FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: March 31, 1996
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
Commission File Number: 0-16479
PEOPLES TELEPHONE COMPANY, INC.
(Exact Name of registrant as specified in its charter)
NEW YORK 13-2626435
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. No.)
2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
(305) 593-9667
(Registrant's telephone number, including area code)
____________________
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months and
(2) has been subject to such filing requirements for the past 90
days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. Common
Stock, $.01 Par Value, outstanding at May 8, 1996 : 16,194,684
shares.
Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands)
March 31, December 31,
Assets 1996 1995
_________ ____________
(Unaudited)
Current assets
Cash and cash equivalents $ 9,461 $ 12,366
Accounts receivable, net of
allowance for doubtful accounts
of $4,958 and $5,108 7,442 7,100
Inventory 2,187 1,990
Prepaid expenses and other
current assets 3,395 3,764
________ ________
Total current assets 22,485 25,220
Property and equipment, net 75,122 78,201
Location contracts, net . 29,255 29,270
Goodwill, net 8,495 8,904
Intangible assets, net 2,406 2,620
Other assets, net 8,220 8,713
Deferred income taxes 3,407 3,407
Investments 2,685 3,736
________ ________
Total assets $152,075 $160,071
======== ========
Liabilities and Shareholders' Equity
Current liabilities
Notes payable and current
maturities of long-term debt $ 502 $ 506
Current portion of obligations
under capital leases 1,139 1,156
Accounts payable and accrued
expenses 19,741 19,603
Accrued interest payable 2,674 5,603
Income and other taxes payable 2,555 2,452
________ _______
Total current liabilities 26,611 29,320
Notes payable and long-term debt 101,098 101,259
Obligations under capital leases 1,141 1,318
________ _______
Total liabilities 128,850 131,897
________ _______
Commitments and contingencies - -
Preferred Stock
Cumulative convertible preferred
stock Series C, $.01 par value;
160 shares authorized; 150 shares
issued and outstanding 13,438 13,413
Preferred stock dividends payable 735 473
_______ _______
Total preferred stock 14,173 13,886
Shareholders' equity
Preferred stock; $.01 par value;
4,140 shares authorized; none
issued and outstanding - -
Convertible preferred stock;
Series B, $.01 par value; 600
shares authorized; none issued
and outstanding - -
Common stock; $.01 par value;
25,000 shares authorized;
16,173 and 16,108 shares
issued and outstanding 162 161
Capital in excess of par value 61,284 61,573
Accumulated deficit (51,946) (47,446)
Unrealized loss on investments (448) -
_________ _________
Total shareholders' equity 9,052 14,288
_________ _________
Total liabilities and
shareholders' equity $152,075 $160,071
========== =========
The accompanying notes are an integral part of these consolidated
financial statements.
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
For the three months ended
March 31,
1996 1995
_________ ________
Revenues
Coin calls $ 18,141 $ 19,061
Non-coin calls 12,355 16,985
________ ________
Total revenues 30,496 36,046
Costs and expenses
Telephone charges 9,863 12,970
Commissions 8,267 8,282
Field service and collection 4,790 5,185
Selling, general and administrative 2,981 2,642
Depreciation and amortization 6,028 5,637
Interest 3,062 1,802
Gain on disposal of prepaid calling
card and international telephone
centers (545) -
Other 550 27
______ ______
Total costs and expenses 34,996 36,545
Loss from continuing operations
before income taxes (4,500) (499)
Benefit from income taxes - 188
_______ _______
Loss from continuing operations (4,500) (311)
_______ _______
Discontinued operations
Loss from operations - -
Loss on disposition - (50)
_______ _______
Loss from discontinued operations - (50)
Extraordinary loss from extinguishment
of debt, net - (2,894)
_______ ________
Net loss $ (4,500) $(3,255)
========= ========
Earnings (loss) per common share
Loss from continuing operations $ (.29) $ (.02)
Loss from discontinued operations - -
Extraordinary loss from extinguish-
ment of debt, net - (.18)
________ _______
Net loss $ (.29) $ (.20)
======== ========
Weighted average common and common
equivalent shares outstanding 16,173 16,081
======== ========
The accompanying notes are an integral part of these consolidated
financial statements.
PEOPLES TELEPHONE COMPANY, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(Unaudited, in thousands)
Three Months Ended,
March 31,
1996 1995
________ _________
Cash flow from operating activities:
Net loss $ (4,500) $ (3,255)
Adjustments to reconcile net
loss to net cash (used in)
provided by operating activities:
Depreciation and amortization 6,028 5,637
Deferred income taxes - (1,954)
Extraordinary loss from
extinguishment of debt - 4,631
Equity in losses of Global Link - 27
Gain on sale of assets (545) -
Change in assets and liabilities:
Decrease in accounts
receivable 158 1,132
Increase in inventory (197) (337)
Decrease (increase) in
prepaid expenses and other
current assets 369 (760)
Decrease (increase) in
other assets 313 (373)
Decrease in accounts
payable and accrued
expenses (54) (883)
Decrease in accrued
interest (2,929) (307)
Increase (decrease)
in taxes payable 103 (77)
Net effect of discontinued
operations - (2,622)
_______ _______
Net cash (used in) provided by
operating activities (1,254) 859
Cash flow from investing activities:
Payments for acquisitions and
certain contracts (1,303) (435)
Property and equipment additions (754) (1,337)
Proceeds from sale of assets 800 1,250
_______ _______
Net cash used in investing activities (1,257) (522)
Cash flow from financing activities:
Net payments under note payable
to bank (165) (83)
Principal payments under capital
lease obligations (229) (1,132)
Exercise of stock options and
warrants - 126
Officer loans - (190)
________ _______
Net cash used in financing activities (394) (1,279)
________ _______
Net decrease in cash and cash
equivalents (2,905) (942)
Cash and cash equivalents at beginning
of period 12,366 7,663
_______ _______
Cash and cash equivalents at end
of period $ 9,461 $ 6,721
======= =======
The accompanying notes are an integral part of these consolidated
financial statements.
PEOPLES TELEPHONE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996 AND MARCH 31, 1995
(unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION:
The accompanying interim consolidated financial data are unaudited;
however, in the opinion of management, the interim data include all
adjustments necessary for a fair presentation of the results for the
interim periods. 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 at the date of the
financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ
from those estimates.
The results of operations for the three months ended March 31, 1996
are not necessarily indicative of the results to be expected for the
year ending December 31, 1996.
The interim unaudited consolidated financial statements should be
read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 1995 as
set forth in the Company's Form 10-K.
During the third quarter of 1995, the Company decided to retain the
remaining portion of its inmate telephone operations. The
accompanying consolidated statements of operations and of cash flows
for the three months ended March 31, 1995 have been reclassified to
present the inmate telephone operations as part of continuing
operations. In addition, certain other amounts for the prior year
have been reclassified to conform with current year presentation.
NOTE 2 - CHANGES IN ACCOUNTING POLICIES
Intangible Assets
During the first quarter of 1996, the Company adopted Statement No.
121 ("SFAS 121"), Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of, which requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS 121 also addresses
the accounting for long-lived assets that are expected to be
disposed of. The effect of adoption did not have a material impact
on the financial results of the Company for the three months ended
March 31, 1996.
Stock Options
In October 1995, the FASB issued Statement No. 123 ("SFAS 123"),
Accounting for Stock-Based Compensation,which requires companies to
either recognize expense for stock-based awards based on their fair
value on the date of grant or provide footnote disclosures regarding
the impact of such changes. The Company adopted the provisions of
SFAS 123 on January 1, 1996 but will continue to account for options
issued to employees or directors under the Company's non-qualified
stock option plans in accordance with Accounting Principles Board
Opinion No.25 ("APB 25"), Accounting for Stock Issued to Employees.
The exercise price of the Company's employee stock options equals
the market price of the underlying stock on the date of grant,
therefore, no compensation expense is recognized under APB 25.
Depreciation and Amortization
Effective January 1, 1996, the Company revised its depreciation and
amortization policy for certain fixed and intangible assets used in
the inmate telephone operations. Based on increased competition and
certain other changes within the inmate telephone industry, the
Company reduced the useful lives of various assets to five years.
This change in accounting estimate resulted in an increase in
Depreciation and amortization expense and Net loss for the three
months ended March 31, 1996 of approximately $0.3 million or $.02
per common share.
NOTE 3 - PREPAID CALLING CARD AND INTERNATIONAL TELEPHONE CENTERS
On September 28, 1995, the Company sold its international telephone
center operations for $2.0 million in cash and notes receivable.
For financial accounting purposes, the recovery of $2.0 million
previously written off will be recognized as the cash is received.
During the quarter ended March 31, 1996, the Company received a
payment of approximately $0.3 million which is included in "Gain on
disposal of prepaid calling card and international telephone
centers" in the accompanying Consolidated Statement of Operations.
On March 1, 1996, Global Link Teleco Corporation ("Global Link")
consummated a merger transaction (the "Merger")with Global
Telecommunications Solutions, Inc. ("GTS"). The Company exchanged
its outstanding notes and other receivables including accrued
interest for shares of GTS Common stock, $0.6 million in cash and
$1.5 million of notes receivable with various due dates through
September 1997. The Company's 19.99% equity interest in Global Link
was converted in the Merger into GTS shares. For financial
accounting purposes, a net gain of approximately $1.0 million will
be deferred until the outstanding receivable balances are collected.
In addition, a gain of approximately $0.3 million was recorded in
the first quarter of 1996 related to amounts collected at the time
of this transaction.
NOTE 4 - INVESTMENTS
The Company's investment in GTS is accounted for in accordance with
Statement No. 115 ("SFAS 115"), Accounting for Certain Investments
in Debt and Equity Securities. Investments in debt and equity
securities , other than those accounted for under the equity method,
are reported at fair value with unrealized gains or losses, net of
tax, recorded as a separate component of Shareholders' Equity. The
Company's investment in GTS at March 31, 1996 was approximately $3.9
million net of approximately $0.4 million of unrealized investment
losses.
NOTE 5 - EARNINGS PER SHARE:
The treasury stock method was used to determine the dilutive effect
of options and warrants on earnings per share data.
For 1996 and 1995, common stock equivalents were excluded since the
effect would be anti-dilutive. Therefore, fully diluted earnings
per share are not presented.
See earnings (loss) per common share calculation as summarized on
page 8.
NOTE 6 - LONG-TERM DEBT:
During April 1996, the Company amended the Fourth Amended Loan and
Security Agreement (the "Amendment") with Creditanstalt-Bankverein
(the "Bank"). In connection with the Amendment, the Bank waived the
Company's non-compliance with certain restrictive covenants
contained in the agreement for the three month period ended December
31, 1995. The Amendment, among other things, decreased the
facility to $10.0 million and reduced the requirements of the
financial covenants. The amended credit facility bears interest at
the Bank's prime rate plus 2% and requires all outstanding principal
balances to be repaid in September 1997. At the same time, the
Company decreased to $5.25 the exercise price of the warrants held
by Creditanstalt American Corporation to acquire Common Stock or
Series B Preferred Stock of the Company that had not already been
repriced. At March 31, 1996, the Company was in compliance with the
amended covenants and had no amounts borrowed under the facility.
NOTE 7 - INCOME TAXES:
At March 31, 1996, the Company recorded valuation allowances of
approximately $1.7 million against deferred tax assets generated
during the three months ended March 31, 1996. A valuation allowance
was provided to reduce the deferred tax assets to a level which,
more likely than not, will be realized.
PEOPLES TELEPHONE COMPANY, INC.
COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(unaudited, in thousands, except per share data)
Three Months Ended
March 31,
1996 1995
__________________
Loss from continuing operations $(4,500) $ (311)
Less:
Cumulative preferred stock dividends 262 -
________ ________
Loss from continuing operations for
per share computations (4,762) (311)
Loss from discontinued operations - (50)
Extraordinary loss from extinguishment
of debt, net - (2,894)
________ _________
Net loss for per share computations $(4,762) $ (3,255)
======== =========
Number of shares:
Weighted average shares used in the
per share computation 16,173 16,081
======= =======
Earnings (loss) per common and common
equivalent share:
Loss from continuing operations $ (.29) $ (.02)
Loss from discontinued operations - -
Extraordinary loss from extinguishment
of debt, net - (.18)
_________ _________
Net loss $ (.29) $ (.20)
========= =========
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis compares the quarter ended
March 31, 1996 to the quarter ended March 31, 1995 and should be
read in conjunction with the consolidated financial statements and
notes thereto appearing elsewhere in this Form 10-Q and in
conjunction with Management's Discussion and Analysis appearing in
the Company's Form 10-K for the year ended December 31, 1995.
The financial results discussed below relate to continuing
operations which primarily consist of the public pay telephone
business and inmate telephone operations. The accompanying
consolidated statements of operations and cash flows for the three
months ended March 31, 1995 have been reclassified to present the
inmate telephone operations as part of continuing operations.
Revenues
The Company primarily derives its revenues from coin and
non-coin calls. Coin revenue is generated exclusively from calls
made by depositing coins in the Company's public pay telephones.
Coin revenue represented approximately 59.5% and 52.9% of total
revenues from continuing operations for the quarters ended March 31,
1996 and 1995, respectively. Coin revenue decreased 4.8% to $18.1
million during the quarter ended March 31, 1996 compared to the same
period in 1995. This decrease is primarily attributable to the
decrease in the average number of public pay telephones operated by
the Company during the first quarter of 1996 to approximately 38,300
compared to an average of approximately 40,000 for the same period
in 1995. While the average coin revenue per public pay telephone
remained relatively consistent period to period, the Company
believes that the number of coin calls made at its public pay
telephones may decrease over time. The Company believes that,
among other things, the decreases will primarily result from the
increased usage of alternative methods of calling such as prepaid
calling cards and wireless technologies and the operation of more
public pay telephones in closer proximity to the Company's
telephones.
During the second quarter of 1995, the Company signed a contract
with AT&T to act as its primary third-party operator service
provider. Prior to the execution of this agreement, non-coin calls
were routed through the Company's private label operator service
program. The Company records as revenue the total amount the end
user pays for the call (net of taxes) when the call is completed
through the Company's private label operator service. In contrast,
when the call is completed through the third-party operator service
provider, the Company records as revenue the amount it receives from
the third-party operator service provider which represents a
negotiated percentage of the total amount the caller pays for the
call. The Company uses its private label operator service or a
third-party operator service provider based on which service the
Company believes nets it the highest gross margin from the call.
Non-coin revenue represented approximately 40.5% and 47.1% of
total revenues from continuing operations for the quarters ended
March 31, 1996 and 1995, respectively. Non-coin revenue is derived
from calling card calls, credit card calls, collect calls and
third-party billed calls placed from the Company's public pay
telephones and inmate telephones. For the quarter ended March 31,
1996, revenues from non-coin calls decreased 27.3% to approximately
$12.4 million, compared to the quarter ended March 31, 1995. This
decrease was primarily attributable to an increase in the number of
public pay telephone calls placed through third-party operator
service providers as opposed to the Company's private label operator
service and the decrease in the number of inmate telephone lines
operated by the Company. During the first quarter of 1996, the
Company operated approximately 2,100 inmate telephone lines,
compared to approximately 3,200 during the first quarter of 1995.
Operating Expenses
Operating expenses include telephone charges, commissions, field
service and collection expenses and selling, general and
administrative expenses. Telephone charges consist of local line
charges paid to Local Exchange Carriers which include costs of
basic service and transport of local coin calls, long-distance
transmission charges and network costs and billing, collection and
validation costs. Commissions represent payments to property owners
and correctional facilities for revenues generated by the Company's
telephones located on their properties. Field service and collection
expenses represent the costs of servicing and maintaining the
telephones on an ongoing basis, costs of collecting coin from the
telephones and other related operational costs. Selling, general and
administrative expenses primarily consist of payroll and related
costs, legal and other professional fees, promotion and advertising
expenses, property, gross receipts and certain other taxes,
corporate travel and entertainment and various other expenses.
The switch by the Company to a third-party operator service
resulted in a decreased revenue base due to the method of recording
revenue for calls made through that service as compared to calls
placed through the Company's private label operator service program
(see above). As a result, operating expenses as a percentage of
revenues for the three months ended March 31, 1996 increased
compared to the same period in 1995. Total operating expenses were
approximately 84.9% and 80.7% of total revenues from continuing
operations for the quarters ended March 31, 1996 and 1995,
respectively.
Telephone charges decreased as a percentage of total revenues
from continuing operations to 32.3% for the quarter ended March 31,
1996, compared to 36.0% for the same period in 1995. The decrease
in telephone charges is primarily due to a decline in the number of
calls placed through the Company's private label operator service
program. The Company paid the costs incurred to transmit, bill,
collect and validate the call when the call was completed through
its private label operator services. In contrast, the Company
incurred no such costs when a third-party operator service provider
completed the call. In addition, the Company has experienced a
decrease in telephone charges as a result of regulatory changes and
competition within the local/intraLata service market which began in
the third quarter of 1995. Telephone charges for the first quarter
of 1995 include a reduction of interexchange carrier expenses
related to a settlement with a service provider for certain billing
errors and underpayment of operator service revenue of approximately
$1.3 million.
Commissions as a percentage of total revenues from continuing
operations were approximately 27.1% and 23.0% for the quarters
ended March 31, 1996 and 1995, respectively. The increase in
commissions as a percentage of revenues was primarily attributable
to (i) the change in the Company's method of recording revenue as a
result of the Company's switch to a third-party operator service
provider; (ii) higher commission rates paid in connection with
the Atlanta Hartsfield International Airport account; and (iii)
higher commission rates for new and renewed contracts due to
increasing competition in the public pay telephone and inmate
telephone markets.
Field service and collection expenses as a percentage of total
revenues from continuing operations were 15.7% and 14.4% for the
first quarter of 1996 and 1995, respectively. This increase was
primarily attributable to the reduced revenue base as described
above. In total, field service and collection expenses decreased
to approximately $4.8 million for the first quarter of 1996 compared
to approximately $5.2 million for the same period in 1995. This
decrease was primarily attributable to cost savings resulting from
office and route consolidations and a focus on achieving further
operating efficiencies. Selling, general and administrative
expenses increased 12.8% to approximately $3.0 million in the first
quarter 1996 versus the first quarter 1995. This increase was
primarily attributable to an increase in insurance premiums, the
salary associated with the addition of an internal sales force and
increases in industry association dues, filing fees and promotional
costs.
Depreciation and Amortization
Depreciation is based on the cost of the telephones, booths,
pedestals and other enclosures, related installation costs and line
interconnection charges and is calculated on a straight-line method
using a ten-year useful life for public pay telephones and a
five-year useful life for inmate telephones. Amortization is
primarily based on acquisition costs including location contracts,
goodwill and non-competition provisions and is calculated on a
straight-line method using estimated useful lives ranging from five
to twenty years. Depreciation and amortization increased to $6.0
million for the quarter ended March 31, 1996, compared to $5.6
million for the same period in 1995. The increase in depreciation
and amortization is primarily attributable to the revision of the
depreciation and amortization policy for certain inmate assets.
Based on increased competition and certain other changes within the
inmate telephone industry, the Company reduced the useful lives of
various assets to five years. As a result of this change in
accounting estimate, depreciation and amortization increased
approximately $0.3 million in the first quarter of 1996.
Interest Expense
In the first quarter of 1996, interest expense increased 69.9%
to $3.1 million as compared to the same quarter in 1995. This
increase is primarily attributable to (i) the higher interest rate
on the Company's $100.0 million of Senior Notes as compared to the
rates in effect on the Company's revolving line of credit in
existence in the first quarter of 1995; and (ii) the inclusion of
interest expense in continuing operations which was previously
allocated to the Company's cellular operations which were included
in discontinued operations.
Gain on Disposal of Prepaid Calling Card and International Telephone
Centers
Gain on disposal of prepaid calling card and international
telephone centers includes approximately $0.3 million received in
connection with the sale of the Company's international telephone
center operations and approximately $0.3 million recognized in
connection with the merger of Global Link Teleco Corporation and
Global Telecommunications Solutions, Inc. (see Note 3 to the
accompanying consolidated financial statements).
Other
Other expense includes approximately $0.6 million of severance
obligations incurred under employment agreements with certain key
executives.
Benefit from Income Taxes
The Company's benefit from income taxes decreased approximately
$0.2 million for the quarter ended March 31, 1996 from the same
period in 1995 primarily due to the fact that for the 1996 period
the Company recorded valuation allowances for 100% of the deferred
tax assets generated from operating losses in the period. The
Company recorded deferred tax assets and deferred tax asset
valuation allowances of approximately $1.7 million for the quarter
ended March 31, 1996.
Net Loss from Continuing Operations before Extraordinary Item
The Company had a net loss from continuing operations of
approximately $4.5 million for the three months ended March 31,
1996, compared to a net loss from continuing operations of
approximately $0.3 million for the same period in 1995.
Extraordinary Loss
As a result of a March 1995 amendment to the Company's revolving
line of credit agreement, the Company recorded extraordinary losses
from the write-off of deferred financing costs associated with the
early extinguishment of debt of approximately $4.6 million, before
the related income tax benefit of $1.7 million, which is included in
the financial results of the Company for the three months ended
March 31, 1995. There were no such items recorded in the first
quarter of 1996.
Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is not presented as an alternative to operating results
or cash flow from operations as determined by Generally Accepted
Accounting Principles ("GAAP"), but rather to provide additional
information related to the ability of the Company to meet current
trade obligations and debt service requirements. EBITDA should not
be considered in isolation from, or construed as having greater
importance than, GAAP operating income or cash flows from operations
as a measure of an entity's performance.
EBITDA from continuing operations was approximately $4.6
million for the quarter ended March 31, 1996, compared to $6.9
million the same period in 1995. Cash flow for the first quarter of
1995 included approximately $1.3 million of one-time income related
to a settlement with a vendor. The remaining decrease is
attributable to a decrease in the Company's installed base of inmate
telephone lines and public pay telephones, increased commissions and
higher selling, general and administrative expenses offset by
decreases in telephone charges and field service and collection
expenses as noted above.
Liquidity and Capital Resources
During the first quarter of 1996, the Company financed its
operations from operating cash flow. For the quarter ended March
31, 1996, the Company's operating cash flow was $(1.3) million
compared to $0.9 million for the same period in 1995.
The Company's working capital deficit was approximately $(4.1)
million, with a current ratio of .84 to 1, at March 31, 1996. This
is consistent with working capital deficit of $(4.1) million and a
current ratio of .86 to 1 at December 31, 1995.
In April 1996, the Company amended certain terms contained in
the Fourth Amended Loan and Security Agreement (the "Amendment").
In connection with the Amendment, the Bank waived the Company's
non-compliance with certain restrictive covenants contained in the
agreement for the three month period ended December 31, 1995.
The Amendment, among other things, decreased the facility to $10.0
million and reduced the requirements of the financial covenants.
The amended credit facility bears interest at the Bank's prime rate
plus 2% and requires all outstanding principal balances to be repaid
in September 1997. At the same time, the Company decreased to $5.25
the exercise price of the warrants held by Creditanstalt American
Corporation to acquire Common Stock or Series B Preferred Stock of
the Company that had not already been repriced. At March 31, 1996,
the Company was in compliance with the amended covenants and had no
amounts borrowed under the facility.
Based upon current expectations, the Company believes that cash
flow from operations, together with amounts which may be borrowed
under the amended credit facility, will be adequate for it to meet
its working capital requirements, pursue its business strategy and
service its obligations with respect to its 12 1/4% Senior Notes ,
although there can be no assurance that it will be able to do so.
Part II OTHER INFORMATION
Item 5. Other Events
(a) The Company has scheduled its Annual Meeting of Shareholders
to be held on July 15, 1996.
(b) E. Craig Sanders has been elected President, Chief
Executive Officer and a Director of the Company effective as of May
2, 1996. He succeeded Robert E. Lund in the positions of President
and Chief Executive Officer. Mr. Lund had been serving in those
positions on an interim basis and will continue as a Director of the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description
10.1 Second Amendment to Fourth Amended and Restated Loan and
Security Agreement dated April 4, 1996 between Peoples Telephone
Company, Inc. and Creditanstalt-Bankverein.
10.2 Second Amendment to Second Amended and Restated Warrant
Agreement dated April 4, 1996 between Peoples Telephone Company,
Inc. and Creditanstalt American Corporation.
10.3 Employment Agreement between E. Craig Sanders and the
Company dated May 2, 1996.
(b) Reports on Form 8-K:
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
Registrant
Date: May 14, 1996 /s/ Bonnie S. Biumi
________________________________
Bonnie S. Biumi
Chief Financial Officer