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EXHIBIT 2
Arch Communications Cash Flow Analysis (in millions, except paging units and per share information)

Fiscal Year: December 1995 1996E 1997E 1998E 1999E 2000E
Subscriber Trends (paging units):
Arch Communications Group




Beginning pagers 538,000 2,006,000 3,121,000 3,826,000 4,667,720 5,507,910
Net additions 1,468,000 1,115,000 705,000 841,720 840,190 826,186
Ending pagers 2,006,000 3,121,000 3,826,000 4,667,720 5,507,910 6,334,096
% change 272.9 55.6 22.6 22.0 18.0 15.0
Average revenue/unit/month $11.00 $8.95 $8.29 $7.88 $7.48 $7.19
% change ” NM (7.3) (5.0) (5.0) (4.0)
Consolidated Income Statement:
Net revenues $141.8 $283.2 $355.6 $444.5 $502.7 $557.7
% change ” 99.7 25.6 25.0 13.1 11.0

EBITDA (operating c.f.) 47.2 102.4 135.9 171.4 198.0 225.5
Cash ¬‚ow margin (%) 33.3 36.2 38.2 38.6 39.4 40.4

Depreciation and amortization 60.2 155.7 195.6 254.9 269.7 278.7
Operating income (13.0) (53.3) (59.7) (83.4) (71.7) (53.2)
Interest expense 22.5 77.7 96.0 100.8 105.7 108.0
Pretax income (39.5) (131.0) (155.6) (184.2) (177.3) (161.2)
Taxes (4.6) 0.0 0.0 0.0 0.0 0.0
Net income (34.9) (131.0) (155.6) (184.2) (177.3) (161.2)
EPS ($/share) ($2.59) ($6.51) ($7.60) ($8.82) ($8.32) ($7.42)
Cash Flow Analysis:
EBITDA $47.2 $102.4 $135.9 $171.4 $198.0 $225.5
Taxes (4.6) 0.0 0.0 0.0 0.0 0.0
Capital expenditures 446.8 428.8 111.7 114.9 113.7 114.3
Pre-interest free c.f. (395.0) (326.4) 24.2 56.5 84.3 111.2

Interest expense 22.5 77.7 96.0 100.8 105.7 108.0
Free cash ¬‚ow (417.6) (404.1) (71.8) (44.2) (21.4) 3.2
Valuation (discounted cash ¬‚ow analysis):
PV (pre-interest free c.f.) ($134.4) $275.6 $777.3 $948.2 $1,078.5 $1,132.4
PV ¬nal year EBITDA (10X) 854.1 972.7 1,107.7 1,261.4 1,436.5 1,635.9
Less net long-term debt 453.4 857.5 929.3 973.5 994.9 991.7
Plus PCS license 6.5 6.5 6.5 6.5 6.5 6.5
Net value 272.8 397.2 962.2 1,242.6 1,526.6 1,783.1
Net value per share NM NM $47.00 $59.50 $71.67 $82.07
Fair price per share NM NM $37.60 $47.60 $57.33 $65.65
Average shares 13.5 20.1 20.5 20.9 21.3 21.7
Net debt per subsidiary $226 $275 $243 $209 $181 $157
WACC*”13.9% What Arch™s stock is worth in one year ($ per share)

*WACC assumes 7% risk free rate of return, 7% market risk premium, 1.6 Arch beta, 11% borrowing rate, and 40% equity/60% debt mix.
Source: John Adams and Wessels, Arnold & Henderson.
536 Equity Security Analysis




13-34
Equity Security Analysis




EXHIBIT 2 (continued)
Arch Communications Cash Flow Analysis (in millions, except paging units and per share information)

Fiscal Year: December 2001E 2002E 2003E 2004E 2005E
Subscriber Trends (paging units):




Arch Communications Group
Beginning pagers 6,334,096 7,157,529 7,944,857 8,659,894 9,266,086
Net additions 823,432 787,328 715,037 606,193 463,304
Ending pagers 7,157,529 7,944,857 8,659,894 9,266,086 9,729,391
% change 13.0 11.0 9.0 7.0 5.0
Average revenue/unit/month $6.97 $6.76 $6.63 $6.49 $6.36
% change (3.0) (3.0) (2.0) (2.0) (2.0)
Consolidated Income Statement:
Net revenues $611.9 $659.4 $704.7 $739.2 $760.7
% change 9.7 7.8 6.9 4.9 2.9

EBITDA (operating c.f.) 255.2 283.9 312.7 337.5 356.8
Cash ¬‚ow margin (%) 41.7 43.1 44.4 45.7 46.9

Depreciation and amortization 286.8 217.8 170.8 125.3 118.6
Operating income (31.6) 66.1 141.9 212.2 238.2
Interest expense 107.7 103.8 95.9 83.1 65.1
Pretax income (139.3) (37.7) 46.0 129.1 173.1
Taxes 0.0 0.0 0.0 0.0 0.0
Net income (139.3) (37.7) 46.0 129.1 173.1
EPS ($/share) ($6.28) ($1.67) $1.99 $5.49 $7.22
Cash Flow Analysis:
EBITDA $255.2 $283.9 $312.7 $337.5 $356.8
Taxes 0.0 0.0 0.0 0.0 0.0
Capital expenditures 112.5 108.4 100.2 90.4 79.5
Pre-interest free c.f. 142.7 175.5 212.5 247.1 227.3

Interest expense 107.7 103.8 95.9 83.1 65.1
Free cash ¬‚ow 35.0 71.7 116.4 164.0 212.2

Valuation (discounted cash ¬‚ow analysis):




Average shares 22.2 22.6 23.1 23.5 24.0
Arch Communications Group




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EXHIBIT 3
Paging Sector Valuations, 1995

March 21, 1996 ACOMa APGRb APPc MBLMd MCLLe PAGEf PNETg Average
Stock price $10.75 $23.00 $6.50 $21.00 $19.00 $25.25 $24.25 ”
Year-to-date % change “7% “4% 6% “5% 1% 6% “17%

December Quarter
Subscribers:
Subscriber base 529,450 2,006,000 784,500 2,369,101 944,013 6,737,907 856,302 ”
ARPU, paging $10.85 $9.70 $10.17 $10.26 $8.51 $7.86 $6.40 $9.11
AOCPU, paging $8.79 $6.13 $8.40 $7.41 $6.41 $4.93 $4.41 $6.64
EBITDA/subscriber $2.06 $3.57 $1.77 $2.85 $2.10 $2.92 $1.99 $2.47
Selling costs/net addition NM $64 NM $72 $69 $32 $65 $60
Churn 2.9% 2.0% 2.5% 3.4% 2.6% 1.3% 1.6% 2.3%
Reseller base 46% 50% 38% 37% 42% 45% 68% 47%
Direct base 54% 50% 62% 63% 58% 55% 32% 53%

December Quarter
Current Growth Rate:
Subscriber growth 145% 273% 20% 64% 25% 53% 142% 103%
Revenue growth 47% 224% 14% 53% 26% 38% 76% 68%
EBITDA growth 84% 303% “5% 82% -5% 44% 51% 79%
Part 2 Business Analysis and Valuation Tools




December Quarter
Margin Analysis (total company):
Net revenues 100% 100% 100% 100% 100% 100% 100% 100%
Service, rental & main. exp. 47% 20% 28% 35% 32% 20% 23% 29%
Selling expense 23% 17% 17% 19% 18% 12% 17% 18%
General and administrative 17% 26% 38% 18% 25% 31% 27% 26%
EBITDA 12% 37% 17% 28% 25% 37% 31% 27%
Depreciation and amortization 34% 55% 28% 29% 43% 27% 44% 37%

September Quarter
Quarter End Ratio and Balance Sheet Analysis:
Receivable turn (days) 34.9 22.2 43.3 30.9 54.2 19.7 43.4 35.5
Long-term debt/capital 46% 62% 67% 58% 39% 106% 59% 63%
EBITDA/interest ratio 0.9 1.8 4.5 1.5 2.6 2.2 1.8 2.2
Net debt/EBITDA ratio 2.4 5.3 5.0 4.3 0.3 3.8 4.1 3.6
Net debt/subscriber $39 $226 $106 $144 $7 $133 $104 $108
Quarter end net debt (mil.) $21 $453 $83 $341 $7 $894 $89 ”
Value of PCS license (mil.) $2 $7 $55 $54 $0 $197 $0 ”
Equity Security Analysis




(continued)
= strengths
537
538




March 21, 1996 ACOMa APGRb APPc MBLMd MCLLe PAGEf PNETg Average
EBITDA Trends:
EBITDA 1995 ($ mil.) $4.7 $47.2 $15.7 $61.7 $27.8 $201.1 $18.4 ”
EBITDA 1996E ($ mil.) $15.1 $102.4 $20.3 $177.1 $33.8 $252.3 $27.7 ”
EBITDA 1997E ($ mil.) $22.6 $135.9 $28.5 $207.5 $43.0 $305.7 $34.2 ”

Enterprise Value/EBITDA Ratio (adjusted for cash value of PCS licenses):
1994 19.9 14.3 9.0 14.4 15.8 21.8 9.9 15.0
1995 38.7 18.9 10.6 27.8 11.0 16.6 13.4 19.6
Equity Security Analysis




1996Eh 15.6 12.9 10.1 11.0 11.4 13.6 10.7 12.2
1997E 11.2 10.3 8.8 10.0 9.3 12.0 8.9 10.1
YE 1996 Enterprise value/subscriber $308 $422 $236 $408 $266 $402 $238 $326

Discounted CF Valuation (per share):
PMV beginning 1996 $24.92 NM $10.66 $0.00 $29.90 $36.49 $38.62 ”
PMV beginning 1997 $32.03 $47.00 $12.26 $39.91 $39.94 $41.98 $55.07 ”
Fair price beginning 1996 $19.93 NM $8.53 NM $23.92 $29.19 $30.90 ”
Fair price year-end 1996 $25.62 $37.60 $9.81 $31.93 $31.95 $33.59 $44.06 ”
Appreciation potential 138% 63% 51% 52% 68% 33% 82%

Other:
Subscribers, YE 1996 766,450 3,121,000 864,500 4,774,101 1,446,013 9,129,907 1,244,802 ”
Net debt, YE 1995 (mil.) $85 $453 $91 $920 $28 $952 $90 ”
Net debt, YE 1996 (mil.) $125 $858 $128 $1,015 $103 $1,271 $121 ”
Net debt, YE 1997 (mil.) $141 $929 $172 $1,131 $118 $1,697 $127 ”
Net Debt per sub., YE 1996 $163 $275 $148 $213 $71 $139 $98 $158
1996 Cap-X/1997 EBITDA ratio 1.5 3.2 1.8 5.3 2.2 1.3 2.4 2.5
Market cap. (mil.) $113 $467 $131 $987 $281 $2,598 $175 ”
Shares outstanding, YE 1995 9.21 19.38 20.03 40.35 14.63 102.25 6.47 ”
Shares outstanding, YE 1996 10.50 20.32 20.10 47.00 14.80 102.90 7.20 ”
Shares outstanding, YE 1997 10.59 20.57 20.38 47.44 14.93 104.14 7.30 ”
Insider stock ownshp. (mil. shs.) 1.80 1.97 16.54 15.52 5.52 3.96 0.76 ”
Insider options (mil. shs.) 0.18 0.18 0.34 0.56 0.33 1.42 0.26 ”
Equity Security Analysis




Source: John Adams and Wessels, Arnold & Henderson.
Note: In calculating PageNet™s enterprise/EBITDA ratio we add back the expected $17 million impact from VoiceNow in 1996.
Ticker Symbols: aA+Network. bArch Communications. cAmerican Paging Inc. dMobileMedia. eMetrocall. fPageNet. gProNet.
h Arch pro forma enterprise multiple 10.9 — 1996 EBITDA.
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Arch Communications Group
539
Equity Security Analysis




13-37 Part 2 Business Analysis and Valuation Tools




EXHIBIT 4
Arch Communications Group Abridged 1995 Annual Report
TO OUR SHAREHOLDERS: ing cash ¬‚ow or “EBITDA” (Earnings Before Interest,
Taxes, Depreciation and Amortization). This perfor-
Arch Communications Group




Arch Communications Group, Inc. enjoyed mance measure is the basis for a company™s valua-
unprecedented success in 1995, a year marked by tion by the equity markets and an important criterion
explosive growth which propelled the Company into for a company™s ability to secure ¬nancing. Arch
the top tier of the narrowband wireless communica- achieved a record increase of EBITDA from a $20
tions industry. In this year of extraordinary growth, million annualized rate at year end 1994 to more
Arch™s subscriber base increased nearly four-fold to than $80 million on an annualized basis at year end
more than 2.0 million subscribers from 538,000 at 1995.
the end of 1994. Arch also produced record ¬nan- Arch™s net revenues in 1995 increased 125%
cial results in 1995. We now have produced 17 con- to $141.8 million from the $63.1 million level for
secutive record quarters of sequential increases in 1994. Net revenues are the sum of service and
net revenues and cash ¬‚ows. product sales less cost of product sales, which is the
To support Arch™s rapid growth we raised more standard presentation method in the paging indus-
than $300 million in new capital including $46 mil- try. Our shareholder equity base, or market capitali-
lion from a public offering of common stock, and zation, increased from $135 million to $500
$225 million in a bank credit facility. This capital will million.
be used for acquisitions and capital expenditures.
Our ability to raise this amount of capital is a re¬‚ec-
Industry Consolidation
tion of Arch™s past success and future promise.
Arch continues to play a major role in our
Unprecedented Growth industry™s accelerating consolidation. To date, we
have completed 32 acquisitions. These acquisitions
Arch™s internal growth rate during 1995 was

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