EXHIBIT 99.2
Communications Central Inc.
Consolidated Pro Forma Balance Sheet
September 30, 1997
(Unaudited)
Communications
Central Inc. InVision Pro Forma
(Consolidated) Telecom Inc. Adjustments Pro Forma
-------------- ------------- -------------- ------------
Assets
Current assets:
Cash ......................................................... $ 1,602,584 $ - $ 5,934,191 (b) $ 7,536,775
Accounts receivable, less allowance for doubtful accounts
of $5,347,000 and $3,586,000 at September 30, 1997 and
June 30, 1997, respectively ................................ 9,440,630 ( 1,200,000) (a) - 8,240,630
Prepaid expenses ............................................. 1,142,194 ( 386,405) (a) - 755,789
Assets held for sale.......................................... 39,387,732 ( 39,387,732) (a) - -
Other current assets ......................................... 2,113,177 ( 76,409) (a) - 2,036,768
------------- ------------- ------------ ------------
Total current assets ....................................... 53,686,317 ( 41,050,546) 5,934,191 18,569,962
Operating equipment:
Telecommunications equipment ................................ 64,013,370 - - 64,013,370
Uninstalled equipment ....................................... 552,721 - - 552,721
------------- ------------- ------------ ------------
64,566,091 - - 64,566,091
Less accumulated depreciation and amortization .............. (34,795,324) - - (34,795,324)
------------- ------------- ------------ ------------
29,770,767 - - 29,770,767
Leasehold improvements and office furniture and equipment,
net of accumulated depreciation and amortization of
approximately $2,737,000 and $3,172,000 at September 30, 1997
and June 30, 1997, respectively ............................. 2,036,714 - - 2,036,714
Intangible assets:
Site license contracts, net ................................. 3,652,626 - - 3,652,626
Agreements not to compete, net .............................. 457,682 - - 457,682
Goodwill, net ............................................... 8,504,788 - - 8,504,788
Other assets, net ............................................... 2,125,382 - - 2,125,382
------------- ------------- ------------ ------------
Total assets .............................................. $100,234,276 ($41,050,546) $ 5,934,191 $65,117,921
============= ============= ============ ============
See footnote to pro forma financial statements.
6
Communications Central Inc.
Consolidated Pro Forma Balance Sheet
September 30,1997
(Unaudited)
Communications
Central Inc InVision Pro Forma
(Consolidated) Telecom Inc Adjustment Pro Forma
---------------- --------------- -------------- -------------
Liabilities and shareholders' equity
Current liabilities:
Accounts payable .................................... $ 6,564,209 $ - $ - $ 6,564,209
Accrued expenses .................................... 4,370,114 ( 580,321)(a) 477,034 (c) 4,266,827
Current portion of long-term debt ................... 68,697,389 - ( 33,697,389) (b) 35,000,000
Accrued commissions ................................. 2,317,772 ( 1,419,679)(a) 104,000 (c) 1,002,093
Accrued interest .................................... 808,170 - - 808,170
Accrued compensation ................................ 168,128 - - 168,128
Accrued income taxes payable ........................ 578,984 - - 578,984
------------ ------------ ------------ ------------
Total current liabilities ......................... 83,504,766 ( 2,000,000) ( 33,116,355) 48,388,411
Shareholders' equity:
Common Stock, $.01 par value
Authorized shares - 50,000,000: issued and outstanding
shares - 6,285,987 at September 30, 1997 and
6,284,222 at June 30, 1997 ........................ 62,860 - - 62,860
Additional paid-in capital .......................... 51,493,206 - - 51,493,206
Accumulated deficit ................................. (34,826,556) - - ( 34,826,556)
------------ ------------ ------------ ------------
Total shareholders' equity ........................ 16,729,510 - - 16,729,510
------------ ------------ ------------ ------------
Total liabilities and shareholders' equity ........ $100,234,276 ($ 2,000,000) ($33,116,355) $65,117,921
============ ============ ============ ============
See footnotes to pro forma financial statements.
7
Communications Central Inc.
Consolidated Pro Forma Statements of Operations
For The Three Months Ended September 30, 1997
(Unaudited)
Comunications
Central Inc. InVision Pro Forma
(Consolidated) Telecom Inc. (d) Adjustment Pro Forma
--------------- -------------- ------------ ---------------
Revenue:
Coin calls $ 8,271,156 $ 33,649 $ - $ 8,237,507
Non coin calls 15,400,230(k) 10,454,065 - 4,946,165
Other 478,465 310,208 - 168,257
------------ -------------- ------------ --------------
24,149,851 10,797,922 - 13,351,929
Costs and expenses:
Line access charges 7,325,252 3,468,073 - 3,857,179
Commissions 5,000,788 2,835,675 - 2,165,113
Service and collection 3,670,912 649,101 6,775(e) 3,028,586
Selling, general and administrative 3,062,288 865,715 34,817(e) 2,231,390
Bad debt expense 3,012,719 2,387,905 - 624,814
Provision for dial-around compensation 1,162,510(k) - - 1,162,510
Depreciation and amortization 2,053,474 - - 2,053,474
------------ -------------- ------------ --------------
Total costs and expenses 25,287,943 10,206,469 41,592 15,123,066
------------ -------------- ------------ --------------
Operating income (loss) ( 1,138,092) 591,453 ( 41,592) ( 1,771,137)
Interest expense ( 1,691,709) ( 802,588) 11,862(f) ( 877,259)
------------ -------------- ------------ --------------
Income (loss) before income tax expense ( 2,829,801) ( 211,135) ( 29,730) ( 2,648,396)
Income tax expense - - - -
------------ -------------- ------------ --------------
Net income (loss) ($ 2,829,801) ($ 211,135) ($ 29,730) ($ 2,648,396)
============ ============== ============ ==============
Net income (loss) per common share ($ 0.45) ($ 0.42)
------------ --------------
Weighted average shares outstanding 6,284,856 6,284,856
============ ==============
See footnotes to pro forma financial statements.
8
(Communications Central Inc.)
Consolidated Pro Forma Statements of Operations
For The Year Ended June 30, 1997
(Unaudited)
Communications
Central Inc. InVision Pro Forma
(Consolidated) Teleco (d) Adjustment Pro Forma
-------------- ------------ ------------ --------------
REVENUE:
Coin calls $34,575,398 $ 119,554 $ - $ 34,455,844
Non coin calls 65,894,619 (k) 45,485,422 - 20,409,197
Other 3,377,759 (j) 608,925 - 2,768,834
------------- ------------- ------------ --------------
103,847,776 46,213,901 - 57,633,875
COSTS AND EXPENSES:
Line access charges 31,532,544 14,954,380 - 16,578,164
Commissions 20,839,017 11,893,337 - 8,945,680
Service and collection 19,218,670 6,297,889 136,235 (e) 13,057,016
Selling, general and administrative 5,868,275 - - 5,868,275
Bad debt expense 17,208,408 15,855,264 - 1,353,144
Depreciation and amortization 12,374,243 3,920,209 - 8,454,034
Impairment loss on assets held for sale 2,400,000 (h) 2,400,000 - -
------------- ------------- ------------ --------------
Total costs and expenses 109,441,157 55,321,079 136,235 54,256,313
------------- ------------- ------------ --------------
Operating income (loss) ( 5,593,381) ( 9,107,178) ( 136,235) 3,377,562
Other Income, net 5,473,408 (g) - - 5,473,408
Impairment loss of loan origination fees ( 1,155,652)(i) - - ( 1,155,652)
Interest expense ( 7,130,140) ( 3,320,095) 295,405 (f) ( 3,514,640)
------------- ------------- ------------ --------------
Income (loss) before income tax expense ( 8,405,765) ( 12,427,273) 159,170 4,180,678
Income tax expense - - - -
------------- ------------- ------------ --------------
Net income (loss) ($ 8,405,765) ($12,427,273) $ 159,170 $ 4,180,678
============= ============= ============ ==============
Net income (loss) per common share ($ 1.38) $ 0.69
------------- --------------
Weighted average shares outstanding 6,101,451 6,101,451
============= ==============
See footnotes to pro forma financial statements.
9
Communications Central Inc.
Footnotes to Pro Forma Financial Statements
-------------------------------------------
(a) Represents assets and liabilities of InVision acquired or assumed by
Talton Holdings, Inc. ("Talton"). Adjustment to accounts receivable
represents the portion of accounts receivable collections that will be
retained by Talton.
(b) Represents the net cash proceeds from Talton on October 6, 1997 as follows:
Cash purchase price $39,631,580
Pay down of debt facility $33,697,389
-----------
Net cash proceeds $ 5,934,191
(c) Estimated expenses accrued due to the sale of InVision.
(d) Adjustments represent the operating results of InVision for the three
months ended September 30, 1997 and the year ended June 30, 1997.
(e) Adjustment represents insurance expense allocated to the
InVision operations from the corporate entity.
(f) Adjustment represents interest expense allocated to the InVision
operations from the corporate entity.
(g) In the fourth quarter of fiscal 1997, the Company recognized approximately
$5.5 million in payments, net of related expenses, forfeited by PhoneTel
Technologies, Inc. ("PhoneTel") as a result of the termination of a proposed
merger between PhoneTel and the Company.
(h) An impairment loss of $2.4 million was realized in fiscal 1997 in accordance
with SFAS No. 121. The impairment loss was determined based on the then
estimated fair value to be received for long-lived assets to be disposed of
under an August 21, 1997 Asset Purchase Agreement with Talton.
(i) In the fourth quarter of fiscal 1997, the Company recognized an impairment
loss on loan origination fees in an approximate amount of $1.2 million (as
the 1996 Credit Agreement was then in default).
(j) The Company recognized realized gains of $1.2 million and an unrealized gain
of $1.4 million in fiscal 1997 on its trading securities.
(k) On September 20, 1996, the Federal Communications Commission ("FCC")
adopted rules in a docket entitled In the Matter of Implementation of the
--------------------------------------
Pay Telephone Reclassification and Compensation Provisions of the
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Telecommunications Act of 1996, FCC 96-388 (the "1996 Payphone Order"),
------------------------------
implementing the payphone provisions of Section 276 of the
Telecommunications Act of 1996 ("Telecom Act"). The 1996 Payphone Order,
which became effective November 7, 1996, initially mandated dial-around
compensation for both access code calls and subscriber 800 calls at a flat
rate of $45.85 per payphone per month (131 calls multiplied by $0.35 per
call). Commencing October 7, 1997 and ending October 6, 1998 the $45.85 per
payphone per month rate was to transition to a per-call system at the rate
of $0.35 per call. Several parties filed petitions for judicial review of
certain of the FCC regulations including the dial-around compensation rate.
On July 1, 1997, the U.S. Court of Appeals for the District of Columbia
Circuit (the "Court") responded to appeals related to the 1996 Payphone
Order by remanding certain issues to the FCC for reconsideration. These
issues included, among other things, the manner in which the FCC established
the dial-around compensation for subscriber 800 and access code calls, the
manner in which interexchange carriers ("IXCs") would be required to
compensate payphone service providers ("PSPs"). The Court remanded the issue
to the FCC for further consideration, and clarified on September 16, 1997
that it had vacated certain portions of the FCC's 1996 Payphone Order,
including the dial-around compensation rate. Specifically, the Court
determined that the FCC did not adequately justify (i) the per-call
compensation rate for subscriber 800 and access code calls at the
deregulated local coin rate of $0.35, because it did not sufficiently
justify its conclusion that the costs of local coin calls are similar to
those of subscriber 800 and access code calls; and (ii) the allocation of
the payment obligation among the IXCs for the period from November 7, 1996
through October 6, 1997.
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In accordance with the Court's mandate, on October 9, 1997 the FCC
adopted and released its Second Report and Order in the same docket, FCC 97-
371 (the "1997 Payphone Order"). This order addressed the per-call
compensation rate for subscriber 800 and access code calls that originate
from payphones in light of the decision of the Court which vacated and
remanded certain portions of the FCC's 1996 Payphone Order. The FCC
concluded that the rate for per-call compensation for subscriber 800 and
access code calls from payphones is the deregulated local coin rate adjusted
for certain cost differences. Accordingly, the FCC established a rate of
$0.284 ($0.350 minus $0.066) per call for the first two years of per-call
compensation (October 7, 1997 through October 6, 1999). The IXCs are
required to pay this per-call amount to PSPs, including the Company,
beginning October 7, 1997. After the first two years of per-call
compensation, the market-based local coin rate, adjusted for certain costs
defined by the FCC as $0.066 per call, is the surrogate for the per-call
rate for subscriber 800 and access code calls. These new rule provisions
were made effective as of October 7, 1997.
In addition, the 1997 Payphone Order tentatively concluded that the same
$0.284 per call rate adopted on a going-forward basis should also govern
compensation obligations during the period from November 7, 1996 through
October 6, 1997, and that PSPs are entitled to compensation for all access
code and subscriber 800 calls during this period. The FCC stated that the
manner in which the payment obligation of the IXCs for the period from
November 7, 1996 through October 6, 1997 will be allocated among the IXCs
will be addressed in a subsequent order.
Based on the FCC's tentative conclusion in the 1997 Payphone Order, the
Company in its first quarter of fiscal 1998 adjusted the amounts of dial-
around compensation previously recorded related to the period from November
7, 1996 through June 30, 1997 from the initial $45.85 rate to $37.20 ($0.284
per call multiplied by 131 calls). As a result of this adjustment, the
provision, net of applicable commissions, recorded in the first quarter for
reduced dial-around compensation was approximately $1,162,510 ($.18 per
share). For the period from July 1, 1997 through October 6, 1997, the
Company recorded dial-around compensation at the rate of $37.20 per payphone
per month. The amount of dial-around revenue recognized in the period from
July 1, 1997 through October 6, 1997 was $2,221,302 and such amount will be
billed after final resolution of the allocation obligations of the IXCs as
determined by the FCC.
The Company's outside federal regulatory counsel, Dickstein, Shapiro,
Morin & Oshinsky LLP, is of the opinion that the Company is legally entitled
to fair compensation under the Telecom Act for dial-around calls the Company
delivered to any carrier during the period from November 7, 1996 through
October 6, 1997. Based on the information available, the Company believes
that the minimum amount it is entitled to as fair compensation under the
Telecom Act for the period from November 7, 1996 through October 6, 1997 is
$37.20 per payphone per month and the Company, based on the information
available to it, does not believe that it is reasonably possible that the
amount will be materially less than $37.20 per payphone per month. While the
amount of $0.284 per call constitutes the Company's position of the
appropriate level of fair compensation, certain IXCs have asserted in the
past, are asserting and are expected to assert in the future that the
appropriate level of fair compensation should be lower than $0.284 per call.
In a letter to the FCC dated August 15, 1997, AT&T stated its intention to
make dial-around payments to PSPs based on its imputed rate of $0.12 per
call until the FCC issues a new order setting the level of fair
compensation.
11