<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE PERIOD ENDED AUGUST 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____ TO ___
COMMISSION FILE
NUMBER 0-24992
TELETOUCH COMMUNICATIONS, INC.
(EXACT NAME OF ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 75-2556090
(State or other jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
110 NORTH COLLEGE, SUITE 200
TYLER, TEXAS 75702
(Address of principal executive offices, including zip code)
(903) 595-8800
(Issuer's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock, $.001 par value -
4,235,611 shares outstanding as of October 12, 1998
<PAGE>
TELETOUCH COMMUNICATIONS, INC.
FORM 10-Q
QUARTER ENDED AUGUST 31, 1998
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS - TELETOUCH COMMUNICATIONS, INC. (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS AT
AUGUST 31, 1998 AND MAY 31, 1998 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS -
THREE MONTHS ENDED AUGUST 31, 1998 AND
AUGUST 31, 1997 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -
THREE MONTHS ENDED AUGUST 31, 1998 AND
AUGUST 31, 1997 6
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS 10
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 15
SIGNATURES 16
2
<PAGE>
PART 1. FINANCIAL INFORMATION
3
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
August 31, 1998 May 31, 1998
--------------------- -------------------
<S> <C> <C>
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents......................................................... $ 4,484 $ 4,567
Accounts receivable, net of allowance............................................. 1,647 1,631
Inventory......................................................................... 3,828 3,347
Deferred income tax assets........................................................ 44 44
Note receivable................................................................... 266 1,107
Prepaid expenses and other current assets......................................... 448 494
----------- -----------
10,717 11,190
PROPERTY, PLANT AND EQUIPMENT, net of
accumulated depreciation of $9,589 in 1999 and $9,134 in 1998...................... 20,012 20,221
GOODWILL, INTANGIBLES AND OTHER ASSETS:
Goodwill........................................................................... 24,786 24,786
Subscriber bases................................................................... 28,225 28,225
FCC licenses....................................................................... 21,725 21,720
Non-compete agreements............................................................. 700 700
Debt issue costs................................................................... 4,100 4,124
Other.............................................................................. 70 50
Accumulated amortization........................................................... (25,911) (23,822)
----------- -----------
53,695 55,783
----------- -----------
$ 84,424 $ 87,194
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.............................................. $ 3,529 $ 4,765
Current portion of long-term debt.................................................. -- --
Current portion of unearned sale/leaseback profit.................................. 405 405
Deferred revenue................................................................... 1,585 1,177
----------- -----------
5,519 6,347
LONG-TERM LIABILITIES:
Long-term debt..................................................................... 74,072 74,487
Unearned sale/leaseback profit..................................................... 3,406 3,507
----------- -----------
77,478 77,994
COMMITMENTS AND CONTINGENCIES -- --
DEFERRED INCOME TAXES 1,030 1,030
STOCKHOLDERS' EQUITY:
Series A cumulative convertible preferred stock, $.001 par value,
15,000 shares authorized, issued, and outstanding.................................. -- --
Series B convertible preferred stock, $.001 par value, 411,459
shares authorized, 87,287 shares issued and outstanding............................ -- --
Common stock, $.001 par value, 25,000,000 shares authorized,
4,235,611 shares issued and outstanding............................................ 4 4
Additional paid-in capital......................................................... 24,817 24,761
Accumulated deficit................................................................ (24,424) (22,942)
----------- -----------
397 1,823
----------- -----------
$ 84,424 $ 87,194
=========== ===========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARES AND PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
August 31,
--------------------------
<S> <C> <C>
1998 1997
Service, rent, and maintenance revenue.............................. $ 10,230 $ 9,428
Product sales revenue............................................... 1,976 1,485
---------- ----------
Total revenues................................................... 12,206 10,913
Net book value of products sold..................................... (1,872) (1,534)
---------- ----------
10,334 9,379
Costs and expenses:
Operating........................................................ 2,928 2,733
Selling.......................................................... 1,230 951
General and administrative....................................... 2,294 2,028
Depreciation and amortization.................................... 3,329 3,113
---------- ----------
Total costs and expenses............................................ 9,781 8,825
---------- ----------
Operating income/(loss)............................................. 553 554
Interest expense, net............................................... (2,035) (2,130)
---------- ----------
Loss before income taxes............................................ (1,482) (1,576)
Income tax expense/(benefit)........................................ -- --
---------- ----------
Net loss............................................................ (1,482) (1,576)
Preferred stock dividends........................................... (775) (676)
---------- ----------
Loss applicable to common stock..................................... (2,257) (2,252)
=========== ===========
Loss per share $ (0.53) $ (0.53)
========== ==========
Weighted Average Shares Outstanding-Basic and Diluted............... 4,235,611 4,235,611
========== ==========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
---------------------------
August 31,
---------------------------
1998 1997
---------------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss.............................................................................. $ (1,482) $ (1,576)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization......................................................... 3,329 3,113
Non cash interest expense............................................................. 749 657
Loss (Gain) on sale of assets......................................................... 1 (29)
Amortization of unearned sale/leaseback profit........................................ (101) --
Changes in operating assets and liabilities:
Accounts receivable, net............................................................ (16) (37)
Inventories......................................................................... (33) 152
Prepaid expenses and other assets................................................... 886 (106)
Accounts payable and accrued expenses............................................... (1,236) (496)
Deferred revenue.................................................................... 408 202
--------- ---------
Net cash provided by operating activities 2,505 1,880
INVESTING ACTIVITIES:
Capital expenditures, including pagers................................................ (1,646) (1,201)
Net proceeds from sale of assets...................................................... 3 101
--------- ---------
Net cash used for investing activities (1,643) (1,100)
FINANCING ACTIVITIES:
Payments on long-term debt............................................................ (1,000) (700)
Net proceeds from preferred and common stock warrants................................. 55 3
--------- ---------
Net cash used for financing activities (945) (697)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS..................................... (83) 83
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD......................................... 4,567 3,371
-------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................................... $ 4,484 $ 3,454
======== =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
The unaudited condensed consolidated financial statements of Teletouch
Communications, Inc., and its subsidiaries (the "Company") for the periods ended
August 31, 1998 and 1997 have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis. Significant
accounting policies followed by the Company were disclosed in the notes to the
financial statements included in the Company's Annual Report on Form 10-K for
the year ended May 31, 1998. The balance sheet at May 31, 1998 has been derived
from the audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the Company's
management, the accompanying condensed consolidated financial statements contain
the material adjustments necessary to present fairly the financial position of
the Company at August 31, 1998 and May 31, 1998 and the results of its
operations and cash flows for the periods ended August 31, 1998 and 1997. All
such adjustments are of a normal recurring nature. Interim period results are
not necessarily indicative of the results to be achieved for the full year.
RECLASSIFICATION: Certain items in the financial statements for the period
ended August 31, 1997 have been reclassified to conform with the presentation of
the financial statements for the period ended August 31, 1998.
NEW ACCOUNTING ANNOUNCEMENTS: As of May 31, 1998, the Company adopted Statement
No. 130, "Reporting Comprehensive Income", which establishes new rules for
reporting and displaying comprehensive income and its components (revenues,
expenses, gains and losses). However, the adoption of this Statement had no
impact on the Company's net income or shareholders' equity.
During the first quarter of fiscal 1998 and 1997, total comprehensive income
was ($1,482) and ($1,576), respectively.
In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 131, "Disclosures about Segments of an Enterprise and Related Information".
Statement No. 131 establishes standards for reporting information about a
company's operating segments and related disclosures about its products,
services, geographic areas of operations and major customers. This statement
will be adopted by the Company in its 10K for fiscal 1999. The adoption of this
statement will not impact the Company's results of operations, cash flows or
financial position.
7
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE B - LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
AUGUST 31, MAY 31,
1998 1998
------------ ---------
(Unaudited)
<S> <C> <C>
Notes Payable................................................ $60,000 $61,000
Junior Subordinated Notes, including accrued interest........ 14,072 13,487
------- -------
$74,072 $74,487
======= =======
</TABLE>
In January, 1998, the Company amended its original agreement (the "Credit
Facility") with a group of lenders, led by Chase Manhattan Bank. The new
amended and restated credit agreement (the "Credit Agreement") provides for
loans in an amount not to exceed $70 million, as opposed to the $95 million
provided for in the original Credit Facility. As of August 31, 1998, $60
million of the Credit Agreement had been funded, and $10 million is available
for future funding. In addition, the Company paid approximately $0.5 million in
amendment fees in order to complete the Credit Agreement. These fees have been
deferred and are being amortized, using the effective interest method, over the
term of the existing loans.
The Credit Agreement bears interest, at the Company's designation, at a
floating rate of either the prime rate plus 1% to 2% or LIBOR plus 2% to 3%
depending on the leverage ratio of the Company and is secured by substantially
all of the assets of the Company and its subsidiaries. Borrowings under the
Credit Agreement require that the principal be repaid in escalating quarterly
installments beginning in August 2000 and ending in fiscal year 2006. In
conjunction with the funding from the original Credit Facility and the Credit
Agreement, the Company entered into interest rate protection agreements which
protect $50 million, $60 million and $47.5 million of the commitments against
future prime rate or LIBOR rate increases above 7.625%, 7.5% and 9.5% for
periods August 1996 through July 1997, August 1997 through July 1998 and August
1998 through July 1999, respectively. In addition, the terms require the
maintenance of certain specified financial and operating covenants, provide for
restrictions on capital expenditures and future acquisitions, prohibit any
payments on the Junior Subordinated Notes or the payment of dividends.
NOTE C - SALE-LEASEBACK TRANSACTION
On January 28, 1998, the Company sold substantially all of its communications
towers for approximately $8.7 million. The proceeds from the sale were used to
reduce the outstanding debt under the Credit Facility. Concurrent with the
sale, the Company leased back space on the towers sold for a period of ten years
for approximately $.6 million per year. The Company recognized a $4.1 million
gain related to the sale of the towers in fiscal 1998 and deferred the remaining
$4.0 million gain to be amortized into income on a straight-line basis over the
period of the lease.
8
<PAGE>
TELETOUCH COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE D - SHAREHOLDERS' EQUITY
TWO FOR THREE REVERSE STOCK SPLIT: In June, 1998, the Company announced a two-
for-three reverse stock split of its common shares distributable to shareholders
of record on June 25, 1998, the effective date of the reverse split. Teletouch
shareholders received two shares of stock and cash resulting from any fractional
share, in exchange for each three currently outstanding shares. All outstanding
shares and per share amounts have been adjusted for all periods presented as a
result of the two for three reverse split.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
CERTAIN STATEMENTS CONTAINED HEREIN ARE NOT BASED ON HISTORICAL FACTS, BUT ARE
FORWARD-LOOKING STATEMENTS THAT ARE BASED UPON NUMEROUS ASSUMPTIONS ABOUT FUTURE
CONDITIONS THAT COULD PROVE NOT TO BE ACCURATE. ACTUAL EVENTS, TRANSACTIONS AND
RESULTS MAY MATERIALLY DIFFER FROM THE ANTICIPATED EVENTS, TRANSACTIONS OR
RESULTS DESCRIBED IN SUCH STATEMENTS. THE COMPANY'S ABILITY TO CONSUMMATE SUCH
TRANSACTIONS AND ACHIEVE SUCH EVENTS OR RESULTS IS SUBJECT TO CERTAIN RISKS AND
UNCERTAINTIES. SUCH RISKS AND UNCERTAINTIES INCLUDE, BUT ARE NOT LIMITED TO,
THE EXISTENCE OF DEMAND FOR AND ACCEPTANCE OF THE COMPANY'S PRODUCTS AND
SERVICES, REGULATORY APPROVALS AND DEVELOPMENTS, ECONOMIC CONDITIONS, THE IMPACT
OF COMPETITION AND PRICING, RESULTS OF FINANCING EFFORTS AND OTHER FACTORS
AFFECTING THE COMPANY'S BUSINESS THAT ARE BEYOND THE COMPANY'S CONTROL. THE
COMPANY UNDERTAKES NO OBLIGATION AND DOES NOT INTEND TO UPDATE, REVISE OR
OTHERWISE PUBLICLY RELEASE THE RESULTS OF ANY REVISIONS TO THESE FORWARD-LOOKING
STATEMENTS THAT MAY BE MADE TO REFLECT FUTURE EVENTS OR CIRCUMSTANCES.
OVERVIEW
The Company is a leading provider of wireless messaging services, primarily
paging services, in non-major metropolitan areas and communities in the
southeast United States. As of August 31, 1998 the Company had approximately
362,200 pagers in service. The Company derives the majority of its revenues from
fixed periodic fees, not dependent on usage, charged to subscribers for paging
services. As long as a subscriber remains on service, operating results benefit
from the recurring payments of the fixed periodic fees without incurring
additional selling expenses or other fixed costs. Due to the growth from the
completion of certain acquisitions in fiscal year 1997, the Company's results of
operations for prior periods may not be indicative of future performance.
10
<PAGE>
RESULTS OF OPERATIONS
The following table presents certain items from the Company's condensed
consolidated statements of operations and certain other information for the
periods indicated.
<TABLE>
<CAPTION>
Three Months ended
August 31,
--------------------------
1998 1997
------------ ------------
(in thousands, except pagers, ARPU and per share amounts)
<S> <C> <C>
Service, rent and maintenance revenue $ 10,230 $ 9,428
Product sales revenue 1,976 1,485
-------- --------
Total revenues 12,206 10,913
Net book value of products sold (1,872) (1,534)
-------- --------
$ 10,334 $ 9,379
Operating income $ 553 $ 554
Net loss $ (1,482) $ (1,576)
Loss per share $ (0.53) $ (0.53)
EBITDA (1) $ 3,882 $ 3,667
Pagers in service at end of period 362,200 328,300
Average revenue per unit ("ARPU") $ 9.31 $ 9.28
</TABLE>
___________________________
(1) EBITDA represents earnings before interest, taxes, depreciation and
amortization and certain non-recurring charges. EBITDA is a standard
measure of financial performance in the paging industry. However, EBITDA is
not a measure defined in generally accepted accounting principles ("GAAP")
and should not be construed as an alternative to operating income or cash
flows from operating activities as determined in accordance with GAAP.
EBITDA is, however, one of the primary financial measures by which the
Company's covenants are calculated under the agreements governing the
Company's indebtedness.
Results of Operations for the three months ended August 31, 1998 and 1997
Total Revenue: The historical total revenue of the Company increased to $12.2
million in the first three months of fiscal year 1999 from $10.9 million in the
first three months of fiscal year 1998. This increase is due primarily to the
increase in the pagers in service resulting from greater market penetration in
the Company's existing markets. Pagers in service increased to approximately
362,200 at August 31, 1998 as compared to 328,300 at August 31, 1997. The
Company believes that internal growth due to further penetration of its existing
markets will continue.
11
<PAGE>
The impact on total revenue of the increase in pagers in service is slightly
magnified by the increase in average revenue per unit ("ARPU"). ARPU for the
three months ended August 31, 1998 was $9.31 as compared to $9.28 for the three
months ended August 31, 1997. This increase in ARPU is due to the slight
decrease in the number of paging units sold to paging resellers. Paging
resellers are businesses that buy airtime at wholesale prices from the Company
and sell the service to subscribers. While the wholesale price to the reseller
is lower than the price the Company charges directly to its customers, the
reseller bears the cost of acquiring, billing, collecting and servicing the
subscribers. As of August 31, 1998 approximately 36% of the Company's paging
units are sold through resellers as opposed to approximately 37% at August 31,
1997. The Company expects to see ARPU decline in the future as the competition
continues to pursue customers in its marketplace, generally resulting in new
customers being added at a lower ARPU than the Company's existing ARPU in that
market. In addition, as the percentage of units sold through resellers
increases, ARPU will decline even further. However, while there can be no
assurance, the Company expects that the growth in units in service will increase
sufficiently to offset this decline in ARPU and not result in a decrease in
total revenue.
Operating Expenses, excluding depreciation and amortization: Operating
expenses, excluding depreciation and amortization, were $6.5 million, 53% of
total revenue, in the first three months of fiscal year 1999 as compared to $5.7
million, 52% of total revenue in the first three months of fiscal year 1998.
The increased costs are primarily due to an increase in operating expenses due
to internal growth and tower lease expenses incurred due to the sale of
previously owned towers.
Depreciation and amortization: Depreciation and amortization expense increased
to $3.3 million in the first three months of fiscal year 1999 from $3.1 million
in the first three months of fiscal year 1998. The increase is due primarily to
the additional depreciation recorded on returned leased pagers. The Company
expects that this expense will stabilize in the near term as the Company focuses
more on selling, rather than leasing pagers.
Interest Expense: Interest expense decreased to $2.0 million in the first
three months of fiscal year 1999 from $2.1 million in the first three months of
fiscal year 1998. This decrease is due to the decreased debt owed by the
Company at August 31, 1998 versus the debt owed at August 31, 1997 partially
offset by the increased amortization of financing costs associated with the
Credit Agreement.
Income tax benefit: For fiscal year 1999 the Company estimates the effective
tax benefit rate will be 0%. A valuation allowance has been recorded against
deferred tax assets which are not likely to be realized. Specifically, the
Company's carryforwards expire at specific future dates and utilization of
certain carryforwards is limited to specific amounts each year. However, due to
the uncertain nature of their ultimate realization the Company has established a
significant valuation allowance against these carryforward benefits and will
recognize benefits only as reassessment demonstrates they are realizable.
Realization is entirely dependent upon future earnings in specific tax
jurisdictions. While the need for this valuation allowance is subject to
periodic review, if the allowance is reduced, the tax benefits of the
carryforwards will be recorded in future operations as a reduction of the
Company's income tax expense.
12
<PAGE>
EBITDA: EBITDA increased to $3.9 million, 32% of total revenue, in the first
three months of fiscal year 1999 from $3.7 million, 34% of total revenue in the
first three months of fiscal year 1998. The decrease in EBITDA as a percentage
of total revenue is due to the fact that operating costs have increased at a
faster pace than total revenue, primarily as a result of the Company expanding
its retail operations.
FINANCIAL CONDITION
In January, 1998, the Company amended its original agreement (the "Credit
Facility") with a group of lenders, led by Chase Manhattan Bank. The new
amended and restated credit agreement (the "Credit Agreement") provides for
loans in an amount not to exceed $70 million, as opposed to the $95 million
provided for in the original Credit Facility. As of August 31, 1998, $60
million of the Credit Agreement had been funded, and $10 million is available
for future funding. In addition, the Company paid approximately $0.5 million in
amendment fees in order to complete the Credit Agreement. These fees have been
deferred and are being amortized, using the effective interest method, over the
term of the existing loans.
The Credit Agreement bears interest, at the Company's designation, at a
floating rate of either the prime rate plus 1% to 2% or LIBOR plus 2% to 3%
depending on the leverage ratio of the Company and is secured by substantially
all of the assets of the Company and its subsidiaries. Borrowings under the
Credit Agreement require that the principal be repaid in escalating quarterly
installments beginning in August 2000 and ending in fiscal year 2006. In
conjunction with the funding from the original Credit Facility and the Credit
Agreement, the Company entered into interest rate protection agreements which
protect $50 million, $60 million and $47.5 million of the commitments against
future prime rate or LIBOR rate increases above 7.625%, 7.5% and 9.5% for
periods August 1996 through July 1997, August 1997 through July 1998 and August
1998 through July 1999, respectively. In addition, the terms require the
maintenance of certain specified financial and operating covenants, provide for
restrictions on capital expenditures and future acquisitions, prohibit any
payments on the Junior Subordinated Notes or the payment of dividends.
The Company's paging operations require capital investment to procure pagers
and to acquire paging infrastructure equipment to support the Company's growth.
The Company's net capital expenditures amounted to $1.6 million and $1.2 million
for the first three months of fiscal years 1999 and 1998, respectively.
Management anticipates capital expenditures for the Company to continue to
increase as the demand for pagers increases and the Company continues to improve
its infrastructure. These expenditures will be paid for with cash generated
from operations and borrowings under the unused portion of the Credit Agreement.
On January 28, 1998, the Company sold substantially all of its communications
towers for approximately $8.7 million. The proceeds from the sale were used to
reduce the outstanding debt under the Credit Facility. Concurrent with the
sale, the Company leased back space on the towers sold for a period of ten years
for approximately $.6 million per year. The Company recognized a $4.1 million
gain related to the sale of the towers in fiscal 1998 and deferred the remaining
$4.0 million gain to be amortized into income on a straight-line basis over the
period of the lease.
13
<PAGE>
IMPACT OF YEAR 2000
The Company has developed a Year 2000 compliance plan to address the issue of
software currently in use that may have time or date sensitivity that require
correction. If not addressed, system failures or miscalculations could cause
disruptions of operations, including, among other things, a temporary inability
to process transactions, prepare invoices or engage in similar normal business
activities.
The Company has contacted its major vendors and received written confirmation
of compliance from them. These software programs involved cover the
transmission of paging signals, invoicing and retention of customer activity and
the reporting of the Company's financial and accounting transactions.
All of these programs are covered under existing maintenance agreements and no
significant costs have been incurred with respect to Year 2000 compliance
issues.
The Company is actively reviewing its product offering for compliance issues
and expects no significant issues or expense with respect to Year 2000
compliance.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various legal proceedings arising in the ordinary
course of business. The Company believes that there is no proceeding, either
threatening or pending, against the Company that could result in a material
adverse effect on the results of operations or financial condition of the
Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a)Exhibits,
--------
Exhibit Page
Number Title of Exhibit Number
- ------ ---------------- ------
27 Financial Data Schedule
(b) Reports on Form 8-K, None.
-------------------
15
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned.
TELETOUCH COMMUNICATIONS, INC.
---------------------------------
(Registrant)
Date: October 13, 1998
/s/J. Richard Carlson
---------------------
J. Richard Carlson
President
Chief Operating Officer
Date: October 13, 1998
/s/Thomas R. McLemore
----------------------
Thomas R. McLemore
Executive Vice President
Chief Financial Officer
(Principal Accounting Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ACT 5 FDS
FOR 1ST QUARTER 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-START> JUN-01-1998
<PERIOD-END> AUG-31-1998
<CASH> 4,484
<SECURITIES> 0
<RECEIVABLES> 1,754
<ALLOWANCES> 107
<INVENTORY> 3,828
<CURRENT-ASSETS> 10,717
<PP&E> 29,601
<DEPRECIATION> 9,589
<TOTAL-ASSETS> 84,424
<CURRENT-LIABILITIES> 5,519
<BONDS> 74,072
0
0
<COMMON> 4
<OTHER-SE> 393
<TOTAL-LIABILITY-AND-EQUITY> 84,424
<SALES> 12,206
<TOTAL-REVENUES> 12,206
<CGS> 1,872
<TOTAL-COSTS> 9,781
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,035
<INCOME-PRETAX> (1,482)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,482)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,482)
<EPS-PRIMARY> (0.53)
<EPS-DILUTED> (0.53)
</TABLE>
