Filed by Towne Services, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934 Subject Company:
Towne Services, Inc. Commission File No. 000-24695
The following is the text of a press release issued by Towne Services, Inc. on
August 8, 2001 announcing second quarter results.
FOR IMMEDIATE RELEASE
Contact: G. Lynn Boggs
Chairman and Chief Executive Officer
(678) 475-5200
TOWNE SERVICES, INC. ANNOUNCES SECOND QUARTER 2001 RESULTS
--------------------------------------
COMPANY ACHIEVES POSITIVE OPERATIONAL CASH FLOW
WITH STRONG YEAR-OVER-YEAR BOTTOM - LINE IMPROVEMENT
SUWANEE, Ga. (August 8, 2001) -- Towne Services, Inc. (Nasdaq/NM: TWNE) today
reported positive cash flow from operations on a quarterly basis for the first
time in the company's history.
The company reported earnings from operations (before income taxes,
depreciation and amortization) of $311,000 for the second quarter ended June 30,
2001, compared with a loss of $1.7 million for the second quarter ended June 30,
2000. The company also reported year-to-date positive operational cash flow,
with earnings from operations (before income taxes, depreciation and
amortization) of $121,000 for the six months ended June 30, 2001 compared with a
loss of $4.1 million for the prior year period.
Net revenues for the quarter ended June 30, 2001 totaled $5.3 million,
compared with $6.8 million for the quarter ended June 30, 2000. The company
reported an adjusted net loss of $826,000, or $(0.16) per share, in the quarter
of 2001 compared with an adjusted net loss of $2.9 million, or $(0.53) per
share, for the same period last year. The adjusted net loss for the second
quarter of 2001 excludes a $1.4 million charge related to merger expenses as an
extraordinary item.
For the six months ended June 30, 2001, the company reported total
revenues of $11.0 million compared with $13.5 million for the six months ended
June 30, 2000. The adjusted net loss attributable to common shareholders was
$2.3 million for the six months ended June 30, 2001 (exclusive of an
extraordinary item of $1.4 million related to merger expenses), compared with a
net loss of $6.3 million a year ago.
All per share figures have been adjusted to reflect the one-for-five
reverse split of the company's common stock effected December 20, 2000.
The company also reported a balance of over $9.6 million of cash and
short-term investments as of June 30, 2001.
-MORE-
"The second quarter results mark a significant milestone for Towne, as
we achieved positive operational cash flow, not only for the first quarter in
the company's history, but year-to-date as well," commented Lynn Boggs, chairman
of the board and chief executive officer of Towne. "Our significant bottom-line
improvement reflects the tangible benefits of the organizational and structural
changes we have implemented throughout the company since the beginning of last
year."
As previously announced on April 16, 2001, the company signed a
definitive agreement to merge Towne with Private Business, Inc. (Nasdaq: PBIZ).
The merger is subject to customary closing conditions, including approval of the
shareholders of both companies at their annual meetings now scheduled for August
9, 2001. The agreement is structured as a tax-free exchange in which Towne's
shareholders will receive shares of common stock of Private Business for their
shares of Towne's common stock.
Towne, based in the metropolitan Atlanta area, is a leading provider of
services and products that process sales and payment information and related
financing transactions for small and mid-sized retail and commercial businesses
and banks in the United States. The company delivers these services and products
on-line by linking its business and bank customers to its processing systems
using the Internet and telecommunications lines. Towne's systems also act as a
hub, or electronic gateway, through which customers can access a variety of
e-commerce business and management tools provided by Towne and its strategic
alliances.
This release contains forward-looking statements that involve risks and
uncertainties, including those relating to Towne's operations, revenue, economic
performance, business prospects, management and financial condition. Actual
results may differ materially from those expressed or implied by such
forward-looking statements as a result of the following factors, among others:
whether Towne can grow its customer base as planned; competitive market
pressures in the financial technology sector; the possible negative effects of
lawsuits filed against Towne; whether Towne will continue to satisfy stock
market listing standards; market acceptance of new products and services; and
other factors discussed under "Management's Discussion and Analysis of Financial
Condition and Results of Operations - Disclosure Regarding Forward-Looking
Statements" in Towne's filings with the Securities and Exchange Commission. In
addition, there are potential risks and uncertainties relating to Towne's
proposed merger with Private Business, including, but not limited to, the
ability of the parties to obtain the required shareholder approval and close the
merger as anticipated.
WE URGE INVESTORS AND SECURITY HOLDERS TO READ PRIVATE BUSINESS'S
REGISTRATION STATEMENT ON FORM S-4 AND THE JOINT PROXY STATEMENT/ PROSPECTUS, AS
SUPPLEMENTED, AND ANY OTHER RELEVANT DOCUMENTS RELATING TO THE MERGER
TRANSACTION, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors and
security holders may obtain a free copy of these and other documents relating to
the transaction at the SEC's web site at www.sec.gov. The documents filed with
the SEC by Private Business may also be obtained free of charge from Private
Business by directing a request to Private Business, Inc., 9010 Overlook
Boulevard, Brentwood, Tennessee 37027, Attention Investor Relations: (615)
565-7374. The documents filed with the SEC by Towne may also be obtained free of
charge from Towne by directing a request to Towne Services, Inc., 3950 Johns
Creek Court, Suite 100, Suwanee, Georgia, 30024, Attention Investor Relations:
(678)
-MORE-
475-5200. READ THE DEFINITIVE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT / PROSPECTUS, AS SUPPLEMENTED, CAREFULLY BEFORE MAKING A DECISION
CONCERNING THE MERGER. Towne and Private Business, and their respective
directors and executive officers, may be deemed to be participants in the
solicitation of proxies from the shareholders of Towne and Private Business in
connection with the merger. INFORMATION ABOUT THE DIRECTORS AND EXECUTIVE
OFFICERS OF TOWNE AND THEIR OWNERSHIP OF TOWNE STOCK, ABOUT THE DIRECTORS AND
EXECUTIVE OFFICERS OF PRIVATE BUSINESS AND THEIR OWNERSHIP OF PRIVATE BUSINESS
STOCK, AND ABOUT THE INTERESTS OF THOSE PARTICIPANTS IS SET FORTH IN THE JOINT
PROXY STATEMENT/PROSPECTUS.
-MORE-
TWNE Announces Second Quarter Results
Page 4
August 8, 2001
TOWNE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------------------------------------------------------
2001 2000 2001 2000
--------------- --------------- ---------------- ----------------
(unaudited) (unaudited)
REVENUES $ 5,309,994 $ 6,780,410 $ 10,981,097 $ 13,480,307
COSTS AND EXPENSES:
Costs of processing, servicing and support 1,243,638 1,878,215 2,692,983 3,940,899
Sales and marketing 2,468,570 4,432,727 5,602,123 9,423,076
General and administrative 1,408,018 2,436,158 2,809,015 4,816,433
--------------- --------------- ---------------- ----------------
Total costs and expenses 5,120,226 8,747,100 11,104,121 18,180,408
--------------- --------------- ---------------- ----------------
EBITDA 189,768 (1,966,690) (123,024) (4,700,101)
--------------- --------------- ---------------- ----------------
Interest Income (121,660) (242,143) (243,667) (630,729)
--------------- --------------- ---------------- ----------------
Earnings before Taxes, Depreciation & Amortization 311,428 (1,724,547) 120,643 (4,069,372)
--------------- --------------- ---------------- ----------------
Provision for Income tax expense 18,285 - 32,471 -
Depreciation & Amortization 1,119,100 1,159,941 2,344,097 2,174,758
--------------- --------------- ---------------- ----------------
Net Profit (Loss) before Extraordinary Item $ (825,957) $ (2,884,488) $ (2,255,925) $ (6,244,130)
=============== =============== ================ ================
Extraordinary Item: Merger Expenses $ 1,390,798 $ - $ 1,390,798 $ -
--------------- --------------- ---------------- ----------------
Net Profit (Loss) $ (2,216,755) $ (2,884,488) $ (3,646,723) $ (6,244,130)
=============== =============== ================ ================
--------------- --------------- ---------------- ----------------
Preferred Stock Dividends $ 40,000 $ 40,000 $ 80,000 $ 80,000
=============== =============== ================ ================
--------------- --------------- ---------------- ----------------
Net Profit (Loss) Attributable to Common
Shareholders $ (2,256,755) $ (2,924,488) $ (3,726,723) $ (6,324,130)
=============== =============== ================ ================
Net Profit (Loss) Attributable to Common
Shareholders per Common Share:
Basic $ (0.45) $ (0.53) $ (0.74) $ (1.16)
=============== =============== ================ ================
Diluted $ (0.45) $ (0.53) $ (0.74) $ (1.16)
=============== =============== ================ ================
Weighted Average Common Shares Outstanding 5,045,281 5,486,997 5,045,281 5,466,082
=============== =============== ================ ================
END