1
UNITED STATES
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K/A-1
Current Report
0-16715
--------------
Commission File Number
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
October 16, 1995
------------------------
Date of Report
(Date of Earliest Event Reported)
PHONETEL TECHNOLOGIES, INC.
------------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1462198
(State of Incorporation) (I.R.S. Identification No.)
1127 Euclid Avenue
650 Statler Office Tower
Cleveland, Ohio 44115-1601
--------------------------------------
Address and zip code of principal executive offices
(216) 241-2555
--------------------
Registrant's telephone number
2
PART I
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The attached is provided in order to satisfy the filing requirements set forth
in the Rules and Regulations of the Securities and Exchange Act of 1934.
Exhibits
(a) Financial Statements of Business Acquired:
1. Public Telephone Corporation - Financial Statements
Years Ended June 30, 1995 and 1994. On December 26,
1995, Geo. S. Olive & Co., LLC, Public Telephone's
auditors reissued the audited financial statements on
Public Telephone Corporation for the Years Ended June
30, 1995 and 1994, due to an addition error on the
Statement of Income. The enclosed audited Financial
Statements for the Years Ended June 30, 1995 and
1994, amends in entirety the audited financial
statements which had been previously filed as Exhibit
(a)1 on Form 8-K.
2. Public Telephone Corporation - Unaudited Balance
Sheets at September 30, 1995.
3. Public Telephone Corporation - Unaudited
Consolidated Statements of Income for the Three
Months ended September 30, 1995 and 1994.
4. Public Telephone Corporation - Unaudited Consolidated
Statements of Cash Flows for the Three Months Ended
September 30, 1995 and 1994.
5. Public Telephone Corporation - Unaudited Notes to the
Financial Statements for the period ended September
30, 1995.
(b) Pro Forma Financial Information:
1. Public Telephone Corporation and PhoneTel
Technologies, Inc. Unaudited Pro Forma Combined
Condensed Balance Sheet at September 30, 1995.
2. Public Telephone Corporation and PhoneTel
Technologies, Inc. Unaudited Pro Forma Combined
Condensed Income Statements for the Year Ended
December 31, 1994, and Six Months Ended September 30,
1995.
3
SIGNATURES
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 hereunto duly authorized.
PHONETEL TECHNOLOGIES, INC.
(Registrant)
Date: December 28, 1995 /s/ Daniel J. Moos
-----------------------------
Daniel J. Moos
Executive Vice President
Treasurer and
Chief Financial Officer
4
EXHIBIT (a)
5
EXHIBIT (a) 1
PUBLIC TELEPHONE CORPORATION
Financial Statements
June 30, 1995 and 1994
[GEO. S. OLIVE & CO. LLC LOGO]
6
PUBLIC TELEPHONE CORPORATION
TABLE OF CONTENTS
PAGE
----
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statement of income 2
Balance sheet 3
Statement of stockholders' equity 4
Statement of cash flows 5
Notes to financial statements 6
7
[GEO. S. OLIVE & CO. LLC LETTERHEAD]
INDEPENDENT AUDITOR'S REPORT
The Board of Directors
Public Telephone Corporation
Fort Wayne, Indiana
We have audited the accompanying balance sheet of Public Telephone Corporation
as of June 30, 1995, and the related statements of income, stockholders'
equity, and cash flows for the year then ended. These financial statements are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit. The
financial statements of Public Telephone Corporation as of June 30, 1994 were
audited by other auditors whose report dated August 9, 1994 expressed an
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As discussed in the notes to the financial statements, a mathematical error
resulting in overstatement of previously reported other income and net income
for the year ended June 30, 1995, were discovered by management of the Company
subsequent to the issuance of the 1995 financial statements. Accordingly, the
1995 statement of income has been restated to correct the error.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Public Telephone Corporation
at June 30, 1995, and the results of its operations and cash flows for the year
then ended in conformity with generally accepted accounting principles.
/s/ Geo. S. Olive & Co. LLC
Fort Wayne, Indiana
September 13, 1995
8
PUBLIC TELEPHONE CORPORATION
STATEMENT OF INCOME
YEAR ENDED JUNE 30 1995 1994
- -------------------------------------------------------------------------------
Net Sales
Coin calls $1,790,559 $1,173,743
Noncoin calls 549,215 509,814
Service and other 128,441 89,497
---------- ----------
2,468,215 1,773,054
---------- ----------
Operating Expenses
Telephone charges 718,922 417,791
General and administrative 929,053 591,000
Commissions 242,590 209,329
Field services and collection 160,345 80,083
Depreciation, telephone equipment 254,846 155,693
---------- ----------
2,305,756 1,453,896
---------- ----------
Operating income 162,459 319,158
---------- ----------
Other Income (Expense)
Interest expense (354,320) (144,682)
Loss on sale of fixed assets (265,970) (71,953)
Other income 1,805
---------- ----------
(618,485) (216,635)
---------- ----------
NET INCOME (LOSS) $ (456,026) $ 102,523
========== ==========
See notes to financial statements.
(2)
9
PUBLIC TELEPHONE CORPORATION
BALANCE SHEET
JUNE 30 1995 1994
- ---------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 68,645 $ 508,016
Accounts receivable
Coin 18,099 9,354
Noncoin 23,747 79,000
Employees 12,301
Prepaid expenses 19,521 10,730
Telephone parts 30,054 15,442
---------- ----------
Total current assets 172,367 622,542
---------- ----------
PROPERTY AND EQUIPMENT, net 2,138,551 1,772,579
---------- ----------
OTHER ASSETS
Intangible assets, net 100,954 128,551
Security deposits 27,668 27,668
---------- ----------
128,622 156,219
---------- ----------
$2,439,540 $2,551,340
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable to officers $ 18,733
Current maturities of long-term debt $ 784,547 657,557
Accounts payable, trade 63,278 27,622
Accrued expenses 95,814 79,874
---------- ----------
Total current liabilities 943,639 783,786
---------- ----------
LONG-TERM DEBT, net of current portion 1,355,741 1,217,291
---------- ----------
DEFERRED COMPENSATION 37,239 14,650
---------- ----------
STOCKHOLDERS' EQUITY
Preferred stock, no par value
Authorized, 10,000,000 and 100,000 shares
Issued and outstanding, 0 shares
Class A common stock, no par value
Authorized, 15,000,000 and 10,000,000 shares
Issued and outstanding 1,056 and 899 shares 922,334 899,000
Class B common stock, no par value
Authorized, 100,000 shares
Issued and outstanding, 0 shares
Retained earnings (deficit) (819,413) (363,387)
---------- ----------
102,921 535,613
---------- ----------
$2,439,540 $2,551,340
========== ==========
See notes to financial statements.
(3)
10
PUBLIC TELEPHONE CORPORATION
STATEMENT OF STOCKHOLDERS' EQUITY
NUMBER RETAINED
OF COMMON EARNINGS TREASURY
SHARES STOCK (DEFICIT) STOCK TOTAL
- ----------------------- ------ -------- ---------- --------- --------
BALANCES, JULY 1, 1993 951 $951,000 $(465,910) $(61,000) $424,090
Net income 102,523 102,523
Retirement of treasury stock (61) (61,000) 61,000
Issuance of stock 9 9,000 9,000
----- -------- --------- -------- --------
BALANCES, JUNE 30, 1994 899 899,000 (363,387) 0 535,613
Net income (loss) (456,026) (456,026)
Issuance of stock 157 23,334 23,334
----- -------- --------- -------- --------
BALANCES, JUNE 30, 1995 1,056 $922,334 $(819,413) $ 0 $102,921
===== ======== ========= ======== ========
See notes to financial statements.
(4)
11
PUBLIC TELEPHONE CORPORATION
STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30 1995 1994
- -----------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net income (loss) $(456,026) $ 102,523
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Depreciation and amortization 331,834 189,666
Loss on sale of equipment 265,970 64,015
Changes in assets and liabilities
Accounts receivable 34,207 (84,604)
Prepaid and sundry assets (23,403) 21,400
Accounts payable, trade 60,656 1,542
Accrued expenses 15,940 76,558
Deferred compensation 22,589 14,650
--------- ---------
Net cash provided by operating activities 251,767 385,750
--------- ---------
INVESTING ACTIVITIES
Proceeds from sale of property and equipment 15,523 10,140
Increase in security deposits (27,668)
Acquisition of Aaron Communication Services, Inc. assets (47,659) (115,252)
Acquisition of TTC Investments assets (438,000)
Other acquisitions of property and equipment (329,611) (319,547)
--------- ---------
Net cash used by investing activities (361,747) (890,327)
--------- ---------
FINANCING ACTIVITIES
Principal payments on long-term debt (674,101) (468,443)
Proceeds received from notes payable 400,000 90,272
Financing fees paid (59,891)
Proceeds from notes payable officers 18,733
Proceeds received on sale-leaseback transactions 1,318,000
Proceeds received from issuance of stock 4,601 9,000
--------- ---------
Net cash provided (used) by financing activities (329,391) 967,562
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (439,371) 462,985
CASH AND CASH EQUIVALENTS, BEGINNNING OF YEAR 508,016 45,031
--------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $ 68,645 $ 508,016
========= =========
SUPPLEMENTAL CASH FLOWS INFORMATION
Notes payable issued in connection with acquisition
of assets $ 139,341 $ 645,617
Deferred financing costs included in accounts payable 25,000
Notes payable to officers converted to common stock 18,733
Cash paid for interest 358,132
Purchase of Wonder Pay Telephone Company assets
under capital lease obligation 360,000
Purchase of fixed assets under capital lease obligation 40,200
See notes to financial statements.
(5)
12
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
Public Telephone Corporation (PTC or the Company) owns, operates, and
maintains pay telephones connected to the network of regulated telephone
companies at various third-party property owner locations, primarily located in
Indiana, Illinois, Ohio, and Michigan. The Company also derives revenue from
routing calls to operator service companies. The Company commenced significant
installation and operation of pay telephones in April 1992.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost, including telephone, installation,
and related costs. Assets acquired under capital leases are recorded at the
present value of lease payments, including bargain purchase options expected to
be exercised. Net gains or losses on sales of telephone equipment leased back
under capital lease arrangements are deferred as a component of capital lease
assets. Depreciation and amortization are provided on the straight-line method
over the estimated useful lives of the assets commencing when the property or
equipment is installed and placed in service.
INTANGIBLE ASSETS
The Company has various intangible assets including noncompetition agreements,
organization costs, goodwill, and financing fees. Amortization is computed
using the straight-line method over the following lives:
YEARS
- -----------------------------------------------------------------------
Consulting and noncompetition agreements 3
Organization costs 3
Goodwill 3
Financing fees 4
BAD DEBTS
Trade accounts receivable are considered fully collectible; therefore, no
allowance for bad debts has been provided.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist of bank deposits in federally insured
accounts. From time to time during the year, the Company's cash accounts
exceeded federally insured limits.
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments, if any, purchased with an original maturity of three
months or less to be cash equivalents.
(6)
13
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
RECLASSIFICATIONS AND RESTATEMENT
Certain amounts presented in prior year financial statements have been
reclassified to conform to the current year presentation. The Company has
reissued its 1995 financial statements to correct a mathematical error
resulting in overstatement of previously reported other income and net income
in the Company's statement of income for the year ended June 30, 1995. Total
other income and net income as shown in the statement of income decreased by
$708,640 from those amounts previously presented.
ACQUISITIONS
On August 30, 1993, the Company acquired certain public pay telephone
operations of Aaron Communication Service, Inc. for approximately $457,000. The
purchase price was financed with capital leases and seller financing of
approximately $115,000 and $342,000.
On January 5, 1994, the Company acquired substantially all the assets of TTC
Investments, a public pay telephone company, for approximately $742,000.
The purchase price was financed with capital leases and seller financing of
approximately $438,000 and $304,000.
On July 7, 1994, the purchase agreement with Aaron Communication Service, Inc.
was amended to include approximately 142 more phones not purchased in the
original agreement on August 30, 1993. The purchase price was financed with
long-term notes and seller financing of approximately $131,000.
On September 13, 1994, the Company acquired substantially all of the assets of
Wonder Pay Telephone Company, a public pay telephone company, for $360,000. The
purchase price was financed with a capital lease of $360,000.
The acquisitions have been accounted for using the purchase method and,
accordingly, the acquired assets have been recorded at their fair values at the
date of acquisition. The purchase price allocations resulted in goodwill of
approximately $71,000 and covenants not to compete of approximately $50,000
during the year ended June 30, 1994.
- - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
JUNE 30 1995 1994
- --------------------------------------------------------------------------------
Telephone equipment $2,543,462 $1,968,895
Furniture and fixtures 61,121 49,204
Vehicles 24,676 24,476
---------- ----------
Total cost 2,629,259 2,042,575
Accumulated depreciation and amortization (490,708) (269,996)
---------- ----------
$2,138,551 $1,772,579
========== ==========
(7)
14
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- - INTANGIBLE ASSETS
Intangible assets consist of the following:
JUNE 30 1995 1994
- -------------------------------------------- -------- --------
Noncompete agreements $ 49,600 $ 49,600
Goodwill 70,778 70,778
Organization costs 18,622 18,622
Financing fees 59,891 25,000
-------- --------
Total cost 198,891 164,000
Accumulated amortization (97,937) (35,449)
-------- --------
$100,954 $128,551
======== ========
- - LONG-TERM DEBT
Long-term debt consists of the following:
JUNE 30 1995 1994
- ---------------------------------------------- ---------- ----------
Notes payable, ranging from 12%-16.2%, payable
in monthly payments of $26,423 including
interest, final payment due May 1999,
collateralized by substantially all of the
Company's assets $ 620,203 $ 260,628
Notes payable, ranging from 5.6%-8%, payable
in monthly payments of $12,397 including
interest, final payment due March 1997,
collateralized by substantially all of the
Company's assets 160,400 353,114
Note payable, noninterest bearing, payable in
monthly payments of $960 including interest
(paid off during 1995) 5,147
Obligations under capital leases 1,359,685 1,255,959
---------- ----------
2,140,288 1,874,848
Current maturities (784,547) (657,557)
---------- ----------
$1,355,741 $1,217,291
========== ==========
(8)
15
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The future maturities of long-term debt are as follows:
YEARS ENDING JUNE 30
- -------------------------------------------------------------
1997 $ 190,726
1998 109,707
1999 88,081
2000 6,891
Long-term maturities of capital leases 960,336
----------
$1,355,741
==========
- - LEASES
The Company is obligated under various capital leases including capital leases
arising out of sale and lease back transactions for telephone equipment that
expire at various dates over the next four years. At June 30, 1995 and 1994,
the gross amounts of equipment and related accumulated amortization recorded
under capital leases were as follows:
JUNE 30 1995 1994
- ------------------------------------------------------------------
Telephone and related equipment $1,545,184 $1,378,038
Accumulated amortization (305,464) (184,572)
---------- ----------
$1,239,720 $1,193,466
========== ==========
Amortization of assets held under capital leases is included with
depreciation expense.
The Company also has three operating leases, primarily for office space that
expire over the next two years. These leases generally contain renewal options
for periods ranging from one to two years. Rental expense for these leases
consisted of $32,914 and $24,872 for the years ended June 30, 1995 and 1994.
(9)
16
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Future minimum lease payments for the office space and capital leases,
including bargain purchase options expected to be exercised and the expected
net cost of warrants and related put options granted to the lessor, for each
fiscal year ending June 30 follows:
CAPITAL OPERATING
YEARS ENDING JUNE 30 LEASES LEASES
- -------------------------------------------------------------------------------
1996 $ 618,530 $11,400
1997 586,171 1,900
1998 414,901
1999 188,667
2000 15,900
---------- -------
Total minimum lease payments 1,824,169 $13,300
Amounts representing interest (464,484) =======
----------
Present value of net minimum capital
lease payments $1,359,685
==========
The capital lease agreements require the Company to pledge the related
telephone site leases as additional collateral. At June 30, 1995, approximately
800 such site leases were so pledged.
- - INCOME TAX
YEAR ENDED JUNE 30 1995 1994
- -------------------------------------------------------------------------------
Reconciliation of federal statutory to
actual tax expense (benefit)
Federal statutory income tax at 34% $(155,049) $ 34,857
Graduated tax rates (11,623)
Change in valuation reserve 167,123 (49,000)
Other (12,074) 25,766
--------- --------
Actual tax expense $ 0 $ 0
========= ========
(10)
17
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
The components of deferred taxes are as follows:
JUNE 30 1995 1994
- -------------------------------------------------------------------------
Accrual to cash adjustment $ 6,474 $ 6,474
Differences in depreciation methods (290,797) (159,000)
Deferred compensation 13,778 8,000
Other 20,943 3,526
Net operating loss carryforward 481,725 206,000
Valuation allowance (232,123) (65,000)
--------- ---------
$ 0 $ 0
========= =========
Assets $ 522,920 $(224,000)
Liabilities (290,797) (159,000)
Valuation allowance (232,123) (65,000)
--------- ---------
$ 0 $ 0
========= =========
The valuation allowance at June 30, 1995 is $232,123 and was increased by
$167,123 during the current year.
At June 30, 1994, the Company incurred a net operating loss for tax reporting
purposes, for financial statement purposes, a provision in lieu of income taxes
of $38,000 was offset primarily by a decrease in the deferred tax assets
valuation allowance.
At June 30, 1995, PTC had net operating loss carryforwards for tax purposes
of approximately $1,302,000, which expire as follows:
YEARS ENDING JUNE 30
- -------------------------------------------------------------------------
2005 $ 43,000
2006 88,000
2007 43,000
2008 217,000
2009 165,000
2010 746,000
----------
$1,302,000
==========
(11)
18
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
Of these loss carryover amounts, approximately $138,000 are subject to
limitation on their use in accordance with Internal Revenue Code Section 382.
This section restricts the annual usage of loss carryovers when a significant
change in ownership has occurred. In the event of any future changes in
ownership, loss carryovers available for utilization could be further limited
or restricted.
- - EMPLOYMENT AGREEMENTS
The Company has employment agreements with two of its principal officers
through June 1996. The agreements provide for base compensation, a portion of
which may be deferred, annual bonuses aggregating 6% of income before taxes,
and incentive bonuses based on improvement in the Company's book value per
share. The incentive bonuses range from an aggregate of 40 shares upon
achieving a book value of $637.50 per share to 320 shares upon achieving a book
value of $2,120.76 per share. The bonuses are payable in cash or Class A common
shares at the election of the Company. The agreements contain specific
provisions in the event the employees voluntarily terminate for good reason or
are terminated without cause or within 18 months of a change in control, as
defined. The aggregate commitment for future salaries at June 30, 1995,
excluding bonuses, under these agreements is $265,000 and is contingent on the
future performance of duties. The aggregate contingent liability at June 30,
1995 should the employees be terminated is $525,000, plus three times the
average annual bonus paid prior to the termination.
The employment agreements also granted the officers the right to purchase a
total of 157 Class A shares at 25% of the Company's June 30, 1994 book value,
which was exercised by the officers in September 1994. The officers are
required to offer the Company a right of first refusal upon sale of such shares
at the greater of market value in excess of $1,000 per share of 25% of the
Company's book value per share at the end of the preceding fiscal year.
The officers have an option to convert all Class A common shares issued in
connection with the stock purchase rights and annual and incentive bonuses into
Class B common stock at a rate of 2.2 Class B common shares for each Class A
common share. The conversion option is nonassignable and the officers must
reconvert their Class B common shares to the Class A common shares to liquidate
them.
- - WARRANTS TO PURCHASE COMMON STOCK
In connection with certain capital lease financing, the Company issued warrants
to a lessor representing the right to purchase 45 shares of Class A common
stock for $1,000 per share. Twenty-five of the warrants expire on June 28, 1998
and the remaining twenty expire September 12, 1998. The lessor has the option
to require the Company to repurchase any shares acquired through the exercise
of the warrants for $4,241 per share. The lessor's option expires May 31, 1998
and August 31, 1998. If the lessor does not purchase the shares covered by the
warrants, the Company will be required to redeem the warrants for $3,181 per
warrant at the end of the lease term.
(12)
19
PUBLIC TELEPHONE CORPORATION
NOTES TO FINANCIAL STATEMENTS
- - COMMITMENTS AND CONTINGENCIES
The Company is the defendant in a lawsuit alleging a breach of contract and
requesting damages of $51,000 plus attorney fees. Management believes that such
litigation and claims will be resolved without material effect on the Company's
financial position.
- - ADVERTISING COSTS
The Company expenses advertising costs as incurred. Advertising costs were
$54,057 and $900 for the years ended June 30, 1995 and 1994.
(13)
20
EXHIBIT (a) 2
PUBLIC TELEPHONE CORPORATION
BALANCE SHEETS
September 30 June 30
1995 1995
---------------- ----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $92,282 $68,645
Accounts receivable 52,111 54,147
Prepaid expenses 23,657 19,521
Telephone parts 31,373 30,054
---------------- ----------
Total current assets 199,423 172,367
---------------- ----------
Property and Equipment
Telecommunication equipment 2,493,179 2,543,462
Furniture and fixtures 59,585 61,121
Vehicles 20,921 24,676
---------------- ----------
2,573,685 2,629,259
Less accumulated depreciation
and amortization (538,303) (490,708)
---------------- ----------
Net property and equipment 2,035,382 2,138,551
---------------- ----------
Other assets
Intangible assets 198,891 198,891
Less accumulated amortization (115,893) (97,937)
---------------- ----------
Net intangible assets 82,998 100,954
Security deposits 29,118 27,668
---------------- ----------
Total other assets 112,116 128,622
---------------- ----------
$2,346,921 $2,439,540
================ ==========
Liabilities and Stockholders' Equity
Current liabilities
Current maturities of long-term debt $625,462 $784,547
Accounts payable 105,202 63,278
Accrued expenses 85,696 95,814
---------------- ----------
Total current liabilities 816,360 943,639
---------------- ----------
Long-term debt, net of current portion 1,426,983 1,355,741
Deferred compensation 68,437 37,239
Stockholders' equity:
Preferred stock
Class A common stock 922,334 922,334
Class B common stock
Accumulated deficit (887,193) (819,413)
---------------- ----------
Total stockholders' equity 35,141 102,921
---------------- ----------
$2,346,921 $2,439,540
================ ==========
The accompanying notes are an integral part of these financial statements.
21
EXHIBIT (a) 3
PUBLIC TELEPHONE CORPORATION
UNAUDITED STATEMENTS OF INCOME
Three Months Three Months
ended ended
September 30 September 30
1995 1994
------------ ------------
Revenues
Coin calls $467,796 $421,347
Non-coin calls 158,572 167,603
other 19,200 33,302
------------ ------------
645,568 622,252
------------ ------------
Operating expenses
Telephone charges 162,731 163,760
General and administrative 206,853 243,033
Commissions 75,946 66,909
Service and collection 41,878 38,544
Depreciation and amortization 78,173 60,459
------------ ------------
565,581 572,705
------------ ------------
Operating income 79,987 49,547
Other income (expense)
Interest expense (91,311) (56,790)
Loss on sale of assets (55,953) 0
Other income (expense) (501) (17,687)
------------ ------------
Total other income (expense) (147,765) (74,477)
------------ ------------
Income (loss) before taxes on income (67,778) (24,930)
------------ ------------
Taxes on income
Net income (loss) ($67,778) ($24,930)
============ ============
The accompanying notes are an integral part of these financial statements.
22
EXHIBIT (a) 4
PUBLIC TELEPHONE CORPORATION
UNAUDITED STATEMENTS OF CASH FLOWS
Three Months Three Months
ended ended
September 30 September 30
1995 1994
--------------- ----------------
Operating activities
Net loss ($67,778) ($24,930)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 78,173 60,459
Loss on sale of property and equipment 55,953
Changes in assets and liabilities:
Accounts receivable 2,036 (739)
Prepaid and other current assets (5,455) (167,563)
Accounts payable and accrued expenses 31,806 (46,304)
Deferred compensation 31,198
--------------- ----------------
Cash provided by operating activities 125,933 (179,077)
--------------- ----------------
Investing activities:
Net change in prproperty and equipment (13,003) (629,560)
Increase (decrease) in other assets (1,450) 0
--------------- ----------------
Cash flows used in investing activities (14,453) (629,560)
--------------- ----------------
Financing Activities
Increase in long-term debt 71,242 476,267
Change in Class A stock 23,334
Principal payments on debt (159,085) (145,827)
--------------- ----------------
Cash provided by financing activities (87,843) 353,774
--------------- ----------------
Net increase (decrease) in cash 23,637 (454,863)
Cash, beginning of period 68,645 508,016
--------------- ----------------
Cash, end of period $92,282 $53,153
=============== ================
The accompanying notes are an integral part of these financial statements.
23
EXHIBIT (a) 5
PUBLIC TELEPHONE CORPORATION
UNAUDITED NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying audited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial
information. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. For further information, refer to the
Financial Statements and Notes thereto included in the Company's Financial
Statements for the Years Ended June 30, 1995 and 1994.
24
EXHIBIT (b)
25
EXHIBIT (b) 1
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
PhoneTel at Public at
September 30 September 30 Pro forma Pro forma
1995 1995 Adjustments Combined
------------- ------------ ----------- -----------
ASSETS
Cash $1,024,948 $92,282 $1,117,230
Accounts receivable, net 1,540,313 52,111 1,592,424
Inventories 749,798 31,373 781,171
Prepaid expenses 96,233 23,657 119,890
Property and equipment, net 11,849,383 2,035,382 $530,824 (1) 14,415,589
Intangibles, net 8,757,440 82,998 951,986 (1) 9,792,424
Other assets, net 1,080,160 29,118 1,109,278
-------------- ------------- ------------ -----------
Total Assets $25,098,275 $2,346,921 $1,482,810 $28,928,006
============== ============= ============ ===========
LIABILITIES AND
- ---------------
STOCKHOLDERS' EQUITY
- --------------------
Current portion long-term
debt and leases $2,665,588 $625,462 $3,291,050
Accounts payable 3,637,606 105,202 3,742,808
Accrued liabilities 717,093 85,696 802,789
Deferred compensation 68,437 68,437
Reserve for nonrecurring items 1,189,834 1,189,834
Long-term debt and capital
lease obligations 7,785,772 1,426,983 9,212,755
-------------- ------------- ------------ -----------
Total liablilities 15,995,893 2,311,780 0 18,307,673
-------------- ------------- ------------ -----------
Preferred stock, 7% cumulative
convertible redeemable 200,000 200,000
Preferred stock, 8% cumulative
convertible redeemable 981,084 981,084
Preferred stock, 10% cumulative
convertible redeemable 1 1
Preferred stock, 10% nonvoting 5,305,340 5,305,340
Common stock 144,940 922,334 ($908,841)(1) 158,433
Additional paid in capital 13,352,953 0 1,504,458 (1) 14,857,411
Accumulated deficit (10,881,936) (887,193) 887,193 (1) (10,881,936)
-------------- ------------- ------------ -----------
Total stockholders'equity 9,102,382 35,141 1,482,810 10,620,333
-------------- ------------- ------------ -----------
Total liabilities and
stockholders' equity $25,098,275 $2,346,921 $1,482,810 $28,928,006
============== ============= ============ ===========
The accompanying notes are an integral part of this pro forma statement.
26
EXHIBIT (b) 2
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(4)
Public for
PhoneTel for the 12 months
the year ended ended Pro forma Pro forma
Dec 31, 1994 Dec 31, 1994 Adjustments Combined
-------------- ------------- ------------ -----------
Net revenues $15,866,087 $2,378,529 $18,244,616
Costs and Expenses:
Operating expenses 12,112,371 998,439 (267,000)(2) 12,843,810
Depreciation and amortization 2,236,269 175,085 423,494 (3) 2,834,848
Selling, general and administrative 2,831,775 846,009 (358,000)(2) 3,319,784
-------------- ------------- ------------ -----------
17,180,415 2,019,533 (201,506) 18,998,442
-------------- ------------- ------------ -----------
Income (loss) from operations (1,314,328) 358,996 (201,506) (753,826)
Other income/(expense) (380,794) (394,750) (775,544)
-------------- ------------- ------------ -----------
Income (loss) before taxes (1,695,122) (35,754) (201,506) (1,529,370)
-------------- ------------- ------------ -----------
Income tax provision
Net income (loss) (1,695,122) (35,754) (201,506) (1,529,370)
Preferred stock dividend 291,980 0 291,980
-------------- ------------- ------------ -----------
Income (loss) applicable to
common stock ($1,987,102) ($35,754) ($201,506) ($1,821,300)
============== ============= ============ ===========
Loss per common share ($0.23) ($0.18)
============== ===========
Weighted average number of
shares outstanding 8,822,914 1,349,290 10,172,204
============== ============= ===========
The accompanying notes are an integral part of this pro forma statement.
27
EXHIBIT (b) 2
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
(4)
PhoneTel for Public for
nine months nine months
ended ended
September 30 September 30 Pro forma Pro forma
1995 1995 Adjustments Combined
--------------- ------------- ------------- -----------
Net revenues $11,956,903 $1,845,968 $13,802,871
Costs and Expenses:
Operating expenses 9,220,083 844,085 ($200,250)(2) 9,863,918
Depreciation and amortization 2,164,822 268,262 317,620 (3) 2,750,704
Selling, general and administrative 2,399,532 594,588 (268,500)(2) 2,725,620
Nonrecurring charges 1,418,530 0 0 1,418,530
--------------- ------------- ------------- -----------
15,202,967 1,706,935 (151,130) 16,758,772
--------------- ------------- ------------- -----------
Income (loss) from operations (3,246,064) 139,033 (151,130) (2,955,901)
Other income/(expense) (291,693) (527,994) (819,687)
--------------- ------------- ------------- -----------
Loss before taxes (3,537,757) (388,961) (151,130) (3,775,588)
Income tax provision --------------- ------------- ------------- -----------
Net loss (3,537,757) (388,961) (151,130) (3,775,588)
Preferred stock dividend 232,251 0 232,251
--------------- ------------- ------------- -----------
Loss applicable to common stock ($3,770,008) ($388,961) ($150,130) ($4,007,839)
=============== ============= ============= ===========
Loss per common share ($0.37) ($0.35)
=============== ===========
Weighted average number of
shares outstanding 10,171,674 1,349,290 11,520,964
=============== ============= ===========
The accompanying notes are an integral part of this pro forma statement.
28
PHONETEL TECHNOLOGIES, INC.
PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION
(1) Represents the issuance of 1,349,290 shares of PhoneTel's common
stock, $.01 par value, at an assumed price of $1.125 per share in
exchange for all of the outstanding common stock of Public Telephone
Corporation ("Public"). In conjunction with the merger, property and
equipment was written up by $530,824 to its estimated fair value and
$961,986 was recorded relating to the value of Public's existing phone
contracts. As required by purchase accounting, the accumulated
deficit of Public prior to the merger was eliminated.
(2) Represents the estimated recurring benefits as a result of the merger
of Public into PhoneTel. The savings are primarily the result of
backroom efficiencies, including the elimination of substantially all
administrative personnel at Public and economies of scale in billing
and other operating areas.
(3) Represents the incremental depreciation and amortization associated
with the merger. The increase in property and equipment is assumed to
depreciate over 60 months while the intangible asset relating to
Public's existing phone contracts is being amortized over 36 months.
(4) PhoneTel has a December 31 year end and Public has a June 30 (fiscal)
year end. In order to provide comparable periods for the Nine Months
ended September 30, 1995, Public's unaudited statement of income for
the three months ended September 30, 1995 was added to Public's
audited Statement of Income for the Year Ended June 30, 1995 while the
unaudited six months ended December 30, 1994 was excluded. In order
to provide comparable periods for the year ended December 31, 1994,
Public's unaudited statement of income for the six months ended
December 31, 1994 was added to Public's audited Statement of Income
for the Year Ended June 30, 1994 while the six months ended December
31, 1993 was excluded.