<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-3
Current Report
0-16715
-------
Commission File Number
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
March 15, 1996
--------------
Date of Report
(Date of Earliest Event Reported)
PHONETEL TECHNOLOGIES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Ohio 34-1462198
---- ----------
(State of Incorporation) (I.R.S. Identification No.)
1127 Euclid Avenue
650 Statler Office Tower
Cleveland, Ohio 44115-1601
--------------------------
Address and zip code of principal executive offices
(216) 241-2555
--------------
Registrant's telephone number
page 1 of 11 pages
<PAGE> 2
PART I
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The attached pro forma financial information amends Form 8-K/A-2, Form 8-K/A-1
and Form 8-K dated March 15, 1996.
EXHIBITS
(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 Communications Systems, Inc. and PhoneTel Technologies,
Inc. - Unaudited Pro Forma Combined Condensed Balance Sheet at
December 31, 1995.
3. World Communications, Inc. and Public Telephone Corporation As
Adjusted, International Payphones, Inc. (a South Carolina
corporation), International Payphones, Inc. (a Tennessee
corporation), Paramount Communications 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 Communications Systems, Inc. and PhoneTel Technologies,
Inc. - Unaudited Pro Forma Combined Condensed Financial
Information - Footnotes to Financial Information.
page 2 of 11 pages
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
PhoneTel Technologies, Inc.
(Registrant)
Date: September 27, 1996 By: /s/ Peter G. Graf
------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
page 3 of 11 pages
<PAGE> 1
EXHIBIT (b) 1
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
INTRODUCTION
The following unaudited pro forma combined condensed financial information gives
effect to the acquisition of all the outstanding shares of common stock of
International Payphones, Inc. (a South Carolina corporation), International
Payphones, Inc. (a Tennessee corporation) (collectively "IPP"), companies
affiliated through common ownership and management, and Paramount Communications
Systems, Inc., (a Florida corporation) ("Paramount") for (i) $13,115,040; (ii)
555,589 shares of the Company's Common Stock, par value $.01 ("Common Stock");
(iii) 13,786 shares of 14% Redeemable Convertible Preferred Stock, $60 stated
value, ("14% Preferred") immediately convertible into 137,860 shares of Common
Stock; (iv) warrants to purchase 297,781 shares of the Company's Common Stock at
a nominal exercise price per share ("Nominal Value Warrants"); and (v)
assumption of liabilities aggregating $2,490,622. The purchase price included
four five year Non-compete Agreements, with an aggregate value of $110,000, with
three of IPP's and one of Paramount's former officers.
The acquisitions are being accounted for as a purchase and, therefore, are
included in the Unaudited Pro Forma Combined Condensed Balance Sheet as if the
transaction had occurred on December 31, 1995 and in the Unaudited Pro Forma
Combined Condensed Statement of Operations as if the transaction had occurred on
January 1, 1995, and giving effect to the pro forma adjustments described
therein.
In a transaction consummated concurrent with the IPP and Paramount acquisitions,
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 Cerberus Partners, L.P. (collectively known as
"Lenders"). 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 the 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 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 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. Based on amounts borrowed at March 31, 1996, the estimated
principal payment in September 1997 would be $612,500, increasing to $975,000,
quarterly for 1998.
page 4 of 11 pages
<PAGE> 2
EXHIBIT (b) 1
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
INTRODUCTION (CONTINUED)
All of the Company's installed telephones are pledged as collateral to the
Credit Facility. 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. 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 initially recorded net of an allocation of the fair value of
the warrants, such fair value was determined using the Black-Scholes valuation
model. The Company has estimated the quarterly non-cash interest expense will be
in excess of $480,000.
The Unaudited Pro Forma Combined Condensed Statement of Operations includes the
acquisitions of IPP and Paramount and also gives effect to the acquisitions
completed in 1995, as follows: (i) the acquisition completed on October 16,
1995, of all the outstanding shares of common stock of Public Telephone
Corporation (an Indiana corporation) ("Public") with the assets consisting of
1,200 installed phones for a purchase price of 224,879 unregistered shares of
Common Stock and assumption of approximately $2,800,000 in outstanding debt and
liabilities. In connection with the acquisition of Public, the Company entered
into five year non-compete agreements with two Public's former owners which
required both cash payments and the issuance, in the aggregate, of 80,000 shares
of the Company's Common Stock; and (ii) the merger completed on September 22,
1995, with World Communications, Inc. (a Missouri corporation) ("World") with
the Company acquiring 3,237 installed phones for a purchase price consisting of
the assumption of approximately $6,900,000 in debt and outstanding liabilities
and the issuance of 402,500 unregistered shares of Common Stock and 503,534
shares of the Company's 10% Cumulative Non-Voting Redeemable Preferred Stock
("10% Preferred"). (On June 27, 1996, the shareholders of the Company approved
the conversion of the 10% Preferred into Common Stock at an exchange ratio of 1
share for 1.6667 shares of Common Stock. On June 28, 1996 the Company converted
the outstanding 10% Preferred into 884,214 shares of Common Stock.) In
connection with the merger of World, the Company entered into two year
non-compete and employment agreements with three of World's former officers
requiring, in the aggregate, payment of $625,000 over a two year period.
The unaudited combined condensed pro forma information presented herein may not
be indicative of the results that actually would have occurred if the
acquisition had occurred on the date indicated, or which may be obtained in the
future. The unaudited pro forma combined financial information should be read in
conjunction with the historical financial statements of the Registrant, IPP and
Paramount.
page 5 of 11 pages
<PAGE> 1
EXHIBIT (b) 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
International International
PhoneTel Payphones Payphones Paramount
Technologies South Carolina Tennessee Communications Ref
----------------- ------------------ ----------------- ------------------- -------
<S> <C> <C> <C> <C> <C>
Assets
- ------
Current assets:
Cash $713,462 $11,336 $17,321 $479,984 [1,2]
Accounts receivable, net 901,508 142,801 48,996 275,623 [1]
Other current assets 185,634 - 15,020 - [1]
----------------- ------------------ ----------------- -------------------
Total current assets 1,800,604 154,137 81,337 755,607
Property and equipment, net 14,099,111 1,022,427 276,811 788,582 [2]
Intangible assets, net 11,592,157 126,810 - 146,029 [1,2]
Other assets 1,425,384 - - 15,098 [1,2]
----------------- ------------------ ----------------- -------------------
$28,917,256 $1,303,374 $358,148 $1,705,316
================= ================== ================= ===================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt $1,010,412 $475,888 $73,978 $483,246 [1,2]
Current portion capital leases 288,972 - - -
Accounts payable 2,772,306 151,539 2,717 373,866 [1,2]
Accrued expenses 1,610,100 - 18,392 221,490 [1,2]
Deferred income taxes - - 6,000 - [1]
Deferred revenues - - - -
Contractual settlements and
restructuring charges 962,338 - - -
----------------- ------------------ ----------------- -------------------
Total current liabilities 6,644,128 627,427 101,087 1,078,602
Long-term debt 9,318,501 643,935 118,654 - [2]
Obligations under capital leases 3,243,965 95,895 - - [2]
14% convertible preferred stock - - - - [2]
Other shareholder's equity:
10% nonvoting preferred stock 5,305,340 - - -
10% redeemable preferred stock 1 - - -
8% cumulative preferred stock 981,084 - - -
7% convertible preferred stock 200,000 - - -
Common stock 28,554 10,000 3,321 100 [2]
Additional paid in capital 16,649,559 57,224 106,000 19,900 [2]
Accumulated (deficit) earnings (13,453,876) (131,107) 29,086 606,714 [1,2]
----------------- ------------------ ----------------- -------------------
9,710,662 (63,883) 138,407 626,714
================= ================== ================= ===================
$28,917,256 $1,303,374 $358,148 $1,705,316
================= ================== ================= ===================
Pro Forma Pro Forma
Adjustments Adjustments
for for Debt Pro Forma
Acquisitions Ref Restructuring Combined
------------------- ------- ----------------- -------------------
Assets
Current assets:
Cash ($14,883,421) [3] $14,552,395 $891,077
Accounts receivable, net (418,424) - 950,504
Other current assets (15,020) - 185,634
------------------- ----------------- -------------------
Total current assets (15,316,865) 14,552,395 2,027,215
Property and equipment, net 7,748,805 [3] 346,500 24,282,236
Intangible assets, net 9,061,294 [3] 3,838,638 24,764,928
Other assets (940,098) - 500,384
------------------- ----------------- -------------------
$553,136 $18,737,533 $51,574,763
=================== ================= ===================
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Current portion of long-term debt ($874,208) [3] $1,305,954 $2,475,270
Current portion capital leases - - 288,972
Accounts payable (376,584) [3] (2,619,746) 304,098
Accrued expenses (361,421) - 1,488,561
Deferred income taxes (6,000) - -
Deferred revenues - [3] 1,200,000 1,200,000
Contractual settlements and
restructuring charges - [3] (753,500) 208,838
------------------- ----------------- -------------------
Total current liabilities (1,618,213) (867,292) 5,965,739
Long-term debt (762,589) [3] 14,567,927 23,886,428
Obligations under capital leases (76,419) [3] (3,243,965) 19,476
14% convertible preferred stock 621,664 [3] 5,647,823 6,269,487
Other shareholder's equity:
10% nonvoting preferred stock - - 5,305,340
10% redeemable preferred stock - [3] (1) -
8% cumulative preferred stock - [3] (981,084) -
7% convertible preferred stock - [3] (200,000) -
Common stock (8,103) [3] 164 34,036
Additional paid in capital 2,901,488 [3] 6,503,792 26,237,963
Accumulated (deficit) earnings (504,692) [3] (2,689,831) (16,143,706)
------------------- ----------------- -------------------
2,388,693 2,633,040 15,433,633
=================== ================= ===================
$553,136 $18,737,533 $51,574,763
=================== ================= ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 5 of 11 pages
<PAGE> 1
EXHIBIT (b) 3
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(6)
World & Public International International
PhoneTel Telephone Payphones Payphones
Technologies As Adjusted South Carolina Tennessee
----------------- ---------------- ----------------- ------------------
<S> <C> <C> <C> <C>
REVENUES:
Coin calls and non-coin $18,587,862 $8,015,757 $3,360,596 $1,194,621
Other 130,121 242,481 - -
----------------- ---------------- ----------------- ------------------
18,717,983 8,258,238 3,360,596 1,194,621
----------------- ---------------- ----------------- ------------------
OPERATING EXPENSES:
Line & transmission charges 5,475,699 3,241,970 983,204 608,061
Location commissions 3,467,626 782,187 615,527 -
Other operating expenses 5,310,262 338,071 709,281 -
Depreciation & amortization 4,383,049 6,076,711 451,929 91,174
Selling, general & administrative 3,200,742 1,012,644 479,083 471,854
Contractual settlements &
restructuring charges 2,169,503 - - -
----------------- ---------------- ----------------- ------------------
24,006,881 11,451,583 3,239,024 1,171,089
----------------- ---------------- ----------------- ------------------
(Loss) income from operations (5,288,898) (3,193,345) 121,572 23,532
Other income (expense) - (321,923) 733 916
Interest expense (781,808) (895,644) (149,248) -
Interest expense - accretion of debt (55,103) - - -
Interest income 16,112 4,205 - 666
----------------- ---------------- ----------------- ------------------
(Loss) income before income taxes
and extraordinary item (6,109,697) (4,406,707) (26,943) 25,114
Income taxes - - 35,800 2,300
----------------- ---------------- ----------------- ------------------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM ($6,109,697) ($4,406,707) ($62,743) $22,814
================= ================ ================= ==================
Earnings per share calculation:
Preferred dividend payable in cash (309,668) (530,534) - -
Preferred dividend payable in kind - - - -
Redemption of 10%, 8%, and
7% Preferred - - - -
----------------- ---------------- ----------------- ------------------
(Loss) income before extraordinary
item applicable to
common shareholders ($6,419,365) ($4,937,241) ($62,743) $22,814
================= ================ ================= ==================
Loss per common share before
extraordinary item ($3.29)
=================
Weighted average number of shares 1,950,561 530,584 365,520 190,069
================= ================ ================= ==================
Pro Forma Pro Forma
Adjustments Adjustments
Paramount for for Debt Pro Forma
Communications Ref Acquisitions Ref Restructuring Combined
-------------------- ---- -------------------- ------- ------------- ----------------
REVENUES:
Coin calls and non-coin $5,675,468 - - $36,834,304
Other - - - 372,602
-------------------- -------------------- ------------- ----------------
5,675,468 - - 37,206,906
-------------------- -------------------- ------------- ----------------
OPERATING EXPENSES:
Line & transmission charges 1,543,956 - - 11,852,890
Location commissions 696,443 - - 5,561,783
Other operating expenses - - - 6,357,614
Depreciation & amortization 393,204 (4) $3,454,508 - 14,850,575
Selling, general & administrative 2,407,479 (4) (1,146,051) - 6,425,751
Contractual settlements &
restructuring charges - - - 2,169,503
-------------------- -------------------- ------------- ----------------
5,041,082 2,308,457 - 47,218,116
-------------------- -------------------- ------------- ----------------
(Loss) income from operations 634,386 (2,308,457) - (10,011,210)
Other income (expense) (85,231) - - (405,505)
Interest expense (64,210) - (5) ($3,462,527) (5,353,437)
Interest expense - accretion of debt - - (5) (1,923,450) (1,978,553)
Interest income 14,800 - - 35,783
-------------------- -------------------- ------------- ----------------
(Loss) income before income taxes
and extraordinary item 499,745 (2,308,457) (5,385,977) (17,712,922)
Income taxes - - - 38,100
-------------------- -------------------- ------------- ----------------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEM $499,745 ($2,308,457) ($5,385,977) ($17,751,022)
==================== ==================== ============= ================
Earnings per share calculation:
Preferred dividend payable in cash - - (5) 309,668 -
Preferred dividend payable in kind - - (5) (653,235) (653,235)
Redemption of 10%, 8%, and
7% Preferred - - (5) (2,002,386) (2,002,386)
-------------------- -------------------- ------------- ----------------
(Loss) income before extraordinary
item applicable to
common shareholders $499,745 ($2,308,457) ($7,731,930) ($20,406,643)
==================== ==================== ============= ================
Loss per common share before
extraordinary item ($6.72)
================
Weighted average number of shares 3,036,734
================
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 6 of 11 pages
<PAGE> 1
EXHIBIT (b) 4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION
<TABLE>
<S> <C> <C>
(1) Cash $424,185
Accounts receivable, net 418,424
Other current assets 15,020
Intangible assets, net 272,839
Other assets 15,098
Current portion of long-term debt 158,904
Accounts payable $ 81,927
Accrued expenses 228,499
Deferred income taxes 6,000
Accumulated (deficit) earnings 988,044
Adjustments for assets and liabilities not acquired from IPP or
Paramount on March 15, 1996 and the recording of additional debt.
(2) Cash $14,459,236
Property and equipment, net $7,748,805
Intangible assets, net 9,334,133
Other assets 925,000
Current portion of long-term debt 1,033,112
Accounts payable 294,657
Accrued expenses 132,922
Long-term debt 762,589
Obligations under capital leases 76,419
14% convertible preferred stock 621,664
Common stock 8,103
Additional paid in capital 2,901,488
Accumulated (deficit) earnings 483,352
</TABLE>
To record the acquisition of IPP and Paramount for a purchase price
consisting of cash, 555,589 unregistered shares of Common Stock, 13,786
shares of 14% Preferred, and Nominal Value Warrants to purchase 297,781
shares of Common Stock; assumption and immediate payoff of most of the
acquired debt; the write-up of acquired property, plant, and equipment
to its fair value; the recording of the increased value of IPP's and
Paramount's existing phone contracts; the value of four Non-compete
Agreements with three former officers of IPP and one former officer of
Paramount; and the recording of the fair value of the Nominal Value
Warrants. The shares of Common Stock were valued at the average of the
BID and ASK on the date of closing (March 15, 1996) as reported by
NASDAQ, less an unregistered discount of 35% ("Discounted Market
Price"). Each share of the 14% Preferred was valued based on its
conversion into ten shares of Common Stock priced at the Discounted
Market Price. Watson, Wyatt & Company have estimated the value of the
Nominal Value Warrants to be $733,732, using the Black-Scholes
valuation method. As required by purchase accounting, the accumulated
retained earnings or deficits of IPP and Paramount prior to the date of
acquisition were eliminated.
page 8 of 11 pages
<PAGE> 2
EXHIBIT (b) 4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<S> <C> <C>
(3) Cash $14,552,395
Property and equipment, net 346,500
Intangible assets, net 3,838,638
Current portion of long-term debt $ 1,305,954
Accounts payable 2,619,746
Obligation relating to contractual
settlements and restructuring charges 753,500
Long-term debt 14,567,927
Obligations under capital leases 3,243,965
Deferred revenues 1,200,000
14% convertible preferred stock 5,647,823
10% redeemable preferred stock 1
8% cumulative preferred stock 981,084
7% convertible preferred stock 200,000
Common stock 164
Additional paid in capital 6,503,792
Accumulated (deficit) earnings 2,689,831
To record the restructuring of the Company's long-term debt and
obligations under capital leases and application of the debt proceeds
form the Credit Facility, including - repayment of certain obligations
of the Company (payment of transaction fees, all outstanding debt and
obligations under capital leases which had a secured interest in the
Company's operating assets, certain trade accounts payable and customer
commissions, shareholders loans, and redemption of the 10%, 8%, and 7%
Preferred stock). A portion of the outstanding debt at December 31,
1995, was paid with 16,371 shares of Common Stock. A charge to
Stockholder's Equity of $2,002,386, representing the difference between
the carrying value of the 10%, 8%, and 7% Preferred and the redemption
price. A loss resulting from the restructuring of the Company's debt,
of $687,445.
(4) Selling, general, and administrative $1,146,051
Depreciation and amortization $3,454,508
Accumulated (deficit) earnings 2,308,457
Represents the estimated recurring benefits resulting from the
acquisitions and the incremental depreciation and amortization
associated with the acquired tangible and intangible assets. The
savings are primarily the result of backroom efficiencies, including
the elimination of certain offices and executives and economies of
scale in billing and other operating areas. The increase in property,
plant and equipment is assumed to depreciate over 60 months while the
intangible assets relating to IPP's and Paramount's existing phone
contracts is being amortized over 60 months, representing the average
remaining life of all acquired contracts. The value of the Non-compete
Agreements is being amortized over the life of the agreements which is
60 months.
</TABLE>
page 9 of 11 pages
<PAGE> 3
EXHIBIT (b) 4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<S> <C> <C>
(5) Interest expense $ 3,462,527
Accretion of debt [interest expense] 1,923,450
Preferred dividend requirement paid in cash $ 309,668
Preferred dividend requirement paid in kind 653,235
Redemption of 10%, 8%, 7% Preferred 2,002,386
Accumulated (deficit) earnings 7,731,930
Recording of the incremental increase in interest expense resulting
from the additional debt; the accretion of debt (required because a
portion of the new debt was reclassified to Shareholders' Equity in
order to represent the cost of the issued warrants; accretion expense
is recorded as a non-cash interest expense); elimination of the
redeemed preferred dividend requirements; the annual 14% Preferred
paid-in-kind dividend requirement (payable with 15,921 shares of 14%
Preferred with a valuation based on the conversion of the 14% Preferred
dividend shares into 159,205 shares of Common Stock priced at the
average of the HIGH and LOW price for the Company's Common Stock as
reported by NASDAQ on March 29, 1996, less an unregistered discount of
35%); and the difference between the carrying value of the 10%, 8%, and
7% Preferred and the redemption price.
</TABLE>
page 10 of 11 pages
<PAGE> 4
EXHIBIT (b) 4
PHONETEL TECHNOLOGIES, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
FOOTNOTES TO FINANCIAL INFORMATION (CONTINUED)
(6) The Company acquired World Communications, Inc. ("World") on September
22, 1995, and Public Telephone Corporation ("Public") on October 16,
1995. The Company's audited Statement of Operations for the year ended
December 31, 1995, includes the acquisition of World and Public from
September 22, 1995 and October 16, 1995, respectively.
The following adjustment reflects the operations of World from January
1, 1995 through September 21, 1995, and Public from January 1, 1995
through October 16, 1995, and gives effect to the pro forma
adjustments. The pro forma adjustments represents the estimated
recurring benefits resulting from the acquisition of World and Public
and the incremental depreciation and amortization associated with the
acquired tangible and intangible assets. The savings are primarily the
result of backroom efficiencies, including the elimination of certain
offices and executives and economies of scale in billing and other
operating areas. Property and equipment is assumed to depreciate over
60 months while the intangible assets relating to World's and Public's
existing phone contracts is being amortized over 36 months,
representing the average remaining life of all acquired contracts. The
value of the Non-compete Agreements is being amortized over the life of
the agreements.
<TABLE>
<CAPTION>
Pro Forma
World Public Adjustments As Adjusted
----- ------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues:
Coin calls $ 6,258,703 $ 1,757,054 $ - $ 8,015,757
Other 58,345 184,136 - 242,481
-------------- ------------- -------------- --------------
6,317,048 1,941,190 - 8,258,238
-------------- ------------- -------------- --------------
Operating expenses:
Line charges 2,706,199 535,771 - 3,241,970
Location commissions 852,944 196,243 (267,000) 782,187
Other operating expenses 1,026,000 112,071 (800,000) 338,071
Depreciation/amortization 855,059 268,262 4,953,450 6,076,771
Selling, general, and admin 1,276,056 594,588 (858,000) 1,012,644
-------------- ------------- -------------- --------------
6,716,258 1,706,935 3,028,450 11,451,643
-------------- ------------- -------------- --------------
Loss from operations (399,210) 234,255 (3,028,540) (3,193,405)
Other income (expense):
Interest expense (590,980) (304,664) - (895,644)
Interest income 834 3,371 - 4,205
Other - (321,923) - (321,923)
-------------- ------------- -------------- --------------
(590,146) (623,216) - (1,213,362)
-------------- ------------- -------------- --------------
Loss before income taxes (989,356) (388,961) (3,028,450) (4,406,767)
Income taxes - - - -
-------------- ------------- -------------- --------------
Net loss $ (989,356) $ $(388,961) (3,028,450) $ (4,406,767)
============== ============= ============== =============
</TABLE>
page 11 of 11 pages
