<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-1
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 18 pages
<PAGE> 2
PART I
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
The attached exhibits and pro forma financial information amends Form 8-K dated
March 15, 1996.
EXHIBITS
(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 Communications Systems,
Inc. and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Balance Sheet at December 31, 1995.
3. International Payphones, Inc. of South Carolina, International
Payphones, Inc. of Tennessee, 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. of South Carolina, International
Payphones, Inc. of Tennessee, Paramount Communications Systems,
Inc. and PhoneTel Technologies, Inc. - Unaudited Pro Forma
Combined Condensed Financial Information - Footnotes to Financial
Information.
page 2 of 18 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: May 14, 1996 /s/ Peter G. Graf
-----------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
page 3 of 18 pages
<PAGE> 1
EXHIBIT (a)1
INTERNATIONAL PAYPHONES, INC.
Financial statements
December 31, 1995 amd December 31, 1994
page 4 of 18 pages
<PAGE> 2
International Payphones, Inc.
Table of contents
<TABLE>
<CAPTION>
Page
<S> <C>
Auditors' opinion 1
Balance Sheets, December 31, 1995 and December 31, 1994 2
Statements of Earnings and Retained Earnings, For the
years ended December 31, 1995 and December 31, 1994 3
Statements of cash flows, for the years ended December 31, 1995
and December 31, 1994. 4
Notes to financial statements, December 31, 1995 and December 31, 1994 5
</TABLE>
<PAGE> 3
[ERNEST M. SEWELL, CPA, PA LETTERHEAD]
To The Stockholders
International Payphones, Inc.
Hilton Head Island, South Carolina
We have audited the accompanying Balance Sheets of International Payphones, Inc.
(a Tennessee corporation) as of December 31, 1995 and December 31, 1994, and the
related Statements of Earnings and Retained Earnings and Cash Flows for years
then ended. These financial statements are the responsibility of the management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Payphones, Inc.
and the results of its operations and its cash flows for the years ended
December 31, 1995 and 1994 in conformity with generally accepted accounting
principles.
/s/ Ernest M. Sewell, CPA
Bluffton, South Carolina
April 24, 1996
1
<PAGE> 4
INTERNATIONAL PAYPHONES, INC.
BALANCE SHEETS
As of December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
ASSETS
<S> <C> <C>
Current Assets
Cash $ 17,321.08 $ 25,530.67
Accounts receivable - trade 48,996.42 35,913.21
Other amounts receivable (Note D) 5,600.00 25,574.54
Parts and supplies inventory 9,420.00 11,625.00
--------------- ---------------
Total Current Assets 81,337.50 98,643.42
Property and Equipment
Property and equipment (Note B and F) 816,148.89 720,142.61
Accumulated depreciation (539,338.28) (455,592.94)
--------------- ---------------
Net Property and Equipment 276,810.61 264,549.67
--------------- ---------------
TOTAL ASSETS $ 358,148.11 $ 363,193.09
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt (Note F) $ 73,978.08 $ 48,761.05
Accounts payable - trade 2,717.23 7,822.66
Accrued payroll and payroll taxes - 10,265.07
Other accrued liabilities (Note E) 18,391.81 24,220.91
Deferred income taxes (Note C) 6,000.00 5,100.00
--------------- ---------------
Total Current Liabilities 101,087.12 96,169.69
Long-term debt - net of current portion (Note F) 118,654.10 81,515.83
--------------- ---------------
TOTAL LIABILITIES 219,741.22 177,685.52
Shareholders' Equity
Common stock 3,321.00 3,321.00
Additional paid-in capital 106,000.00 106,000.00
Retained earnings 29,085.89 76,186.57
--------------- ---------------
Total Shareholders' Equity 138,406.89 185,507.57
--------------- ---------------
TOTAL LIABILITIES AND EQUITY $ 358,148.11 $ 363,193.09
=============== ===============
</TABLE>
The accompanying notes are an integral part of this statement.
2
<PAGE> 5
INTERNATIONAL PAYPHONES, INC.
STATEMENTS OF EARNINGS AND RETAINED EARNINGS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Revenue $ 1,194,620.91 $ 1,135,734.73
Direct costs 608,061.14 553,336.70
--------------- ---------------
Gross Profit 586,559.77 582,398.03
General and Administrative Expenses 563,028.15 546,365.04
--------------- ---------------
Earnings from operations 23,531.62 36,032.99
Other income (expense):
Interest income (665.84) -
Gain (loss) on asset sale 916.16 (2,731.45)
--------------- ---------------
Earnings before taxes 25,113.62 33,301.54
Provision for income tax expense (Note C) 2,300.00 2,535.00
--------------- ---------------
Net earnings 22,813.62 30,766.54
BEGINNING RETAINED EARNINGS 76,186.57 88,677.65
--------------- ---------------
99,000.19 119,444.19
Less dividend distributions
(69,914.30) (43,257.62)
--------------- ---------------
ENDING RETAINED EARNINGS $ 29,085.89 $ 76,186.57
=============== ===============
</TABLE>
The accompanying notes are an integral part of this statement.
3
<PAGE> 6
INTERNATIONAL PAYPHONES, INC.
STATEMENTS OF CASH FLOWS
For the years ended December 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Cash Flows From Operating Activities
Net income (loss) $ 22,813.62 $ 30,766.54
Adjustments to reconcile net income (loss)
to net cash provided (used) by operating activities
Depreciation 91,174.16 96,689.77
(Gain) loss on disposal of property (916.16) 2,731.45
(Increase) decrease in accounts receivable (13,083.21) (4,610.68)
(Increase) decrease in inventories 2,205.00 32,152.00
Increase (decrease) in accounts payable (5,105.43) (16,981.09)
Increase (decrease) in income taxes payable 3,000.00 (5,280.00)
Increase (decrease) in other accrued expenses (5,829.10) 3,112.86
Increase (decrease) in payroll taxes (10,265.07) 9,691.53
--------------- ---------------
Total adjustments 61,180.19 117,505.84
--------------- ---------------
Net Cash Provided (Used) by Operating Activities 83,993.81 148,272.38
Cash Flows From Investing Activities
Proceeds from disposal of property 18,250.06 5,312.20
Purchases of fixed assets (71,329.00) (18,225.16)
Leasehold improvements - (10,274.42)
--------------- ---------------
Net Cash Provided (Used) by Investing Activities (53,078.94) (23,187.38)
Cash Flows From Financing Activities
Proceeds from long-term debt 96,329.00 30,893.30
Decrease in other accounts receivable 19,974.54 29,012.38
Repayment of long-term debt (49,068.19) (52,552.75)
Repayment of capital lease obligations (34,345.51) (59,869.12)
Repayment of stockholder loans - (22,575.20)
Dividends paid (72,014.30) (43,257.62)
--------------- ---------------
Net Cash Provided (Used) by Financing Activities (39,124.46) (118,349.01)
--------------- ---------------
NET INCREASE (DECREASE) IN CASH (8,209.59) 6,735.99
CASH AT BEGINNING OF YEAR 25,530.67 18,794.68
--------------- ---------------
CASH AT END OF YEAR $ 17,321.08 $ 25,530.67
=============== ===============
Supplemental Disclosures
Noncash Investing and Financing Activities:
Assets acquired through capital lease $ (49,440.00) $ (66,598.00)
Capital lease used to acquire assets 49,440.00 66,598.00
Cash Paid During the Year for:
Interest $ 13,489.00 $ 20,919.00
Income taxes 2,300.00 2,535.00
</TABLE>
The accompanying notes are an integral part of this statement.
4
<PAGE> 7
INTERNATIONAL PAYPHONES, INC.
NOTES TO THE FINANCIAL STATEMENTS
December 31, 1995 and December 31, 1994
Note A - General
International Payphones, Inc. is a Tennessee corporation formed in 1985 to
sale, install, lease and maintain pay telephone equipment. The majority of the
Company's operations are in the eastern region of the the state of Tennessee
where it owns approximately 500 telephones and receives pay telephone coin
income and long distance commissions. Under agreements with pay phone site
location owners the Company collects the pay phone coin revenue and the long,
terms run distance comission income and pays a percentage of this revenue to the
site location owner each month. These agreements cover periods ranging from five
to twenty years.
Note B - Property and equipment
Property and equipment is stated at cost and is depreciated using the
straight-line method over useful lives ranging from 5 to 7 years for equipment
and vehicles and 31.5 years for leasehold improvements. Repairs and maintenance
are charged to expense when incurred and improvements which substantially
prolong the useful lives of the assets involved are capitalized and depreciated.
The cost of assets classified by major categorys is as follows:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Furniture & fixtures $ 58,120.58 $ 58,120.58
Office equipment 35,998.97 35,998.97
Telephone equipment 515,563.78 466,123.78
Leasehold improvements 74,802.66 74,802.66
Vehicles 131,662.90 85,096.62
--------------- ---------------
Total cost 816,148.89 720,142.61
</TABLE>
Note C - Income taxes
The Company is an S corporation for Federal income tax purposes. As a
result, no provision for Federal income taxes is made by the Company because the
individual stockholder's report and pay Federal income tax on their allocated
percentage of the corporation's net earnings. The Company does pay Tennessee
state excise tax on its net earnings at a 6% tax rate. There are timing
differences in how items of income and expense are reported on the tax return
and in the financial statements. These differences involve trade receivables for
long distance commission income which is reported as income when earned in the
financial statements but is reported as received for tax purposes. In addition,
depreciation expense is claimed under IRS Code Section 179 and using accelerated
writeoff methods for tax purposes while the straigthtline writeoff method is
used for financial reporting. State excise tax is provided for in the financial
statements as the items of income and deduction are recognized therein
regardless of when they are reported on the income tax return. As a result of
these timing differences, deferred tax liabilities of $ 6,000 and $ 3,000,
respectively, have been accrued at December 31, 1995 and December 31, 1994.
Note D - Other amounts receivable:
The Company is affiliated through common stock ownership and control with
other companys involved in the telecommunications industry. Loans to these
affiliates on open account totaled $ 19,886 at December 31, 1994. Loans to
employees at December 31, 1994 totaled $ 7,937.
5
<PAGE> 8
INTERNATIONAL PAYPHONES, INC.
NOTES TO THE FINANCIAL STATEMENTS - Continued
December 31, 1995 and December 31, 1994
Note E - Other accrued liabilities:
Other accrued liabilities include the Company's estimate of accrued site
commissions due as of December 31, 1995 and December 31, 1994. Under the terms
of the Company's royalty agreements with its customers, site commissions are
payable after the end of the month in which the net coin and long distance
revenue is received. As of December 31, 1995 and December 31, 1994, the Company
has accrued approximately two months, respectively, of unpaid site commissions.
Note F - Long-term debt:
Long-term debt at December 31, 1995 and December 31, 1994 includes the
following:
<TABLE>
<CAPTION>
1995 1994
--------------- ---------------
<S> <C> <C>
Note payable to First National Bank of Gatlinburg dated
November 2, 1994 in the face amount of $ 17,000 payable in 18
monthly installments of $ 1,000 including interest at prime
plus 1.5% $ 4,377.89 $ 15,269.36
Note payable to Conquest Communications dated in December,
1993 in the face amount of $ 25,000 payable in monthly
installments with interest. - 5,117.01
Note payable to First Union Bank of Georgia dated October 11,
1993 in the face amount of $ 24,763 payable in 60 monthly
installments of $ 487 including interest at 6.75%. This note is
collateralized by a 1994 Ford Explorer. - 19,773.54
Notes payable (two) to First Union Bank of South Carolina
dated September 17, 1993 in the face amounts of $15,022 each, both
payable in 60 monthly installments of $292 including interest at
6.25%. These notes are collateralized by two 1993 Ford cargo vans. 18,219.80 23,457.12
Note payable to First Tennessee Bank dated January 31, 1994 in
the face amount of $ 13,893 payable in 60 monthly installments of
$ 289 including interest at 9.00%. This note is collateralized by
a 1994 Toyota Corolla. 9,422.68 11,681.97
Note payable to Nationsbank of South Carolina dated December
14, 1993 in the face amount of $ 15,596 payable in 60 monthly
installments of $ 309 including interest at 7.00%. This note is
collateralized by a 1994 Ford Econoline. 10,187.33 12,867.48
Note payable to First National Bank of Gatlinburg dated August
28, 1995 in the face amount of $ 25,000 payable in 23 monthly
installments of $ 1,000 including interest at prime plus 2.362%.
This note is collateralized by pay phones and royalty contracts. 21,890.59 -
</TABLE>
6
<PAGE> 9
INTERNATIONAL PAYPHONES, INC.
NOTES TO THE FINANCIAL STATEMENTS - Continued
December 31, 1995 and December 31, 1994
Note F - Long-term debt -continued:
<TABLE>
<CAPTION>
<S> <C> <C>
Capitalized lease purchase agreement dated January 26, 1994 in
the original sum of $ 66,370, due in monthly installments of $
2,139 through December, 1996, decreasing to $ 1,123 through
March, 1997, including sales tax and finance charges at 14%. 21,412.70 42,110.40
Capitalized lease purchase agreement dated May 5, 1995 in the
original sum of $ 49,440, due in monthly installments of $ 1,842
through March, 1998, including sales tax and finance charges
at 19%. 36,981.01 -
Note payable to Nationsbank of South Carolina dated November
4, 1995 in the face amount of $ 71,329 payable in 60 monthly
installments of $ 1,484 including interest at 8.95%. This note is
collateralized by a 1995 Mercedes 70,140.18 -
--------------- ---------------
192,632.18 130,276.88
Less current portion (73,978.08) (48,761.05)
--------------- ---------------
$ 118,654.10 $ 81,515.83
=============== ===============
</TABLE>
Note G - Operating leases
The Company leases its office space from one of the stockholders under an
oral agreement at a monthly rate of $ 1,000 plus utilities, taxes, repairs,
maintenance and leasehold improvements. The Company also leases three vehicles
under separate noncancelable operating lease agreements dated March 25, 1993,
January 22, 1994 and April 21, 1995. These agreements call for monthly lease
payments of $ 509, $ 1,006, and $ 444, respectively, including sales tax. Each
agreement allows for additional charges for excess milage upon expiration of the
lease. Future minimum annual lease payments under the vehicle leases are as
follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31, 1995 $ 22,183.00
Year ended December 31, 1996 18,936.00
Year ended December 31, 1997 11,371.00
Year ended December 31, 1998 1,333.00
--------------
$ 53,823.00
</TABLE>
Note H - Events subsequent to December 31, 1995
Effective March 15, 1996 the Company entered into a merger agreement with
PhoneTel Technologies, Inc. under which 100% of the Company stock was acquired
by Phonetel and the Company ceased to exist as a seperate entity.
7
<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.
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 13 of 18 pages
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT (B) 2
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------
International International
PhoneTel Payphones Payphones Paramount
Technologies South Carolina Tennessee Communications
----------------- --------------- ------------------ -------------------
ASSETS
Current assets:
<S> <C> <C> <C> <C>
Cash $713,462 $11,341 $17,321 $354,984
Accounts receivable, net 901,508 2,824 48,996 217,913
Other current assets 185,634 - 15,020 -
----------------- --------------- ------------------ -------------------
Total current assets 1,800,604 14,165 81,337 572,897
Property and equipment, net 14,099,111 1,021,733 276,811 853,712
Intangible assets, net 11,592,157 196,783 - -
Other assets 1,425,384 14,687 - 29,222
----------------- --------------- ------------------ -------------------
$28,917,256 $1,247,368 $358,148 $1,455,831
================= =============== ================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $1,010,412 $158,225 $73,978 -
Current portion capital leases 288,972 - - -
Accounts payable 2,772,306 - 2,717 $103,194
Accrued expenses 1,610,100 7,081 18,392 265,957
Deferred income taxes - - 6,000 -
Contractual settlements and
restructuring charges 962,338 - - -
----------------- --------------- ------------------ -------------------
Total current liabilities 6,644,128 165,306 101,087 369,151
Long-term debt 9,318,501 1,049,824 118,654 483,246
Obligations under capital leases 3,243,965 - - -
Deferred revenues - - - -
Stockholder's equity:
14% convertible preferred stock - - - -
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
Additional paid in capital 16,649,559 57,224 106,000 19,900
Accumulated (deficit) earnings (13,453,876) (34,986) 29,086 583,434
----------------- --------------- ------------------ -------------------
9,710,662 32,238 138,407 603,434
----------------- --------------- ------------------ -------------------
$28,917,256 $1,247,368 $358,148 $1,455,831
================= =============== ================== ===================
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments
for for Debt Pro Forma
Ref Acquisitions Ref Restructuring Combined
------- -------------------- ------- ------------------ -------------------
ASSETS
<S> <C> <C> <C> <C> <C>
Current assets:
Cash [1,2] ($14,758,426) [3] $14,552,395 $891,077
Accounts receivable, net [1] (220,737) - 950,504
Other current assets [1] (15,020) - 185,634
-------------------- ------------------ -------------------
Total current assets (14,994,183) 14,552,395 2,027,215
Property and equipment, net [2] 7,702,976 [3] 346,500 24,300,843
Intangible assets, net [1,2] 9,540,682 [3] 3,838,638 25,168,260
Other assets [1,2] (954,222) - 515,071
-------------------- ------------------ -------------------
$1,295,253 $18,737,533 $52,011,389
==================== ================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt [2] ($232,203) [3] ($225,000) $785,412
Current portion capital leases - - 288,972
Accounts payable [1,2] (103,194) [3] (2,619,746) 155,277
Accrued expenses [2] (254,421) - 1,647,109
Deferred income taxes [1] (6,000) - -
Contractual settlements and
restructuring charges - [3] (753,500) 208,838
-------------------- ------------------ -------------------
Total current liabilities (595,818) (3,598,246) 3,085,608
Long-term debt [1,2] (1,651,724) [3] 12,435,166 21,753,667
Obligations under capital leases - [3] (3,243,965) -
Deferred revenues - [3] 1,200,000 1,200,000
Stockholder's equity:
14% convertible preferred stock [2] 621,664 [3] 5,647,823 6,269,487
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 [2] (8,103) [3] 164 34,036
Additional paid in capital [2] 3,506,767 [3] 10,167,507 30,506,957
Accumulated (deficit) earnings [1,2] (577,533) [3] (2,689,831) (16,143,706)
-------------------- ------------------ -------------------
3,542,795 11,944,578 25,972,114
-------------------- ------------------ -------------------
$1,295,253 $18,737,533 $52,011,389
==================== ================== ===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 14 of 18 pages
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT (B) 3
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
- ---------------------------------------------------------------------------------------------------------------------------
PhoneTel International International
Technologies Payphones Payphones Paramount
[6] South Carolina Tennessee Communications
----------------- ---------------- --------------- -------------------
REVENUES:
<S> <C> <C> <C> <C>
Coin calls and commissions $14,811,361 $3,308,814 $1,194,621 $5,606,758
Operator services and other 3,906,622 - - -
---------------- --------------- -------------------
-----------------
18,717,983 3,308,814 1,194,621 5,606,758
----------------- ---------------- --------------- -------------------
COSTS AND EXPENSES:
Line and transmission charges 5,475,699 977,737 608,061 1,423,479
Location commissions 3,467,626 582,182 - 1,011,700
Other operating expenses 5,310,262 269,973 - 577,606
Depreciation and amortization 4,383,049 415,827 - 393,204
Selling, general and administrative 3,200,742 923,428 563,028 1,562,983
Contractual settlements and
restructuring charges 2,169,503 - - -
----------------- ---------------- --------------- -------------------
24,006,881 3,169,147 1,171,089 4,968,972
----------------- ---------------- --------------- -------------------
(Loss) income from operations (5,288,898) 139,667 23,532 637,786
Other income (expense) - (2,915) 916 -
Interest expense (781,808) (133,769) - (64,210)
Interest expense - accretion of debt (55,103) - - -
Interest income 16,112 - 666 12,468
----------------- ---------------- --------------- -------------------
(Loss) Income before income taxes
and extraordinary items (6,109,697) 2,983 25,114 586,044
Income taxes - - 2,300 -
----------------- ---------------- --------------- -------------------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEMS ($6,109,697) $2,983 $22,814 $586,044
================= ================ =============== ===================
Earnings per share calculation:
Preferred dividend payable in cash (309,668) - - -
Preferred dividend payable in kind - - - -
Redemption of 10%, 8%, and
7% Preferred - - - -
----------------- ---------------- --------------- -------------------
(Loss) income before extraordinary
items applicable to
common shareholders ($6,419,365) $2,983 $22,814 $586,044
================= ================ =============== ===================
Per common share loss before
extraordinary items ($3.29)
=================
Weighted average number of shares 1,950,561 365,520 190,069
================= ================ ===============
</TABLE>
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Adjustments Adjustments
for for Debt Pro Forma
Ref Acquisitions Ref Restructuring Combined
------- -------------------- ------- ------------------ -------------------
REVENUES:
<S> <C> <C> <C> <C> <C>
Coin calls and commissions - - $24,921,554
Operator services and other - - 3,906,622
-------------------- ------------------ -------------------
- - 28,828,176
-------------------- ------------------ -------------------
COSTS AND EXPENSES:
Line and transmission charges - - 8,484,976
Location commissions - - 5,061,508
Other operating expenses - - 6,157,841
Depreciation and amortization [4] $3,463,023 - 8,655,103
Selling, general and administrative [4] (1,146,051) - 5,104,130
Contractual settlements and
restructuring charges - - 2,169,503
-------------------- ------------------ -------------------
2,316,972 - 35,633,061
-------------------- ------------------ -------------------
(Loss) income from operations (2,316,972) - (6,804,885)
Other income (expense) - - (1,999)
Interest expense - [5] ($3,462,527) (4,442,314)
Interest expense - accretion of debt - [5] (3,022,564) (3,077,667)
Interest income - - 29,246
-------------------- ------------------ -------------------
(Loss) income before income taxes
and extraordinary items (2,316,972) (6,485,091) (14,297,619)
Income taxes - - 2,300
-------------------- ------------------ -------------------
(LOSS) INCOME BEFORE
EXTRAORDINARY ITEMS ($2,316,972) ($6,485,091) ($14,299,919)
==================== ================== ===================
Earnings per share calculation:
Preferred dividend payable in cash - [5] 309,668 -
Preferred dividend payable in kind - [5] (619,904) (619,904)
Redemption of 10%, 8%, and
7% Preferred - [5] (2,002,386) (2,002,386)
-------------------- ------------------ -------------------
(Loss) income before extraordinary
items applicable to
common shareholders ($2,316,972) ($8,797,713) ($16,922,209)
==================== ================== ===================
Per common share loss before
extraordinary items ($6.75)
===================
Weighted average number of shares 2,506,150
===================
</TABLE>
The accompanying notes are an integral part of these financial statements.
page 15 of 18 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 $299,190
Accounts receivable, net 220,737
Other current assets 15,020
Other assets 29,222
Intangible assets, net 196,783
Accounts payable $ 74,494
Long-term debt 132,651
Deferred income taxes 6,000
Accumulated (deficit) earnings 813,109
Adjustment for assets not acquired from IPP or Paramount on March 15,
1996 and accrual of additional liabilities.
(2) Cash $14,459,236
Property and equipment, net $7,702,976
Intangible assets, net 9,737,465
Other assets 925,000
Current portion of long-term debt 232,203
Accounts payable 28,700
Accrued expenses 284,421 30,000
Long-term debt 1,784,375
14% convertible preferred stock 621,664
Common stock 8,103
Additional paid in capital 3,506,767
Accumulated (deficit) earnings 235,576
</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. The Nominal Value Warrants were valued based on their
equivalent common shares at the Discounted Market Price less the
nominal exercise price per share. As required by purchase accounting,
the accumulated retained earnings or deficits of IPP and Paramount
prior to the date of acquisition were eliminated.
page 16 of 18 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 225,000
Accounts payable 2,619,746
Deferred revenues $ 1,200,000
Obligation relating to contractual
settlements and restructuring charges 753,500
Long-term debt 12,435,166
Obligations under capital leases 3,243,965
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 10,167,507
Accumulated (deficit) earnings 2,689,831
</TABLE>
To record the restructuring of the Company's long-term debt and
obligations under capital leases and application of the debt proceeds,
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. The redemption of the 10%, 8%, and 7%
Preferred resulted in the recording of a dividend in the amount of
$2,002,386. An extraordinary loss resulting from the debt payoff, of
$687,445, was recorded to the accumulated deficit.
<TABLE>
<S> <C> <C>
(4) Selling, general, and administrative $1,146,051
Depreciation and amortization $3,463,023
Accumulated (deficit) earnings 2,316,972
</TABLE>
Represents the estimated recurring benefits resulting from the
acquisitions and the incremental depreciation and amortization
associated with the acquisitions. 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. The value of the Non-compete Agreements is being amortized over
the life of the agreements which is 60 months.
page 17 of 18 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) Preferred dividend requirement paid in kind $ 619,904
Preferred dividend requirement paid in cash $ 309,668
Interest expense 3,462,527
Accretion of debt [interest expense] 3,022,564
Redemption of 10%, 8%, 7% Preferred 2,002,386
Accumulated (deficit) earnings $8,797,713
</TABLE>
Recording of four quarterly 14% Preferred paid-in-kind stock dividends
(paid in 14% Preferred shares with the valuation of the stock dividend
based on the conversion of the 14% Preferred shares into Common Stock
priced at the Discounted Market Price); elimination of the redeemed
preferred dividend requirements; the incremental increase in interest
expense on the new 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); and the difference between
the carrying value of the 10%, 8%, and 7% Preferred and the redemption
price.
(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.
page 18 of 18 pages
