Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15d
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For Quarterly Period Ended September 30, 1995
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-17366
------------------------------
SHARED TECHNOLOGIES INC.
------------------------
(exact name of registrant as specified in its charter)
Delaware 87-0424558
---------- -------------
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
100 Great Meadow Road, Suite 104
Wethersfield, CT 06109
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(Address of principal executive offices)
(203) 258-2400
-----------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or 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 close of the latest
practicable date.
Class Outstanding at November 14, 1995
------------- ---------------------------
Common Stock, $.004 par value 8,504,823 shares
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
-------- ---------------------- -----
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance
Sheets as of September 30,
1995 and December 31, 1994 3-4
Consolidated Statements of
Operations for the nine months
ended September 30, 1995 and 5
1994
Consolidated Statements of
Operations for the three
months ended September 30,
1995 and 1994 6
Consolidated Statements of
Cash Flows for the nine
months ended September 30,
1995 and 1994 7
Consolidated Statements of
Stockholders' Equity for
the nine months ended
September 30, 1995 8
Notes to Consolidated
Financial Statements 9-11
Item 2 Management's Discussion and
Analysis of Results of
Operations and Financial
Condition 12-13
PART II OTHER INFORMATION 14
Signature Page 15
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<TABLE>
<CAPTION>
Item 1. Financial Statements
------------------------------------
Shared Technologies Inc.
Consolidated Balance Sheets
September 30, 1995 and December 31,
1994
(unaudited)
September 30, December 31,
1995 1994
---------- -------------
<S> <C> <C>
CURRENT ASSETS:
Cash $1,410,374 $172,262
Accounts receivable, less allowance
for doubtful accounts of $914,000
in 1995 and $584,000 in 1994 11,587,514 8,532,770
Other current assets 1,344,891 727,375
Deferred income taxes 550,000 550,000
-------- -------
Total current assets 14,892,779 9,982,407
------------ ------------
Equipment, at cost:
Telecommunications equipment 29,499,909 26,222,732
Office and data processing
equipment 6,131,803 4,995,191
------------ ------------
35,631,712 31,217,923
Less - Accumulated depreciation 18,062,821 15,473,023
------------ ------------
17,568,891 15,744,900
------------- -------------
Other Assets 14,617,414 12,197,929
----------- ------------
Total Assets $47,079,084 $37,925,236
-------------- -----------------
-------------- ----------------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Balance Sheets
September 30, 1995 and December 31, 1994
(unaudited)
September December 31,
30,1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Notes payable and current portion of
long-term debt and capital lease
obligations $2,437,710 $1,840,401
Accounts payable 10,664,246 8,191,350
Accrued expenses 2,666,048 2,381,736
Advance billings 1,248,382 1,260,158
---------- ------------
Total current liabilities 17,016,386 13,673,645
---------- ------------
Long-Term Debt and Capital Lease 4,012,234 2,886,365
Obligations less current portion ---------- ------------
Minority Interest in Net Assets of
Subsidiaries 1,662,690 101,504
--------- ---------
Redeemable Put Warrant 416,287 383,048
-------- --------
STOCKHOLDERS' EQUITY:
Preferred Stock, $.01 par value:
Series C, authorized 1,500,000 shares,
outstanding 906,930 shares in 1995 and
1994 9,069 9,069
Series D, authorized 1,000,000 shares,
outstanding 456,900 shares in 1995 and
1994 4,569 4,569
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Balance Sheets
September 30, 1995 and December 31,
1994
(unaudited)
September 30, December 31,
1995 1994
<S> <C> <C>
Series E, authorized 400,000
shares, outstanding no shares in
1995 and 400,000 shares in 1994 4,000
Series F, authorized 700,000
shares, outstanding no shares in
1995 and 700,000 shares in 1994 7,000
Common Stock; $.004 par value,
20,000,000 shares authorized;
8,476,315 and 6,628,246 shares
outstanding in 1995 and 1994
respectively 33,905 26,513
Additional paid-in capital 44,647,005 41,488,128
Accumulated deficit (20,723,061) (22,465,105)
Obligations to issue common stock 1,806,500
---------- ------------
Total stockholders' equity 23,971,487 20,880,674
------------ -------------
Total liabilities and stockholders' $47,079,084 $37,925,236
equity -------------- -------------
-------------- -------------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statements of Operations
For the Nine Months Ended
September 30, 1995 and 1994
(unaudited)
September 30, September 30,
1995 1994
<S> <C> <C>
Revenue:
Shared tenant services $25,248,201 $20,450,338
Facility management services 9,266,253 3,443,468
Cellular services 9,160,128 7,620,195
----------- ----------
Total Revenue 43,674,582 31,514,001
----------- -----------
Cost of Revenue:
Shared tenant services 13,933,976 11,224,004
Facility management services 7,163,639 2,796,147
Cellular services 5,530,558 3,969,979
---------- -----------
Total Cost of Revenue 26,628,173 17,990,130
---------- -----------
Gross Margin 17,046,409 13,523,871
Selling, General & Administrative
Expenses:
Field 12,659,071 8,700,681
Corporate 3,457,279 3,058,956
----------- ----------
Operating Income 930,059 1,764,234
Gain on sale of subsidiary stock 1,374,544 -
Interest Expense (574,209) (228,117)
Interest Income 130,016 69,792
Minority Interest in Net (Income)
Loss of Subsidiaries 213,445 (43,080)
-------- ----------
Net Income 2,073,855 1,562,829
Preferred Stock Dividends (298,575) (349,974)
--------- ------------
Net Income Applicable to Common Stock $1,775,280 $1,212,855
---------------- --------------
---------------- --------------
Net Income Per Common Share $0.20 $0.21
-------- ---------
-------- ---------
Weighted Average Shares Outstanding 8,698,207 5,699,483
------------ -----------
------------ -----------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statements of Operations
For the Three Months Ended
September 1995 and 1994
(unaudited)
September 30, September 30,
1995 1994
<S> <C> <C>
Revenue:
Shared tenant services $8,178,263 $8,101,762
Facility management services 3,916,491 2,691,972
Cellular services 3,870,059 3,699,285
----------- ----------
Total Revenue 15,964,813 14,493,019
----------- -----------
Cost of Revenue:
Shared tenant services 4,353,841 4,667,446
Facility management services 2,913,726 2,137,853
Cellular services 2,451,861 1,854,885
---------- -----------
Total Cost of Revenue 9,719,428 8,660,184
---------- -----------
Gross Margin 6,245,385 5,832,835
Selling, General & Administrative
Expenses:
Field 4,678,533 3,954,061
Corporate 1,313,734 1,206,329
----------- ----------
Operating Income 253,118 672,445
Interest Expense (244,596) (101,768)
Interest Income 58,568 32,234
Minority Interest in Net
Loss of Subsidiaries 124,600
-------- ----------
Net Income 191,690 602,911
------------ ---------
Preferred Stock Dividends (99,680) (130,772)
--------- ----------
Net Income Applicable to Common Stock $92,010 $472,139
----------- ----------
----------- ----------
Net Income Per Common Share $0.01 $0.07
---------- --------
---------- --------
Weighted Average Shares Outstanding 8,751,048 6,549,668
---------------- -----------
------------ -----------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statements of Cash Flows
For the Nine Months Ended
September 30, 1995 and 1994
(unaudited)
September September 30,
30,1995 1994
<S> <C> <C>
Cash Flows Provided by Operating
Activities
Net Income $2,073,855 $1,562,829
Adjustments:
Gain on sale of subsidiary stock (1,374,544)
Depreciation & amortization 3,266,030 2,293,934
Minority interest in net income
(loss) of subsidiaries (213,445) 43,080
Change in Assets and Liabilities:
Accounts receivable (2,407,574) (2,126,013)
Other current assets (593,696) (38,746)
Other assets (309,640) 43,993
Accounts payable 1,541,358 1,046,443
Accrued expenses (57,756) (883,911)
Advanced billings (46,776) 16,932
---------- ------------
Net cash provided by operating
activities 1,877,812 1,958,541
---------- ------------
Cash Flows used in Investing Activities
Acquisitions (2,482,793) (3,779,725)
Capital expenditures (3,099,289) (2,521,417)
----------- -----------
Net cash used in investing activities (5,582,082) (6,301,142)
------------ -------------
Cash Flows From Financing Activities:
Preferred stock dividends (298,575) (349,974)
Net proceeds from sale of subsidiary
stock 3,274,175
Purchase of subsidiary treasury stock (375,000)
Proceeds from borrowings 2,929,193 2,121,547
Repayments of notes payable, long-
term debt and capital lease
obligations (1,750,860) (1,697,627)
Net proceeds from sales of common 1,163,449 4,711,509
stock ---------- ----------
Net cash provided by financing
activities 4,942,382 4,785,455
----------- -----------
Net increase in cash 1,238,112 442,854
Cash, Beginning of Period 172,262 408,533
--------- ----------
Cash, End of Period $1,410,374 $851,387
----------- -----------
----------- -----------
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for -
Interest $568,963 $227,650
Income taxes $73,611 $25,032
Supplemental Disclosures of Noncash
Investing and Financing Activities:
Issuance of common stock in connection
with acquisitions $1,806,500 -
------------ --------------
------------ --------------
Issuance of preferred stock in
connection with acquisition
- $5,000,000
------------ --------------
------------ --------------
Dividend accretion on redeemable put
warrant $33,236 -
--------- ----------
--------- ----------
Issuance of stock to settle accrued $185,320 $66,946
expenses ------------ --------------
------------ --------------
The accompanying notes are an integral part of these financial
statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statement of
Stockholders' Equity
For the period ended
September 30, 1995
(unaudited)
<S> <C> <C> <C> <C>
Series C Series D
Preferred Preferred
Stock Stock
Shares Amount Shares Amount
Balance, January 1, 1995 906,930 $9,069 456,900 $4,569
Issuance of Common Stock
per obligation to issue - - - -
Conversion of Preferred - - - -
Stock
Sale of Common Stock - - - -
Common stock issued in
lieu of compensation and
other - - - -
Net income - - - -
Dividend accretion of
redeemable put warrant - - - -
Preferred stock dividends - - - -
-------- ------- --------- ----------
Balance, September 30, 906,930 $9,069 456,900 $4,569
1995 -------- ------- -------- --------
-------- ------- -------- --------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statement of
Stockholders' Equity
For the period ended
September 30, 1995
(unaudited)
<S> <C> <C> <C> <C>
Series E Series F
Preferred Preferred
Stock Stock
Shares Amount Shares Amount
Balance, January 1, 1995 400,000 $4,000 700,000 $7,000
Issuance of Common Stock
per obligation to issue - - - -
Conversion of Preferred (400,000) ($4,000) (700,000) ($7,000)
Stock
Sale of Common Stock - - - -
Common stock issued in
lieu of compensation and
other - - - -
Net income - - - -
Dividend accretion of
redeemable put warrant - - - -
Preferred stock dividends - - - -
-------- -------- ---------- -----------
Balance, September 30, 0 $0 0 $0
1995 --- ----- -------- ---------
--- ----- -------- ---------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statement of
Stockholders' Equity
For the period ended
September 30, 1995
(unaudited)
<S> <C> <C> <C>
Common Additional
Stock
Paid-in
Shares Amount Capital
Balance, January 1, 1995 6,628,246 $26,513 $41,488,128
Issuance of Common Stock
per obligation to issue 405,395 1,621 1,804,879
Conversion of Preferred 1,100,000 4,400 6,600
Stock
Sale of Common Stock 315,500 1,262 1,228,062
Common stock issued in
lieu of compensation and 27,174 109 119,336
other
Net income - - -
Dividend accretion of
redeemable put warrant - - -
Preferred stock dividends - - -
----------- ----------- --------------
Balance, September 30, 8,476,315 $33,905 $44,647,005
1995 ----------- ----------- --------------
----------- ----------- --------------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
<TABLE>
<CAPTION>
Shared Technologies Inc.
Consolidated Statement of
Stockholders' Equity
For the period September
30, 1995
(unaudited)
<S> <C> <C> <C>
Obligations Total
Accumulated to Issue Stockholders'
Deficit Common Stock Equity
Balance, January 1, 1995 ($22,465,105) $1,806,500 $20,880,674
Issuance of Common Stock
per obligation to issue - (1,806,500) (0)
Conversion of Preferred - - (0)
Stock
Sale of Common Stock - - 1,229,324
Common stock issued in
lieu of compensation and - - 119,445
other
Net income 2,073,855 - 2,073,855
Dividend accretion of
redeemable put warrant (33,236) - (33,236)
Preferred stock dividends (298,575) - (298,575)
------------- ------------ -------------
Balance, September 30, ($20,723,061) $0 $23,971,487
1995 ------------- ------------- -------------
------------- ------------- ------------
The accompanying notes are an integral part of these consolidated
financial statements.
</TABLE>
Shared Technologies Inc.
Notes to Consolidated Financial Statements
September 30, 1995
(Unaudited)
1. Basis of Presentation: The consolidated financial statements
included herein have been prepared by Shared Technologies Inc.
(the Company) pursuant to the rules and regulations of the
Securities and Exchange Commission and reflect all adjustments,
consisting only of normal recurring adjustments, which are, in
the opinion of management, necessary to present a fair statement
of the results for interim periods. Certain information and
footnote disclosures have been omitted pursuant to such rules and
regulations, although the Company believes that the disclosures
are adequate to make the information presented not misleading.
It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements
and the notes thereto included in the Company's December 31, 1994
report on Form 10-K. Certain reclassifications to prior year
financial statements were made in order to conform to the 1995
presentation.
2. Income Taxes: The Company and its subsidiaries file a
consolidated federal income tax return but generally file
separate state income tax returns. As of December 31, 1994, the
Company has net operating loss carryforwards for federal income
tax purposes of approximately $22.7 million, which expire, if
unused, from 2001 to 2007.
3. Acquisitions: In June 1994, the Company acquired all of the
partnership interests in Access Telecommunication Group, L.P. and
Access Telemanagement, Inc. (collectively Access). The purchase
price was $9,252,000, of which $4,252,000 was paid in cash and
the balance through the issuance of 400,000 shares of Series E
Preferred Stock valued at $3.75 per share and 700,000 shares of
Series F Preferred Stock valued at $5.00 per share.
On June 30, 1995 the Company purchased all of the outstanding
capital stock of Office Telephone Management ("OTM"). OTM
provides telecommunication management services primarily to
businesses located in executive office suites. The purchase
price is currently allocated as follows:
<TABLE>
<CAPTION>
<S> <C>
Goodwill $1,915,000
Property, Plant & Equipment 1,400,000
Accounts Receivable, (net) 400,000
Other current assets 20,000
Debt (current and long-term) (545,000)
Accounts Payable (525,000)
Accrued Expense (530,000)
------------
Net Purchase Price $2,135,000
------------
------------
</TABLE>
In May and June 1995, the Company's cellular subsidiary Shared
Technologies Cellular, Inc. ("STC") commenced management and
subsequently completed its acquisition of the outstanding capital
stock of Cellular Hotline, Inc. ("Hotline") for $617,000. The
$617,000 was comprised of $367,000 in cash, paid at closing, and
the issuance of 50,000 shares of STC common stock. At the
discretion of the former Hotline stockholders, STC was required
to repurchase all or a portion of the shares for $5.00 per share,
at any time during the period commencing three months and ending
six months after June 19, 1995. The former Hotline stockholders
exercised their put option during that period. Additionally at
closing, STC issued options to purchase 50,000 additional shares
of STC common stock, exercisable at $7.50 per share for three
years. The agreement provides for additional payments based upon
attaining certain levels of activation revenues, as defined, over
a one year period.
Unaudited proforma consolidated statements of operations for the
nine-month period ended September 30, 1994 and 1995 as through
the acquisitions of Access, OTM and Hotline had been made at the
beginning of the period are as follows:
1994 1995
Revenues $40,796,000 $46,401,000
Net Income $1,730,000 $1,697,000
Net Income Per Share $0.23 $0.20
Weighted Average Shares 7,488,054 8,698,207
4. Contingencies: While providing services at the Jacob K.
Javits Convention Center in 1991, the Company licensed the right
to provide certain public pay telephone services at the Center to
Tel-A-Booth Communications, Ltd. In 1992, Tel-A-Booth filed a
claim against the New York Convention Center Operating
Corporation and its facilities manager, Ogden Allied Facility
Management, and against the Company seeking $10,000,000 in
damages for which no amounts have been provided in the
accompanying consolidated financial statements. While any
litigation contains an element of uncertainty, management is of
the opinion based on the current status of the claim that the
ultimate resolution of this matter should not have a material
adverse effect upon either results of operations, cash flows or
financial position of the Company.
The Company's subsidiary, Shared Technologies Cellular, Inc.
(STC) has entered into an agreement for partial settlement of
certain litigation arising in connection with its purchase of
certain assets from Road and Show South, Ltd. ("Road and Show")
Pursuant to the settlement, STC has been indemnified against a
claim from a former employee of an affiliate of Road and Show.
As between STC and Road and Show, certain claims exist, which the
parties have agreed to attempt to settle through mediation or
arbitration. The Company's management believes that in the event
such claims are resolved against STC that they would not, in the
aggregate, have a material adverse effect on the Company's
financial condition.
In addition to the above matters, the Company is a party to
various legal actions, the outcome of which, in the opinion of
management, will not have a material adverse effect on the
Company's financial condition and results of operations.
5. Gain on sale of subsidiary stock: In April, 1995, the
Company's cellular subsidiary Shared Technologies Cellular, Inc.
("STC") completed its SB-2 filing with the Securities and
Exchange Commission and became a public company. Prior to this
date STC had been an approximately 86% owned subsidiary of the
Company. STC sold 950,000 shares of common stock at $5.25 which
generated net proceeds of approximately $3,274,000, after
underwriters' commissions and offering expenses. These proceeds
are intended to be used to finance marketing activities relating
to STC's cellular telephone rental service ($1.15 million),
repayment of indebtedness to the Company ($1.25 million),
acquisition of telecommunication equipment, billing technology
management information systems and centralized reservation
systems ($.5 million) and the balance for working capital and
general corporate purposes. The net effect on the consolidated
financial statements for the second quarter was a gain of
approximately $1,375,000.
6. Subsequent Events: In November 1995 the Company signed an
agreement under which Fairchild Industries Ind. ("FII"),
following a reorganization transferring all non-communications
assets to its parent RHI Holding Inc., will merge into the
Company. The company will be called Shared Technologies
Fairchild Inc. Under the proposed merger agreement the Company
will issue 6 million shares of common stock, 1,000,000 shares of
convertable preferred stock with a $25,000,000 liquidation
preference and 1,000,000 shares of special preferred stock with
an initial $20,000,000 liquidation preference and raise
approximately $238 million through senior debt from banks and
subordinated debt from the capital markets. The Company has
entered into financing arrangements with CS First Boston which
include a highly confident letter for all of the debt financing
for the transaction.
In November 1995 the Company's cellular subsidiary, STC,
commenced management and subsequently completed its acquisition
of certain assets of PTC Cellular, Inc. ("PTCC"). The purchase
price was $3,800,000, comprised of $300,000 in cash, the
assumption of $1,200,000 in assumed account payable, a 5-year
promissory note in the principal amount of $2,000,000 and the
issuance of 100,000 shares of STC common stock, $.01 par value.
Additionally, the agreement allows for royalty payments in the
amount of three percent (3%) of quarterly revenues generated from
certain of the acquired assets not to exceed an aggregate of
$2,500,000. Also, STC has committed to PTCC to obtain financing
in the amount of $7,000,000 within six months of the acquisition
date.
Pro Forma financial information is not yet available.
Item 2.
Management's Discussion and Analysis of Results of Operations and
Financial Condition
Results of Operations
---------------------
The Company's revenues rose to $43,675,000 for the nine months
ended September 30, 1995, an increase of $12,161,000 or 39% over
the nine months ended September 30, 1994. Revenues rose to
$15,965,000 for the three month period ended September 30, 1995
an increase of $1,471,000 or 9% over the three month period ended
September 30, 1994. Each division continued to contribute
significantly to the increase in revenue. Shared tenant services
(STS) increased $4,798,000 or 23%, facility management services
(FMS) grew $5,823,000 or 169% and cellular services (STC) rose
$1,540,000 or 20% for the nine months ended September 30, 1995
over the nine months ended September 30, 1994. The majority of
the growth in STS revenue was attributable to the June 1994
acquisition of Access Telecommunications Group, L.P. (Access).
Growth in FMS revenue was attributable to the Access acquisition
as well as the June 1995 acquisition of Office Telephone
Management (OTM). $876,000 of the FMS revenue growth for the
nine and three months ended September 30, 1995, was due to the
addition of OTM. The growth in STC revenues was due to expanded
operations through the opening of new locations and recent
acquisitions.
Gross margin dropped to 39% of revenue for the nine months ended
September 30, 1995 from 43% for the nine months ended September
30, 1994. Gross margin decreased to 39% of revenue for the three
months ended September 30, 1995 compared to 40% for the three
months ended September 30, 1994.
Changes in the Company's gross margin were impacted by changes in
sales mix and the Company's continued growth in 1995. STS
accounted for 58% and 51% of total sales for the nine and three
months ended September 30, 1995 compared to 65% and 56% for the
same periods ended September 30, 1994. FMS accounted for 21% and
25% of total sales for the nine and three months ended September
30, 1995 compared to 11% and 19% for the same periods ended
September 30, 1994. STC accounted for 21% and 24% of total sales
for the nine and three months ended September 30, 1995 compared
to 24% and 25% for the same periods ended September 30, 1994.
For the nine months ended September 30, 1995, STS produced a 45%
gross margin and FMS a 23% gross margin compared to 45% and 19%
for the period ended September 30, 1994 For the three months
ended September 30, 1995 STS produced a 47% gross margin and FMS
a 26% gross margin compared to 42% and 21% for the period ended
September 30, 1994. Several factors have impacted the swings in
gross margin for these divisions. The purchase of Access in 1994
added significantly to the revenue bases of both divisions and
caused STS gross margin to drop while FMS gross margin increased.
In the last quarter management successfully increased STS margins
through reduction in direct costs and culling non profitable
business from their revenue base. FMS margins improved over the
last three months mainly due to the addition of OTM which
recorded gross margins of 35% for the third quarter. STC gross
margin dropped to 40% and 37% for the nine and three months ended
September 30, 1995 from 48% and 50% for the nine and three months
ended September 30, 1994. This drop was mainly due to the
acquisition of Cellular Hotline, Inc. in May 1995, which produced
lower gross margin than the core business and 1994 second quarter
World Cup cellular rentals which produced unusually high gross
margins.
Selling, general and administrative expenses as a percentage of
revenue were 37% and 38% for the nine and three months ended
September 30, 1995 compared to 37% and 36% for the nine and three
months ended September 30, 1994. The STS and FMS divisions have
reduced cost as a percentage of revenue through synergy's created
with the Company's overall growth. However this has been offset
by STC which has added overhead costs related to aggressively
growing the cellular business in the wake of its April 1995
public offering. As STC revenues grow, management expects to see
a decrease in the percentage of selling, general and
administration costs to revenue.
Interest expense increased by $346,000 for the nine months ended
September 30, 1995 over the nine months ended September 30, 1994
and $143,000 for the three months ended September 30, 1995 over
the three months ended September 30, 1994. This is attributable
to the addition of interest bearing debt since June 1994.
In late April 1995 the Company successfully completed a public
offering of its cellular subsidiary's stock. Following the sale
the Company's percentage of ownership dropped from 86% to
approximately 60%. The accounting treatment of the sale required
the Company to record a gain of approzimately $1,375,000 for nine
months ended September 30, 1995.
Liquidity and Capital Resources
-------------------------------
The Company's working capital deficit at September 30, 1995 was
$2,124,000 compared to $3,691,00 at December 31, 1994.
Stockholder's equity at September 30, 1995 was $23,971,000
compared to $20,881,000 at December 31, 1994.
Net cash provided by operations decreased to $1,878,000 for the
nine months ended September 30, 1995 versus $1,959,000 for the
nine months ended September 30, 1994. The Company continues to
utilize cash from operations to manage its working capital
deficit.
The Company continued to invest heavily in equipment at both new
and existing locations. $3,099,000 was spent on capital
expenditures for the nine months ended September 30, 1995
compared to $2,521,000 for the nine months ended September 30,
1994. The Company has also continued to expand through
acquisition investing $2,483,000 in 1995 to acquire Office
Telephone Management Inc. and Cellular Hotline Inc. During 1994
$3,780,000 was invested to acquire Access Telecommunication
Group, L.P. (Access).
Cash to finance this growth was provided mainly from financing
activities. During the first nine months of 1995 $1,160,000 was
raised from sales of new stock, $3,274,000 from an initial public
offering of the Company's cellular subsidiary, and $2,929,000
from new borrowings. A portion of these proceeds were used to
repay $1,751,000 in principal debt and repurchase $375,00 in STC
stock. During 1994 $4,785,000 was raised from financing
activities, the majority of the proceeds came from sales of stock
and new borrowings. These proceeds were used to purchase
equipment, finance the purchase of Access and repay existing
debt.
The Company plans to continue to manage the working capital
deficit and to expand operations throughout 1995. This growth is
expected to be financed with cash from operations and new
borrowings from existing credit lines.
<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
<S> <C>
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
None
(b) Reports on Form 8-K
On June 30, 1995 the Company filed a
Form 8-K, date of report June 19, 1995,
in which, the Company reported the
acquisition of Cellular Hotline, Inc.
by its majority owned subsidiary Shared
Technologies Cellular, Inc.
On August 3, 1995 the Company filed a
Form 8-K/A Amendment #3, date of report
June 27, 1994, regarding its
acquisition of Access Telecommunication
Group, L.P.
</TABLE>
SIGNATURE
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.
SHARED TECHNOLOGIES INC.
By: /s/ Vincent DiVincenzo
----------------------------
Vincent DiVincenzo
Senior Vice President-Finance
and Administration, Treasurer,
Chief Financial Officer
Date: November 14, 1995
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