<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A-2
CURRENT REPORT
0-16715
---------------------------------
COMMISSION FILE NUMBER
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
JANUARY 3, 1997
---------------------------------
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
PHONETEL TECHNOLOGIES, INC.
---------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
OHIO
------------------------------------
(STATE OF INCORPORATION)
34-1462198
------------------------------------
(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> 2
PART I
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On January 1, 1997, PhoneTel Technologies., Inc. the Registrant (or
"Company") completed the acquisition of Cherokee Communications, Inc.,
("Cherokee" or "Sellers") whereby the Company, acquired 14,000 public pay
telephones (located primarily in Texas, New Mexico, Utah, Montana and Colorado),
of which approximately 726 were under contract waiting to be installed, the
equipment being on hand for substantially all of those phones, and parts and
supplies inventory for a purchase price consisting of:
<TABLE>
<S> <C>
Acquired installed and uninstalled pay telephones and locations under
contract............................................................ $52,847,750
Non-competition agreements with three of the executives and owners of
Cherokee who are now employees and officers of the Company.......... 1,249,998
Transaction costs..................................................... 1,125,216
-----------
55,222,964
Contingent consideration paid into escrow:
Additional consideration payable if interstate operator service rate
guidelines are NOT implemented during:
1997 -- payable on January 3, 1998............................. 3,000,000
1998 -- payable on January 3, 1999............................. 3,000,000
Amount retained for "true-up" adjustments............................. 1,000,000
-----------
Total................................................................. $62,222,964
===========
</TABLE>
In addition, the Company acquired certain outstanding accounts receivable,
including dial-around compensation, prepaids and deposits, and coin in the
installed pay telephones aggregating $5,888,088, and assumed accounts payable,
accrued expenses, and vehicle debt aggregating $3,407,961, both of which were
adjustments to the purchase price above.
On January 14, 1997, the Company completed the acquisition of 1,250
installed public pay telephones (located in Texas), parts and supplies
inventories, and certain other assets of Texas Coinphone for a purchase price of
approximately $3,700,000.
The Cherokee and Texas Coinphone acquisitions were recorded as purchases
and the differences between the aggregate fair values of the tangibles assets
acquired and the total purchase price, approximately $30,000,000, were recorded
as acquired pay telephone location contracts and will be amortized over the
estimated average remaining economic life of the acquired pay telephone location
contracts. All purchase price allocations for the acquisitions are preliminary
in nature and are subject to change within twelve months following each
acquisition based on refinements as actual data becomes available.
The acquisitions of Cherokee and Texas Coinphone were completed using a
portion of the net proceeds from the Company's debt and equity public offerings
completed on December 18, 1996. The Company sold 6,750,000 shares of its Common
Stock, par value $0.01 ("Common Stock"), to the public at $3.00 per share, or
$20,250,000 before expenses (the "Company Equity Offering") and $125,000,000
aggregate principal amount of its 12% Senior Notes due 2006 (the "Company Debt
Offering").
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(b) Pro Forma financial information. The following unaudited pro forma
condensed financial statements as of and for the year ended December 31, 1995
and as of and for the nine months ended September 30, 1996, as set forth in
Exhibit 99.2 hereto and incorporated herein by reference, replace the pro forma
financial information previously filed as Exhibit 99.2 under Form 8-K dated
January 3, 1997:
1. Introduction to Unaudited Pro Forma Combined Condensed Financial
Information.
<PAGE> 3
2. Cherokee Communications, Inc., Texas Coinphone, Amtel
Communications, Inc. and Combined Companies (Debtor-in-Possession),
Payphones of America, Inc., International Pay Phones, Inc. (a
Tennessee company), International Pay Phones, Inc. (a South
Carolina Company), Paramount Communications Systems, Inc., World
Communications, Inc., Public Telephone Corporation, and PhoneTel
Technologies, Inc. -- Unaudited Pro Forma Combined Condensed
Statement of Operations for the Year Ended December 31, 1995.
3. Cherokee Communications, Inc., Texas Coinphone, Amtel
Communications, Inc. and Combined Companies (Debtor-in-Possession),
Payphones of America, Inc., International Pay Phones, Inc. (a
Tennessee company), International Pay Phones, Inc. (a South
Carolina Company), Paramount Communications Systems, Inc., World
Communications, Inc., Public Telephone Corporation, and PhoneTel
Technologies, Inc. -- Footnotes to the Unaudited Pro Forma Combined
Condensed Statement of Operations for the Year Ended December 31,
1995.
4. Cherokee Communications, Inc., Texas Coinphone, Amtel
Communications, Inc. and Combined Companies (Debtor-in-Possession),
Payphones of America, Inc., International Pay Phones, Inc. (a
Tennessee company), International Pay Phones, Inc. (a South
Carolina Company), Paramount Communications Systems, Inc., and
PhoneTel Technologies, Inc. -- Unaudited Pro Forma Combined
Condensed Statement of Operations for the Nine Months Ended
September 30, 1996.
5. Cherokee Communications, Inc., Texas Coinphone, Amtel
Communications, Inc. and Combined Companies (Debtor-in-Possession),
Payphones of America, Inc., International Pay Phones, Inc. (a
Tennessee company), International Pay Phones, Inc. (a South
Carolina Company), Paramount Communications Systems, Inc., World
Communications, Inc., Public Telephone Corporation, and PhoneTel
Technologies, Inc. -- Footnotes to the Unaudited Pro Forma Combined
Condensed Statement of Operations for the Nine Months Ended
September 30, 1996.
6. Cherokee Communications, Inc., Texas Coinphone and PhoneTel
Technologies, Inc. -- Unaudited Pro Forma Combined Condensed
Balance Sheet at September 30, 1996.
7. Cherokee Communications, Inc., Texas Coinphone and PhoneTel
Technologies, Inc. -- Footnotes to the Unaudited Pro Forma Combined
Condensed Balance Sheet at September 30, 1996.
(c) Exhibits
<TABLE>
<S> <C>
EXHIBIT NO. DOCUMENT
99.2 Unaudited pro forma financial statements listed in Item 7(b).
</TABLE>
<PAGE> 4
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: March 5, 1997 By: /s/ PETER G. GRAF
------------------------------------
Peter G. Graf
Chairman of the Board and
Chief Executive Officer
<PAGE> 5
EXHIBIT INDEX
<TABLE>
<S> <C>
EXHIBIT NO. DOCUMENT
99.2 Unaudited pro forma financial statements listed in Item 7(b).
</TABLE>
<PAGE> 6
INTRODUCTION
The following unaudited pro forma combined, condensed statement of
operations adjust the historical statements of operations data for the year
ended December 31, 1995 and the nine months ended September 30, 1996 include
adjustments to give effect to: (i) the acquisition of World Communications Inc.
("World") on September 22, 1995, Public Telephone Corporation ("Public
Telephone") on October 15, 1995, International Pay Phones, Inc. (a South
Carolina company) ("IPP SC") and International Pay Phones, Inc. (a Tennessee
company) ("IPP TN") (collectively "IPP"), on March 15, 1996, Paramount
Communications Systems, Inc. ("Paramount") on March 15, 1996, Pay Phones of
America, Inc. ("POA") effective August 1, 1996 and ACI-HDT Supply Company, Amtel
Communications Services, Amtel Communications Correctional Facilities, Amtel
Communications, Inc. and Amtel Communications Payphones, Inc., Debtors-
in-Possession, (collectively referred to as "Amtel") on September 13, 1996; (ii)
the funds borrowed under the Credit Agreement; (iii) the sale by the Company of
$20 million of Common Stock pursuant to the Company Equity Offering (as defined
below); (iv) the sale (as defined below) by the Company of $125 million of
senior debt pursuant to the Company Debt Offering and the application of the
proceeds therefrom and (v) the acquisition of Cherokee on January 3, 1997, and
Texas Coinphone on January 14, 1997 (which were funded with the proceeds from
the Company Equity Offering and the Company Debt Offering).
The following unaudited pro forma combined condensed balance sheet as of
September 30, 1996, adjusts the historical balance sheet to give effect to: (i)
the Cherokee and Texas Coinphone acquisitions; (ii) the sale by the Company of
$20 million of Common Stock pursuant to the Company Equity Offering; and (iii)
the sale by the Company of $125 million of Senior Notes pursuant to the Company
Debt Offering and the application of the net proceeds therefrom, including the
repayment of the $41,000,000 borrowed pursuant to the credit facility ("Credit
Agreement") provided by Internationale Nederlanden (U.S.) Capital Corporation
and Cerberus Partners, L.P. (collectively known as "Lenders"), the repayment of
certain capital lease obligations, and the repayment of sellers' notes issued in
connection with the POA Acquisition ("POA Seller's Notes").
Cherokee's fiscal year ends on September 30; accordingly the historical and
pro forma information relating to Cherokee is for the nine month period ended
June 30, 1996 and as of June 30, 1996. All purchase price allocations for the
acquisitions are preliminary in nature and are subject to change within twelve
months following each acquisition based on refinements as actual data becomes
available.
The pro forma adjustments are included in the unaudited pro forma balance
sheet as if the Cherokee and Texas Coinphone transactions had occurred on
September 30, 1996 and in the unaudited pro forma statements of operations as if
the transactions had occurred at the beginning of each period presented. The
audited pro forma combined condensed financial data should be read in
conjunction with the historical financial statements and notes thereto included
elsewhere in this filing, and are not necessarily indicative of the results of
operations that might have occurred if the transactions had taken place on the
dates indicated or which might occur in any future period.
1
<PAGE> 7
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA ADJUSTMENTS
WORLD, PUBLIC ADJUSTMENTS FOR EQUITY
TELEPHONE, FOR 1995 OFFERING
PHONETEL IPP AND AND 1996 AND DEBT
TECHNOLOGIES PARAMOUNT (A) AMTEL POA ACQUISITIONS OFFERING
------------ ------------- ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Coin calls...................... $ 12,130,189 $12,474,844 $ 9,689,179 $ 3,747,247 $ (295,000) --
Non-coin........................ 3,776,501 5,771,598 5,459,411 4,418,667 (964,000) --
Other........................... 2,811,293 147,259 1,910,550 49,221 (1,612,000) --
----------- ----------- ------------ ------------ ----------- ------------
18,717,983 18,393,701 17,059,140 8,215,135 (2,871,000)(b) --
----------- ----------- ------------ ------------ ----------- ------------
Operating expenses:
Line and transmission charges... 5,475,699 6,377,191 6,862,015 3,599,271 (1,695,000)(c) --
Location commissions............ 3,467,626 2,361,157 3,921,741 1,178,156 (1,067,000)(d) --
Field operations................ 5,310,262 1,847,352 2,719,090 289,036 (3,027,000)(e) --
Depreciation and amortization... 4,383,049 2,059,628 1,621,029 1,218,095 8,529,000(f) --
Selling, general and
administrative................. 3,200,742 5,229,060 15,103,091 1,911,624 (14,310,000)(g) --
Other unusual charges and
contractual settlements........ 2,169,503 -- -- -- -- --
----------- ----------- ------------ ------------ ----------- ------------
24,006,881 17,874,388 30,226,966 8,196,182 (11,570,000) --
----------- ----------- ------------ ------------ ----------- ------------
Loss from operations............ (5,288,898) 519,313 (13,167,826) 18,953 8,699,000 --
----------- ----------- ------------ ------------ ----------- ------------
Other income (expense):
Interest expense:
Related parties................ -- -- -- -- (7,009,000)(h) $ 7,009,000(l)
Others......................... (836,911) (1,109,102) (7,429,502) (971,141) 7,525,000(i) (13,498,000)(m)
Interest income................. 16,112 21,320 -- 415 -- --
Reorganization expenses......... -- -- (539,942) -- 539,942(j) --
Other........................... -- (311,932) (429,967) (68,517) 429,967(j) --
----------- ----------- ------------ ------------ ----------- ------------
Total other income (expense).... (820,799) (1,399,714) (8,399,411) (1,039,243) 1,485,909 (6,489,000)
----------- ----------- ------------ ------------ ----------- ------------
Loss before income taxes and
extraordinary item............. (6,109,697) (880,401) (21,567,237) (1,020,290) 10,184,909 (6,489,000)
Income taxes.................... -- 38,100 4,000 (277,720) (42,100)(k) --
----------- ----------- ------------ ------------ ----------- ------------
Loss before extraordinary
item........................... $ (6,109,697) $ (918,501) $(21,571,237) $ (742,570) $ 10,227,009 $ (6,489,000)
=========== =========== ============ ============ =========== ============
Earnings per share:
Preferred dividend.............. (309,668) (343,567) -- -- -- --
----------- ----------- ------------ ------------ ----------- ------------
Loss before extraordinary item
applicable to common
shareholders................... $ (6,419,365) $(1,262,068) $(21,571,237) $ (742,570) $ 10,227,009 $ (6,489,000)
=========== =========== ============ ============ =========== ============
Loss per common share........... $ (3.29)
===========
Number of shares................ 1,950,561 1,083,694 2,162,163 166,666 6,750,000(n)
=========== =========== ============ ============ ============
<CAPTION>
PRO FORMA
PRO FORMA FOR FOR 1995,
1995 AND 1996 1996 AND 1997
ACQUISITIONS, PRO FORMA ACQUISITIONS,
EQUITY OFFERING ADJUSTMENTS EQUITY OFFERING
AND DEBT TEXAS FOR 1997 AND DEBT
OFFERING CHEROKEE COINPHONE ACQUISITIONS OFFERING
--------------- ----------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Coin calls...................... $ 37,746,459 $14,036,665 $ 846,210 -- $ 52,629,334
Non-coin........................ 18,462,177 17,049,394 553,337 $(1,105,000)(p) 34,959,908
Other........................... 3,306,323 505,581 -- -- 3,811,904
------------ ----------- ---------- ----------- ------------
59,514,959 31,591,640 1,399,547 (1,105,000) 91,401,146
------------ ----------- ---------- ----------- ------------
Operating expenses:
Line and transmission charges... 20,619,176 9,673,772 513,036 -- 30,805,984
Location commissions............ 9,861,680 4,909,445 135,746 -- 14,906,871
Field operations................ 7,138,740 3,121,831 280,706 (1,233,000)(p) 9,308,277
Depreciation and amortization... 17,810,801 4,298,090 151,926 8,010,000(q) 30,270,817
Selling, general and
administrative................. 11,134,517 5,520,405 357,197 (1,130,000)(r) 15,882,119
Other unusual charges and
contractual settlements........ 2,169,503 -- -- -- 2,169,503
------------ ----------- ---------- ----------- ------------
68,734,417 27,523,543 1,438,611 5,647,000 103,343,571
------------ ----------- ---------- ----------- ------------
Loss from operations............ (9,219,458) 4,068,097 (39,064) (6,752,000) (11,942,425)
------------ ----------- ---------- ----------- ------------
Other income (expense):
Interest expense:
Related parties................ -- -- -- -- --
Others......................... (16,319,656) (1,631,416) (57,561) 1,689,000(s) (16,319,633)
Interest income................. 37,847 57,278 21,563 (21,563)(t) 95,125
Reorganization expenses......... -- -- -- -- --
Other........................... (380,449) 1,125,630 281,501 (281,501)(u) 745,181
------------ ----------- ---------- ----------- ------------
Total other income (expense).... (16,662,258) (448,508) 245,503 1,385,936 (15,479,327)
------------ ----------- ---------- ----------- ------------
Loss before income taxes and
extraordinary item............. (25,881,716) 3,619,589 206,439 (5,366,064) (27,421,752)
Income taxes.................... (277,720) 1,399,140 -- -- 1,121,420
------------ ----------- ---------- ----------- ------------
Loss before extraordinary
item........................... $ (25,603,996) $ 2,220,449 $ 206,439 $(5,366,064) $ (28,543,172)
============ =========== ========== =========== ============
Earnings per share:
Preferred dividend.............. (653,235) -- -- -- (653,235)
------------ ----------- ---------- ----------- ------------
Loss before extraordinary item
applicable to common
shareholders................... $ (26,257,231)(o) $ 2,220,449 $ 206,439 $(5,366,064) $ (29,196,407)
============ =========== ========== =========== ============
Loss per common share........... $ (2.17)(o) $ (2.41)
============ ============
Number of shares................ 12,113,084 12,113,084
============ ============
</TABLE>
The accompanying Footnotes to the Unaudited Pro Forma Combined Condensed
Statement of Operations are an integral part of these financial statements.
2
<PAGE> 8
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(a) Represents the operations of World, Public Telephone, Paramount, IPP SC
and IPP TN for the period from January 1, 1995 through the date
indicated.
<TABLE>
<CAPTION>
WORLD PUBLIC TELEPHONE PARAMOUNT IPP SC IPP TN
JANUARY 1, 1995 JANUARY 1, 1995 JANUARY 1, 1995 JANUARY 1, 1995 JANUARY 1, 1995
-SEPTEMBER 21, -OCTOBER 14, -DECEMBER 31, -DECEMBER 31, -DECEMBER 31,
1995 1995 1995 1995 1995 COMBINED
--------------- ---------------- --------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Coin calls.............. $ 2,791,016 $1,376,867 $ 3,751,744 $ 3,360,596 $ 1,194,621 $12,474,844
Non-coin................ 3,467,687 380,187 1,923,724 -- -- 5,771,598
Other................... 58,345 88,914 -- -- -- 147,259
----------- ---------- ----------- ----------- ----------- -----------
6,317,048 1,845,968 5,675,468 3,360,596 1,194,621 18,393,701
----------- ---------- ----------- ----------- ----------- -----------
Operating expenses:
Line and transmission
charges............... 2,706,199 535,771 1,543,956 983,204 608,061 6,377,191
Location commissions.... 852,944 196,243 696,443 615,527 -- 2,361,157
Field operating
expenses.............. 1,026,000 112,071 -- 709,281 -- 1,847,352
Depreciation and
amortization.......... 855,059 268,262 393,204 451,929 91,174 2,059,628
Selling, general and
administrative........ 1,276,056 594,588 2,407,479 479,083 471,854 5,229,060
----------- ---------- ----------- ----------- ----------- -----------
6,716,258 1,706,935 5,041,082 3,239,024 1,171,089 17,874,388
----------- ---------- ----------- ----------- ----------- -----------
Income (loss) from
operations.............. (399,210) 139,033 634,386 121,572 23,532 519,313
----------- ---------- ----------- ----------- ----------- -----------
Other income (expense):
Interest expense........ (590,980) (304,664) (64,210) (149,248) -- (1,109,102)
Interest income......... 834 3,371 14,800 733 1,582 21,320
Other................... -- (226,701) (85,231) -- -- (311,932)
----------- ---------- ----------- ----------- ----------- -----------
Total other income
(expense)............... (590,146) (527,994) (134,641) (148,515) 1,582 (1,399,714)
----------- ---------- ----------- ----------- ----------- -----------
Income (loss) before
income taxes............ (989,356) (388,961) 499,745 (26,943) 25,114 (880,401)
Income taxes............ -- -- -- 35,800 2,300 38,100
----------- ---------- ----------- ----------- ----------- -----------
Net income (loss)......... $ (989,356) $ (388,961) $ 499,745 $ (62,743) $ 22,814 $ (918,501)
=========== ========== =========== =========== =========== ===========
</TABLE>
(b) Represents the estimated reduction in revenues for assets not acquired.
<TABLE>
<S> <C>
Amtel........................................................ $2,859,000
POA.......................................................... 12,000
----------
$2,871,000
==========
</TABLE>
(c) Represents the reduction in line and transmission charges of $1,562,000
to reflect lower volumes at Amtel resulting from the reduction in the
number of public pay telephones from 11,500 to 9,400 at December 31,
1995. The decrease in the telephone count was the result of the Amtel
Court Appointed Bankruptcy Trustee (the "Amtel Trustee")
"de-installing" unprofitable public pay telephones. In 1996 the Trustee
continued the program of "de-installing" unprofitable public pay
telephones. On September 13, 1996, the Company acquired 6,872 installed
public pay telephones. Additionally, the Company estimates that line
and transmission charges for Amtel's public pay telephones will
decrease by an additional $133,000 due to volume discounts resulting
from the assimilation of Amtel's public pay telephones.
3
<PAGE> 9
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
(d) Represents estimated lower location commissions due to assets not
acquired.
<TABLE>
<S> <C>
Amtel........................................................ $ 800,000
Public Telephone............................................. 267,000
----------
$1,067,000
==========
</TABLE>
(e) World, Public Telephone, IPP and Paramount:
<TABLE>
<S> <C>
Reductions in the operations and field service personnel:
Closing of the Pompano Beach, Florida service office and
the elimination of eight employees.................... $ 253,000
Closing of an office in Chicago, Illinois and
elimination of three employees........................ 127,000
Closing of the Detroit, Michigan office and elimination
of two employees...................................... 47,000
Closing of the Ft. Wayne, Indiana office and elimination
of four employees..................................... 93,000
Elimination of four technicians in Florida due to the
elimination of duplicate routes....................... 83,000
Elimination of eleven employees in field pay phone
support located in Cleveland, Ohio.................... 197,000
----------
Subtotal................................................... 800,000
----------
Amtel:
Elimination of operator service costs associated with
revenues eliminated in footnote (b)..................... 632,000
Elimination of costs relating to assets not acquired:
Cost of public pay telephones not acquired............ 845,000
Cost of all personnel assigned to the inmate/prison
pay telephone business segment that was not
acquired........................................... 485,000
Cost of Amtel's telephone supply business not
acquired........................................... 170,000
----------
Subtotal................................................... 2,132,000
----------
POA:
Elimination of costs associated with duplicate operator
services................................................ 95,000
----------
Total........................................................ $3,027,000
==========
</TABLE>
(f) Represents additional depreciation and amortization associated with the
acquired tangible and intangible assets.
<TABLE>
<CAPTION>
LIVES
---------------------
AMOUNT TANGIBLE INTANGIBLE
---------- -------- ----------
(MONTHS)
<S> <C> <C> <C>
World, Public Telephone, IPP and Paramount... $6,117,000 60 24-60
Amtel........................................ 1,008,000 60 54
POA.......................................... 1,404,000 60 60-72
----------
$8,529,000
==========
</TABLE>
(g) Amtel:
Amtel Communications, Inc. and its combined companies filed
voluntary petitions for relief under Chapter 11 of the United States
Bankruptcy Code on August 3, 1995, administratively
4
<PAGE> 10
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
consolidated under Case No. 95-08253-A11. Amtel continued to operate
its business as a debtor-in-possession under the jurisdiction of the
United States Bankruptcy Court for the Southern District of California.
Prior to the Company's acquisition of certain assets from Amtel, Amtel
was comprised of five separate operating subsidiaries: (i) Amtel
Communications, Inc. ("ACI") was generally the administrative arm for
the other four subsidiaries; (ii) Amtel Communications Services, Inc.
("ACS") sold telephone long-distance debit cards; (iii) Amtel
Communications Correctional Facilities, Inc. ("ACF") provided pay
telephone services to correctional facilities; (iv) Amtel
Communications Payphones, Inc. ("ACP") provided public pay telephone
services; and (v) ACI-HDT Supply, Inc. ("HDT") sold equipment. Prior to
filing for bankruptcy, Amtel had 11,500 public pay telephone locations
under contract.
The Amtel Trustee determined that more than 5,000 of the public
pay telephone locations, out of 11,500 locations, were either
non-profitable or marginally profitable and that the public pay
telephone subsidiary had a chance of being profitable. The Amtel
Trustee implemented a cost reduction and downsizing program in October
1995, whereby the Amtel Trustee disposed of unprofitable assets,
including public pay phones, wrote-off non-existent fixed assets,
closed down Amtel's corporate office in San Diego, California
eliminating 65 employees and moved the remaining administrative staff
to other facilities. Additionally, the Amtel Trustee disposed of the
ACS, ACF and HDT business segments. The majority of the downsizing was
completed in March 1996. By July 1996, Amtel had reduced its number of
installed public pay telephones to 7,300 locations. On September 13,
1996, the Company acquired 6,872 installed public pay telephones.
<TABLE>
<S> <C>
The reductions in selling, general and administrative costs
are summarized as follows:
Elimination of 65 employees assigned to corporate
office................................................. $ 6,453,000
Closing of corporate office............................... 711,000
Elimination of vehicles formerly used by the terminated
employees.............................................. 275,000
Elimination of professional consultants not retained by
Company................................................ 681,000
Elimination of office leases not assumed located in San
Diego and Los Angeles, California...................... 401,000
Elimination of compensation expense to Amtel Trustee,
corporate controller, accounting manager, and six
administrative clerks located in San Diego; and seven
operational personnel located in five regional
offices................................................ 2,840,000
-----------
Subtotal for Amtel.......................................... 11,361,000
-----------
Paramount:
Elimination of the entire corporate office staff located
in Fort Lauderdale, Florida............................ 378,000
Elimination of professional fees.......................... 128,000
Elimination of one subcontractor.......................... 37,000
Closing of the corporate headquarters in Fort Lauderdale,
Florida................................................ 69,000
Reduction in insurance.................................... 30,000
Elimination of executive benefits......................... 3,000
-----------
Subtotal for Paramount...................................... 645,000
-----------
</TABLE>
5
<PAGE> 11
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
<TABLE>
<S> <C>
IPP:
Elimination of six employees located in Hilton Head, South
Carolina and Knoxville, Tennessee...................... 270,000
Closing of corporate offices in Hilton Head, South
Carolina and Knoxville, Tennessee...................... 139,000
Elimination of professional fees.......................... 22,000
Employee benefits not assumed............................. 13,000
Reduction in insurance.................................... 55,000
Owners' commissions eliminated............................ 82,000
Addition of one new executive............................. (80,000)
-----------
Subtotal for IPP............................................ 501,000
-----------
World:
Elimination of six executives and related benefits located
in St. Louis, Missouri and Cleveland, Ohio............. 500,000
-----------
Subtotal for World.......................................... 500,000
-----------
Public Telephone:
Elimination of three executives (former owners) and
related benefits located in Fort Wayne, Indiana........ 358,000
-----------
Subtotal for Public Telephone............................... 358,000
-----------
Subtotal for World, Public Telephone, IPP and Paramount..... 2,004,000
-----------
POA:
Elimination of all salaries and benefits of executives
located in St. Louis, Missouri......................... 189,000
Elimination of 14 administrative employees located in St.
Louis, Missouri........................................ 412,000
Closing of corporate office in St. Louis, Missouri........ 181,000
Elimination of professional fees.......................... 163,000
-----------
Subtotal for POA............................................ 945,000
-----------
Total selling, general and administrative................... $14,310,000
===========
</TABLE>
(h) Represents additional interest expense for borrowings under the Credit
Agreement.
<TABLE>
<CAPTION>
AMOUNT INTEREST PRO FORMA
BORROWED RATE EXPENSE
----------- -------- ----------
<S> <C> <C> <C>
To fund the acquisitions of World,
Public Telephone, IPP and Paramount... $32,223,484 13.25% $4,270,000
To fund the acquisitions of Amtel and
POA and to pay related expenses and
other obligations..................... 8,776,516 13.25% 1,163,000
Accretion of original issue debt
discount.............................. 1,576,000
----------
$7,009,000
==========
</TABLE>
6
<PAGE> 12
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
(i) Represents reduction in interest expense to reflect elimination of
separate Company borrowings, offset by interest expense on POA Sellers'
Notes.
<TABLE>
<S> <C>
World, Public Telephone, IPP and Paramount................... $ 650,000
Amtel........................................................ 7,430,000
POA.......................................................... (555,000)
----------
$7,525,000
==========
</TABLE>
(j) Represents the write off, by the Amtel Trustee, of non-existent Amtel
assets aggregating $429,967 (net book value) and elimination of
$539,942 in expenses resulting from the Amtel Trustee's reorganization
and restructuring of Amtel.
(k) Represents elimination of income tax expense.
(l) Represents elimination of interest expense incurred under the Credit
Agreement.
(m) Represents increase in interest expense.
<TABLE>
<CAPTION>
AMOUNT INTEREST MONTHS INTEREST
OUTSTANDING RATE OUTSTANDING EXPENSE
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Debt pursuant to the Debt Offering....... 125,000,000 12% 12 $15,000,000
Interest savings on the POA Sellers'
Notes and repayment of capital
leases................................. (1,502,000)
-----------
$13,498,000
===========
</TABLE>
(n) Represents 6,750,000 shares of Common Stock sold pursuant to the
Company Equity Offering at $3.00 per share.
(o) Loss per share excludes an increase of the loss to common shareholders
of (i) $2,002,386 which was realized on redemption of the 10%
Preferred, 8% Preferred, and 7% Preferred; (ii) an extraordinary loss
of $267,281 realized on the restructuring of the Company's debt on
March 15, 1996; and (iii) and estimated extraordinary loss of
$9,805,281 to be realized on the early retirement of the borrowings
under the Credit Agreement.
(p) Represents the estimated reduction in other operating expenses
primarily to eliminate redundant operations and operations personnel
and the reclassifications of chargebacks to non-coin revenue for the
Cherokee to conform to PhoneTel's presentation.
<TABLE>
<S> <C>
Cherokee..................................................... $ 40,000
Texas Coinphone.............................................. 88,000
Reclassification of chargebacks.............................. 1,105,000
----------
$1,233,000
==========
</TABLE>
(q) Represents additional depreciation and amortization associated with the
acquired tangible and intangible assets for the acquisitions completed
in 1997.
<TABLE>
<CAPTION>
LIVES
---------------------
AMOUNT TANGIBLE INTANGIBLE
---------- -------- ----------
(MONTHS)
<S> <C> <C> <C>
Cherokee..................................... $7,481,000 60 60-82
Texas Coinphone.............................. 529,000 60 72
----------
$8,010,000
==========
</TABLE>
7
<PAGE> 13
FOOTNOTES TO THE UNAUDITED PRO FORMA
COMBINED CONDENSED STATEMENT OF OPERATIONS -- (CONTINUED)
(r) Texas Coinphone:
<TABLE>
<S> <C>
Elimination of expenses associated with the business
segment acquired:
Elimination of four employees located in the Bryan, Texas
corporate office........................................ $ 74,000
Taxes and benefits of four eliminated employees............ 7,000
Reduction in insurance..................................... 19,000
Closing of Bryan, Texas office............................. 2,000
Bryan, Texas office telephones............................. 10,000
Reduction in professional fees............................. 18,000
----------
Subtotal..................................................... 130,000
----------
</TABLE>
Cherokee:
<TABLE>
<S> <C>
Elimination of salaries and benefits of 13 administrative
employees located in Jacksonville, Texas................ 442,000
Reduction in insurance..................................... 33,000
Reduction in professional fees............................. 78,000
Elimination of executive benefits.......................... 33,000
Closing of corporate office in Jacksonville, Texas......... 140,000
Elimination of salaries and benefits of four sales
employees located in Jacksonville, Texas and one sales
employee located in Denver, Colorado.................... 229,000
Elimination of sales and marketing expense for five sales
employees............................................... 40,000
Other miscellaneous eliminations........................... 5,000
----------
Subtotal for Cherokee...................................... 1,000,000
----------
Total........................................................ $1,130,000
==========
</TABLE>
(s) Represents the estimated reductions in interest expense to reflect
elimination of separate Company borrowings.
<TABLE>
<S> <C>
Cherokee..................................................... $1,631,000
Texas Coinphone.............................................. 58,000
----------
$1,689,000
==========
</TABLE>
(t) Represents elimination of Texas Coinphone interest income.
(u) Represents elimination of Texas Coinphone other income which relates to
assets not acquired.
8
<PAGE> 14
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
PHONETEL IPP AND FOR 1996
TECHNOLOGIES PARAMOUNT (a) AMTEL (b) POA (c) ACQUISITIONS
------------ ------------- ------------ ---------- ------------
<S> <C> <C> <C> <C> <C>
Revenues
Coin calls......................... $ 16,988,697 $ 1,883,110 $ 6,653,874 $1,769,257 --
Non-coin........................... 9,308,538 590,457 3,464,990 1,795,827 --
Other.............................. 2,018,191 15,113 87,968 831,179 $ (28,000)(d)
------------ ----------- ------------ ----------- ------------
28,315,426 2,488,680 10,206,832 4,396,263 (28,000)
------------ ----------- ------------ ----------- ------------
Operating expenses:
Line and transmission charges...... 6,800,782 585,463 3,440,664 814,759 --
Location commissions............... 4,101,195 376,269 2,322,097 509,461 --
Field operations................... 8,102,314 356,816 456,092 1,237,567 (247,000)(e)
Depreciation and amortization...... 8,876,238 183,931 1,101,916 695,490 2,442,000(f)
Selling, general and
administrative.................... 3,757,559 492,244 3,161,957 1,149,506 (1,881,000)(g)
Other unusual charges and
contractual settlements........... 5,517,753 -- -- -- --
------------ ----------- ------------ ----------- ------------
37,155,841 1,994,723 10,482,726 4,406,783 314,000
------------ ----------- ------------ ----------- ------------
Loss from operations............... (8,840,415) 493,957 (275,894) (10,520) (342,000)
------------ ----------- ------------ ----------- ------------
Other income (expense):
Interest expense:
Related parties................... (3,588,420) -- -- -- (815,000)(h)
Others............................ (551,243) (30,881) (8,508) (388,768) (453,000)(i)
Interest income.................... -- -- 2,248 4,111 --
Reorganization expenses............ -- -- (1,105,843) -- 1,105,843(j)
Other.............................. -- (12,638) (1,342,615) (64,036) 1,342,615(j)
------------ ----------- ------------ ----------- ------------
Total other income (expense)....... (4,139,663) (43,519) (2,454,718) (448,693) 1,180,458
------------ ----------- ------------ ----------- ------------
Loss before income taxes and
extraordinary item................ (12,980,078) 450,438 (2,730,612) (459,213) 838,458
Income taxes....................... -- -- 5,667 -- (5,667)(k)
------------ ----------- ------------ ----------- ------------
Loss before extraordinary item..... $(12,980,078) $ 450,438 $ (2,736,279) $ (459,213) $ 844,125
============ =========== ============ =========== ============
Earnings per share:
Preferred dividend................. (269,565) -- -- -- --
------------ ----------- ------------ ----------- ------------
Loss before extraordinary item
applicable to common
shareholders...................... $(13,249,643) $ 450,438 $ (2,736,279) $ (459,213) $ 844,125
============ =========== ============ =========== ============
Loss per common share.............. $ (3.08)
============
Number of shares................... 4,305,130 154,330 2,037,324 129,629
============ =========== ============ ===========
<CAPTION>
PRO FORMA PRO FORMA FOR
ADJUSTMENTS 1996
FOR EQUITY ACQUISITIONS, PRO FORMA
OFFERING EQUITY OFFERING ADJUSTMENTS
AND DEBT AND DEBT TEXAS FOR 1997
OFFERING OFFERING CHEROKEE COINPHONE ACQUISITIONS
----------- --------------- ----------- ---------- ------------
<S> <C> <C>
Revenues
Coin calls......................... -- $ 27,294,938 $12,571,961 $ 910,263 --
Non-coin........................... -- 15,159,812 11,061,973 403,573 $ (736,000)(p)
Other.............................. -- 2,924,451 817,273 39,485 --
----------- ------------- ----------- ----------- ------------
-- 45,379,201 24,451,207 1,353,321 (736,000)
----------- ------------- ----------- ----------- ------------
Operating expenses:
Line and transmission charges...... -- 11,641,668 6,451,165 459,477 --
Location commissions............... -- 7,309,022 3,885,956 153,801 --
Field operations................... -- 9,905,789 4,107,855 85,843 (878,000)(p)
Depreciation and amortization...... -- 13,299,575 3,831,645 56,398 6,065,000(q)
Selling, general and
administrative.................... -- 6,680,266 4,909,963 432,635 (847,000)(r)
Other unusual charges and
contractual settlements........... -- 5,517,753 -- -- --
----------- ------------- ----------- ----------- ------------
-- 54,354,073 23,186,584 1,188,154 4,340,000
----------- ------------- ----------- ----------- ------------
Loss from operations............... -- (8,974,872) 1,264,623 165,167 (5,076,000)
----------- ------------- ----------- ----------- ------------
Other income (expense):
Interest expense:
Related parties................... 4,375,000(l) (28,420) -- -- --
Others............................ (10,416,000)(m) (11,848,400) (1,358,917) (51,325) 1,410,242(s)
Interest income.................... -- 6,359 3,645 -- --
Reorganization expenses............ -- -- -- -- --
Other.............................. -- (76,674) (17,365) 123,236 (123,236)(t)
----------- ------------- ----------- ----------- ------------
Total other income (expense)....... (6,041,000) (11,947,135) (1,372,637) 71,911 1,287,006
----------- ------------- ----------- ----------- ------------
Loss before income taxes and
extraordinary item................ (6,041,000) (20,922,007) (108,014) 237,078 (3,788,994)
Income taxes....................... -- -- (19,188) -- --
----------- ------------- ----------- ----------- ------------
Loss before extraordinary item..... $(6,041,000) $ (20,922,007) $ (88,826) $ 237,078 $ (3,788,994)
=========== ============= =========== =========== ============
Earnings per share:
Preferred dividend................. -- (269,565) -- -- --
----------- ------------- ----------- ----------- ------------
Loss before extraordinary item
applicable to common
shareholders...................... $(6,041,000) $ (21,191,572)(o) $ (88,826) $ 237,078 $ (3,788,994)
=========== ============= =========== =========== ============
Loss per common share.............. $ (1.58)(o)
=============
Number of shares................... 6,750,000(n) 13,376,413
=========== =============
<CAPTION>
PRO FORMA
FOR 1996 AND 1997
ACQUISITIONS,
EQUITY OFFERING
AND DEBT
OFFERING
------------------
Revenues
Coin calls......................... $ 40,777,162
Non-coin........................... 25,889,358
Other.............................. 3,781,209
------------
70,447,729
------------
Operating expenses:
Line and transmission charges...... 18,552,310
Location commissions............... 11,348,779
Field operations................... 13,221,487
Depreciation and amortization...... 23,252,618
Selling, general and
administrative.................... 11,175,864
Other unusual charges and
contractual settlements........... 5,517,753
------------
83,068,811
------------
Loss from operations............... (12,621,082)
------------
Other income (expense):
Interest expense:
Related parties................... (28,420)
Others............................ (11,848,400)
Interest income.................... 10,004
Reorganization expenses............ --
Other.............................. (94,039)
------------
Total other income (expense)....... (11,960,855)
------------
Loss before income taxes and
extraordinary item................ (24,581,937)
Income taxes....................... (19,188)
------------
Loss before extraordinary item..... $(24,562,749)
============
Earnings per share:
Preferred dividend................. (269,565)
------------
Loss before extraordinary item
applicable to common
shareholders...................... $(24,832,314)
============
Loss per common share.............. $ (1.86)
============
Number of shares................... 13,376,413
============
</TABLE>
The accompanying Footnotes to the Unaudited Pro Forma Combined Condensed
Statement of Operations are an integral part of these financial statements.
9
<PAGE> 15
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
(a) Represents the operations of IPP SC, IPP TN and Paramount for the period
from January 1, 1996 through March 15, 1996.
<TABLE>
<CAPTION>
IPP SC IPP TN PARAMOUNT COMBINED
-------- -------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues:
Coin calls............................. $648,143 $193,203 $1,041,764 $1,883,110
Non-coin............................... -- -- 590,457 590,457
Other.................................. 1,199 13,914 -- 15,113
-------- -------- ---------- ----------
649,342 207,117 1,632,221 2,488,680
-------- -------- ---------- ----------
Operating expenses:
Line and transmission charges.......... 234,659 74,923 275,881 585,463
Location commissions................... 115,660 28,752 231,857 376,269
Field operating expenses............... 68,844 21,630 266,342 356,816
Depreciation and amortization.......... 82,614 19,399 81,918 183,931
Selling, general and administrative.... 195,643 100,538 196,063 492,244
-------- -------- ---------- ----------
697,420 245,242 1,052,061 1,994,723
-------- -------- ---------- ----------
Income (loss) from operations............ (48,078) (38,125) 580,160 493,957
-------- -------- ---------- ----------
Other income (expense):
Interest expense....................... (18,088) (1,423) (11,370) (30,881)
Other.................................. -- -- (12,638) (12,638)
-------- -------- ---------- ----------
Total other income (expense)............. (18,088) (1,423) (24,008) (43,519)
-------- -------- ---------- ----------
Income (loss) before income taxes........ (66,166) (39,548) 556,152 450,438
Income taxes........................... -- -- -- --
-------- -------- ---------- ----------
Net income (loss)........................ $(66,166) $(39,548) $ 556,152 $ 450,438
======== ======== ========== ==========
</TABLE>
(b) Represents the operations of Amtel for the period January 1, 1996 through
September 12, 1996.
(c) Represents the operations of POA for the period January 1, 1996 through July
31, 1996.
(d) Represents the estimated reduction in revenues previously generated from
assets not acquired in the acquisition of POA.
(e) Represents the estimated reduction in other operating expenses primarily
resulting from eliminating certain offices, redundant personnel and costs of
operations not acquired (principally Amtel).
<TABLE>
<S> <C>
Amtel.................................................................... $ 35,000
POA...................................................................... 212,000
--------
$247,000
========
</TABLE>
(f) Represents additional depreciation and amortization associated with the
acquired tangibles and intangible assets.
<TABLE>
<CAPTION>
LIVES
------------------------
AMOUNT TANGIBLE INTANGIBLE
---------- -------- -----------
(MONTHS)
<S> <C> <C> <C>
IPP and Paramount................................. $ 745,000 60 60
Amtel............................................. 761,000 60 54
POA............................................... 936,000 60 60-72
----------
$2,442,000
==========
</TABLE>
10
<PAGE> 16
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS -- (CONTINUED)
(g) Represents estimated reductions in selling, general and administrative
expenses principally resulting from elimination of pre-petition expenses at
Amtel and redundant personnel.
<TABLE>
<S> <C>
IPP and Paramount...................................................... $ 239,000
Amtel.................................................................. 1,153,000
POA.................................................................... 489,000
----------
$1,881,000
==========
</TABLE>
(h) Represents additional interest expense for borrowings under the Credit
Agreement to fund the acquisitions of Amtel and POA, net of $57,000
recorded by the Company from the dates of acquisition through September 30,
1996.
<TABLE>
<CAPTION>
BORROWED INTEREST PRO FORMA
AMOUNT RATE EXPENSE
---------- -------- ---------
<S> <C> <C> <C>
$8,776,546 13.25% $ 815,000
========== ===== ========
</TABLE>
(i) Represents reduction in interest expense to reflect elimination of separate
Company borrowings offset by interest expense on POA Sellers' Notes.
<TABLE>
<S> <C>
Amtel.................................................................. $ 9,000
POA.................................................................... (462,000)
----------
$ (453,000)
=========
</TABLE>
(j) Represents the write off, by the Amtel Trustee, of non-existent Amtel
assets aggregating $1,342,615 (net book value) and elimination of
$1,105,843 in expenses resulting from the Amtel Trustee's reorganization
and restructuring of Amtel.
(k) Represents elimination of income tax expense.
(l) Represents elimination of interest expense incurred under the Credit
Agreement.
(m) Represents increase in interest expense.
<TABLE>
<CAPTION>
AMOUNT INTEREST MONTHS INTEREST
OUTSTANDING RATE OUTSTANDING EXPENSE
----------- -------- ----------- -----------
<S> <C> <C> <C> <C>
Debt pursuant to the Company Debt
Offering............................... 125,000,000 12% 6 $11,250,000
Interest savings on the POA Sellers'
Notes and repayment of capital
leases................................. (834,000)
-----------
$10,416,000
===========
</TABLE>
(n) Represents 6,750,000 shares of Common Stock to be sold pursuant to the
Company Equity Offering at $3.00 per share.
(o) Loss per share excludes an increase of the loss to common shareholders of
(i) $2,002,386 which was realized on redemption of the 10% Preferred, 8%
Preferred, and 7% Preferred; (ii) an extraordinary loss of $267,281 realized
on the restructuring of the Company's debt on March 15, 1996; and (iii) and
estimated extraordinary loss of $9,805,281 to be realized on the early
retirement of the borrowings under the Credit Agreement.
11
<PAGE> 17
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS -- (CONTINUED)
(p) Represents the estimated reduction in other operating expenses primarily to
eliminate redundant operations and operations personnel and the
reclassifications of chargebacks to non-coin revenue for the Cherokee to
conform to PhoneTel's presentation.
<TABLE>
<S> <C>
Cherokee................................................................. $ 76,000
Texas Coinphone.......................................................... 66,000
Reclassification of chargebacks.......................................... 736,000
--------
$878,000
========
</TABLE>
(q) Represents additional depreciation and amortization associated with the
acquired tangible and intangible assets for the acquisition, completed in
1997.
<TABLE>
<CAPTION>
LIVES
------------------------
AMOUNT TANGIBLE INTANGIBLE
---------- -------- -----------
(MONTHS)
<S> <C> <C> <C>
Cherokee.......................................... $5,611,000 60 60-82
Texas Coinphone................................... 454,000 60 72
----------
$6,065,000
==========
</TABLE>
(r) Texas CoinPhone:
<TABLE>
<S> <C>
Elimination of expenses associated with the business segment acquired:
Elimination of four employees located in the Bryan, Texas corporate
office............................................................. $ 56,000
Taxes and benefits of four eliminated employees..................... 5,000
Reduction in insurance.............................................. 14,000
Closing of Bryan, Texas office...................................... 1,000
Bryan, Texas office telephones...................................... 7,000
Reduction in professional fees...................................... 14,000
--------
Subtotal............................................................... 97,000
--------
</TABLE>
Cherokee:
<TABLE>
<S> <C>
Elimination of salaries and benefits of 13 administrative employees
located in Jacksonville, Texas......................................... 330,000
Reduction in insurance................................................. 25,000
Reduction in professional fees......................................... 59,000
Elimination of executive benefits...................................... 25,000
Closing of corporate office in Jacksonville, Texas..................... 105,000
Elimination of salaries and benefits of four sales employees located in
Jacksonville, Texas and one sales employee located in Denver,
Colorado............................................................ 172,000
Elimination of sales and marketing expense for five sales employees.... 30,000
Other miscellaneous eliminations....................................... 4,000
--------
Subtotal for Cherokee.................................................. 750,000
--------
Total.................................................................... $847,000
========
</TABLE>
12
<PAGE> 18
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENT OF OPERATIONS -- (CONTINUED)
(s) Represents reduction in interest expense to reflect elimination of separate
Company borrowings.
<TABLE>
<S> <C>
Cherokee............................................................... $1,358,917
Texas Coinphone........................................................ 51,325
----------
$1,410,242
==========
</TABLE>
(t) Represents elimination of Texas Coinphone other income which relates to
assets not acquired.
13
<PAGE> 19
PHONETEL TECHNOLOGIES, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO FORMA
FOR EQUITY FOR EQUITY
OFFERING OFFERING
PHONETEL AND DEBT AND DEBT TEXAS
TECHNOLOGIES OFFERING OFFERING CHEROKEE COINPHONE
------------ --------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash.................................... $ 655,734 $ 83,952,579(a) $ 84,608,313 $ 364,691 $ 80,895
Accounts receivable, net................ 2,423,060 -- 2,423,060 3,712,950 55,140
Other current assets.................... 247,426 -- 247,426 210,439 --
----------- ----------- ----------- ----------- -----------
Total current assets.................... 3,326,220 83,952,579 87,278,799 4,288,080 136,035
Property and equipment, net............. 31,682,061 -- 31,682,061 16,354,960 1,143,869
Intangible assets, net.................. 39,226,619 1,948,675(b) 41,175,294 4,048,701 --
Other assets............................ 705,473 -- 705,473 665,044 35,420
----------- ----------- ----------- ----------- -----------
$74,940,373 $ 85,901,254 $160,841,627 $25,356,785 $1,315,324
=========== =========== =========== =========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Current long-term debt:
Payable to related parties............ $ 5,234,953 $ (4,717,707)(c) $ 517,246 -- --
Payable to others..................... 995,673 -- 995,673 $ 2,982,325 $ 183,300
Current portion capital leases.......... 803,336 (656,947)(d) 146,389 977,433 --
Accounts payable........................ 2,969,681 -- 2,969,681 754,048 39,472
Accrued expenses........................ 3,524,690 -- 3,524,690 2,979,962 21,590
Deferred revenues....................... 600,000 -- 600,000 -- --
Other unusual items and contractual
settlements........................... 516,392 -- 516,392 -- --
----------- ----------- ----------- ----------- -----------
Total current liabilities............... 14,644,725 (5,374,654) 9,270,071 7,693,768 244,362
Long-term debt:
Payable to related parties............ 31,053,337 (31,053,337)(c) -- -- --
Payable to others..................... 3,832,781 121,677,579(e) 125,510,360 10,636,237 626,910
Capital leases.......................... 7,225,722 (7,093,053)(d) 132,669 -- 40,578
Deferred taxes.......................... -- -- -- 342,359 --
14% preferred mandatorily redeemable at
$6,978,963............................ 6,539,053 -- 6,539,053 -- --
Other equity:
Preferred stock....................... -- -- -- 2,400,000 --
Common stock.......................... 76,397 67,500(f) 143,897 351,903 166,395
Additional paid in capital............ 40,541,544 17,912,500(f) 58,454,044 1,097,630 --
Accumulated deficit................... (28,973,186) (10,235,281)(f) (39,208,467) 2,834,888 237,079
----------- ----------- ----------- ----------- -----------
Total other equity...................... 11,644,755 7,744,719 19,389,474 6,684,421 403,474
----------- ----------- ----------- ----------- -----------
$74,940,373 $ 85,901,254 $160,841,627 $25,356,785 $1,315,324
=========== =========== =========== =========== ===========
<CAPTION>
PRO FORMA
FOR 1997
PRO FORMA ACQUISITIONS
ADJUSTMENTS EQUITY OFFERING
FOR 1997 AND DEBT
ACQUISITIONS OFFERING
------------ ---------------------
<S> <C> <C>
ASSETS
Current assets:
Cash.................................... $(61,974,877)(g) $ 23,079,022
Accounts receivable, net................ 186,117(h) 6,377,267
Other current assets.................... 1,095,230(h) 1,553,095
----------- -----------
Total current assets.................... (60,693,530) 31,009,384
Property and equipment, net............. 7,270,037(i) 56,450,927
Intangible assets, net.................. 25,567,230(i) 70,791,225
Other assets............................ 5,301,973(h) 6,707,910
----------- -----------
$(22,554,290) $ 164,959,446
=========== ===========
LIABILITIES AND EQUITY
Current liabilities:
Current long-term debt:
Payable to related parties............ -- $ 517,246
Payable to others..................... $ (3,165,625)(j) 995,673
Current portion capital leases.......... (6,108)(k) 1,117,714
Accounts payable........................ (793,520)(l) 2,969,681
Accrued expenses........................ (197,417)(l) 6,328,825
Deferred revenues....................... -- 600,000
Other unusual items and contractual
settlements........................... -- 516,392
----------- -----------
Total current liabilities............... (4,162,670) 13,045,531
Long-term debt:
Payable to related parties............ -- --
Payable to others..................... (11,263,147)(j) 125,510,360
Capital leases.......................... (40,578)(k) 132,669
Deferred taxes.......................... -- 342,359
14% preferred mandatorily redeemable at
$6,978,963............................ -- 6,539,053
Other equity:
Preferred stock....................... (2,400,000)(m) --
Common stock.......................... (518,298)(m) 143,897
Additional paid in capital............ (1,097,630)(m) 58,454,044
Accumulated deficit................... (3,071,967)(m) (39,208,467)
----------- -----------
Total other equity...................... (7,087,895) 19,389,474
----------- -----------
$(22,554,290) $ 164,959,446
=========== ===========
</TABLE>
The accompanying Footnotes to the Unaudited Pro Forma Combined Balance Sheet are
an integral part of these financial statements.
14
<PAGE> 20
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET
AT SEPTEMBER 30, 1996
(a) Represents adjustments to cash
<TABLE>
<S> <C>
Company Equity Offering proceeds, net of estimated expense........... $ 17,980,000
Company Debt Offering proceeds, net of expenses...................... 118,475,000
Repayment of borrowings under Credit Agreement....................... (41,000,000)
Fees payable on early retirement of borrowings under Credit
Agreement.......................................................... (430,000)
Repayment of POA Sellers' Notes...................................... (3,322,421)
Repayment of capital lease obligation................................ (7,750,000)
------------
$ 83,952,579
============
</TABLE>
(b) Represents adjustments to the intangibles assets
<TABLE>
<S> <C>
Fees and expenses relating to the Company Debt Offering.............. $ 6,525,000
Write-off unamortized fees pertaining to the Credit Agreement........ (4,576,325)
------------
$ 1,948,675
============
</TABLE>
(c) Represents adjustments to current and long-term payable to related parties
<TABLE>
<S> <C>
Repay current portion of borrowings under Credit Agreement........... $ (4,717,707)
============
Repay long-term portion of borrowings under Credit Agreement......... $(31,053,337)
============
</TABLE>
(d) Represents adjustments to current and long-term obligations under capital
leases
<TABLE>
<S> <C>
Repay obligations under capital leases, current portion.............. $ (656,947)
============
Repay obligations under capital leases, long-term obligations........ $ (7,093,053)
============
</TABLE>
(e) Represents adjustments to long-term debt payable to others
<TABLE>
<S> <C>
Repayment of POA Sellers' Notes...................................... $ (3,322,421)
Gross proceeds from Company Debt Offering............................ 125,000,000
------------
$121,677,579
============
</TABLE>
(f) Represents adjustment to other stockholders' equity
<TABLE>
<S> <C>
Common Stock
Issuance of 6,750,000 shares pursuant to the Company Equity
Offering........................................................ $ 67,500
============
Additional paid-in-capital
Proceeds from the sale of 6,750,000 shares of Common Stock at an
offering price of $3.00 per share, net of estimated transaction
fees of $2,270,000.............................................. $ 17,912,500
============
Accumulated deficit
Warrant accretion -- extraordinary loss on early retirement of
borrowings under the Credit Agreement........................... $ (5,228,956)
Write-off of unamortized debt costs relating to the early
retirement of borrowings under the Credit Agreement............. (4,576,325)
Fees payable on early retirement of borrowings under the Credit
Agreement....................................................... (430,000)
------------
$(10,235,281)
============
</TABLE>
15
<PAGE> 21
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET -- (CONTINUED)
(g) Represents adjustments to cash
<TABLE>
<S> <C>
Purchase of Cherokee and payment of related fees..................... $(58,497,503)
Cash acquired in Cherokee Acquisition................................ 263,521
Purchase of Texas Coinphone.......................................... (3,660,000)
Cash not acquired in Texas Coinphone acquisition..................... (80,895)
------------
$(61,974,877)
============
</TABLE>
(h) Represents adjustments to accounts receivable, net and other assets to
eliminate assets not acquired:
<TABLE>
<S> <C>
Accounts receivable, net
Cherokee........................................................... $ 241,257
Texas Coinphone.................................................... (55,140)
------------
$ 186,117
============
Other current assets
Cherokee........................................................... $ 1,095,230
------------
$ 1,095,230
============
Other assets
Cherokee........................................................... $ (665,044)
Texas Coinphone.................................................... (32,983)
Funds held pursuant to potential Rate Cap arrangements............. 6,000,000
------------
$ 5,301,973
============
</TABLE>
(i) Represents adjustments to property and equipment, net and intangible assets,
net to reflect purchase price allocations
<TABLE>
<S> <C>
Property and equipment
Cherokee........................................................... $ 6,730,512
Texas Coinphone.................................................... 539,525
------------
$ 7,270,037
============
Intangible assets
Telephone location contracts -- Cherokee........................... $ 22,293,063
Noncompetition agreements -- Cherokee.............................. 1,249,998
Telephone location contracts -- Texas Coinphone.................... 2,024,169
------------
$ 25,567,230
============
</TABLE>
(j) Represents adjustments to current and long-term debt to others
<TABLE>
<S> <C>
Current long-term debt not acquired
Cherokee........................................................... $ (2,982,325)
Texas Coinphone.................................................... (183,300)
------------
$ (3,165,625)
============
Long-term debt not acquired
Cherokee........................................................... $(10,636,237)
Texas Coinphone.................................................... (626,910)
------------
$(11,263,147)
============
</TABLE>
16
<PAGE> 22
FOOTNOTES TO THE UNAUDITED PRO FORMA COMBINED
CONDENSED BALANCE SHEET -- (CONTINUED)
(k) Represents adjustments to current and long-term capital leases
<TABLE>
<S> <C>
Current portion of capital leases of Cherokee not acquired........... $ (6,108)
============
Long-term capital leases of Texas Coinphone not acquired............. $ (40,578)
============
</TABLE>
(l) Represents adjustments to accounts payable and accrued expenses
<TABLE>
<S> <C>
Accounts payable not assumed
Cherokee........................................................... $ (754,048)
Texas Coinphone.................................................... (39,472)
------------
$ (793,520)
============
Accrued expenses not assumed, net of acquisition expenses
Cherokee........................................................... $ (543,327)
Texas Coinphone.................................................... (21,590)
Acquisition expenses............................................... 367,500
------------
$ (197,417)
============
</TABLE>
(m) Represents adjustments to the other shareholders' equity
<TABLE>
<S> <C>
Preferred stock of Cherokee redeemed prior to acquisition completion
date............................................................... $ (2,400,000)
============
Common stock eliminated
Cherokee........................................................... $ (351,903)
Texas Coinphone.................................................... (166,395)
------------
$ (518,298)
============
Paid-in capital of Cherokee eliminated............................... $ (1,097,630)
============
Retained earnings eliminated
Cherokee........................................................... $ (2,834,888)
Texas Coinphone.................................................... (237,079)
------------
$ (3,071,967)
============
</TABLE>
17
