NEW YORK-Executives of American Paging Inc., Minneapolis, withstood a verbal beating from securities analysts last week after the company announced disappointing third quarter operating results.
“Paging is an area where we haven’t done our job. We overlooked some things. It is possible to hit potholes you don’t foresee,” said Murray L. Swanson, chief financial officer of Telephone and Data Systems Inc., Chicago, the firm’s parent company. “We ask a little bit of patience with us. We realize our performance and our credibility are at stake.”
American Paging announced its service revenue dropped 1.4 percent to $23.8 million compared with the third quarter of 1995, although it increased by 1.2 percent higher than the $23.5 million earned in the second quarter of this year.
The company posted an operating cash flow loss of $4.4 million for the quarter and an operating loss of $16.7 million, which includes $1.7 million in interest payments for purchase of a narrowband personal communications services license.
Customer units in service increased by 1.5 percent to 788,300 when compared with the third quarter last year, but declined by 1.9 percent, or 15,200 units, compared with the second quarter of this year.
Backlogs due to the high volume of used pagers returned to a new, centralized customer care center caused shortages of pagers in service, according to Terry Sullivan, who was appointed chief executive officer in September.
Creating the customer care center was part of an initial restructuring plan that American Paging announced in the summer of 1995. Furthermore, many of the pagers the company received for repairs also turned out to be obsolete.
“The consequences of these problems were two-fold: a write-down of obsolete inventory in the third quarter as well as a reduction in new customer activations,” Sullivan said.
Provisions for restructuring costs in the third quarter totaled $7 million, including $2.8 million for depreciation of obsolete inventory.
“We had felt that, by this time, we would start to see benefits of this restructuring effort,” said LeRoy T. Carlson, Jr., board chairman of American Paging and chief executive officer of TDS. “Unfortunately, we have not. In fact, the disruption caused by these actions has been more severe than we anticipated.”
Sullivan termed American Paging’s problems “fixable,” and said he would present its board of directors with an action plan early next month.
“My charter and my intent is to turn the company around,” he said. “I will have to undo some things that were done before I took the helm.”
