<PAGE #>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from _________ to _________
Commission File Number 333-35017
________________________________
TELETRAC HOLDINGS, INC.
_______________________
(Exact name of registrant as specified in its charter)
Delaware 43-1789886
_______________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2323 Grand Street, Suite 1100
Kansas City, Missouri 64108
________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 816 474-0055
____________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
______ _____
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Class A Common Stock,
$.01 par value, 249,000 shares outstanding as of November 13, 1997 and
Class B Common Stock, $.01 par value, no shares outstanding as of November
13, 1997.<PAGE>
<PAGE #>
TELETRAC HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, 1996 September 30, 1997
_________________ __________________
(unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 27,639,168 $ 53,733,172
Accounts receivable, net 2,504,173 5,034,407
Inventories (note 3) 2,782,932 3,338,475
Prepaid expenses and other 2,113,076 3,830,477
______________ _____________
Total current assets 35,039,349 65,936,531
______________ _____________
RESTRICTED CASH 1,256,285 1,756,327
RESTRICTED INVESTMENTS -- 40,285,811
PROPERTY AND EQUIPMENT,
net of depreciation 16,845,801 24,567,356
LICENSES AND OTHER,
net of amortization 571,899 5,729,494
______________ _____________
Total assets $ 53,713,334 $ 138,275,519
============== =============
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TELETRAC HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTD.)
December 31, 1996 September 30, 1997
_________________ __________________
(unaudited)
LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable $ 1,900,168 $ 1,057,135
Current portion of long-term
obligations 1,382,340 491,007
Interest payable on senior notes -- 2,245,833
Accrued expenses 664,675 1,618,081
Unearned revenue and contracts 250,053 1,126,427
Refrequency liability 7,234,158 3,807,876
Other current liabilities 216,008 413,338
____________ _____________
Total current liabilities 11,647,402 10,759,697
____________ _____________
SENIOR NOTES, 14% due 8/1/2007 (note 2) -- 98,077,379
OTHER LONG-TERM OBLIGATIONS 1,615,344 2,025,942
PREFERRED STOCK, redeemable cumulative,
15% dividend, 190,477 shares authorized
and 190,476.19 shares issued
and outstanding 33,340,000 37,052,500
PREFERRED STOCK, undesignated, 190,477
shares authorized, none issued or
outstanding -- --
STOCKHOLDERS' EQUITY (DEFICIT):
Common stock, Class A, $.01 par value,
1,000,000 shares authorized
and 249,000 issued and outstanding 2,490 2,490
Common stock, Class B, $.01 par value,
70,000 shares authorized and none issued
or outstanding -- --
Warrants, 105,000 units to
purchase 57,071 shares of
Class A common stock outstanding -- 7,039,954
Paid-in-capital 22,024,094 22,022,656
Accumulated deficit (14,915,996) (38,705,099)
______________ _______________
Total stockholders' deficit 7,110,589 (9,639,999)
______________ _______________
Total liabilities and
stockholders' deficit $ 53,713,334 $ 138,275,519
=============== ===============
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements<PAGE>
<PAGE #>
TELETRAC HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Nine Months For the Three Months
Ended September 30, Ended September 30,
1996 1997 1996 1997
__________ ___________ __________ __________
OPERATING REVENUES $10,329,584 $18,687,936 $4,388,534 $7,318,012
Cost of revenues 3,735,357 9,036,378 1,977,942 3,834,315
Selling and advertising 3,538,524 8,872,007 1,708,122 2,661,294
General and administra-
tive 9,853,082 14,951,434 3,619,346 4,915,253
Research & development
costs -- 2,873,084 -- 833,038
Refrequency costs 677,114 -- 271,474 --
Depreciation and
amortization 883,763 1,754,243 340,333 755,008
_______ _________ _______ _______
Loss from operations (8,358,256) (18,799,210)(3,528,683) (5,680,896)
OTHER EXPENSE (INCOME):
Interest expense 33,461 2,527,979 23,387 2,441,545
Interest and other income (86,546) 1,250,586) (12,070) (845,800)
________ ___________ ________ _________
Loss before income taxes (8,307,171) (20,076,603)(3,540,000) (7,276,641)
PROVISION FOR INCOME TAXES -- -- -- --
NET LOSS $(8,307,171)$(20,076,603)$(3,540,000)(7,276,641)
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.
<PAGE>
<PAGE #>
TELETRAC HOLDINGS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Nine Months Ended September 30,
________________________________________________
1996 1997
____ ____
OPERATING ACTIVITIES:
Net Loss $(8,307,171) $(20,076,603)
Adjustments to reconcile net loss to net
cash used in operating activities-
Depreciation and amortization 883,763 1,754,243
Accretion of discount on senior notes -- 117,333
Changes in working capital and other
assets and liabilities, net of
acquisition and refrequency (2,463,131) (3,610,634)
Restricted cash (722,114) (500,042)
Refrequency liability 677,113 (3,426,282)
Accrued interest on senior
notes -- 2,245,833
________________ _______________
Total Adjustments (1,624,369) (3,419,549)
________________ _______________
Cash used in operating
activities (9,931,540) (23,496,152)
________________ _______________
INVESTING ACTIVITIES:
Acquisition of property and equipment (6,460,339) (8,854,274)
Acquisition of other intangible assets -- (62,002)
Acquisition of Airtouch Teletrac (2,098,875) (1,000,000)
________________ _______________
Cash used in investing activities (8,559,214) (9,916,276)
________________ _______________
FINANCING ACTIVITIES:
Issuance of common stock, net 18,838,627 --
Proceeds from issuance of senior
notes and warrants, net -- 100,607,766
Restricted investments (40,285,811)
Cost of credit facility -- (815,523)
________________ _______________
Cash provided by financing
activities 18,838,627 59,506,432
________________ _______________
NET CHANGE IN CASH 347,873 26,094,004
CASH AND CASH EQUIVALENTS,
beginning of period 310,564 27,639,168
________________ _______________
CASH AND CASH EQUIVALENTS,
end of period $ 658,437 $ 53,733,172
================ ===============
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.<PAGE>
<PAGE #>
TELETRAC HOLDINGS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
COMMON STOCK PAID-IN ACCUMULATED
CLASS A CLASS B WARRANTS CAPITAL DEFICIT
_______ _______ ________ _______ ___________
BALANCE, December
31, 1996 $ 2,490 $ -- $ -- $22,024,094 $(14,915,996)
Issuance of
warrants related
to senior debt -- -- 7,039,954 -- --
Cost of issuance
of preferred
stock -- -- -- (1,438)
Net loss -- -- -- -- (20,076,603)
Preferred stock
dividends -- -- -- -- (3,712,500)
BALANCE, September
30, 1997 $ 2,490 $ -- $7,039,954 $22,022,656 $(38,705,099)
======= ====== ========== =========== ============
The accompanying notes are an integral part of these Condensed Consolidated
Financial Statements.<PAGE>
<PAGE #>
NOTE 1 - BASIS OF PRESENTATION.
The condensed consolidated interim financial statements of Teletrac
Holdings, Inc. and subsidiary ("Teletrac" or the "Company") included herein
have been prepared by the Company without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the "Commission")
and reflect all adjustments that are, in the opinion of management,
necessary to fairly present the financial position, results of operations,
and cash flows for the interim periods. Teletrac Holdings, Inc. and
Teletrac, Inc. completed an exchange agreement on August 6, 1997, whereby
stockholders of Teletrac, Inc. exchanged common and preferred stock of
Teletrac, Inc. for common and preferred stock of Teletrac Holdings, Inc.
This transaction was accounted for as a combining of interests under common
control, similar to a pooling of interests. Certain information and
footnote disclosures normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles have
been condensed or omitted pursuant to such SEC rules and regulations.
Management believes that the disclosures made are adequate to make the
information presented not misleading. The results for interim periods are
not necessarily indicative of the results for the full year. The interim
financial statements should be read in conjunction with the financial
statements and notes thereto contained in the Company's Registration
Statement on Form S-1.
NOTE 2 - LONG-TERM DEBT
In August 1997, the Company issued $105.0 million of 14% Senior Notes due
August 1, 2007 ("the Notes"). Gross proceeds of the Notes were approxi-
mately $61.4 million in unrestricted funds and $39.9 million in restricted
funding allocated for the first three years of interest payments on the
Notes. The Notes were issued with 105,000 detachable warrants (the
"Warrants"). Each Warrant entitles the holder to purchase .537495 shares
(collectively, the "Warrant Shares") of the Company's Class A Common Stock
at an exercise price of $.01 per share, currently representing 10% of the
Class A Common Stock on a fully diluted basis. The Warrants have been
valued at $7.04 million. The discount of $7.04 million is being accreted
over the life of the Notes. The Company has recorded in other assets
approximately $4.4 million of deferred financing costs which are being
amortized over the life of the Notes. The Notes accrue interest until
maturity at a rate of 14% per annum. Interest on the Notes will be payable
semi-annually in arrears on February 1 and August 1 of each year, commenc-
ing on February 1, 1998.
In September 1997, the Company entered into an agreement to establish
revolving credit facilities (the "Revolvers") in the aggregate principal
amount of $30.0 million expiring on March 31, 2003. Pursuant to this
agreement, the Company issued 5,707 warrants to purchase one share each of
the Company Class A Common Stock at an exercise price of $202 per share.
The Company has recorded in other assets approximately $816,000 of deferred
financing costs which are being amortized over the life of the Revolvers.
The Revolvers have a .500% commitment fee rate based on the total principal
amount, paid quarterly. To date, the Company has made no draws against the
Revolvers.<PAGE>
<PAGE #>
In September 1997, the Company increased the Warrant Shares of the Senior
Notes to purchase an additional 634 shares of Class A Common Stock. The
additional Warrant Shares were issued subject to the Senior Note agreement
having allocated 10% of Class A Common Stock, on a fully diluted basis, to
the holders of the Notes. The need to issue the additional shares arose
from the issuance of Warrants to the participating banks involved in the
Revolvers agreement.
NOTE 3 - INVENTORIES
Inventories consisted of the following at December 31, 1996 and September
30, 1997 (unaudited):
December 31, 1996 September 30, 1997
_________________ __________________
Vehicle Location Units $2,087,976 $1,680,010
Messaging Units 356,528 844,065
Computers & Software 84,377 354,485
Other Inventory 254,051 459,915
__________ __________
Total Inventory $2,782,932 $3,338,475
========== ==========
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment, including equipment under capital leases, consisted
of the following at December 31, 1996 and September 30, 1997 (unaudited):
December 31, 1996 September 30, 1997
_________________ __________________
System Equipment $4,986,898 $10,136,267
Automobiles 89,545 363,700
Furniture & Fixtures 761,937 1,394,643
Computer Equipment 2,411,855 3,358,260
Leasehold Improvements 42,539 215,444
Construction in Progress 9,774,693 11,972,271
___________ ___________
Total Property & Equipment $18,067,467 $27,440,585
___________ ___________
Accumulated Depreciation ($1,221,666) ($2,873,229)
___________ ___________
Net Property & Equipment $16,845,801 $24,567,356
=========== ===========<PAGE>
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Management's Discussion and Analysis of Results of Operations and
Financial Condition contain forward-looking statements which involve risks
and uncertainties. The Company's actual results may differ significantly
from the results discussed in forward-looking statements. Factors that
might cause such a difference include, but are not limited to, the "Risk
Factors" set forth in the Company's Registration Statement on Form S-1.
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
REVENUES. Total revenues for the three months ended September
30, 1997 were $7.3 million, compared to $4.4 million in the third quarter
of 1996, an increase of 66%.
Equipment revenues increased to $4.0 million for the three months
ended September 30, 1997 from $2.1 million for the three months ended
September 30, 1996, an increase of 90%, principally due to an increase in
the Company's commercial sales efforts. Gross commercial installations
increased to 8,141 units for the three months ended September 30, 1997 from
4,727 units for the three months ended September 30, 1996.
Service revenues increased to $3.4 million for the three months
ended September 30, 1997 from $2.3 million for the three months ended
September 30, 1996, an increase of 48%, primarily due to an increase in the
number of commercial units in service, to 61,369 at September 30, 1997
from 40,589 at September 30, 1996. Also, the average commercial service
revenue per unit increased to $16.93 in September 1997 from $15.55 in
September 1996 as a result of adherence to fixed airtime rates and an
increase in ancillary services.
COST OF REVENUES. Cost of revenues includes the cost of equip-
ment and the direct cost of providing service (network telephone, billing,
roadside assistance and bad debt expense). Cost of revenues increased to
$3.8 million for the three months ended September 30, 1997 from $2.0
million for the three months ended September 30, 1996 primarily as a result
of the higher number of new units sold and in service.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general
and administrative expenses increased by $3.1 million, to $8.4 million for
the three months ended September 30, 1997 from $5.3 million for the three
months ended September 30, 1996. The increase was primarily related to
increased sales personnel for <PAGE>
<PAGE #>
the commercial operations, the funding of new product development and
increased support for the growth of the customer base. The Company
expensed $0.8 million in the three months ended September 30, 1997 relating
to research and development for its new Integrated Base Station Unit
(IBSU).
REFREQUENCING COSTS. Refrequencing costs were not accrued for
the three months ended September 30, 1997 since all units placed in service
in 1997 are operating on the new frequency.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization
increased for the three months ended September 30, 1997 to $0.8 million
from $0.3 million for the three months ended September 30, 1996, primarily
due to depreciation on additional assets related to the new market build-
out and additional infrastructure in existing markets.
OPERATING LOSSES. Operating losses incurred by the Company were
$5.7 million for the three months ended September 30, 1997, as compared to
$3.5 million for the three months ended September 30, 1996, for the reasons
discussed above.
NET LOSS. For the reasons discussed above, net loss increased to
$7.3 million for three months ended September 30, 1997 from $3.5 million
for three months ended September 30, 1996. No tax benefit has been
recognized for any period due to the uncertainty of net operating loss
carry-forward utilization.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEM-
BER 30, 1996
REVENUES. Total revenues for the nine months ended September
30, 1997 were $18.7 million, compared to $10.3 million for the nine months
ended September 30 1996, an increase of 82%.
Equipment revenues increased to $9.6 million for the nine months
ended September 30, 1997 from $3.9 million for the nine months ended
September 30, 1996, an increase of 146%, principally due to an increase in
gross commercial installations to 23,371 units for the nine months ended
September 30, 1997 from 9,170 units for the nine months ended September 30,
1996.
Service revenues increased to $9.1 million for nine months ended
September 30, 1997 from $6.5 million for nine months ended September 30,
1996, an increase of 40%, primarily due to an increase in the number of
commercial units in service, to 61,369 at September 30, 1997 from 40,589
at September 30, 1996. Also, the average commercial service revenue per
unit increased to $16.93 in September 1997 from $15.55 in September 1996.
<PAGE>
<PAGE #>
COST OF REVENUES. Costs of revenues includes the cost of
equipment and the direct cost of providing service (network telephone,
billing, roadside assistance and bad debt expense). Cost of revenues
increased to $9.0 million for the nine months ended September 30, 1997 from
$3.7 million for the nine months ended September 30, 1996 primarily as a
result of the higher number of new units sold. In addition, the Company
incurred $0.7 million for the nine months ended September 30, 1997 on
telephone costs associated with installing and maintaining its networks in
markets that are not yet opened.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general
and administrative expenses increased by $13.3 million, to $26.7 million
for the nine months ended September 30, 1997 from $13.4 million for the
nine months ended September 30, 1996. The increase was primarily related
to increased sales personnel for the commercial operations, the funding of
new product development and increased support for the growth of the
customer base. The Company expensed $2.9 million in the nine months ended
September 30, 1997 that primarily relates to research and development for
its new IBSU.
REFREQUENCING COSTS. Refrequencing costs were not accrued for
the nine months ended September 30, 1997 since all units placed in service
in 1997 are operating on the new frequency.
DEPRECIATION AND AMORTIZATION. Depreciation and Amortization
increased for the nine months ended September 30, 1997 to $1.8 million from
$0.9 million for the nine months ended September 30, 1996, primarily due to
depreciation on additional assets related to the new market build-out and
additional infrastructure in existing markets.
OPERATING LOSSES. Operating losses incurred by the Company were
$18.8 million for the nine months ended September 30, 1997, as compared to
$8.4 million for the nine months ended September 30, 1996, for the reasons
discussed above.
NET LOSS. For the reasons discussed above, net loss increased to
$20.1 million for nine months ended September 30, 1997 from $8.3 million
for nine months ended September 30, 1996. No tax benefit has been recog-
nized for any period due to the uncertainty of net operating loss carry-
forward utilization.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures were $8.9 million for the nine months ended
September 30, 1997, primarily for the build-out of the Company's networks
in new markets. The Company currently expects that its aggregate capital
expenditures (excluding the acquisition of spectrum rights) will be $14.8
million for 1997<PAGE>
<PAGE #>
and an aggregate $17 million for both 1998 and 1999 combined. These
capital expenditures will consist primarily of costs associated with the
opening of new markets in 1997 and 1998. In addition, the Company's
capital expenditure plans include network design and development, the
maintenance of existing markets, and other capital improvements.
In September 1997, the Company entered into an agreement to
establish revolving credit facilities (the Revolvers") in the aggregate
principal amount of $30.0 million expiring on March 31, 2003. The Company
issued 5,707 warrants to purchase one share each of the Company Class A
Common Stock at an exercise price of $202 per share. The Company has
recorded in other assets approximately $816,000 of deferred financing costs
which are being amortized over the life of the Revolvers. The revolvers
have a .500% commitment fee rate based on the total principal amount, paid
quarterly. To date, the Company has made no draws against the Revolvers.
<PAGE #>
PART II - OTHER INFORMATION
None.
<PAGE #>
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, thereunto duly authorized.
TELETRAC HOLDINGS, INC.
By: /s/ Alan B. Howe
__________________________
Alan B. Howe
Vice President of
Finance and Corporate
Development and on
behalf of the Registrant
November 13, 1997
