ProNet Inc. of Plano, Texas, released bleak second-quarter financial results, said its proposed merger with Teletouch Communications Inc. was mutually terminated and is fighting a class action lawsuit filed by some of its stockholders.
For the three-month period ended June 30, ProNet’s net loss was $14.1 million, or $1.76 per share, compared with a $400,000 net loss, or 6 cents per share, for the same quarter last year.
Second-quarter net revenues increased 61 percent to $21.5 million, from $13.3 million a year ago, said the company.
“ProNet, along with the paging industry, has been under extreme pressure in the marketplace during the past weeks. We remain very bullish on the fact that the paging industry and our company fundamentals are intact,” commented Jackie Kimzey, ProNet’s chairman and chief executive officer. “Our company has not changed. Our long-term strategy is the same.”
Earnings for the period were affected by a nonrecurring merger termination charge of $7.4 million that includes underwriting, advisory, legal and accounting fees and merger financing costs, said ProNet. The decrease in earnings also is attributed to an increase in interest expense that resulted from the company’s senior subordinated note offering in June 1995 and additional depreciation and amortization expenses related to its 19 acquisitions completed since March 1994.
The ProNet stockholders’ lawsuit, filed June 27 in the U.S. District Court for the Northern District of Texas, alleges that ProNet and certain officers and its investment banker/underwriter “participated in a scheme to inflate the price of ProNet stock in order to effect numerous acquisitions and to consummate concurrent debt and equity offerings in violation of the federal securities laws,” stated the stockholders. Those investors who filed the complaint had purchased ProNet common stock between Jan. 31 and June 21.
“The defendants scheme was successful as it pushed the price of ProNet stock up as high as $33.63 per share before the truth regarding ProNet’s operations and prospectus was revealed and ProNet’s stock price collapsed to as low as $7.38 per share,” said the stockholders.
Kelly Love, ProNet’s manager of investor relations, told RCR, “we have hired outside legal counsel and will defend ourselves vigorously” (RCR July 8, p. 9).
In its earnings report, ProNet said that under the terms of its $120 million 10.88 percent senior subordinated notes due 2006, the proceeds from the sale of the notes have been held in escrow since the offering was completed. Because the merger with Teletouch was called off, ProNet said it will redeem the notes at 101 percent of the principal amount of the notes at maturity, plus accrued interest to the date of redemption. All funds necessary for the redemption are being held in the escrow account.
For the second quarter, ProNet’s net additions of paging units from internal growth were 68,222, a 122 percent increase from a year ago.
The company noted it will not pursue trying to acquire the assets of Ventures In Paging L.C.
