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EXHIBIT (b) 5.
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION
(1) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM AMTEL
Debit Credit
----- ------
Cash $ 6,400,188
Accounts receivable, net 527,883
Other current assets 137,553
Other assets 1,517,425
Property and equipment, net 8,566,221
Intangible assets, net $ 8,525,949
Accounts payable 1,930,980
Pre-petition payables 80,598,956
Accrued expenses 370,161
Common stock 28,379
Additional paid in capital 4,616,218
Accumulated deficit 69,688,937
Represents the acquisition of selected assets of Amtel for a purchase
price consisting of: (i) $7,277,622 in cash ($1,300,000 paid in June
1996); (ii) 2,162,163 unregistered shares of the Company's Common
Stock, valued at the average of the BID and ASK (as reported by NASDAQ
on September 13, 1996, less an unregistered and block discount of
20.19% as determined by Key Trust) $4,637,840, or $2.15 per share; and
(iii) acquisition expenses of approximately $397,500; and the
elimination of assets and liabilities not acquired.
(2) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM POA AND
LIABILITIES ASSUMED
Debit Credit
----- ------
Cash $ 200,000
Accounts receivable, net 372,558
other current assets 7,531
Property and equipment, net $ 2,891,481
Intangible assets, net 5,613,562
Other assets 1,093,406
Current portion of long-term debt - others 238,425
Current portion of long-term leases 690,200
Accounts payable 84,690
Accrued expenses 610,249
Long-term debt - others 3,203,940
Obligations under capital leases 1,712,089
Common stock 347,089
Additional paid in capital 309,999
Accumulated deficit 1,718,923
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PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(2) PURCHASE PRICE ALLOCATION FOR ASSETS PURCHASED FROM POA AND
LIABILITIES ASSUMED (CONTINUED)
Represents the acquisition of POA for a purchase price consisting of:
(i) $500,000 in cash ($300,000 paid in March 1996); (ii) 166,666
unregistered shares of Common Stock, valued at the average of the BID
and ASK (as reported by NASDAQ on September 16, 1996, less an
unregistered and block discount of 30.42% as determined by Key Trust)
$311,665, or $1.87 per share; (iii) assumption of capital lease
obligations of $7,750,000; (iv) notes payable to selling shareholders
of POA, $3,634,114; (v) assumption of other debt $234,890; (vi) two
five year non-competition and consulting agreements with two of the
selling shareholders, $307,264; and (vii) approximately $166,748 in
related acquisition expenses; and the elimination of assets and
liabilities not acquired.
(3) FINANCING TO COMPLETE THE ACQUISITION OF AMTEL AND POA AND TO PROVIDE
ADDITIONAL WORKING CAPITAL
Debit Credit
----- ------
Cash $ 5,950,000
Intangibles, net 60,000
Accrued expenses 1,764,546
Accounts payable 1,002,000
Current long-term debt $ 7,276,546
Long-term debt 1,500,000
Represents the additional borrowings under the Credit Facility, as
amended September 13, 1996, to complete the acquisitions of POA and
Amtel, pay related acquisition expenses and to pay other obligations of
the Company.
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PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(4) PRO FORMA ADJUSTMENTS FOR THE ACQUISITIONS COMPLETED ON MARCH 15, 1996
The following adjustment combines the operations of IPP and Paramount
for the period from January 1, 1996 through March 14, 1996 and gives
effect to the pro forma adjustments. The pro forma adjustments
represent the estimated recurring savings resulting from the
acquisition of IPP and Paramount on March 15, 1996, and the incremental
depreciation and amortization associated with the acquired tangible and
intangible assets. 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.
Property and equipment is assumed to depreciate over 60 months while
the intangible assets, consisting primarily of existing phone
contracts, is being amortized over 60 months, representing the average
remaining life of all acquired contracts.
Pro Forma Statement of Operations
for the period
January 1, 1996 through March 14, 1996
Pro Forma
IPP Paramount Adjustments As Adjusted
--------- ----------- ----------- ------------
Revenues $ 856,459 $ 1,632,221 $ -- $ 2,488,680
Operating expenses:
Line & transmission charges 309,582 275,881 -- 585,463
Location commissions 144,412 231,857 -- 376,269
Other operating expenses 90,474 266,342 -- 356,816
Depreciation & amortization 102,013 81,918 744,909 928,840
Selling, general, & admin 296,181 196,063 (238,761) 253,483
--------- ----------- --------- -----------
942,662 1,052,061 506,148 2,500,871
--------- ----------- --------- -----------
Loss from operations (86,203) 580,160 (506,148) (12,191)
Other income (expense):
Interest expense (19,511) (11,370) -- (30,881)
Other -- (12,638) -- (12,638)
--------- ----------- --------- -----------
(19,511) (24,008) -- (43,519)
--------- ----------- --------- -----------
Loss before income taxes (105,714) 556,152 (506,148) (55,710)
Income taxes -- -- -- --
--------- ----------- --------- -----------
Net loss $(105,714) $ 556,152 $(506,148) $ (55,710)
========= =========== ========= ===========
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PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(5) AMTEL'S COST SAVINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated reduction in: (i) selling, general, and
administrative expenses of $823,408; (ii) other operating expenses of
$25,000; (iii) reorganization expenses of $789,888; (iv) interest
expense of $6,077; and (v) other expenses of $959,011 resulting from
the acquisition of certain assets of Amtel and the incremental increase
in depreciation and amortization of $555,275 associated with the
acquired tangible and intangible assets. The savings are primarily due
to the elimination of costs associated with Amtel's operations which
were not acquired, the closing of certain offices, the elimination of
redundant executives, the economies of scale in billing and other
operating areas, and the elimination of the costs associated with the
bankruptcy of Amtel. The increase in property and equipment is assumed
to depreciate over 60 months, other assets over 36 months, while the
intangible assets, consisting primarily of existing telephone location
contracts, is being amortized over 54 months, representing the average
remaining life of all acquired telephone location contracts.
(6) POA'S COST SAVINGS FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated reduction in revenues, from the acquisition of
POA, of $27,625; and the estimated cost savings consisting of: (i)
other operating expenses, $181,786; (ii) selling, general, and
administrative expenses, $419,400; (iii) interest expense of $45,337;
and the incremental depreciation and amortization of $762,025
associated with the acquired tangible and intangible assets. 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
and equipment is assumed to depreciate over 60 months while the
intangible assets, consisting primarily of POA's existing telephone
location contracts, is being amortized over 72 months, representing the
average remaining life of all acquired contracts.
(7) INTEREST ON THE ADDITIONAL DEBT FOR THE SIX MONTHS ENDED JUNE 30, 1996
Represents the estimated increase in interest expense of $581,446
resulting from the additional debt, under the Credit Facility, required
to complete the Amtel and POA acquisitions, pay related expenses and
other obligations, at an assumed interest rate of 13.25%.
(8) CALCULATION OF EARNINGS PER SHARE
Earnings per share excludes a loss of $2,002,386 which was realized on
redemption of the 10% Preferred, 8% Preferred, and 7% Preferred and an
extraordinary loss of $267,281 realized on the restructuring of the
Company's debt on March 15, 1996.
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PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(9) PRO FORMA ADJUSTMENTS FOR THE ACQUISITIONS COMPLETED IN SEPTEMBER AND
OCTOBER 1995 AND MARCH 1996
Represents the operations of IPP and Paramount for the period from
January 1, 1995 through December 31, 1995, World from January 1, 1995
through September 21, 1995, and Public Telephone from January 1, 1995
through October 16, 1995, and gives effect to the pro forma
adjustments. The pro forma adjustments represent the estimated
recurring savings resulting from the acquisitions of IPP, Paramount,
Public Telephone, and World and the incremental depreciation and
amortization associated with the acquired tangible and intangible
assets. 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. Property 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 (36 months for World's and Public
Telephone's acquired intangibles), representing the average remaining
life of all acquired contracts. The value of the Non-compete Agreements
is being amortized over the life of the agreements.
Pro Forma Statement of Operations
for the periods prior to the dates of acquisition
Public IPP and Pro Forma Pro Forma
World Telephone Paramount Adj's As Adjusted
----------- ----------- ------------ ------------- ------------
Revenues $ 6,317,048 $ 1,941,190 $ 10,230,685 $ -- $ 18,488,923
Operating expenses:
Line and transmission charges 2,706,199 535,771 3,135,221 -- 6,377,191
Location commissions 852,944 196,243 1,311,970 (267,000) 2,094,157
Other operating expenses 1,026,000 112,071 709,281 (800,000) 1,047,352
Depreciation and amortization 855,059 268,262 936,307 6,116,925 8,176,553
Selling, general, and administrative 1,276,056 594,588 3,358,416 (2,004,051) 3,225,009
----------- ----------- ------------ ------------- ------------
6,716,258 1,706,935 9,451,195 3,045,874 20,920,262
----------- ----------- ------------ ------------- ------------
Loss from operations (399,210) 234,255 779,490 (3,045,874) (2,431,339)
Other income (expense):
Interest expense (590,980) (304,664) (312,458) (3,462,527) (4,571,629)
Interest expense accretion of debt -- -- -- (3,022,564) (3,022,564)
Interest income 834 3,371 15,466 -- 19,671
Other -- (321,923) (83,582) -- (405,505)
----------- ----------- ------------ ------------- ------------
(590,146) (623,216) (281,574) (6,485,091) (7,980,027)
----------- ----------- ------------ ------------- ------------
Income (loss) before taxes (989,356) (388,961) 479,916 (9,530,965) (10,411,366)
Income taxes -- -- 38,100 (38,000) --
----------- ----------- ------------ ------------- -------------
Net income (loss) $ (989,356) $ (388,961) $ 459,816 $ (9,492,865) $(10,411,366)
=========== =========== ============ ============= =============
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PHONE TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(10) AMTEL'S COST SAVINGS FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the estimated reduction in: (i) selling, general, and
administrative expenses of $11,360,614; (ii) other operating expenses
of $2,131,584; (iii) line and transmission charges of $1,694,515; (iv)
commissions expense of $800,000; (v) revenues of $2,859,394; (vi)
interest expense of $7,429,502; (vii) reorganization expense of
$539,942; (viii) other expenses of $429,967; resulting from the
acquisition of Amtel and the incremental increase in depreciation and
amortization of $1,045,167 associated with the acquired tangible and
intangibles assets. The savings are primarily due to the elimination of
employees and expenses resulting from the restructuring plan
implemented by the trustee on behalf of the bankruptcy court in the
later part of 1995, the elimination of costs associated with Amtel's
operations which were not acquired, the closing of certain offices, the
elimination of the redundant executives, the economies of scale in
billing and other operating areas, and the elimination of costs
associated with the bankruptcy of Amtel. The increase in property and
equipment is assumed to depreciate over 60 months, other assets over 36
months, while the intangible assets, consisting primarily of existing
telephone location contracts, is being amortized over 54 months,
representing the average remaining life of all acquired contracts.
(11) POA'S COST SAVINGS FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the estimated reduction in revenues, resulting from the
acquisition of POA, of $12,053; and the estimated cost savings
consisting of: (i) other operating expenses, $95,711; (ii) selling,
general, and administrative expenses, $945,079; (iii) interest expense
of $135,496; and the incremental depreciation and amortization of
$1,524,050 associated with the acquired tangible and intangible assets.
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 and equipment is assumed to depreciate over 60 months while
the intangible assets, consisting primarily of POA's existing telephone
location contracts, is being amortized over 72 months, representing the
average remaining life of all acquired contracts.
(12) INTEREST ON THE ADDITIONAL DEBT FOR THE YEAR ENDED DECEMBER 31, 1995
Represents the incremental increase in interest expense of $1,162,892
resulting from the additional debt, under the Credit Facility, required
to complete the Amtel and POA acquisitions, pay related expenses and
other obligations, at an assumed interest rate of 13.25%.
(13) CONVERSION OF THE 10% PREFERRED
To eliminate the preferred dividend requirement of $530,534 based on
the conversion of the 10% Preferred into 884,214 shares of Common Stock
on June 28, 1996.
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