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.
* * * *
THE FOLLOWING IS A PRESS RELEASE ISSUED BY PHONETEL
TECHNOLOGIES, INC. ON MAY 16, 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 FIRST QUARTER RESULTS
CLEVELAND, OH - MAY 16, 2002 -- PhoneTel Technologies, Inc. ("PhoneTel")
(OTC:BB: PHTE), one of the nation's largest independent providers of public pay
telephone services, today announced results for the first quarter ended March
31, 2002. The Company reported a net loss of $6.8 million, or $0.67 per share,
basic and diluted, which is an increase of $0.6 million or 9.6% from the net
loss of $6.2 million, or $0.61 per share, basic and diluted, for the first
quarter of 2001.
Total revenue for the first quarter ended March 31, 2002 decreased 22.9% to $8.8
million, compared to $11.4 million for the prior year's first quarter. The
decrease is a result of the Company's removal of unprofitable phones and lower
call volumes due to increased competition from wireless services. Coin call
revenue decreased 16.8% to $5.6 million from $6.7 million for the first quarter
of 2001. Non-coin call revenue declined 33.8% to $3.0 million from $4.5 million
for the year earlier quarter. Impacting both coin call and non-coin call revenue
was a decrease in the number of installed phones as the Company continued
implementation of its strategy to remove unprofitable phones. The number of
average payphones per month declined to approximately 30,000 for the quarter
ended March 31, 2002, from approximately 35,000 for the quarter ended March 31,
2001.
The Company's operating expenses, consisting primarily of telephone charges,
commissions, field operations, SG&A expenses, and depreciation and amortization,
declined 19.3% to $12.0 million for the first quarter of 2002, compared to $14.8
million for the year earlier quarter. The decrease was primarily the result of
the unprofitable phone removal program, net credits of $0.5 million related to
the resolution of disputes over line charges, and cost savings in field
operations resulting from the implementation of a joint payphone servicing
arrangement with Davel Communications, Inc. ("Davel"). Depreciation and
amortization also declined due to lower asset carrying values resulting from
impairment charges in prior years.
RECENT DEVELOPMENTS
On May 9, 2002, PhoneTel and Davel announced that Davel filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission (SEC), which
includes a joint proxy statement/prospectus of PhoneTel and Davel. PhoneTel and
Davel had previously announced the execution of a merger agreement and related
agreements under which (1) indebtedness of Davel in an aggregate amount of
approximately $218.8 million (plus interest accrued after June 30, 2002) will be
exchanged for 380,612,730 shares of Davel common stock; (2) indebtedness of
PhoneTel in an aggregate amount of approximately $33.2 million (plus interest
accrued after June 30, 2002) will be exchanged for 112,246,511 shares of
PhoneTel common stock; (3) a wholly owned subsidiary of Davel will merge with
and into PhoneTel, with each share of PhoneTel common stock (including the
shares issued in exchange for the PhoneTel indebtedness) being converted into
the right to receive 1.8233 shares of Davel common stock; and (4) PhoneTel will
survive as a wholly owned subsidiary of Davel after the merger. The registration
statement filed with the SEC seeks to register the 223,238,000 Davel shares
being delivered to PhoneTel stockholders in the merger.
At the same time, the Company announced that Cleveland, Ohio has been selected
as the combined companies' corporate headquarters, following the merger. The
companies also announced the composition of the proposed Board of Directors for
the combined entity. The proposed Board includes John D. Chichester, Chief
Executive Officer and President of PhoneTel, who is designated to serve in those
same capacities for the consolidated Company post-merger, and Bruce W. Renard,
current President of Davel, who will serve in a Board and consulting capacity
post-merger. In addition, Andrew C. Barrett, former commissioner with the
Federal Communications Commission and the Illinois Commerce Commission and
current managing director of the Barrett Group; James N. Chapman, an independent
capital markets and strategic planning consultant for private and public
companies; and Kevin P. Genda, a managing director of Cerberus Capital
Management, L.P. and senior vice president-chief credit officer of Ableco
Finance LLC have also been selected to serve on the new Board of Davel.
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 operating in the shopping center,
hospitality, health care, convenience store, university, service station, retail
and restaurant industries.
Founded in 1979, Davel currently is the largest independent payphone provider in
the United States. Headquartered in Tampa, Florida, Davel operates payphones in
44 states and the District of Columbia.
In connection with the proposed transactions, PhoneTel and Davel have filed
relevant materials with the SEC, including the Registration Statement on Form
S-4 filed on May 9, 2002 that contains a prospectus and join proxy statement.
Because those documents contain important information, holders of PhoneTel's
common stock are urged to read them. The Registration Statement filed by Davel
is available for free at the SEC's website, www.sec.gov. Information on how to
obtain transaction-related documents for free from Davel is set forth in the
Registration Statement.
PhoneTel and its directors and executive officers and Davel and its directors
and executive officers may be deemed to be participants in the solicitation of
proxies from the holders of PhoneTel's common stock and/or Davel's common stock
in connection with the proposed transactions. On February 21, 2002 information
regarding the participants and their interest in the solicitation was filed
pursuant to Rule 425 with the SEC by each of PhoneTel and Davel. To PhoneTel's
knowledge, as of May 16, 2002, neither Davel nor any of its executive officers
held any shares of PhoneTel's common stock. Investors may obtain additional
information regarding the interests of the participants by reading the final
prospectus and joint proxy statement if and when it becomes available.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
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 the Company's 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, or a combined PhoneTel and Davel, to differ materially,
many of which are beyond the control of PhoneTel, 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 with the SEC. 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 release.
Information on significant potential risks and uncertainties is set forth more
fully in the Company's Annual Report on Form 10-K for the year ended December
31, 2001, Quarterly Report on Form 10-Q for the quarter ended March 31, 2002,
and the Registration Statement on Form S-4 filed with the SEC by Davel on May 9,
2002.
-- FINANCIAL TABLES FOLLOW --
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT FOR SHARE AND PER SHARE AMOUNTS)
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(UNAUDITED)
THREE MONTHS ENDED MARCH 31
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2001 2002
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REVENUES:
Coin calls $6,716 $5,586
Non coin telecommunication services 4,499 2,977
Other 141 189
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11,356 8,752
Operating expenses: 14,867 11,998
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Loss from operations (3,511) (3,246)
Interest expense, net (2,706) (3,573)
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Net loss $(6,217) $(6,819)
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Net loss per common share, basic and diluted ($0.61) ($0.67)
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Weighted average number of shares, basic and diluted 10,189,684 10,189,684
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CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
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(Unaudited)
December 31 March 31
2001 2002
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Current assets $11,986 $12,579
Property and equipment, net 13,983 12,844
Intangible assets, net 22,770 21,781
Other assets 689 625
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Total assets $49,428 $47,829
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Current liabilities $78,462 $82,418
Long term debt 1,116 2,380
Shareholders' equity (deficit) (30,150) (36,969)
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Total liabilities and shareholders' equity
(deficit) $49,428 $47,829
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