3/29/02
FORM 425
Filed by: PhoneTel Technologies, Inc. (OTCBB: PHTE.OB)
Commission File No. 0-16715
Pursuant to Rule 425 under the Securities Act of
1933 and deemed filed pursuant to Rule 14a-12
under the Securities Exchange Act of 1934
Subject Companies: PhoneTel Technologies, Inc.
Davel Communications, Inc.
Davel Financing Company, L.L.C.
DF Merger Corp.
PT Merger Corp.
* * * *
THE FOLLOWING IS A PRESS RELEASE ISSUED BY PHONETEL TECHNOLOGIES, INC. ON MARCH
29, 2002:
* * * *
PRESS RELEASE
FOR IMMEDIATE RELEASE
Contacts: John D. Chichester Richard P. Kebert
President and Chief Financial Officer
(216) 241-2555 Chief Executive Officer
PHONETEL TECHNOLOGIES, INC. REPORTS FINANCIAL RESULTS FOR TWELVE MONTHS
ENDED DECEMBER 31, 2001
Cleveland, Ohio - March 29, 2002 - PhoneTel Technologies, Inc. (OTC: BB: PHTE)
today reported financial results for year ended December 31, 2001.
Revenues for 2001 were $45.0 million compared to $58.8 million in 2000. The
decline in revenue is a result of the Company's ongoing strategy to remove
unprofitable payphones, lower call volumes from increased wireless competition
and continued migration of payphone traffic to lower revenue "dial-around"
calling.
For the years ended December 31, EBITDA from recurring operations decreased $1.4
million from $1.8 million in 2000 to $0.4 million in 2001. The decline in EBITDA
from recurring operations was due to the decline in revenue offset by the
decrease in operating expenses, including substantial reductions in field
operating costs resulting from the previously announced
shared payphone servicing agreement with Davel Communications, Inc. Operating
expenses were also lower in 2001 as a result of a $4.4 million write-off of
dial-around compensation accounts receivable in the fourth quarter of 2000. The
loss from operations decreased from $37.5 million to $31.1 million in 2001
primarily due to the decrease in charges relating to payphone location
contracts, which resulted from asset impairment and the removal of unprofitable
payphones and a reduction in the related depreciation and amortization. The
Company's net loss decreased by $5.8 million, or 12.0% from $48.4 million in
2000 to $42.6 million in 2001. The Company's net loss per share declined from
$4.75 to $4.18 per common share in 2001.
On February 21, 2002, the Company announced that it had executed a definitive
merger agreement with Davel Communications, Inc. in which PhoneTel will become a
wholly owned subsidiary of Davel. The merger agreement is subject to approval by
the shareholders of both companies and the receipt of material third party and
governmental approvals and consents.
In connection with the merger, the existing secured lenders of both PhoneTel and
Davel have agreed to exchange a substantial amount of debt for equity securities
issued by the respective companies and to restructure the remaining debt. In
addition, on February 19, 2002 PhoneTel and Davel have each executed amendments
to their existing credit agreements and have entered into a new combined $10
million senior credit facility, the proceeds of which will be used to finance
certain operating and transaction expenses.
In connection with the debt exchange, immediately prior to the Davel merger,
PhoneTel's secured lenders will own 87% of PhoneTel's outstanding common stock,
with the remaining secured debt not to exceed $36.5 million (compared to $62.6
million outstanding at December 31, 2001). Immediately prior to the Davel
merger, existing shareholders of PhoneTel's common stock will own 9% of
PhoneTel's outstanding shares, and 4% of the common stock will be reserved for
issuance of stock options and awards to PhoneTel employees.
Immediately following the merger, current PhoneTel shareholders will own
approximately 3.28% of the shares of Davel common stock, and current Davel
shareholders will own approximately 1.91%. Of the remaining shares, 4.00% are
intended to be reserved for issuance of employee stock options and awards, and
the companies' current lenders will own approximately 90.81%. In connection with
the merger, the then outstanding debt of the existing secured lenders of both
entities (approximately $337 million at December 31, 2001) will be reduced to
$100 million in debt of the merged entity through the exchange of debt for
equity securities.
The merger is currently expected to close in the third quarter of 2002.
Forward-Looking Statements
- --------------------------
Materials included in this document contain "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors that could cause our actual results to be materially different
from historical results or from any future results expressed or implied by such
forward-looking statements. The factors that could cause actual results of
PhoneTel, Davel, or a combined PhoneTel and Davel, to differ materially, many of
which are beyond the control of PhoneTel or Davel include, but are not limited
to, the following: (1) the businesses of PhoneTel and Davel may not be
integrated successfully or such integration may be more difficult,
time-consuming or costly than expected; (2) expected benefits and synergies from
the combination may not be realized within the expected time frame or at all;
(3) revenues following the
transaction may be lower than expected; (4) operating costs, customer loss and
business disruption, including, without limitation, difficulties in maintaining
relationships with employees, customers, clients or suppliers may be greater
than expected following the transaction; (5) generating incremental growth in
the customer base of the combined company may be more costly or difficult than
expected; (6) the effects of legislative and regulatory changes; (7) the tax
treatment of the proposed transactions; (8) an inability to retain necessary
authorizations from the FCC and state utility or telecommunications authorities;
(9) an increase in competition from cellular phone and other wireless products
and wireless service providers; (10) the introduction of new technologies and
competitors into the telecommunications industry; (11) changes in labor,
telephone line service, equipment and capital costs; (12) future acquisitions,
strategic partnerships and divestitures; (13) general business and economic
conditions; and (14) other risks described from time to time in periodic reports
filed by PhoneTel or Davel with the Securities and Exchange Commission. You are
urged to consider statements that include the words "may," "will," "would,"
"could," "should," "believes," "estimates," "projects," "potential," "expects,"
"plans," "anticipates," "intends," "continues," "forecast," "designed," "goal,"
or the negative of those words or other comparable words, to be uncertain and
forward-looking. This cautionary statement applies to all forward-looking
statements included in this document.
PhoneTel Technologies, Inc. is a leading independent provider of pay telephones
and related services with operations in 45 states and the District of Columbia.
PhoneTel serves a wide array of customers in the shopping center, hospitality,
health care, convenience store, university, service station, retail and
restaurant industries.
***
PhoneTel and its directors, executive officers and certain other related persons
and employees may be soliciting proxies or deemed to be soliciting from PhoneTel
or Davel shareholders in favor of the proposed transactions. Information with
respect to the PhoneTel participants and their interests in the solicitation was
filed pursuant to Rule 425 with the SEC by PhoneTel on February 21, 2002.
Shareholders of PhoneTel may obtain additional information regarding the
interests of the participants and additional information regarding the proposed
transactions by reading the joint proxy statement/prospectus intended to be
filed with respect to the proposed transactions if and when it becomes
available. This document is currently not available.
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
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YEAR ENDED DECEMBER 31
-------------------------------------------
2000 2001
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Revenues $58,844 $44,971
Operating expenses 57,083 44,601
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EBITDA from recurring operations (1) 1,761 370
Depreciation and amortization 17,469 12,986
Charges relating to location contracts 21,205 17,582
Other unusual charges and contractual settlements 579 862
------------------ -------------------
Loss from operations (37,492) (31,060)
Interest expense - net (10,914) (11,521)
------------------ -------------------
Net loss ($48,406) ($42,581)
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Net loss per common share, basic and diluted ($4.75) ($4.18)
================== ===================
Weighted average number of shares, basic and diluted 10,189,684 10,189,684
================== ===================
(1) EBITDA from recurring operations includes operating income before
interest expense - net, depreciation and amortization, charges relating
to location contracts, and other unusual charges and contractual
settlements.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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DECEMBER 31 DECEMBER 31
2000 2001
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Current assets $ 13,351 $ 11,986
Property and equipment, net 18,858 13,983
Intangible assets, net 48,374 22,770
Other assets 606 689
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Total assets $ 81,189 $ 49,428
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Current liabilities $ 67,696 $ 78,462
Long-term debt 1,062 1,116
Shareholders' equity (deficit) 12,431 (30,150)
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Total liabilities and shareholders' equity $ 81,189 $ 49,428
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