<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
-------------
[ ] 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 0-16715
PHONETEL TECHNOLOGIES, INC.
---------------------------
(NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
OHIO 34-1462198
---- ----------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO,)
INCORPORATION OR ORGANIZATION)
</TABLE>
<TABLE>
<S> <C>
1127 EUCLID AVENUE, SUITE 650, STATLER OFFICE TOWER 44115-1601
- --------------------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(216) 241-2555
--------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date: AS OF AUGUST 6, 1996,
5,310,880 SHARES OF THE REGISTRANT'S COMMON STOCK $.01 PAR VALUE, WERE
OUTSTANDING.
Transitional Small Business Disclosure Format (check one): Yes No X
--- ---
page 1 of 22 pages
<PAGE> 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
FORM 10-QSB
QUARTER ENDED JUNE 30, 1996
INDEX
<TABLE>
<CAPTION>
PAGE NO.
PART I. FINANCIAL INFORMATION
<S> <C> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of December 31, 1995
and June 30, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Statements of Consolidated Operations for the Six and
Three Months Ended June 30, 1995 and 1996 . . . . . . . . . . . . . . . . 4
Statements of Consolidated Cash Flows for the Six
Months Ended June 30, 1995 and 1996 . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations . . . . . . . . . . . . . . 13
</TABLE>
<TABLE>
<CAPTION>
PART II. OTHER INFORMATION
<S> <C> <C> <C>
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . 19
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</TABLE>
page 2 of 22 pages
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
December 31 June 30
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 713,462 $ 1,188,846
Accounts receivable, net of allowance for doubtful
of $40,000 and $100,961, respectively 901,508 1,427,855
Acquisition deposits -- 1,300,000
Other current assets 185,634 302,469
----------- -----------
Total current assets 1,800,604 4,219,170
Property and equipment, net 14,099,111 22,995,039
Intangible assets, net 11,592,157 24,691,804
Other assets 1,425,384 263,716
----------- -----------
$28,917,256 $52,169,729
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 1,010,412 $ 5,051,107
Current portion of obligation under capital leases 288,972 73,510
Accounts payable 2,772,306 2,035,228
Accrued expenses 1,610,100 3,342,314
Obligations relating to contractual settlements
restructuring charges 962,338 480,551
----------- -----------
Total current liabilities 6,644,128 10,982,710
Long-term debt 9,318,501 20,219,861
Obligations under capital leases 3,243,965 202,557
Deferred revenues -- 900,000
14% cumulative preferred stock mandatory redeemable
(redemption amount $6,742,960, due June 30, 2000) -- 6,404,228
Nonredeemable preferred stock, common stock
and other shareholders' equity 9,710,662 13,460,373
----------- -----------
$28,917,256 $52,169,729
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 3 of 22 pages
<PAGE> 4
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended June 30 Three Months Ended June 30
---------------------------- ----------------------------
1995 1996 1995 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Coin calls $4,995,329 $10,428,758 $2,664,224 $5,959,549
Non-coin 2,305,495 5,292,530 1,004,207 3,383,648
Other 577,238 1,101,636 436,316 855,709
------------ ------------ ------------ ------------
7,878,062 16,822,924 4,104,747 10,198,906
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Line and transmission charges 2,100,427 3,862,878 1,287,084 2,260,838
Location commissions 1,516,365 2,536,729 886,665 1,377,263
Other operating expenses 2,682,710 5,048,051 1,132,493 2,906,855
Depreciation and amortization 1,432,491 5,158,689 731,591 3,109,812
Selling, general & administrative 1,345,427 2,398,125 767,934 1,295,041
Contractual settlements and
restructuring charges -- 1,117,729 -- 540,354
------------ ------------ ------------ ------------
9,077,420 20,122,201 4,805,767 11,490,163
------------ ------------ ------------ ------------
Loss from operations (1,199,358) (3,299,277) (701,020) (1,291,257)
Interest expense (213,642) (2,535,645) (110,901) (1,867,026)
------------ ------------ ------------ ------------
Loss before extraordinary item (1,413,000) (5,834,922) (811,921) (3,158,283)
Extraordinary item:
Loss on debt restructuring -- (897,926) -- (81,367)
------------ ------------ ------------ ------------
NET LOSS ($1,413,000) ($6,732,848) ($811,921) ($3,239,650)
============ ============ ============ ============
Earnings per share calculation:
Preferred dividend payable in cash (154,834) -- (77,417) --
Preferred dividend payable in kind -- (110,622) -- (83,372)
Accretion of 14% Preferred to its
redemption value -- (24,119) -- (24,119)
Redemption of 10%, 8%, and
7% Preferred -- (2,002,386) -- --
------------ ------------ ------------ ------------
Net loss applicable to
common shareholders ($1,567,834) ($8,869,975) ($889,338) ($3,347,141)
============ ============ ============ ============
Net loss per common share before
extraordinary item ($0.99) ($2.23) ($0.54) ($0.78)
============ ============ ============ ============
Net loss per common share ($0.99) ($2.48) ($0.54) ($0.80)
============ ============ ============ ============
Weighted average number of shares 1,586,142 3,576,381 1,648,058 4,196,868
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 4 of 22 pages
<PAGE> 5
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
Six Months Ended June 30
1995 1996
------------ ------------
<S> <C> <C>
CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net loss ($1,413,000) ($6,732,848)
Adjustments to reconcile net loss to net
cash flow from operating activities:
Depreciation and amortization 1,432,491 5,158,689
Stock issued in lieu of cash payments 61,160 20,621
Accretion of debt -- 1,053,441
Extraordinary loss on debt restructuring -- 338,546
Increase in allowance for doubtful accounts -- 60,961
Changes in assets and liabilities:
Accounts receivable (233,352) (441,708)
Acquisition deposits -- (1,300,000)
Other current assets 94,429 (116,835)
Accounts payable 575,257 (707,650)
Accrued expenses (51,711) 1,614,714
Obligations relating to contractual
settlements and restructing charges -- (481,787)
------------ ------------
465,274 (1,533,856)
------------ ------------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Acquisition of International Pay Phones, Inc. -- (4,826,335)
Acquisition of Paramount Communications Systems -- (9,825,391)
Deferred revenues -- 900,000
Purchases of intangible assets (185,087) (662,440)
Change in other assets (79,209) 236,668
Purchases of property and equipment (220,626) (1,065,496)
------------ ------------
(484,922) (15,242,994)
------------ ------------
CASH FLOWS (USED IN) PROVIDED BY FINANCING ACTIVITIES:
Proceeds from debt issuances 200,000 32,223,454
Proceeds from shareholder debt -- 575,000
Principal payments on borrowings (918,141) --
Proceeds from issuance of preferred and
common stock and other 690,000 (10,272,477)
Dividends paid (40,375) --
Debt financing costs -- (4,166,097)
Redemption of 10% and 8% Preferred Stock -- (1,117,371)
Equity financing costs (52,935) --
Proceeds from warrant and option exercises 20,000 9,725
------------ ------------
(101,451) 17,252,234
------------ ------------
(Decrease) increase in cash (121,099) 475,384
Cash at beginning of period 478,756 713,462
------------ ------------
Cash at end of period $357,657 $1,188,846
============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 5 of 22 pages
<PAGE> 6
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB
and Item 310(b) of Regulation S-B. Accordingly, they do not include all
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three and six months ended June 30, 1996 are
not necessarily indicative of the results that may be expected for the
year ended December 31, 1996. For further information, refer to the
consolidated financial statements and footnotes thereto included in the
Company's annual report on Form 10-KSB and subsequently amended on Form
10-KSB\A-1 for the year ended December 31, 1995.
Certain amounts relating to the three and six months ended June 30, 1995
have been reclassified to conform to the current quarter presentation.
The reclassifications have no impact on total assets, shareholders'
equity or net loss as previously reported.
2. ACQUISITIONS AND MERGERS
On March 15, 1996, the Company completed the acquisition of the
outstanding common stock of International Pay Phones, Inc. (a South
Carolina company) and International Pay Phones, Inc. (a Tennessee company)
(collectively "IPP"), companies affiliated through common ownership and
management. In connection with the acquisition of IPP, the Company
acquired 2,101 installed telephones for a purchase price consisting of:
(i) $3,496,487 in cash; (ii) 555,589 unregistered shares of the
Company's Common Stock, par value $.01, ("Common Stock"); (iii) 5,453
shares of 14% Convertible Cumulative Redeemable Preferred Stock ("14%
Preferred"); and (iv) warrants to purchase 117,785 shares of the
Company's Common Stock at a nominal exercise price per share ("Nominal
Value Warrants"). Additionally, the Company assumed approximately
$1,757,000 in liabilities, of which $1,551,796 was repaid by the Company
on March 15, 1996. The cash purchase price included three five year
non-compete agreements, with an aggregate value of $60,000, with three of
IPP's former officers.
On March 15, 1996, the Company completed a Share Purchase Agreement with
Paramount Communications Systems, Inc. (a Florida corporation)
("Paramount"). Under the terms of the Agreement, the Company acquired
2,528 installed telephones for a purchase price consisting of: (i)
$9,618,553 in cash; (ii) 8,333 shares of 14% Preferred; and (iii) Nominal
Value Warrants to purchase 179,996 shares of the Company's Common Stock.
page 6 of 22 pages
<PAGE> 7
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
2. ACQUISITIONS AND MERGERS (CONTINUED)
In addition, the Company assumed outstanding liabilities of approximately
$733,000, of which $697,947 was repaid on March 15, 1996. The purchase
price included a five year consulting and non-compete agreement, valued
at $50,000, with one of Paramount's former officers.
The acquisitions were recorded as purchases and the differences between
the fair values of the tangible assets acquired and the total purchase
price, aggregating $10,027,505, were recorded as increases to intangibles
and are being amortized over the average life of the acquired location
contracts which have been estimated to be 60 months.
PENDING ACQUISITION
On June 26, 1996, the Company entered into an Asset Purchase Agreement
with ACI-HDT Supply Company, Amtel Communications Services, Amtel
Communications Correctional Facilities, Amtel Communications, Inc. and
Amtel Communications Payphones, Inc. (all California corporations and
Debtors-in-Possession) collectively referred to as "Amtel" for the
purchase of approximately 7,100 telephones, of which 6,000 are considered
revenue producing telephones, for $7,000,000 in cash and $6,000,000 in
Common Stock. The sale of Amtel's phones to the Company is subject to
approval by the Bankruptcy Court. The Company has the right to pay the
entire purchase price in cash if the Company's Common Stock is trading at
less than $3.50 per share. Upon execution of the Asset Purchase
Agreement, the Company made a deposit of $1,300,000. The deposit is
refundable if the Bankruptcy Court fails to approve the sale.
3. PROPERTY AND EQUIPMENT
As of December 31, 1995 and June 30, 1996 property and equipment
consisted of the following:
<TABLE>
<CAPTION>
Estimated
Useful Lives December 31 June 30
(in years) 1995 1996
------------ --------------- --------------
<S> <C> <C> <C>
Telephones, boards, enclosures and cases 3-7 $ 16,386,987 $ 27,228,267
Furniture, fixtures and other equipment 3-5 989,300 1,312,548
Leasehold improvements 2-5 231,466 235,422
--------------- -------------
17,607,753 28,776,237
Less - accumulated depreciation (3,508,642) (5,781,198)
--------------- -------------
$ 14,099,111 $ 22,995,039
=============== =============
</TABLE>
page 7 of 22 pages
<PAGE> 8
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
4. INTANGIBLE ASSETS
As of December 31, 1995 and June 30, 1996 intangible assets consisted of
the following:
<TABLE>
<CAPTION>
Amortization
Period December 31 June 30
(in months) 1995 1996
------------------ -------------- ------------
<S> <C> <C> <C>
Costs incurred in the acquisition and
installation of telephones 36-120 $ 13,403,126 $ 24,065,203
Debt restructuring costs 60 - 5,141,097
Non-compete agreements 24-60 1,513,765 1,623,765
State operating certifications 60 466,796 466,796
------------ -----------
15,383,687 31,296,861
Less: Accumulated amortization ( 3,791,530) (6,605,057)
------------ ------------
$ 11,592,157 $ 24,691,804
============ ============
</TABLE>
5. LONG-TERM DEBT
In a transaction consummated on March 15, 1996, the Company borrowed
$30,530,954 (out of a total credit facility ("Credit Facility")
commitment of $37,250,000) from Internationale Nederlanden (U.S.) Capital
Corporation and one other lender (collectively known as "Lenders").
Subsequent to March 15, 1996, the Company borrowed an additional
$1,692,500 against the Credit Facility. As of June 30, 1996, $5,026,546
was available to the Company under the Credit Facility to fund
acquisitions and for general working capital purposes, subject to certain
conditions (including availability of additional collateral). The
initial borrowings under the Credit Facility were used to complete the
Paramount and IPP acquisitions, to repay $8,503,405 of outstanding debt
and $3,173,931 of outstanding obligations under capital leases, to redeem
the 10% Cumulative Redeemable Preferred Stock ("10% Preferred"), 8%
Cumulative Redeemable Preferred Stock ("8% Preferred"), and 7% Cumulative
Convertible Redeemable Preferred Stock ("7% Preferred"), and to pay
related transactions fees. The additional borrowings of $1,692,500 were
used for acquisition deposits ($1,300,000) and working capital.
The Credit Facility requires monthly interest payments at the Alternate
Base Rate (as defined therein) plus 5% and contains various covenants
restricting the Company's ability to pay dividends or incur additional
debt, among other conditions, and also contains financial covenants
requiring minimum net worth, working capital and earnings before
interest, depreciation and amortization among other covenants. The
Credit Facility also contains a subjective acceleration clause which
states that in the event of a material adverse change in the business, as
determined by the Lenders, the Lenders can call the debt at their
discretion. The Lenders have waived their right to exercise
page 8 of 22 pages
<PAGE> 9
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
5. LONG-TERM DEBT (CONTINUED)
this subjective acceleration clause through April 1, 1997. Principal
payments commence on September 1997, and continue quarterly through June
1999 at which time the remaining principal balance is due. The amount of
the principal payment is contingent upon numerous factors, including the
borrowing base and cash flow of the Company. All of the Company's
installed telephones are pledged as collateral to the Credit Facility.
On June 30, 1996, the Company did not meet certain financial loan
covenants. The Lenders have waived compliance with these loan
covenants.
The majority of the Credit Facility (currently $29,000,000) can be
converted into Series B Special Convertible Preferred Stock ("Series B
Preferred"), at the ratio of 833 shares for each $100,000 in outstanding
debt and accrued interest. Additionally, the Lenders received warrants to
purchase 204,824 shares of Series A Special Convertible Preferred Stock
("Series A Preferred"), at an exercise price of $0.20 per share for the
initial borrowings under the Credit Facility. Pursuant to the loan
agreement, the Lenders will receive additional warrants to purchase Series
A Preferred for providing the $1,300,000 acquisition deposit. Each share
of Series A Preferred and Series B Preferred is convertible into 20 shares
of Common Stock. The debt under the Credit Facility was recorded net of
the fair value of the warrants. The Company recorded non-cash interest
expense (accretion of debt) of $755,640 for the three months ended June
30, 1996 and $1,053,441 for the six months ended June 30, 1996.
6. PREFERRED STOCK MANDATORY REDEEMABLE
As of December 31, 1995 and June 30, 1996, preferred stock mandatory
redeemable consisted of the following:
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
------------- ----------
<S> <C> <C>
14% Cumulative Redeemable Convertible Preferred Stock
($60 stated value - 200,000 shares authorized;
107,918.19 shares issued and outstanding at
June 30, 1996; cumulative dividends issuable of
4,464.48 shares, valued at $110,622; mandatory
redemption amount of $6,742,960 due June 30, 2000) - $6,404,228
</TABLE>
The Company records dividends, declared and undeclared, at their fair
market value and recognizes the difference between the carrying value of
the 14% Preferred and the mandatory redemption amount, through monthly
accretions, using the interest method. For the six and three months
ended June 30, 1996, the carrying value of the 14% Preferred was
increased by $24,119 through accretions. Each share of 14% Preferred is
entitled to receive a quarterly dividend of 0.035 shares of 14%
Preferred. Each share of 14% Preferred is convertible into 10 shares of
Common Stock.
page 9 of 22 pages
<PAGE> 10
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
7. NONREDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER SHAREHOLDERS' EQUITY
As of December 31, 1995 and June 30, 1996, nonredeemable preferred
stock, common stock and other shareholders' equity consisted of the
following:
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
------------- ---------
<S> <C> <C>
10% Cumulative Nonvoting Redeemable Preferred Stock
($10 stated value - 550,000 shares authorized;
530,534 shares issued and outstanding at
December 31, 1995, redeemed on June 28, 1996) $ 5,305,340 -
Series A Special Convertible Preferred Stock
($0.20 par value, $0.20 stated value - 250,000
shares authorized; no shares issued) - -
Series B Special Convertible Preferred Stock
($0.20 par value, $120 stated value - 250,000
shares authorized; no shares issued) - -
10% Cumulative Redeemable Preferred Stock
($1,000 stated value - 3,880 shares authorized;
1,496 shares issued and outstanding at
December 31, 1995, redeemed
on March 15, 1996) 1 -
8% Cumulative Redeemable Preferred Stock
($100 stated value - 16,000 shares authorized;
12,200 shares issued and outstanding at
December 31, 1995, redeemed
on March 15, 1996) 981,084 -
7% Cumulative Convertible Redeemable Preferred Stock
($100 stated value - 2,500 shares authorized, issued
and outstanding at December 31, 1995,
redeemed on March 15, 1996) 200,000 -
Common Stock
($0.01 par value - 50,000,000 shares authorized;
2,855,350 and 5,248,230 shares issued and
outstanding at December 31, 1995 and
June 30, 1996) 28,554 $ 52,482
</TABLE>
page 10 of 22 pages
<PAGE> 11
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
7. NONREDEEMABLE PREFERRED STOCK, COMMON STOCK
AND OTHER SHAREHOLDERS' EQUITY (CONTINUED)
<TABLE>
<CAPTION>
December 31 June 30
1995 1996
------------- ---------
<S> <C> <C>
Additional paid-in capital 16,649,559 35,731,742
Accumulated deficit ( 13,453,876) ( 22,323,851)
------------- -------------
$ 9,710,662 $ 13,460,373
============= ============
</TABLE>
On February 23, 1996, the Company created three new classes of preferred
stock: (i) Series A Preferred; (ii) Series B Preferred; and (iii) 14%
Preferred.
On March 15, 1996, concurrent with the Lenders Credit Facility, the
Company redeemed the 10% Preferred, 8% Preferred, and the 7% Preferred.
The redemption price was cash payments aggregating $1,117,371 and
34,436.33 shares of 14% Preferred. In the aggregate, $6,269,487 of the
Company's outstanding obligations, including portions of the purchase
price for the IPP and Paramount acquisitions, was liquidated by issuing
107,918.19 shares of 14% Preferred. The $2,002,386 excess of the
redemption price of the preferred issues redeemed over their aggregate
carrying value was recorded as a reduction of earnings available to
common shareholders as of March 31, 1996.
On March 15, 1996, Nominal Value Warrants to purchase 2,018,942 shares of
Common Stock were issued in conjunction with the IPP and Paramount
acquisitions, redemption of the 10% Preferred, 8% Preferred and 7%
Preferred, and conversion of certain debt of the Company to the 14%
Preferred. The warrants expire on March 13, 2001.
During the second quarter of 1996, warrants representing 972,487 shares
of Common Stock were exercised, and total proceeds to the Company were
$9,725. Of the total warrants exercised, 539,989 shares of Common Stock
were issued to an officer of the Company.
On June 27, 1996, the shareholders of the Company approved an amendment
to the Articles of Incorporation which authorizes the Company to have
outstanding 60,000,000 shares; of which 50,000,000 shares are to be
classified as Common Stock and 10,000,000 shares as Preferred Stock. The
shareholders also approved conversion rights to the 10% Preferred. Each
share of 10% Preferred is convertible into 1.6667 shares of Common Stock
at any time by the shareholder or the Company. On June 28, 1996, the
Company converted the outstanding 10% Preferred into 884,214 shares of
Common Stock.
page 11 of 22 pages
<PAGE> 12
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE QUARTER AND SIX MONTHS ENDED JUNE 30, 1996
- -------------------------------------------------------------------------------
8. SUBSEQUENT EVENTS
The Company has reflected in its June 30, 1996 financial statements a
one-time charge of $325,000 for settlement of the Company's contractual
obligations to an Executive.
Nominal Value Warrants representing 62,650 shares of Common Stock were
exercised by an officer of the Company, and total proceeds to the Company
were $627.
page 12 of 22 pages
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
ACQUISITIONS AND MERGERS
PENDING ACQUISITIONS AND MERGERS
On June 26, 1996, the Company entered into an Asset Purchase Agreement with
ACI-HDT Supply Company, Amtel Communications Services, Amtel Communications
Correctional Facilities, Amtel Communications, Inc. and Amtel Communications
Payphones, Inc. (all California corporations and Debtors-in-Possession)
collectively referred to as "Amtel" for the purchase of approximately 7,100
telephones, of which 6,000 are considered revenue producing telephones, for
$7,000,000 in cash and $6,000,000 in Common Stock. The sale of Amtel's phones
to the Company is subject to approval by the Bankruptcy Court. The Company has
the right to pay the entire purchase price in cash if the Company's Common
Stock is trading at less than $3.50 per share. Upon execution of the Asset
Purchase Agreement, the Company made an earnest money deposited of $1,300,000.
The deposit is refundable if the Bankruptcy Court fails to approve the sale.
COMPLETED ACQUISITIONS AND MERGERS
On March 15, 1996 the Company completed the acquisition of the outstanding
common stock of IPP. The Company acquired 2,101 installed telephones for a
purchase price consisting of: (i) $3,496,487 in cash; (ii) 555,589
unregistered shares of the Company's Common Stock; (iii) 5,453 shares of 14%
Preferred (immediately convertible into 54,530 shares of Common Stock); and
(iv) Nominal Value Warrants to purchase 117,785 shares of the Company's Common
Stock. Additionally, the Company assumed approximately $1,757,000 in
liabilities, of which $1,551,795 was repaid by the Company on March 15, 1996.
The cash purchase price included three five year non-compete agreements, with
an aggregate value of $60,000, with three of IPP's former officers.
On March 15, 1996, the Company completed a Share Purchase Agreement with
Paramount. Under the terms of the Agreement, the Company acquired 2,528
installed telephones for a cash purchase price of $9,618,553, 8,333 shares of
14% Preferred Stock (immediately convertible into 83,330 shares of Common
Stock) and Nominal Value Warrants to purchase 179,996 shares of the Company's
Common Stock. In addition, the Company assumed outstanding liabilities of
approximately $733,000, of which $697,947 was repaid on March 15, 1996. The
purchase price included a five year consulting and non-compete agreement,
valued at $50,000, with one of Paramount's former officers.
The acquisitions were recorded as purchases and the differences between the
fair values of the tangible assets acquired and the total purchase prices were
recorded as increases to intangibles and amortized over the life of the
acquired location contracts which were estimated to be 60 months. The results
of operations of each acquired company are included in the results of
operations of the Company from March 15, 1996.
page 13 of 22 pages
<PAGE> 14
LIQUIDITY AND CAPITAL RESOURCES
The Company intends to fund the Amtel acquisition with the Credit Facility and
with the proceeds from an equity offering which the Company believes it will
have completed by the end of the third quarter.
In a transaction consummated on March 15, 1996, the Company borrowed
$30,530,954 (out of a total Credit Facility commitment of $37,250,000) from the
Lenders. Subsequent to March 15, 1996, the Company borrowed an additional
$1,692,500 against the Credit Facility. As of June 30, 1996, $5,026,546 was
available under the Credit Facility to fund future acquisitions and general
working capital purposes, subject to certain conditions (including the
availability of collateral). The initial borrowings under the Credit Facility
were used to complete the Paramount and IPP acquisitions, to repay $8,503,405
of outstanding debt and $3,173,931 of outstanding obligations under capital
leases, to redeem the 10% Preferred, 8% Preferred, and 7% Preferred, and to pay
related transactions fees. The additional borrowings of $1,692,000 were used
for acquisition deposits ($1,300,000) and working capital.
The Credit Facility requires monthly interest payments at the Alternate Base
Rate (as defined therein) plus 5% and contains various covenants restricting
the Company's ability to pay dividends or incur additional debt, among other
conditions, and also contains financial covenants requiring minimum net worth,
working capital and earnings before interest, depreciation and amortization
among other covenants. The Credit Facility also contains a subjective
acceleration clause which states that in the event of a material adverse change
in the business, as determined by the Lenders, the Lenders can call the debt at
its discretion. The Lenders have waived their right to exercise this
subjective acceleration clause through April 1, 1997. Principal payments
commence September 1997, and continue quarterly through June 1999 at which time
the remaining principal balance is due. The amount of the principal payment is
contingent upon numerous factors, including the borrowing base and cash flow of
the Company. All of the Company's installed telephones are pledged as
collateral to the Credit Facility. On June 30, 1996, the Company did not meet
certain financial loan covenants. The Lenders have waived compliance with these
loan covenants.
The majority of the Credit Facility (currently $29,000,000) can be converted
into Series B Preferred at the ratio of 833 shares for each $100,000 in
outstanding debt and accrued interest. Additionally, the Lenders received
warrants to purchase 204,824 shares of Series A Preferred at an exercise price
of $0.20 per share. Each share of Series A Preferred and Series B Preferred is
convertible into 20 shares of Common Stock. The debt under the Credit Facility
was recorded net of the fair value of the warrants. The Company has recorded
non-cash interest expense (accretion of debt) of $755,640 for the three months
ended June 30, 1996 and $1,053,441 for the six months ended June 30, 1996.
On March 15, 1996, concurrent with the consummation of the Credit Facility, the
Company redeemed the 10% Preferred, 8% Preferred, and 7% Preferred. The
redemption price was cash payments aggregating $1,117,371 and 34,436.33 shares
of 14% Preferred. In the aggregate, $6,269,487 of the Company's outstanding
obligations, including portions of the purchase price for the IPP and Paramount
acquisitions, was liquidated by issuing 107,918.19 shares of 14% Preferred.
The $2,002,386 excess of the redemption price of the preferred issues redeemed
over their aggregate carrying value was recorded as a reduction of earnings
available to common shareholders on March 15, 1996.
page 14 of 22 pages
<PAGE> 15
On March 15, 1996, Nominal Value Warrants to purchase 2,018,942 shares of
Common Stock were issued in conjunction with the IPP and Paramount
acquisitions, redemption of the 10% Preferred, 8% Preferred, and 7% Preferred,
and conversion of certain debt of the Company to the 14% Preferred. The
warrants expire on March 13, 2001.
At June 30, 1996, long-term debt, including the current portion and excluding
the portion allocated to the Lenders warrants, was $25,270,968 and obligations
under capital leases, including the current portion, amounted to $276,067
compared with $10,328,913 and $3,532,937 at December 31, 1995, an increase of
$14,942,055 in long-term debt and a decrease of $3,256,870 in obligations under
capital leases. Total long-term debt outstanding, including the current
portion and the amount allocated to the Lenders warrants, was $34,338,663 at
June 30, 1996. The overall increase is mostly attributable to debt incurred in
connection with the IPP and Paramount acquisitions.
The Company had a working capital deficit of $6,763,540 at June 30, 1996,
compared to a working capital deficit of $4,843,524 at December 31, 1995, an
increase of $1,920,016. Income before interest, taxes, depreciation and
amortization, contractual settlements and restructuring charges, and the
extraordinary loss on debt restructuring was $2,977,141 for the six months
ended June 30, 1996, compared to $233,133 for the six months ended June 30,
1995, an increase of $2,744,008. Cash flows used in operations amounted to
$1,533,856 a decrease of $1,999,130 over cash provided by operations for the
six months ended June 30, 1995 of $465,274, mostly due to the larger loss in
the first and second quarter of 1996, the acquisition deposit, and the
repayment of contractual obligations.
Management believes, but cannot assure, that cash flow from operations, the
proceeds and the availability under the Credit Facility and other financial
alternatives, including an equity offering projected to be completed in the
third quarter of 1996 as discussed above, will be sufficient to allow the
Company to sustain its operations and meet its obligations over the next twelve
months.
RESULTS OF OPERATIONS
At June 30, 1996, the Company had approximately 14,826 installed telephones
(excluding pending acquisitions) compared to 5,038 at June 30, 1995, an
increase of 9,788 installed telephones, or 194.3%. The increase in installed
telephones is attributable to telephones acquired in acquisitions and internal
growth.
REVENUE
Total Revenues. Total revenues from all product lines increased $8,944,862, or
113.5%, from $7,878,062 for the six months ended June 30, 1995 to $16,822,924
for the six months ended June 30, 1996.
Revenues from coin calls increased $5,433,429, or 108.8%, from $4,995,329 for
the six months ended June 30, 1995 to $10,428,758 for the six months ended June
30, 1996. This increase is attributable primarily to an increase in the number
of installed pay telephones, which increased by 9,788, with the majority of
the increase occurring in the fourth quarter of 1995 and the first quarter of
1996 and attributable to the Company's recent acquisitions.
page 15 of 22 pages
<PAGE> 16
Non-coin revenues increased $2,987,035, or 129.6%, from $2,305,495 for the six
months ended June 30, 1995 to $5,292,530 for the six months ended June 30,
1996. The increase was primarily due to the acquisition and installment of
additional revenues producing pay telephones. However, this increase was
offset in part by a reduction in operator assisted calls as a result of
aggressive dial-around advertising by long distance carriers such as American
Telephone & Telegraph Company ("AT&T") and MCI Communications Corporation
("MCI"). In addition, in December 1995 the Company decided to focus on the
ownership and maintenance of its pay telephone business and outsourced its
operator service center.
Other revenues increased $524,398, or 90.8%, from $577,238 for the six months
ended June 30, 1995 to $1,101,636 for the six months ended June 30, 1996. This
increase was primarily the result of increased telephones and dial-around
compensation.
Operating Expenses. Line charges increased $1,762,451, or 83.9%, from
$2,100,427 for the six months ended June 30, 1995 to $3,862,878 for the six
months ended June 30, 1996. Line charges represented 26.7% of total revenues
for the six months ended June 30, 1995 and 23.0% of total revenues for the six
months ended June 30, 1996. The increase in line charges was, in part, due to
increased coin calls resulting from the continuation of the 1994 program which
offered customers a three minute long-distance call anywhere in the continental
United States for $0.75 (the "$0.75 Long Distance Call Program"), as well as
increases in certain local telephone company line charges.
Location commissions increased $1,020,364, or 67.3%, from $1,516,365 for the
six months ended June 30, 1995 to $2,536,729 for the six months ended June 30,
1996. Location commissions represented 19.2% of total revenues for the six
months ended June 30, 1995 and 15.1% of total revenues for the six months ended
June 30, 1996. The increase is due to location agreements from pay telephones
acquired in the acquisitions of World Communications, Inc. ("World") and Public
Telephone Corporation, ("Public Telephone") and due to increased competition in
obtaining new locations.
Other operating expenses, (consisting of personnel costs, rents, utilities,
repair and maintenance of the phones, operator services processing fees and
property/sales taxes), increased $2,365,341, or 88.2%, from $2,682,710 for the
six months ended June 30, 1995 to $5,048,051 for the six months ended June 30,
1996. Other operating expenses represented 34.1% of total revenues for the six
months ended June 30, 1995 and 30.0% of total revenues for the six months ended
June 30, 1996. The increase was primarily the result of higher personnel costs,
rent, utilities and service related expenses attributable to the outsourcing of
operator services and to the acquisitions of World and Public Telephone
completed in September and October 1995, respectively, and to a lesser extent,
the acquisitions of IPP and Paramount completed in March 1996, the increase in
the Company's pay telephone base, and the additional field personnel to
accommodate the increased business. Management anticipates economies of scale
resulting from these acquisitions will be realized in 1996, resulting in the
decrease of other operating expenses as a percentage of total revenues.
Depreciation and amortization increased $3,726,198, or 260.1%, from $1,432,491
for the six months ended June 30, 1995 to $5,158,689 for the six months ended
June 30, 1996. Depreciation and amortization represented 18.2% of total
revenues for the six months ended June 30, 1995 and 30.7% of total revenues for
the six months ended June 30, 1996. This increase was primarily due to the
Company's acquisitions and expansion of its pay telephone base, purchases of
additional computer equipment, service vehicles and software to accommodate the
Company's growth.
page 16 of 22 pages
<PAGE> 17
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expenses increased $1,052,698, or 78.2%, from
$1,345,427 for the six months ended June 30, 1995 to $2,398,125 for the six
months ended June 30, 1996. SG&A represented 17.1% of total revenues for the
six months ended June 30, 1995 and 14.3% of total revenues for the six months
ended June 30, 1996. The increase was primarily the result of the acquisitions
of World, Public Telephone, IPP and Paramount.
Settlement of Employment Contracts and Restructuring Charges. Settlement of
employment contracts and restructuring charges consists primarily of the costs
associated with the write-off of selected assets in connection with the
continued evaluation of the Company's operations and certain one-time charges
and consulting fees incurred for changes to the operations of the Company.
Settlements of employment contracts and restructuring charges were $0 and
$1,117,729 for the six months ended June 30, 1995 and 1996, respectively.
Settlements of the employment contracts and restructuring charges constituted
6.6% of total revenues for the six months ended June 30, 1996.
Interest Expense. Interest expense increased $1,268,562, or 593.8%, from
$213,642 for the six months ended June 30, 1995 to $1,482,204 for the six
months ended June 30, 1996. Interest expense represented 2.7% of total
revenues for the six months ended June 30, 1995 and 8.8% of total revenues for
the six months ended June 30, 1996. The increase was due to the financing
obtained for the recent acquisitions. Non-cash interest expense was
$1,053,441, or 6.3% of revenues, for the six months ended June 30, 1996,
representing the accretion of the debt under the Credit Facility to its
maturity amount.
Extraordinary Items. The Company recorded an extraordinary loss of $897,926,
or 5.3% of total revenues, for the six months ended June 30, 1996. The
extraordinary loss related to one-time costs that were incurred in connection
with the restructuring of the Company's debt and obligations under
non-cancelable capital leases assumed by the Company under the terms of the
acquisitions of World and Public Telephone. Concurrent with the restructuring
of the Company's debt and the redemption of the 10% Preferred, 8% Preferred,
and 7% Preferred, the Company recorded the difference between the carrying
value of the 10% Preferred, 8% Preferred, and 7% Preferred and the redemption
price as a decrease to the accumulated deficit of $2,002,386.
IMPACT OF SEASONALITY
Since a large concentration of telephones are in shopping malls, the greatest
portion of the Company's revenue is earned in the fourth quarter due to the
increased holiday traffic. Company phones located outdoors, in the northern and
western states, will experience reduced revenues during periods of adverse
weather.
page 17 of 22 pages
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
WORKING CAPITAL RESTRICTIONS AND OTHER LIMITATIONS UPON THE PAYMENT OF DIVIDENDS
The Lenders Credit Facility contains various covenants restricting the
Company's ability to pay dividends or incur additional debt, among other
conditions, and also contains financial covenants requiring the Company to
maintain certain financial ratios, including, among other things, minimum net
worth, working capital and earnings before interest, depreciation and
amortization among other covenants. On June 30, 1996, the Company did not meet
certain financial loan covenants. The Lenders have waived compliance with
these loan covenants.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On June 27, 1996, the Company held it's Annual Meeting of Shareholders. Total
shares eligible to vote as of the record date were 4,364,016 and total shares
voted were 2,913,956 or 66.77%. The following nominees for director of the
Company, as listed in the proxy statement, were elected:
<TABLE>
<CAPTION>
For Abstain
---- -------
<S> <C> <C> <C> <C>
Peter Graf 2,871,366 65.80% 42,590 0.98%
Steven Richman 2,871,366 65.80% 42,590 0.98%
George Henry 2,900,118 66.46% 13,838 0.32%
Joseph Abrams 2,871,366 65.80% 42,590 0.98%
Stuart Hollander 1,847,700 42.34% 1,066,256 24.43%
Nickey Maxey 2,897,460 66.39% 16,496 0.38%
Aron Katzman 2,856,208 65.45% 57,748 1.32%
</TABLE>
The following proposals were approved by the shareholders at the Annual Meeting
of Shareholders:
Amendment to the Articles of Incorporation of the Company to increase
the number of shares that the Company shall have authority to issue
from 50,000,000 to 60,000,000 of which 50,000,000 shall be classified
as Common Stock and 10,000,000 shall be classified as Preferred Stock.
<TABLE>
<CAPTION>
Abstain/
For Against withheld Broker Non-Votes
--------- --------- --------- ----------------
<S> <C> <C> <C>
2,860,919 25,463 27,574 -
65.56% 0.58% 0.63% -
</TABLE>
Amendment to the Company's Code of Regulations increasing the maximum
size of the Board of Directors to nine.
<TABLE>
<CAPTION>
Abstain/
For Against withheld Broker Non-Votes
--------- --------- --------- ----------------
<S> <C> <C> <C> <C>
2,756,684 21,828 27,432 108,012
63.17% 0.50% 0.63% 2.48%
</TABLE>
page 18 of 22 pages
<PAGE> 19
Amendment to the Articles of Incorporation to grant conversion rights to
the Company's 10% Cumulative Nonvoting Redeemable Preferred Stock so
that each share of 10% Cumulative Nonvoting Redeemable Preferred Stock
shall be convertible into shares of the Company's Common Stock, whereby
530,534 shares of 10% Cumulative Nonvoting Redeemable Preferred Stock
would be convertible, at any time, into 884,214 shares of Common Stock.
<TABLE>
<CAPTION>
Abstain/
For Against withheld Broker Non-Votes
--------- --------- --------- ----------------
By a vote of the Common stockholders:
<S> <C> <C> <C>
2,264,624 29,908 38,334 581,090
51.89% 0.69% 0.88% 13.32%
</TABLE>
<TABLE>
<CAPTION>
By a vote of the 10% Cumulative Nonvoting Redeemable Preferred stockholders:
<S> <C> <C> <C>
463,691 - 12,039 -
87.40% - 2.27% -
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
(27) Financial Data Schedule
(b) REPORTS ON FORM 8-K
The following reports on Form 8-K were filed by the Company during the
first quarter of 1996.
FORM 8-K/A-2 AMENDING FORM 8-K DATED OCTOBER 16, 1995:
(b) Pro Forma Financial Information:
1. Public Telephone Corporation and PhoneTel Technologies, Inc.
Unaudited Pro Forma Combined Condensed Balance Sheet at September
30, 1995.
2. Public Telephone Corporation and PhoneTel Technologies, Inc.
Unaudited Pro Forma Combined Condensed Income Statements for the
Year Ended December 31, 1994, and Six Months Ended September 30,
1995.
3. Public Telephone Corporation and PhoneTel Technologies, Inc.
Pro Forma Combined Condensed Financial Information - Footnotes to
Financial Information.
FORM 8-K DATED MARCH 15, 1996:
(a) Financial Statements of Business Acquired:
1. International Pay Phones, Inc. of South Carolina Financial
Statements For the Year Ended December 31, 1994
page 19 of 22 pages
<PAGE> 20
2. International Payphones, Inc. of Tennessee Financial Statements
For the Year Ended December 31, 1994 and for the Nine Months
Ended September 30, 1995
3. Paramount Communications Systems, Inc. Financial Statements For
the Years Ended December 31, 1994, 1993, and 1992.
(c) Other Exhibits:
1. Agreement and Plan of Merger between PhoneTel Technologies, Inc.
and International Pay Phones, Inc. (a South Carolina company)
dated November 22, 1995, and all amendments thereto.
2. Agreement and Plan of Merger between PhoneTel Technologies, Inc.
and International Pay Phones, Inc. (a Tennessee company) dated
November 22, 1995, and all amendments thereto.
3. Share Purchase Agreement between PhoneTel Technologies, Inc. and
Paramount Communications Systems, Inc., dated November 16, 1995,
and all amendments thereto.
4. Credit Agreement dated as of March 15, 1996 among PhoneTel
Technologies, Inc., Various Lenders and Internationale
Nederlanden (U.S.) Capital Corporation.
5. Security Agreement dated as of March 15, 1996 among PhoneTel
Technologies, Inc., Public Telephone Corporation, World
Communications, Inc., Northern Florida Telephone Corporation and
Paramount Communications Systems, Inc. and Internationale
Nederlanden (U.S.) capital Corporation as Agent for itself and
certain other lenders.
6. Warrant Purchase Agreement dated as of March 15, 1996 between
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
7. Registration Rights Agreement dated March 15, 1996 between
PhoneTel Technologies, Inc. and Internationale Nederlanden (U.S.)
Capital Corporation and Cerberus Partners, L.P.
FORM 8-K/A-1 AMENDING FORM 8-K DATED MARCH 15, 1996:
(a) Financial Statements of Business Acquired:
1. International Payphones, Inc. of Tennessee Financial Statements
For the Years Ended December 31, 1995 and 1994
(b) Pro Forma Financial Information:
1. Introduction to Unaudited Pro Forma Combined Condensed Financial
Information
2. International Payphones, Inc. of South Carolina, International
Payphones, Inc. of Tennessee, Paramount Communication Systems,
Inc. and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Balance Sheet at December 31, 1995.
page 20 of 22 pages
<PAGE> 21
3. International Payphones, Inc. of South Carolina, International
Payphones, Inc. of Tennessee, Paramount Communication Systems,
Inc. and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Statement of Operations for the Year Ended
December 31, 1995.
4. International Payphones, Inc. of South Carolina, International
Payphones, Inc. of Tennessee, Paramount Communication Systems,
Inc. and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Financial Information - Footnotes to Financial
Information.
FORM 8-K/A-2 AMENDING FORM 8-K/A-1 AND FORM 8-K DATED MARCH 15, 1996:
(a) Financial Statements of Business Acquired:
1. International Payphones, Inc. (a South Carolina corporation)
Financial Statements For the Year Ended December 31, 1995
2. Paramount Communications Systems, Inc. Financial Statements For
the Year Ended December 31, 1995
(b) Pro Forma Financial Information:
1. Introduction to Unaudited Pro Forma Combined Condensed Financial
Information
2. International Payphones, Inc. (a South Carolina corporation),
International Payphones, Inc. (a Tennessee corporation),
Paramount Communication Systems, Inc. and PhoneTel Technologies,
Inc. - Unaudited Pro Forma Combined Condensed Balance Sheet at
December 31, 1995.
3. International Payphones, Inc. (a South Carolina corporation),
International Payphones, Inc. (a Tennessee corporation),
Paramount Communication Systems, Inc. and PhoneTel Technologies,
Inc. - Unaudited Pro Forma Combined Condensed Statement of
Operations for the Year Ended December 31, 1995.
4. International Payphones, Inc. (a South Carolina corporation),
International Payphones, Inc. (a Tennessee corporation),
Paramount Communication Systems, Inc. and PhoneTel Technologies,
Inc. - Unaudited Pro Forma Combined Condensed Financial
Information - Footnotes to Financial Information.
page 21 of 22 pages
<PAGE> 22
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PHONETEL TECHNOLOGIES, INC.
August 12, 1996 By: /s/ Peter G. Graf
-------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
Chief Accounting Officer
page 22 of 22 pages
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1996 AND STATEMENT OF
CONSOLIDATED OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE FOOTNOTES
THERETO AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,188,846
<SECURITIES> 0
<RECEIVABLES> 1,528,816
<ALLOWANCES> (100,961)
<INVENTORY> 0
<CURRENT-ASSETS> 4,219,170
<PP&E> 28,776,237
<DEPRECIATION> (5,781,198)
<TOTAL-ASSETS> 52,169,729
<CURRENT-LIABILITIES> 10,982,710
<BONDS> 20,219,861
<COMMON> 52,482
6,404,228
0
<OTHER-SE> 13,407,891
<TOTAL-LIABILITY-AND-EQUITY> 52,169,729
<SALES> 0
<TOTAL-REVENUES> 16,822,924
<CGS> 0
<TOTAL-COSTS> 20,122,201
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,535,645
<INCOME-PRETAX> (5,834,922)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,834,922)
<DISCONTINUED> 0
<EXTRAORDINARY> (897,926)
<CHANGES> 0
<NET-INCOME> (6,732,848)
<EPS-PRIMARY> (2.48)
<EPS-DILUTED> (2.48)
</TABLE>
