<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [x]
<TABLE>
<CAPTION>
<S> <C>
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[x] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
</TABLE>
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(Name of Registrant as Specified In Its Charter)
TOTAL-TEL USA COMMUNICATIONS, INC.
- ------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
REVISION LLC
WALT ANDERSON
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<PAGE>
November 19, 1998
AN IMPORTANT MESSAGE
FROM THE COMMITTEE
FOR REVISION OF TOTAL-TEL
Dear Fellow Shareholders:
As the largest shareholder of Total-Tel, we believe that Total-Tel has reached
a critical point in its history. Your vote is going to help decide its future.
Total-Tel has once again proposed a slate of Directors whose telecommunications
experience, with the exception of one Director, is limited to its prior
Total-Tel background. We believe that Total-Tel, which has been run by members
of the same family for the past forty years, now stands at a dangerous
crossroads between growth and deterioration. While management has boasted to
you of its accomplishments in the past, we believe that in recent years it has
embarked on ill-conceived and misguided policies and programs which could place
the future profitability of the company, and the future value of your
investment, in jeopardy.
That is why we have undertaken the time consuming and expensive process of
seeking to elect an alternate slate of four independent, experienced nominees
to the Board. Our nominees collectively have over 45 years of
telecommunications experience and have overseen the growth of companies such as
MCI, Mid-Atlantic Telecom, Atlantic Telecom, Telco Communications Group, Inc.,
U.S. Sprint, Esprit Telecom and Long Distance Wholesale Club.
We will soon be sending you our proxy statement and blue proxy card. We urge
you not to return management's white proxy card for the December 10 Annual
Meeting until you have had a chance to review our materials. If you have
already returned a card to Total-Tel, you will be given a chance to revoke your
vote when you receive our proxy statement and blue card.
Our proxy material will outline many reasons for replacing the incumbent board.
We urge you to take a minute to read the brief material below to get a preview
of just a few of our concerns.
Poor Financial Performance
Total-Tel's financial performance has deteriorated over the last several years
due to a confused business strategy. For the six months ended July 31, 1998,
net income fell by 38% from the comparable period in 1997, from approximately
$881,000 to $540,000. See Exhibit 1. Sales also declined in the three-month
period ended July 1998 from the comparable period in 1997, as increased selling
efforts to retail customers did not make up for a reduction in carrier sales.
Earnings have been stagnant over the longer term as well, with net income lower
in fiscal year 1998 than fiscal year 1995. For fiscal 1998, Total-Tel's return
on assets was less than 3%. See Exhibit 3. Total-Tel was able to increase total
minutes of use (MOU) from 365.9 million in 1996 to 862.5 million in 1998 only
through sacrificing margins and by expanding its service offerings to less
profitable wholesale customers. See Exhibit 4. Total-Tel's operating margin
fell 67% to $.002 per MOU in 1998 from $.006 per MOU in 1996.
<PAGE>
Stagnant, Undervalued Stock Price
Total-Tel's stock price has been stagnant since 1996. See Exhibit 5. The only
strength it has shown appears to be related to takeover speculation triggered
by our sizable stock acquisitions rather than Total-Tel's underlying operating
performance. In fact, before our first significant acquisitions of shares in
November 1997, Total-Tel's stock price stood at approximately $11 per share,
far below the $16.50 per share as of November 18, 1998 that the Committee
believes reflects takeover speculation triggered by our acquisitions of Shares.
Total-Tel still trails many of its peers in terms of valuation. In fact,
Total-Tel is currently trading at an enterprise value to sales multiple that is
62% lower than the average of a peer group of 12 comparably sized companies
that resell long-distance service to commercial customers. See Exhibit 6.
Total-Tel is currently trading at 1.0 times sales, while the average peer
company is trading at 2.6 times sales. See Exhibit 6. Moreover, 10 of the 12
companies in Total-Tel's peer group trade at higher enterprise value to sales
multiples. Before we acted on the opportunity to acquire Total Tel's
undervalued shares, Total-Tel's enterprise value to sales relative to its peers
was even worse.
Failure to Pursue Opportunities to Maximize Shareholder Value
Total-Tel's Chief Executive Officer, Warren Feldman, has failed to share
several merger and acquisition opportunities with the Board of Directors. Mr.
Feldman testified under oath that in the past nine years, he has had many
discussions with companies seeking to acquire or merge with Total-Tel. The
Board of Directors minutes, which we have had an opportunity to review in the
course of our pending litigation with the Company, barely reflect any
discussions regarding overtures made to Total-Tel for potential merger or
acquisition opportunities and do not reflect any Board votes regarding these
issues. According to the testimony of Mr. Feldman and one other Director of the
Company, potential partners or acquirors have included Cable and Wireless,
Mid-Atlantic Telecom, LCI, USLD, ACC, Qwest, Fonorola, Telco Communications and
RSL. We do not believe that any of these opportunities were given due
consideration by the Board of Directors. In fact, Leon Genet, a director, has
testified under oath that he was unaware of any such opportunity.
THE FUTURE OF TOTAL-TEL IS IN YOUR HANDS
We, and our nominees, beneficially own collectively approximately 30% of the
outstanding shares of Total-Tel. See Annex 1. Clearly, we have a huge stake in
Total-Tel's future. We hope you will agree with us that the best course of
action to protect and enhance our mutual investment in the future is the
election of a new slate of experienced independent nominees.
Thank you for your consideration.
Sincerely,
/s/ Walt Anderson
-----------------------------------
Walt Anderson, on Behalf of the
Committee for Revision of Total-Tel
<PAGE>
Exhibit 1
TOTAL-TEL USA COMMUNICATIONS, INC.
Inability to Achieve Bottom-Line Income Growth
[Bar graph showing the Company's net income for fiscal years
1995 through 1998 and the six month periods ended July 31, 1997 and July 31,
1998.]
<PAGE>
Exhibit 2
TOTAL-TEL USA COMMUNICATIONS, INC.
Inability to Achieve Growth in Earnings Per Share
[Bar graph showing the Company's earnings per share for each
quarter of fiscal 1998 and the first two quarters of fiscal 1999.]
<PAGE>
Exhibit 3
TOTAL-TEL USA COMMUNICATIONS, INC.
Higher Expenditures and Lower Returns
[Bar graph showing the Company's net income/assets for fiscal
years 1995 through 1998 and the six month periods ended July 31, 1997 and July
31, 1998.]
<PAGE>
Exhibit 4
TOTAL-TEL USA COMMUNICATIONS, INC.
Deteriorating Sales Margins
[Bar graph showing the Company's net income/sales for fiscal
years 1995 through 1998 and the six month periods ended July 31, 1997 and July
31, 1998.]
<PAGE>
Exhibit 5
TOTAL-TEL USA COMMUNICATIONS, INC.
Weekly Closing Stock Price
[Graph of the Company's weekly closing stock price from
September 5, 1996 to November 4, 1998.]
<PAGE>
Exhibit 6
TOTAL-TEL USA COMMUNICATIONS, INC.
Enterprise Value to Sales Multiple
($ in thousands)
<TABLE>
<CAPTION>
(A) (B) (A)+(B)=(C) (D) (C)/(D)
Net Debt Enterprise
Company Market Cap & Pfd. (1) Value (EV) TTM Sales EV / Sales
------- ---------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Advanced Comm Group $112,792 $21,756 $134,548 $113,825(2) 1.2x
CFW Comm Co. 281,428 502 281,930 63,827 4.4x
CT Comm, Inc. 304,570 18,098 322,668 84,589 3.8x
D&E Comm, Inc. 107,967 11,666 119,633 50,121 2.4x
General Comm 211,268 333,349 544,617 240,645 2.3x
IDT Corp. 603,617 (56,672) 546,945 335,372 1.6x
Primus Telecomm 325,709 182,028 507,737 373,671 1.4x
Telegroup, Inc 76,486 80,496 156,982 370,207 0.4x
Telscape International 40,868 7,244 48,112 116,325 0.4x
US LEC Corp 366,743 (38,017) 328,726 58,966 5.6x
USN Comm, Inc. 8,807 137,838 146,645 117,532 1.2x
Viatel, Inc. 370,736 155,958 526,694 89,007 5.9x
Average 234,249 71,187 305,436 167,841 2.6x
Total-Tel USA Comm 126,605 (890) 125,715 126,240 1.0x
</TABLE>
(1) Total debt and preferred stock net of cash and cash equivalents.
(2) Last nine months annualized.
TTM= Trailing-Twelve Months
<PAGE>
ANNEX 1
WALT ANDERSON. Walt Anderson is the sole manager (the
"Manager") of Revision LLC ("Revision") and the holder of 100% of the voting
membership interests in Revision. Revision is a newly formed Delaware limited
liability company. Revision was organized to acquire, invest in, trade in, sell
or otherwise dispose of the common stock, par value $.05 per share (the
"Shares"), of the Company and to engage in any other lawful business activity
related thereto. All powers of Revision are exercised exclusively by Mr.
Anderson and the business and affairs of Revision are managed exclusively by
Mr. Anderson. Revision and Mr. Anderson intend to vote their Shares for the
election of the Revision Nominees.
Mr. Anderson's principal occupation is the management of a
private investment fund. Mr. Anderson is also the Secretary of Gold & Appel,
for which he is attorney-in-fact. From May 1984 to December 1993, Mr. Anderson
served as President and Chairman of Mid-Atlantic Telecom (Telecom Services).
From October 1992 to September 1998, Mr. Anderson served as Chairman of Esprit
Telecom Group plc. (Telecom Services). From May 1996 to the Present, Mr.
Anderson has served as Chairman of Teleport UK Ltd. (Satellite Communications).
From July 1997 to the Present, Mr. Anderson has served as President and
Chairman of Entree International Ltd. (Financial Consulting Services). Mr.
Anderson is also a director of American Technology Labs (Network Equipment),
Aquarius Holdings Ltd. (Water Transport Systems), Cis-Lunar Development (Diving
Equipment), Rotary Rocket Corp. (Space Transportation Systems), Net-Tel
Holdings (Telecom Services) and US WATS (Telecom Services).
JOSEPH L. STERN. From 1975 to the Present, Joseph L. Stern
has served as the President of Stern Telecommunications Corp., an engineering,
consulting and product development organization with broad expertise in
telecommunications.
DENNIS J. SPINA. From February 1998 to the Present, Dennis J.
Spina has served as Vice Chairman and President of Internet Services of RCN, a
telecommunications company. From August 1996 to February 1998, Mr. Spina served
as Chief Executive Officer of Erols Internet, Inc. (Internet Service Provider)
(Erols was acquired by RCN). From January 1996 to July 1996, Mr. Spina was
involved in Independent Consulting in the service and distribution industry.
From November 1994 to December 1995, Mr. Spina served as President and Chief
Executive Officer of International Service Systems (Janitorial and Energy
Management). From August 1990 to October 1994, Mr. Spina served as President
and Chief Executive Officer of Suburban Propane, Inc. (division of Hanson PLC).
Mr. Spina was also hired in a turnaround capacity and served as President and
Chief Executive Officer of Petrolane, Inc. (Propane Distribution) from August
1990 to July 1993. Petrolane was reorganized in a "prepackaged" proceeding in
July 1993 under the U.S. Bankruptcy Code.
THOMAS J. CIRRITO. From August 1995 to the Present, Thomas J.
Cirrito has served as a general partner of Atocha, L.P., a Texas limited
partnership whose principal business is investment capital management for
growth. From June 1998 to the Present, Mr. Cirrito has served as a Director of
Net-Tel (Long Distance). From December 1997 to the Present, Mr. Cirrito has
served as the Chairman of the Board of Digital Commerce (Electronic
Commercial). From April 1996 to June 1997, Mr. Cirrito served as the President
of Consumer Division, Telco (Long Distance). From June 1993 to April 1995, Mr.
Cirrito served as the Chief Executive Officer of Long Distance Wholesale Club
(Long Distance).
<PAGE>
The following sets forth the name, business address, and the
number of Shares of beneficially owned by Revision, Walt Anderson ("Anderson")
and the Revision Nominees as of November 11, 1998:
<TABLE>
<CAPTION>
Number of Shares
of Common Stock
Beneficially
Name Business Address Owned Percent of Class
---- ---------------- ----- ----------------
<S> <C> <C> <C>
Revision LLC 1313 North Market Street 1,857,434(1) 24.1%
Wilmington, Delaware 19801
Walt Anderson 3050 K Street, NW 1,857,634(1)(2) 24.1%
Suite 250
Washington, DC 20007
Joseph L. Stern c/o Stern 100 (3)
Telecommunications Corp.
584 Broadway, Suite 706
New York, New York 10012-
3254
Dennis J. Spina 8 Stonehouse Road 5 (3)
Califon, New Jersey 07830
Thomas J. Cirrito 6429 Georgetown Pike 504,694 6.5%
McLean, Virginia 22101
</TABLE>
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(1) Revision and Anderson, collectively, beneficially own 1,857,634 Shares or
24.1% of the outstanding Shares. Anderson directly owns 200 Shares or less than
.01% of the outstanding Shares. Revision directly owns 1,857,434 Shares or
24.1% of the outstanding Shares. As the Manager and holder of 100% of the
voting membership interests in Revision, Anderson has the sole power to vote or
direct the voting of the 1,857,434 Shares owned by Revision, and the power, in
the name and on behalf of Revision, to dispose of such Shares. Accordingly,
Anderson may be deemed to be the beneficial owner of the Revision Shares. As of
the date of this Proxy Statement, Revision is enjoined from voting 477,694
Shares included in the foregoing. Accordingly, Revision and Anderson,
collectively, will be able to vote 1,379,940 Shares (representing 17.9% of the
outstanding Shares) at the Annual Meeting.
(2) Anderson is the President and a Director of the Foundation for
International NonGovernmental Development of Space, a non-profit organization
("FINDS") which owns 94,930 Shares. Anderson does not have a controlling
interest in FINDS and thus disclaims beneficial ownership of the Shares held by
FINDS.
(3) Less than 1% of the outstanding Shares.
(4) Mr. Cirrito beneficially owns 504,694 Shares representing approximately
6.5% of the outstanding Shares. Of the 504,694 Shares beneficially owned by Mr.
Cirrito, 20,000 Shares are owned directly by him and 484,694 Shares are
beneficially owned by Atocha, L.P., a Texas limited partnership of which Mr.
Cirrito is general partner.
