1
EXHIBIT (b)4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION
(1) Cash $299,190
Accounts receivable, net 220,737
Other current assets 15,020
Other assets 29,222
Intangible assets, net 196,783
Accounts payable $ 74,494
Long-term debt 132,651
Deferred income taxes 6,000
Accumulated (deficit) earnings 813,109
Adjustment for assets not acquired from IPP or Paramount on March 15,
1996 and accrual of additional liabilities.
(2) Cash $14,459,236
Property and equipment, net $7,702,976
Intangible assets, net 9,737,465
Other assets 925,000
Current portion of long-term debt 232,203
Accounts payable 28,700
Accrued expenses 284,421 30,000
Long-term debt 1,784,375
14% convertible preferred stock 621,664
Common stock 8,103
Additional paid in capital 3,506,767
Accumulated (deficit) earnings 235,576
To record the acquisition of IPP and Paramount for a purchase price
consisting of cash, 555,589 unregistered shares of Common Stock, 13,786
shares of 14% Preferred, and Nominal Value Warrants to purchase 297,781
shares of Common Stock; assumption and immediate payoff of most of the
acquired debt; the write-up of acquired property, plant, and equipment
to its fair value; the recording of the increased value of IPP's and
Paramount's existing phone contracts; the value of four Non-compete
Agreements with three former officers of IPP and one former officer of
Paramount; and the recording of the fair value of the Nominal Value
Warrants. The shares of Common Stock were valued at the average of the
BID and ASK on the date of closing (March 15, 1996) as reported by
NASDAQ, less an unregistered discount of 35% ("Discounted Market
Price"). Each share of the 14% Preferred was valued based on its
conversion into ten shares of Common Stock priced at the Discounted
Market Price. The Nominal Value Warrants were valued based on their
equivalent common shares at the Discounted Market Price less the
nominal exercise price per share. As required by purchase accounting,
the accumulated retained earnings or deficits of IPP and Paramount
prior to the date of acquisition were eliminated.
page 16 of 18 pages
2
EXHIBIT (b)4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(3) Cash $14,552,395
Property and equipment, net 346,500
Intangible assets, net 3,838,638
Current portion of long-term debt 225,000
Accounts payable 2,619,746
Deferred revenues $ 1,200,000
Obligation relating to contractual
settlements and restructuring charges 753,500
Long-term debt 12,435,166
Obligations under capital leases 3,243,965
14% convertible preferred stock 5,647,823
10% redeemable preferred stock 1
8% cumulative preferred stock 981,084
7% convertible preferred stock 200,000
Common stock 164
Additional paid in capital 10,167,507
Accumulated (deficit) earnings 2,689,831
To record the restructuring of the Company's long-term debt and
obligations under capital leases and application of the debt proceeds,
including - repayment of certain obligations of the Company (payment of
transaction fees, all outstanding debt and obligations under capital
leases which had a secured interest in the Company's operating assets,
certain trade accounts payable and customer commissions, shareholders
loans, and redemption of the 10%, 8%, and 7% Preferred stock). A
portion of the outstanding debt at December 31, 1995, was paid with
16,371 shares of Common Stock. The redemption of the 10%, 8%, and 7%
Preferred resulted in the recording of a dividend in the amount of
$2,002,386. An extraordinary loss resulting from the debt payoff, of
$687,445, was recorded to the accumulated deficit.
(4) Selling, general, and administrative $1,146,051
Depreciation and amortization $3,463,023
Accumulated (deficit) earnings 2,316,972
Represents the estimated recurring benefits resulting from the
acquisitions and the incremental depreciation and amortization
associated with the acquisitions. The savings are primarily the result
of backroom efficiencies, including the elimination of certain offices
and executives and economies of scale in billing and other operating
areas. The increase in property, plant and equipment is assumed to
depreciate over 60 months while the intangible assets relating to IPP's
and Paramount's existing phone contracts is being amortized over 60
months. The value of the Non-compete Agreements is being amortized over
the life of the agreements which is 60 months.
page 17 of 18 pages
3
EXHIBIT (b)4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(5) Preferred dividend requirement paid in kind $ 619,904
Preferred dividend requirement paid in cash $ 309,668
Interest expense 3,462,527
Accretion of debt [interest expense] 3,022,564
Redemption of 10%, 8%, 7% Preferred 2,002,386
Accumulated (deficit) earnings $8,797,713
Recording of four quarterly 14% Preferred paid-in-kind stock dividends
(paid in 14% Preferred shares with the valuation of the stock dividend
based on the conversion of the 14% Preferred shares into Common Stock
priced at the Discounted Market Price); elimination of the redeemed
preferred dividend requirements; the incremental increase in interest
expense on the new debt; the accretion of debt (required because a
portion of the new debt was reclassified to shareholders' equity in
order to represent the cost of the issued warrants; accretion expense
is recorded as a non-cash interest expense); and the difference between
the carrying value of the 10%, 8%, and 7% Preferred and the redemption
price.
(6) The Company acquired World Communications, Inc. ("World") on September
22, 1995, and Public Telephone Corporation ("Public") on October 16,
1995. The Company's audited Statement of Operations for the year ended
December 31, 1995, includes the acquisition of World and Public from
September 22, 1995 and October 16, 1995, respectively.
page 18 of 18 pages