FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarterly Period Ended: March 31, 1998
or
[ ] Transition Report Pursuant to Section 13 or 15(d)
Of the Securities Exchange Act of 1934
Commission File Number: 0-16479
PEOPLES TELEPHONE COMPANY, INC.
-------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 13-2626435
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) I.D. No.)
2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172
(Address of principal executive offices) (Zip Code)
(305) 593-9667
--------------
(Registrant's telephone number, including area code)
--------------------
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 and (2) has been subject to such filing requirements for
the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date. Common Stock, $.01 Par Value,
outstanding at May 5, 1998: 16,212,434 shares.
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Part I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED BALANCE SHEET
(in thousands, except per share data)
March 31, December 31,
Assets 1998 1997
--------- -----------
<S> <C> <C>
(Unaudited)
Current assets:
Cash and cash equivalents ....................................... $ 3,939 $ 22,834
Restricted cash ................................................. 920 920
Accounts receivable, net of allowance for doubtful accounts
of $5,117 in 1998 and $4,936 in 1997 ......................... 17,742 17,061
Inventory ....................................................... 2,386 2,125
Prepaid expenses and other current assets ...................... 2,501 2,631
--------- -----------
Total current assets ........................................ 27,488 45,571
Property and equipment, net ....................................... 50,951 48,237
Location contracts, net ........................................... 23,624 23,936
Intangible assets, net ............................................ 815 824
Goodwill, net ..................................................... 9,358 4,084
Deferred income taxes ............................................. 3,407 3,407
Other assets, net ................................................. 5,277 5,258
--------- -----------
Total assets ................................................. $ 120,920 $ 131,317
========= ===========
Liabilities and Shareholders' Equity
Current liabilities:
Notes payable and current maturities of long-term debt .......... $ 362 $ 634
Current portion of obligations under capital leases ............. 470 536
Accounts payable and accrued expenses ........................... 19,307 22,722
Accrued interest payable ........................................ 2,541 5,702
Income and other taxes payable .................................. 3,021 2,844
--------- -----------
Total current liabilities .................................... 25,701 32,438
Notes payable and long-term debt .................................. 100,000 100,000
Obligations under capital leases .................................. 500 275
--------- -----------
Total liabilities ............................................ 126,201 132,713
--------- -----------
Commitments and contingencies ..................................... -- --
Redeemable Preferred Stock:
Cumulative convertible preferred stock; Series C, $.01 par
value; 160 shares authorized; 150 shares issued and
outstanding, $100 per share liquidation value .............. 13,751 13,711
Preferred stock dividends payable ............................... 2,835 2,573
--------- -----------
Total preferred stock ....................................... 16,586 16,284
--------- -----------
Common shareholders' deficit:
Preferred stock; $.01 par value; 4,240 shares authorized; none
issued and outstanding ....................................... -- --
Convertible preferred stock; Series B, $.01 par value;
600 shares authorized; none issued and outstanding ........... -- --
Common stock; $.01 par value; 75,000 shares authorized;
16,212 shares in 1998 and 16,209 shares in 1997 issued
and outstanding ............................................ 162 162
Capital in excess of par value .................................. 58,996 59,291
Accumulated deficit ............................................. (79,128) (75,108)
Accumulated other comprehensive loss ............................ (1,897) (2,025)
--------- -----------
Total common shareholders' deficit ........................... (21,867) (17,680)
--------- -----------
Total liabilities less shareholders' deficit ................. $ 120,920 $ 131,317
========= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
2
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<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share data)
For the three months ended
March 31,
--------------------------
1998 1997
---------- ----------
<S> <C> <C>
Revenues:
Coin calls ..................................... $ 19,253 $ 17,940
Non-coin calls ................................. 8,641 10,111
---------- ----------
Total revenues .............................. 27,894 28,051
Costs and expenses:
Telephone charges .............................. 7,298 7,413
Commissions .................................... 7,829 7,566
Field service and collection ................... 5,077 4,746
Depreciation and amortization .................. 5,478 5,256
Selling, general and administrative ............ 3,002 2,935
---------- ----------
Total costs and expenses ................... 28,684 27,916
---------- ----------
Operating (loss) income ........................ (790) 135
Other (income) and expenses:
Interest expense, net ......................... 3,230 3,348
---------- ----------
Loss from continuing operations
before income taxes ............................ (4,020) (3,213)
Income taxes ..................................... -- --
---------- ----------
Loss from continuing operations .................. (4,020) (3,213)
Loss from discontinued operations ................ -- (685)
---------- ----------
Net loss ......................................... $ (4,020) $ (3,898)
========== ==========
Earnings per share (basic and diluted):
Loss from continuing operations ............... $ (0.27) $ (0.22)
Loss from discontinued operations ............. -- (0.04)
---------- ----------
Net loss .................................... $ (0.27) $ (0.26)
========== ==========
Weighted average common shares outstanding ....... 16,212 16,195
========== ==========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
STATEMENTS OF CONSOLIDATED CASH FLOWS
(unaudited, in thousands)
For the three months ended
March 31,
--------------------------
1998 1997
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<S> <C> <C>
Cash flows from operating activities
Net loss .................................................. $ (4,020) $ (3,898)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization ............................. 5,478 5,256
Amortization of deferred financing costs .................. 196 285
Changes in operating assets and liabilities:
Accounts receivable ................................... (681) (5,162)
Inventory ............................................. 11 48
Prepaid expenses and other current assets ............. 130 (53)
Other assets .......................................... (87) (1,107)
Accounts payable and accrued expenses ................. (3,415) 1,909
Accrued interest payable .............................. (3,161) (3,065)
Income and other taxes payable ........................ 177 (420)
Net effect of discontinued operations and assets
held for sale ....................................... -- 578
--------- ---------
Net cash used in operating activities ..................... (5,372) (5,629)
Cash flows from investing activities
Property and equipment additions .......................... (786) (418)
Proceeds from sale of assets .............................. -- 233
Payments for acquisition of Indiana Telcom assets ......... (11,317) --
Payments for certain contracts ............................ (913) (1,658)
--------- ---------
Net cash used in investing activities .................... (13,016) (1,843)
Cash flows from financing activities
Principal payments on long-term debt ...................... (272) (149)
Principal payments under capital lease obligations ........ (242) (352)
Debt issuance costs ....................................... -- (218)
Exercise of stock options and warrants .................... 7 2
--------- ---------
Net cash used in financing activities ..................... (507) (717)
--------- ---------
Net decrease in cash and cash equivalents ................. (18,895) (8,189)
Cash and cash equivalents at beginning of period .......... 22,834 12,556
--------- ---------
Cash and cash equivalents at end of period ................ $ 3,939 $ 4,367
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND MARCH 31, 1997
(unaudited)
NOTE 1 - UNAUDITED INTERIM INFORMATION
The accompanying interim consolidated financial data for Peoples Telephone
Company, Inc. (the "Company") and subsidiaries, are unaudited; however, in the
opinion of management, the interim data include all adjustments necessary for a
fair presentation of the results for the interim periods. The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
The results of operations for the three months ended March 31, 1998 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1998.
The interim unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended December 31, 1997 as set forth in the Company's 1997 Annual
Report on Form 10-K.
NOTE 2 - INVESTMENTS AND OTHER COMPREHENSIVE LOSS
Investments in debt and equity securities are accounted for in accordance with
Statement of Financial Accounting Standards No. 115 ("SFAS 115"), Accounting for
Certain Investments in Debt and Equity Securities. The Company's investment in
Global Telecommunications Solutions, Inc. ("GTS") is classified as "available
for sale," and reported at fair value with unrealized gains or losses, net of
tax, recorded as a separate component of Shareholders' Equity. The Company's
investment in GTS common stock at March 31, 1998 was approximately $1.3 million,
net of approximately $1.9 million of unrealized losses.
As of January 1, 1998, the Company adopted SFAS 130, Reporting Comprehensive
Income. SFAS 130 establishes new rules for the reporting and display of
comprehensive income and its components; however, the adoption of SFAS 130 had
no impact on the Company's net loss or shareholders' deficit. SFAS 130 requires
unrealized gains or losses on the Company's available-for-sale securities,
which, prior to adoption, were reported separately in shareholders' deficit, to
be included in other comprehensive income. Prior year financial statements have
been reclassified to conform to the requirements of SFAS 130.
5
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<TABLE>
<CAPTION>
PEOPLES TELEPHONE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND MARCH 31, 1997
(unaudited)
The components of the comprehensive loss are as follows:
For the three months
ended March 31,
---------------------
1998 1997
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<S> <C> <C>
Net loss ............................................. $ (4,020) $(3,898)
Unrealized gain on investment, net of income taxes ... 128 128
-------- --------
Comprehensive loss ................................... $ (3,892) $(3,770)
======== ========
</TABLE>
NOTE 3 - EARNINGS PER SHARE
For the quarters ended March 31, 1998 and 1997, the treasury stock method was
used to determine the dilutive effect of the options and warrants on earnings
per share data. The following table summarizes the loss from continuing
operations and the weighted average number of shares outstanding used in the
computation of earnings per common in accordance with the Financial
Accounting Standards Board's Statement No. 128, Earnings Per Share.
<TABLE>
<CAPTION>
For the three months
ended March 31,
---------------------
1998 1997
-------- --------
<S> <C> <C>
Net loss from continuing operations ................... $ (4,020) $ (3,213)
Deduct:
Cumulative preferred stock dividend requirement .... (262) (262)
Preferred stock issuance cost accretion ............. (39) (39)
-------- --------
Net loss applicable to common shareholders .......... $ (4,321) $ (3,514)
======== ========
Weighted average common shares outstanding .......... 16,212 16,195
======== ========
Basic and diluted loss per share .................... $ (0.27) $ (0.22)
======== ========
</TABLE>
Diluted loss per share is equal to basic loss per share since the conversion of
preferred shares and the exercise of outstanding options and warrants would be
anti-dilutive for all periods presented.
NOTE 4 - LONG-TERM DEBT
During March 1997, the Company executed an amendment to the Fourth Amended and
Restated Loan and Security Agreement (the "Credit Facility") which increased the
Company's Credit Facility with Creditanstalt-Bankverein from $10.0 million to
$20.0 million. The interest rate on balances outstanding under the Credit
Facility varies based upon the leverage ratio maintained by the Company.
Outstanding principal balances are due in full in the year 2000. Interest is
payable monthly for loans based on the prime rate and quarterly for loans based
on the LIBOR rate. A commitment fee of 1/2 of 1% is charged on the aggregate
daily available balance of the Credit Facility. The Credit Facility is secured
by substantially all of the Company's assets and contains certain covenants
which, among other things, require the Company to maintain certain cash flow
levels and interest coverage ratios and places certain restrictions on the
payment of dividends. At March 31, 1998, the Company had no amounts borrowed
under the Credit Facility.
6
<PAGE>
PEOPLES TELEPHONE COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1998 AND MARCH 31, 1997
(unaudited)
NOTE 5 - INCOME TAXES
For the three months ended March 31, 1998 and March 31, 1997, the Company
recorded deferred tax assets and deferred tax asset valuation allowances of
approximately $1.5 million. Valuation allowances were provided to reduce the
deferred tax assets to a level which, more likely than not, will be realized.
NOTE 6 - LOSS FROM DISCONTINUED OPERATIONS
In the last quarter of 1997, the Company sold the operating assets of its inmate
telephone division. The accompanying Statement of Income and Statement of Cash
Flows for the first quarter ended March 31, 1997 have been restated to present
results of the former inmate telephone division as discontinued operations. In
the three months ended March 31, 1997, the Company reported approximately $0.7
million loss from discontinued operations.
NOTE 7 - ACQUISITION
On January 12, 1998, the Company acquired the operating assets of Indiana Telcom
Corporation for approximately $11.3 million in cash. The acquisition was
accounted for as a purchase, and, accordingly, the purchase price was allocated
to the assets acquired and liabilities assumed based on appraisals and
other estimates of their underlying fair values. The allocation of the purchase
price is preliminary, pending finalization of appraisal and other estimates. The
excess of the purchase price over the fair value of net assets acquired of $5.6
million was recorded as goodwill and is being amortized over 5 years.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis compares the quarter ended March 31,
1998 to the quarter ended March 31, 1997 and should be read in conjunction with
the consolidated financial statements and notes thereto appearing elsewhere in
this Form 10-Q and in conjunction with Management's Discussion and Analysis
appearing in the Company's Form 10-K for the year ended December 31, 1997.
Statements in Management's Discussion and Analysis relating to matters that
are not historical facts are forward-looking statements. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance or achievements of Peoples
Telephone Company, Inc. to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such known and unknown risks, uncertainties and other factors
include, but are not limited to, the following: the impact of competition,
especially in a deregulated environment (including the ability of the Company to
implement higher market-based rates for local coin calls), uncertainties with
respect to the implementation and effect of the Telecommunications Act of 1996,
including any new rule-making by the Federal Communications Commission (FCC) or
litigation which may seek to modify or overturn the FCC orders implementing such
act or portions thereof, the ongoing ability of the Company to deploy its public
pay phones in favorable locations, the Company's ability to continue to
implement operational improvements and the ability of the Company to efficiently
integrate acquisitions of other telephone companies. Such factors and others are
set forth more fully in the Company's 1997 Annual Report on Form 10-K and the
consolidated financial statements and notes there to appearing elsewhere in this
Form 10-Q.
Overview
On January 12, 1998, the Company acquired the operating assets of Indiana
Telcom Corporation for approximately $11.3 million in cash. This transaction
added approximately 2,600 public pay telephones, located primarily in Indiana
and adjacent midwestern states, and was largely financed with the proceeds from
the sale of the Company's inmate division in December 1997.
Revenues
The Company primarily derives its revenues from coin and non-coin calls.
Coin revenue is generated exclusively from calls made by depositing coins in the
Company's public pay telephones. Coin revenue represented approximately 69.0%
and 64.0% of total revenues for the quarters ended March 31, 1998 and 1997,
respectively. Coin revenue increased 7.3% to $19.3 million during the quarter
ended March 31, 1998, compared to the same period in 1997. The Company's average
installed public pay telephone base was approximately 42,400 phones and 38,400
phones for the three month periods ended March 31, 1998 and 1997, respectively.
Coin revenue on a per phone basis decreased by 2.8% for the quarter ended March
31, 1998, as compared to the same period in 1997. The decrease in coin revenue
on a per phone basis is primarily attributable to the higher than expected
call-suppression resulting from the implementation of higher market-based local
calling rates following local coin rate deregulation. Management believes the
magnitude of the call suppression should decrease as the public payphone
consumer becomes accustomed to the market-based local coin rates, although there
can be no assurances that this will occur. The Company also believes that the
decrease is the result of, among other things, the increased usage of
alternative methods of calling such as prepaid calling cards and wireless
technologies and the operation of more public pay telephones in closer proximity
to the Company's telephones.
On November 8, 1996, the Federal Communications Commission (the "FCC")
issued its final order on reconsideration (the "Initial Payphone Order") setting
forth and affirming regulations implementing Section 276 of the Federal
Telecommunications Act of 1996, previously issued on September 20, 1996. The
8
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Initial Payphone Order initially mandated compensation for access code and 1-800
subscriber calls ("Dial-Around Compensation") at a flat rate of $45.85 per
payphone per month (an assumed 131 calls multiplied by $0.35 per call). The
Company recorded Dial-Around Compensation at this rate in the first quarter of
1997. On October 9, 1997, in response to the remand of certain issues by the
U.S. Court of Appeals for the District of Columbia, the FCC released its Second
Report and Order (the "Remand Order") which established a rate of $0.284 per
call for per call compensation from October 7, 1997 forward. The Remand Order
tentatively concluded that the same $0.284 per call rate should govern
compensation obligations during the period from November 7, 1996 through October
6, 1997 and that the allocation method between long-distance carriers would be
determined in a separate order. The Company recorded the net effect of this rate
change as a Provision for Dial-Around Compensation Adjustment in the third
quarter of 1997. For the period from November 7, 1996 through October 6, 1997,
the Company has collected approximately $9.9 million from carriers for
Dial-Around Compensation. At March 31, 1998, the Company's accounts receivable
include approximately $6.5 million of accrued revenue for Dial-Around
Compensation from this period which will be billed after final resolution of the
allocation obligations of the IXCs as determined by the FCC. See "Business -
Public Pay Telephone Industry Overview", "Business - Regulation" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Provision for Dial-Around Compensation Adjustment" appearing in
the Company's Form 10-K for the year ended December 31, 1997 for a more complete
discussion.
Non-coin revenue is derived from calling card calls, credit card calls,
collect calls and third-party billed calls placed from the Company's public pay
telephones. The Company currently uses AT&T and Sprint to act as its primary
national operator service providers. When the call is completed through the
third-party operator service provider, the Company records as revenue the amount
it receives from the third-party operator service provider which represents a
negotiated percentage of the total amount the caller pays for the call.
The Company is continuing to experience a shift in call traffic from
operator service calls, for which the Company receives a percentage of the
revenue generated by those calls, to access code calls for which the Company
receives a flat rate per phone or per call Dial-Around Compensation amount. Due
to aggressive advertising campaigns by long-distance companies promoting the use
of access code calls, the Company believes that the decrease in non-coin revenue
due to the changes in call traffic patterns is likely to continue. Subject to
possible changes resulting from the appeal of the Remand Order, these decreases
in non-coin revenue are currently being offset to some extent by changes in the
amount of compensation due to the Company for access code calls as well as (800)
subscriber calls, as required under the Remand Order. The Remand Order mandates
Dial-Around Compensation to public pay telephone providers for both types of
calls at a rate of $0.284 per call beginning October 7, 1997.
Non-coin revenue represented approximately 31.0 % and 36.0% of total
revenues for the quarters ended March 31, 1998 and 1997, respectively. For the
quarter ended March 31, 1998, revenues from non-coin calls decreased 14.5%, to
approximately $8.6 million, compared to the quarter ended March 31, 1997. This
decrease was primary attributable to the decrease in the compensation rate for
dial-around calls as a result of the implementation of the Remand Order. After
adjusting for the rate change for Dial-Around Compensation from $0.35 to $0.284
per call, 1997's first quarter non-coin revenues would have been $1.0 million
lower. Using these adjusted figures, non-coin revenues in the first quarter of
1998 would have been $0.5 million, or approximately 5.0%, lower than the first
quarter of 1997.
Operating Expenses
Operating expenses include telephone charges, commissions, field service
and collection expenses and selling, general and administrative expenses.
Telephone charges consist of local line charges paid to Local Exchange Carriers
which include the costs of basic service and transport of local coin calls,
long-distance transmission charges and network costs and billing, collection and
validation costs. Commissions represent payments to property owners for revenues
generated by the Company's telephones located on their properties. Field service
and collection expenses represent the costs of servicing and maintaining the
telephones on an ongoing basis, costs of collecting coin from the telephones and
other related operational costs. Selling, general and administrative expenses
primarily consist of payroll and related costs, legal and other professional
fees, promotion and advertising expenses, property, gross receipts and certain
9
<PAGE>
other taxes, corporate travel and entertainment and various other expenses.
Total operating expenses were approximately 83.2% and 80.8% of total revenues
for the quarters ended March 31, 1998 and 1997, respectively.
Telephone charges decreased as a percentage of total revenues to 26.2% for
the quarter ended March 31, 1998, compared to 26.4% for the same period in 1997.
The Company continues to experience decreased telephone charges as a result of
regulatory changes and competition within the local/intraLATA service market.
Commissions as a percentage of total revenues for the three months ended
March 31, 1998 increased to approximately 28.1% as compared to 27.0% for the
same period of the prior year. The increase in commissions as a percentage of
revenues for the three months was primarily attributable to increased commission
rates for new and renewed contracts.
Field service and collection expenses as a percentage of total revenues
from continuing operations were 18.2% and 16.9% for the first quarters of 1998
and 1997, respectively. Field service and collection expenses increased
approximately 7.0%, to approximately $5.1 million, for the first quarter of
1998, as compared to the same period in 1997. This increase was primarily
attributable to the increase in the average number of installed payphone and to
additional costs incurred for the addition of certain key operations employees
who are needed to implement certain initiatives which are intended to achieve
further operational efficiencies. Selling, general and administrative expenses
were consistent at approximately $3.0 million and $2.9 million for the first
quarter of 1998 and 1997, respectively.
Depreciation and Amortization
Depreciation is based on the cost of the telephones, booths, pedestals and
other enclosures, related installation costs and line interconnection charges
and is calculated on a straight-line method using a ten-year useful life for
public pay telephones. Amortization is primarily based on acquisition costs
including location contracts, goodwill and non-competition provisions and is
calculated on a straight-line method using estimated useful lives ranging from
three to twenty years. Depreciation and amortization increased to $5.5 million
for the quarter ended March 31, 1998, compared to $5.3 million for the same
period in 1997, primarily due to additional depreciation and amortization
expense related to the Indiana Telcom acquisition and to the renewal costs of
location contracts.
Interest Expense
For the first quarter of 1998, interest expense was approximately $3.2
million which is relatively consistent with interest expense in the same quarter
in 1997.
Benefit from Income Taxes
The Company currently records valuation allowances for 100% of the deferred
tax assets generated from operating losses. The Company recorded deferred tax
assets and deferred tax asset valuation allowances of approximately $1.5 million
for the three months ended March 31, 1998 and 1997.
Net Loss
Net loss for the three months ended March 31, 1998 was approximately $4.0
million as compared to $3.9 million for the first quarter of 1997. After
adjusting for the rate change for Dial-Around Compensation, 1997's first quarter
net loss would have been approximately $0.8 million greater. Using this adjusted
figure for comparison, the net loss for the first quarter of 1998 would have
been approximately $0.7 million, or 14.7%, lower than the first quarter of 1997.
10
<PAGE>
Earnings Before Interest, Taxes, Depreciation and Amortization
EBITDA is not presented as an alternative to operating results or cash flow
from operations as determined by Generally Accepted Accounting Principles
("GAAP"), but rather to provide additional information related to the ability of
the Company to meet current trade obligations and debt service requirements.
EBITDA should not be considered in isolation from, or construed as having
greater importance than, GAAP operating income or cash flows from operations as
a measure of an entity's performance.
EBITDA from continuing operations was approximately $4.7 million for the
quarter ended March 31, 1998, compared to $5.4 million for the same period in
1997. After adjusting for the rate change for Dial-Around Compensation, 1997's
first quarter EBITDA would have been approximately $4.6 million. Using this
adjusted figure, EBITDA for the first quarter of 1998 would have been
approximately $0.1 million, or 2.5%, higher than the first quarter of 1997.
Liquidity and Capital Resources
During the first quarter of 1998, the Company continued to finance its
operations from current and prior period operating cash flow. For the three
months ended March 31, 1998, the Company's operating cash flow was $(5.4)
million compared to $(5.6) million for the same period in 1997.
The Company's net working capital was approximately $1.8 million, with a
current ratio of 1.1 to 1.0, at March 31, 1998. This compares with a net working
capital of $13.1 million at December 31, 1997. $11.3 million of cash was used in
January, 1998 to acquire the assets of Indiana Telcom Corporation.
Based upon current expectations, the Company believes that cash flow from
operations, together with amounts which may be borrowed under the amended credit
facility, will be adequate for it to meet its working capital requirements,
pursue its business strategy and service its obligations with respect to its 12
1/4% Senior Notes, although there can be no assurances that it will be able to
do so. The preceding forward looking information is subject to a variety of
factors and uncertainties, including the impact of competition on the Company's
operations, the ultimate implementation and effect of the Telecommunications Act
of 1996, and the ongoing ability of the Company to deploy its phones in
favorable locations and to continue to implement operational improvements.
11
<PAGE>
Part II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit Description
- ------- -----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
12
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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 thereunto duly authorized.
PEOPLES TELEPHONE COMPANY, INC.
Registrant
Date: May 14, 1998 /s/ William A. Baum
William A. Baum
On behalf of the registrant and as
Chief Financial Officer
13
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EXHIBIT INDEX
Exhibits
27 Financial Data Schedule (for SEC use only)
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000819694
<NAME> PEOPLES TELEPHONE COMPANY, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 3939000
<SECURITIES> 0
<RECEIVABLES> 22859000
<ALLOWANCES> (5117000)
<INVENTORY> 2386000
<CURRENT-ASSETS> 27488000
<PP&E> 132253000
<DEPRECIATION> (81302000)
<TOTAL-ASSETS> 120920000
<CURRENT-LIABILITIES> 25701000
<BONDS> 100000000
0
16586000
<COMMON> 162000
<OTHER-SE> (22029000)
<TOTAL-LIABILITY-AND-EQUITY> 120920000
<SALES> 27894000
<TOTAL-REVENUES> 27894000
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