 Total Year to Year
Q2 97 Installed Installed % Increase
Base Base
Domestic
Pagers 510,909 9,978,879 7,875,423 26.7%
VoiceNow(a) 2,474 2,658 --- ---
Total Domestic 513,383 9,981,537 7,875,423 26.7%
International(b)
Pagers 24,766 76,404 6,341 1105.0%
PageNet Consolidated 538,149 10,057,941 7,881,764 27.6%
Nationwide service 57,298 686,648 448,087 53.2%
Alphanumeric 109,380 1,076,731 579,214 85.9%
Direct Channel 145,748 4,900,810 4,201,571 16.6%
Indirect Channel 392,401 5,157,131 3,680,193 40.1%
(a)VoiceNow first available in February 1997 in test market (b)PageNet of Canada began service in April 1996
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SOURCE: Paging Network, Inc.
Contact: Jenny Haynes of Paging Network, Inc., 972-985-6749
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