0000950170-95-000149.txt : 19950815 0000950170-95-000149.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950170-95-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: PEOPLES TELEPHONE COMPANY INC CENTRAL INDEX KEY: 0000819694 STANDARD INDUSTRIAL CLASSIFICATION: COMMUNICATION SERVICES, NEC [4899] IRS NUMBER: 132626435 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16479 FILM NUMBER: 95563582 BUSINESS ADDRESS: STREET 1: 2300 NORTHWEST 89TH PL CITY: MIAMI STATE: FL ZIP: 33172 BUSINESS PHONE: 3055939667 MAIL ADDRESS: STREET 2: 2300 NORTHWEST 89TH PLACE CITY: MIAMI STATE: FL ZIP: 33172 10-Q 1 PEOPLES TELEPHONE COMPANY, INC. FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended: JUNE 30, 1995 or [ ] Transition Report Pursuant to Section 13 or 15(d) Of the Securities Exchange Act of 1934 Commission File Number: 0-16479 PEOPLES TELEPHONE COMPANY, INC. (Exact Name of registrant as specified in its charter) NEW YORK 13-2626435 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) I.D. No.) 2300 NORTHWEST 89TH PLACE, MIAMI, FLORIDA 33172 (Address of principal executive offices) (Zip Code) (305) 593-9667 (Registrant'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 and (2) has been subject to such filing requirements for the past 90 days. Yes X No___ APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock, $.01 Par Value, outstanding at June 30, 1995: 15,882,200 shares. Part I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS
PEOPLES TELEPHONE COMPANY, INC. CONSOLIDATED BALANCE SHEET (IN THOUSANDS) JUNE 30, DECEMBER 31, ASSETS 1995 1994 ----------- ------------ (UNAUDITED) (RESTATED) Current assets Cash and cash equivalents ....................................... $ 5,820 $ 7,663 Accounts receivable, net of allowance for doubtful accounts of $4,623 and $6,035 .............................................. 16,029 17,682 Inventory ....................................................... 3,820 2,981 Prepaid expenses and other current assets ...................... 4,228 3,276 Net assets of prepaid calling card and international telephone center business .............................................. - 2,595 Net assets of discontinued operations ........................... 27,433 25,780 --------- --------- Total current assets ......................................... 57,330 59,977 Property and equipment, net ....................................... 73,171 76,379 Location contracts, net ........................................... 30,234 31,877 Goodwill, net ..................................................... 5,844 6,221 Intangible assets, net ............................................ 2,507 2,802 Other assets, net ................................................. 5,309 11,882 Deferred income taxes ............................................. 3,406 1,453 Investment in unconsolidated affiliate ............................ 3,087 - --------- --------- Total assets ................................................. $ 180,888 $ 190,591 ========= ========= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable and current maturities of long-term debt .......... $ 22 $ 14,286 Current portion of obligations under capital leases ............. 2,035 2,738 Accounts payable and accrued expenses ........................... 23,055 22,799 Accrued interest payable ........................................ 1,054 1,061 Income and other taxes payable .................................. 2,674 2,691 --------- --------- Total current liabilities .................................... 28,840 43,575 Notes payable and long-term debt .................................. 104,575 94,390 Obligations under capital leases .................................. 3,971 3,911 --------- --------- Total liabilities ............................................ 137,386 141,876 --------- --------- Commitments and contingencies ..................................... - - Shareholders' equity: Preferred stock; $.01 par value; 4,300 shares authorized; none issued and outstanding ................................... - - Convertible preferred stock; Series B, $.01 par value; 600 shares authorized; none issued and outstanding ....................... - - Common stock; $.01 par value; 25,000 shares authorized; 15,882 and 15,789 shares issued and outstanding ............... 159 158 Capital in excess of par value .................................. 58,259 58,143 Accumulated deficit ............................................. (14,916) (9,586) --------- --------- Total shareholders' equity ................................... 43,502 48,715 --------- --------- Total liabilities and shareholders' equity ................... $ 180,888 $ 190,591 ========= =========
The accompanying notes are an integral part of these consolidated financial statements. 2
PEOPLES TELEPHONE COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE THREE MONTHS ENDED JUNE 30, -------------------------- 1995 1994 ---------- ---------- (RESTATED) Revenues Coin calls .............................................................. $19,871 $19,141 Non-coin calls .......................................................... 9,652 7,952 Service and other ....................................................... - 410 ------- ------- Total revenues ....................................................... 29,523 27,503 Costs and expenses Telephone charges ....................................................... 9,525 10,026 Commissions ............................................................. 6,894 5,589 Field service and collection ............................................ 5,046 5,069 Depreciation and amortization ........................................... 4,777 4,370 Selling, general and administrative ..................................... 2,491 3,851 Interest ................................................................ 1,831 1,319 Loss from operations of prepaid calling card and international telephone centers ....................................... - (661) Loss on disposal of prepaid calling card and international telephone centers ....................................... - - Litigation settlement expense ........................................... 925 - Other ................................................................... 109 - ------- ------- Total costs and expenses ............................................. 31,598 29,565 Loss from continuing operations before income taxes ....................... (2,075) (2,062) Benefit from income taxes ................................................. - 762 ------- ------- Loss from continuing operations ........................................... (2,075) (1,300) ------- ------- Discontinued operations Loss from operations, net of tax benefit of $351 ........................ - (624) (Loss) income on disposition ............................................. - - ------- ------- Loss from discontinued operations ....................................... - (624) Extraordinary loss from extinguishment of debt, net ..................... - ------- ------- Net loss .............................................................. $(2,075) $(1,924) ======= ======= Earnings (loss) per common share Loss from continuing operations........................................... $ (.13) $ (.08) Loss from discontinued operations ........................................ - (.04) Extraordinary loss from extinguishment of debt, net ...................... - - ------- ------- Net loss.............................................................. $ (.13) $ (.12) ======= ======= Weighted average common and common equivalent shares outstanding .............................................................. 15,869 15,786 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 3
PEOPLES TELEPHONE COMPANY, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) FOR THE SIX MONTHS ENDED JUNE 30, -------------------------- 1995 1994 ---------- ---------- (RESTATED) Revenues Coin calls ........................................ $38,931 $36,998 Non-coin calls .................................... 17,924 14,921 Service and other ................................. 122 711 ------- ------- Total revenues ................................. 56,977 52,630 Costs and expenses Telephone charges ................................. 18,015 18,330 Commissions ....................................... 13,191 10,466 Field service and collection ...................... 9,674 9,986 Depreciation and amortization ..................... 9,518 8,483 Selling, general and administrative ............... 4,860 6,523 Interest .......................................... 3,310 2,308 Loss from operations of prepaid calling card and international telephone centers ................. - 68 Loss on disposal of prepaid calling card and international telephone centers ................. - - Litigation settlement expense ..................... 925 - Other ............................................. 136 - ------- ------- Total costs and expenses ....................... 59,629 56,164 Loss from continuing operations before income taxes . (2,652) (3,534) Benefit from income taxes ........................... 216 1,231 ------- ------- Loss from continuing operations ..................... (2,436) (2,303) ------- ------- Discontinued operations Loss from operations, net of tax benefit of $972 .. - (1,678) (Loss) income on disposition ...................... - - ------- ------- Loss from discontinued operations ................. - (1,678) Extraordinary loss from extinguishment of debt, net (2,894) - ------- ------- Net loss ...................................... $(5,330) $(3,981) ======= ======= Earnings (loss) per common share Loss from continuing operations .................... $ (.16) $ (.15) Loss from discontinued operations .................. - (.10) Extraordinary loss from extinguishment of debt, net (.18) - ------- ------- Net loss ....................................... $ (.34) $ (.25) ======= ======= Weighted average common and common equivalent shares outstanding ........................................ 15,850 15,798 ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 4
PEOPLES TELEPHONE COMPANY, INC. STATEMENTS OF CONSOLIDATED CASH FLOWS (UNAUDITED, IN THOUSANDS) SIX MONTHS ENDED JUNE 30, 1995 JUNE 30, 1994 ------------- ------------- (RESTATED) Cash flow from operating activities: Net loss .............................................................. $(5,330) $ (3,981) Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: Depreciation and amortization ..................................... 9,518 8,483 Deferred income taxes ............................................. (1,953) (2,281) Extraordinary loss from extinguishment of debt .................... 2,894 - Gain on sale of assets ............................................ - (2,015) Change in assets and liabilities: Decrease (increase) in accounts receivable ................... 1,653 (4,121) Increase in inventory ........................................ (839) (1,502) (Increase ) decrease in prepaid expenses and other current assets ........................................ (952) 812 Decrease (increase) in other assets .......................... 3,649 (3,968) Increase in investment in unconsolidated affiliate ........... (3,087) - Increase (decrease) in accounts payable and accrued expenses ......................................... 256 (230) (Decrease) increase in accrued interest...................... (7) 314 (Decrease) increase in taxes payable ......................... (17) 644 Net effect of discontinued operations ........................ (58) 2,735 ------- -------- Net cash provided (used in) by operating activities ..................... 5,727 (5,110) Cashflow from investing activities: Payments for acquisitions and certain contracts ..................... (805) (16,284) Property and equipment additions .................................... (3,160) (8,077) Proceeds from sale of assets ........................................ 1,000 2,400 Investments in joint ventures ....................................... - (1,888) ------- -------- Net cash used in investing activities ................................... (2,965) (23,849) Cash flow from financing activities: Net borrowings under note payable to bank ........................... (4,079) 29,861 Debt issuance costs ................................................. - (1,318) Principal payments under capital lease obligations .................. (643) (537) Exercise of stock options and warrants .............................. 302 1,211 Officer loans ....................................................... (185) - ------- -------- Net cash (used in ) provided by financing activities .................... (4,605) 29,217 -------- Net (decrease) increase in cash and cash equivalents .................... (1,843) 258 Cash and cash equivalents at beginning of period ........................ 7,663 4,529 ------- -------- Cash and cash equivalents at end of period .............................. $ 5,820 $ 4,787 ======= ========
5 PEOPLES TELEPHONE COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995 AND JUNE 30, 1994 (UNAUDITED) NOTE 1 - UNAUDITED INTERIM INFORMATION: The accompanying interim consolidated financial data are unaudited; however, in the opinion of management, the interim data include all adjustments necessary for a fair presentation of the results for the interim periods. The quarter ended June 30, 1994 and the six months ended June 30, 1994 included adjustments of $3.4 million and $5.5 million, respectively, for, among other things, amounts incurred for settling disputes and claims and bad debt reserves. The results of operations for the three months and the six months ended June 30, 1995 are not necessarily indicative of the results to be expected for the year ending December 31, 1995. The interim unaudited consolidated financial statements should be read in conjunction with the restated audited consolidated financial statements and notes thereto for the year ending December 31, 1994 as set forth in the Company's Form 10-K/A No. 2. NOTE 2 - EARNINGS PER SHARE: The treasury stock method was used to determine the dilutive effect of options and warrants on earnings per share data. For 1995 and 1994, common stock equivalents were excluded since the effect would be anti-dilutive. Therefore, fully diluted earnings per share is not presented. See earnings (loss) per common share calculation as summarized on page 10. NOTE 3 - LONG-TERM DEBT: Amounts due under the Company's revolving line of credit and various other notes payable of approximately $105.1 million were refinanced in July 1995 through the sale of $100 million of 12 1/4% Senior Notes due 2002 and the issuance of 150,000 shares of Series C Cumulative Convertible Preferred Stock for $15 million (see Note 7). Accordingly, such amounts have been classified as long-term in the accompanying Consolidated Balance Sheet. In June 1995, the Company settled a lawsuit filed against it by Ascom Communications, Inc. (ACI) for approximately $5.7 million. This amount was equal to the amounts previously recorded for promissory notes issued in connection with the 1993 purchase of ACI. These notes were repaid in connection with the refinancing discussed above. As a result of a March 1995 amendment to its revolving line of credit, the Company recorded an extraordinary loss of $4.6 million for the write-off of deferred financing costs, before the income tax benefit of approximately $1.7 million. NOTE 4 - INVESTMENTS IN UNCONSOLIDATED AFFILIATE: During February, 1995, the Company sold its prepaid calling card business to Global Link Teleco Corporation ("Global Link") for approximately $6.3 million. The Company received $1 million in cash, a $5.3 million promissory note due February 1998, bearing interest at 8.5%, payable quarterly, and shares of common stock of Global Link. For financial accounting purposes, the net gain of approximately $3.4 million will be deferred until cash is received. 6 As a result of the February 1995 transaction, and because of a drafting error discovered in May 1995 that did not reflect the intentions of the parties, the Company's interest in the outstanding common stock of Global Link was 28.8% instead of the intended 19.99%. To correct this error, the Company has agreed with Global Link to reduce its share ownership to the intended 19.99% level. The Company's investment in Global Link is accounted for using the equity method. The Company's share of the results of operations of Global Link from the divestiture date through June 30, 1995 are included in "Other" in the Statements of Operations. The 1994 results of operations of the prepaid calling card business have been segregated and reported as a separate component of income from continuing operations. The Company's investment in Global Link represents $6.6 million of outstanding notes receivable less the $3.4 million deferred gain on the February 1995 transaction and $0.1 million representing the Company's share of Global Link's first and second quarter 1995 operating results. NOTE 5 - INCOME TAXES: At June 30, 1995, the Company recorded a valuation allowance of approximately $0.8 million against deferred tax assets generated during the quarter ended June 30, 1995. A valuation allowance was provided to reduce the deferred tax assets to a level which, more likely than not, will be realized. NOTE 6- DISCONTINUED OPERATIONS: In 1994, in connection with the planned divestiture of the inmate telephone and cellular telephone operations, the Company recorded a provision for the estimated impairment of asset values and losses through the anticipated divestiture date, net of income taxes, of $2.5 million and $4.8 million, respectively. The cellular telephone operations provision is net of an estimated gain on disposition of approximately $1.1 million and includes a valuation allowance of approximately $3.4 million against deferred tax assets that may not be realized upon the disposition of the cellular telephone operations. This provision included approximately $(0.1) million and $(2.0) million for the estimated operating income (losses) of the inmate telephone and cellular telephone operations, respectively, for the six months ended June 30, 1995. The following combining tables set forth the results of operations of the inmate telephone and cellular telephone operations (in thousands):
THREE MONTHS ENDED JUNE 30, 1995 -------------------------------------- PTC INMATE CELLULAR, INC. TOTAL ------ -------------- ------- Revenues ................................... $7,307 $ 2,158 $ 9,465 ------ ------- ------- Loss from operations before income taxes... (164) (1,071) (235) Benefit from income taxes .................. 62 - 62 ------ ------- ------- Net loss ................................... $ (102) $(1,071) $(1,173) ====== ======= =======
7
1994 --------------------------------------- PTC INMATE CELLULAR, INC. TOTAL ------- -------------- ------- Revenues .............................................. $10,904 $ 2,982 $13,886 ------- ------- ------- Income (loss) from operations before income taxes .... 476 (1,451) (975) (Provision for) benefit from income taxes ............. (105) 545 (440) ------- ------- ------- Net income (loss) ..................................... $ 371 $ (906) $ (535) ======= ======= =======
SIX MONTHS ENDED JUNE 30, 1995 --------------------------------------- PTC INMATE CELLULAR, INC. TOTAL ------- -------------- ------- Revenues .............................................. $15,413 $ 4,662 $20,075 ------- ------- ------- Loss from operations before income taxes ............. (85) (2,232) (2,317) Benefit from income taxes ............................. 32 - 32 Net loss .............................................. $ (53) $(2,232) $ 2,285 ======= ======= =======
1994 --------------------------------------- PTC INMATE CELLULAR, INC. TOTAL ------- -------------- ------- Revenues .............................................. $21,284 $ 5,812 $27,096 ------- ------- ------- Income (loss) from operations before income taxes .... 676 (3,327) (2,651) (Provision for) benefit from income taxes ............. (180) 1,249 1,069 ------- ------- ------- Net income (loss) ..................................... $ 496 $(2,078) $(1,582) ======= ======= =======
NOTE 7 - SUBSEQUENT EVENTS: During July 1995, the Company completed the sale of $100 million of Senior Notes due 2002 (the "Senior Notes") and the issuance of 150,000 shares of Series C Cumulative Convertible Preferred Stock (the "Preferred Stock") for $15 million. The net proceeds of approximately $109.5 million from the Senior Notes and the Preferred Stock were used to repay the outstanding balance due under the Company's revolving line of credit and certain other notes payable (see Note 3). The Senior Notes bear interest at 12 1/4% per annum, payable semiannually beginning January 15, 1996. The Senior Notes are senior unsecured obligations of the Company and are redeemable at the option of the Company, in whole or in part, on or after July 15, 2000 at pre-established redemption prices together with accrued and unpaid interest to the redemption date. The Preferred Stock cumulates dividends at an annual rate of 7%, which is payable in cash or, at the Company's option during the first three years, will cumulate. The Preferred Stock is immediately convertible into shares of Common Stock of the Company at an initial conversion price of $5.25 per share and is mandatorily redeemable by the Company 10 years after issuance. Pursuant to the terms of the Preferred Stock, the holders are entitled to elect two of the six members of the Company's Board of Directors. In connection with the sale of the Preferred Stock, the Company issued warrants to purchase 275,000 shares of Common Stock of the Company to a third party who assisted with the transaction. The initial exercise price of the warrants is $5.25 per share. 8 Simultaneously with the sale of the Senior Notes and issuance of the Preferred Stock, the Company executed the Fourth Amended and Restated Loan and Security Agreement (the "Loan Agreement") with Creditanstalt Bankverein (the "Bank"). The Loan Agreement provides for a new $40 million credit facility bearing interest at rates ranging from the Bank's prime rate plus 1 1/2% to LIBOR plus 3%. All outstanding principal balances are due in full April 30, 1999 and interest is payable monthly for loans based on the prime rate and quarterly for loans based on the LIBOR rate. A commitment fee of 1/2 of 1% is charged on the aggregate daily unused balance of the credit facility under the Loan Agreement. The Loan Agreement is secured by substantially all of the Company's assets and contains certain restrictive covenants which, among other things, require the Company to maintain certain net worth and cash flow levels and places certain restrictions on the payment of dividends. NOTE 8 - COMMITMENTS AND CONTINGENCIES: During July 1995, the Company reached an agreement in principle for the settlement (the "Proposed Settlement") of a lawsuit seeking class action certification, brought by two shareholders against the Company and certain of its officers and directors in the United States District Court, Southern District of Florida, alleging the violation of certain federal securities laws. The Company's share of the Proposed Settlement of approximately $0.9 million has been recorded in the accompanying Statements of Operations. The Proposed Settlement is subject to approval by the District Court. The accompanying notes are an integral part of these consolidated financial statements. 9
PEOPLES TELEPHONE COMPANY, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (UNAUDITED, IN THOUSANDS, EXCEPT PER SHARE DATA) THREE MONTHS ENDED JUNE 30, ------------------------ 1995 1994 -------- -------- Loss from continuing operations ............................. $(2,075) $(1,300) Loss from discontinued operations ........................... - (624) ------- ------- Net loss .................................................... $(2,075) $(1,924) ======= ======= Number of shares: Weighted average shares used in the per share computation ... 15,869 15,786 ======= ======= Earnings (loss) per common and common equivalent share: Loss from continuing operations ............................. $ (.13) $ (.08) Loss from discontinued operations ........................... - (.04) ------- ------- Net loss .................................................... $ (.13) $ (.12) ======= =======
SIX MONTHS ENDED JUNE 30, ------------------------ 1995 1994 -------- -------- Loss from continuing operations ............................. $(2,436) $(2,303) Loss from discontinued operations ........................... - (1,678) Extraordinary loss from extinguishment of debt, net ......... (2,894) - ------- ------- Net loss .................................................... $(5,330) $(3,981) ======= ======= Number of shares: Weighted average shares used in the per share computation ... 15,850 15,798 ======= ======= Earnings (loss) per common and common equivalent share: Loss from continuing operations ............................. $ (.16) $ (.15) Loss from discontinued operations ........................... - (.10) Extraordinary loss from extinguishment of debt, net ......... (.18) - ------- ------- Net loss .................................................... $ (.34) $ (.25) ======= =======
The accompanying notes are an integral part of these consolidated financial statements. 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis compares the quarter ended June 30, 1995 to the quarter ended June 30, 1994 and the six months ended June 30, 1995 to the six months ended June 30, 1994, and should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this Form 10-Q and in conjunction with Management's Discussion and Analysis appearing in the Company's Form 10-K/A No. 2 for the year ended December 31, 1994. The financial results discussed below relate to continuing operations which primarily consist of the public pay telephone business. REVENUES The Company primarily derives its revenues from coin and non-coin calls. Coin revenue is generated exclusively from calls made by depositing coins in the Company's public pay telephones. Coin revenue represented approximately 67.3% and 69.6% of total revenues from continuing operations for the quarters ended June 30, 1995 and 1994 and 68.3% and 70.3% for the six months ended June 30, 1995 and 1994, respectively. Coin revenue increased 3.8% to $19.9 million during the quarter ended June 30, 1995 and 5.2% to $38.9 million for the six months ended June 30, 1995 compared to the same periods in 1994. This revenue growth was primarily attributable to growth in the Company's installed base of public pay telephones. The Company's average installed public pay telephone base was approximately 40,000 for the six months ended June 30, 1995, compared to an average of approximately 37,000 for the same period in 1994. The decline in coin revenues per telephone was primarily attributable to the addition of telephones between periods having a lower average coin revenue per telephone than did the Company's installed base during 1994. The Company believes that the number of coin calls made at its public pay telephones may decrease over time. The Company believes, that among other things, this decrease will be primarily attributable to more public pay telephones in closer proximity to the Company's telephones, alternative methods of calling such as wireless technologies and increased usage of prepaid calling cards. Non-coin revenue represented approximately 32.7% and 28.9% of total revenues from continuing operations for the quarters ended June 30, 1995 and 1994 and 31.5% and 28.4% for the six months ended June 30, 1995 and 1994, respectively. Non-coin revenue is derived from calling card calls, credit card calls, collect calls and third party billed calls. For the quarter ended June 30, 1995, revenues from non-coin calls increased 21.4% to approximately $9.7 million, compared to the quarter ended June 30, 1994. Non-coin revenue increased 20.1% to approximately $17.9 million for the six months ended June 30, 1995 as compared to the same period in 1994. These increases were primarily attributable to the increase in the Company's installed base of public pay telephones described above and an increase in the number of calls placed through third party operator service providers. During the second quarter of 1995 the Company signed a contract with AT&T to act as its primary third-party operator service provider. Prior to the execution of this agreement, non-coin calls were routed through the Company's private label operator service program. In addition, non-coin revenue for the second quarter of 1995 includes approximately $0.5 million for the collection of previous underpayments of compensation. The Company records the total amount the end user pays for the call (net of taxes) as revenue when the call is completed through the Company's private label operator service. In contrast, the Company records as revenue the amount it receives from the third-party operator service provider which represents a negotiated percentage of the total amount the caller pays for the call. The Company uses its private label operator service or a third party operator service provider based on which service the Company believed netted it the highest gross margin from the call. 11 OPERATING EXPENSES Operating expenses include telephone charges, commissions, field service and collection expenses and selling, general and administrative expenses. Telephone charges consist of local line charges to LECs which include costs of basic service and transport of local coin calls, long distance transmission charges and network costs and billing, collection and validation costs. Commissions represent payments to Property Owners for revenues generated by public pay telephones located on their properties. Field service and collection expenses represent the costs of servicing and maintaining the telephones on an ongoing basis, costs of collecting coin from the telephones, and other related operational costs. Selling, general and administrative expenses primarily consist of payroll and related costs, legal and other professional fees, promotion and advertising expenses, property, gross receipts and certain other taxes, corporate travel and entertainment, and various other expenses. Total operating expenses were approximately 81.1% and 89.2% of total revenues from continuing operations for the quarters ended June 30, 1995 and 1994, respectively. For the six months ended June 30, 1995, total operating expenses were 80.3% of total revenues as compared to 86.1% for the same period in 1994. Telephone charges decreased as a percentage of total revenues from continuing operations to 32.3% for the quarter ended June 30, 1995, compared to 36.5% for the same period in 1994. The decrease in telephone charges is due to a decline in the number of calls placed through the Company's private label operator system which is partially offset by an increase in telephone charges as a result of an increase in the Company's installed public pay telephone base. The Company pays the costs incurred to transmit, bill, collect and validate the call when the call is completed through its private label operator services. In contrast, the Company incurs no such cost when a third party operator service provider completes the call. For the six months ended June 30, 1995 and 1994, telephone charges were 31.6% and 34.8% of revenues, respectively. Telephone charges for the six months ended June 30, 1995 include a reduction of interexchange carrier expenses related to a settlement with a service provider for certain billing errors and underpayment of operator service revenue of approximately $1.3 million. Telephone charges for the six months ended June 30, 1994 included one-time income adjustments of approximately $0.6 million for a contract signing bonus and volume discounts credited to the Company by certain of its service providers. Commissions as a percentage of total revenues from continuing operations were approximately 23.4% and 20.3% for the quarters ended June 30, 1995 and 1994, respectively. For year to date 1995, commissions were 23.2% of revenues from continuing operations versus 19.9% for the same period in 1994. The increase in commissions as a percentage of revenues was primarily attributable to higher commission rates paid in connection with the recently obtained Atlanta Hartsfield International Airport account. Field service and collection expenses as a percentage of total revenues from continuing operations were 17.1% and 18.4% for the second quarter of 1995 and 1994, respectively. For the six months ended June 30, 1995, field service and collection expenses were 17.0% compared with 19.0% for the same period in 1994. The decrease in these expenses was primarily attributable to the Company's efforts to reduce operating expenses which were commenced in June 1994 and included the downsizing of the Company's field personnel. Selling, general and administrative expenses decreased to 8.4% of total revenues from continuing operations in the second quarter 1995 versus 14.0% for the second quarter 1994. For the six moths ended June 30, 1995, selling, general and administrative expenses were 8.5% of revenue versus 12.4% for the same period in 1994. The decrease in selling, general and administrative expenses was primarily attributable to the cost reduction plan and reengineering efforts commenced by the Company in June 1994. 12 DEPRECIATION AND AMORTIZATION Depreciation is based on the cost of the telephones, booths, pedestals, and other enclosures, related installation costs and line interconnection charges and is calculated on a straight-line method using a ten-year useful life. Amortization is primarily based on acquisition costs including location contracts, goodwill and non-competition provisions and is calculated on a straight-line method using estimated useful lives ranging from five to 20 years. Depreciation and amortization increased to $4.8 million for the quarter ended June 30, 1995, compared to $4.4 million for the same period in 1994. For the six months ended June 30, 1995 and 1994, depreciation and amortization were $9.5 million and $8.5 million, respectively. The increase in depreciation and amortization is primarily attributable to increases in the number of installed public pay telephones that resulted from acquisitions during 1994. INTEREST EXPENSE In the second quarter of 1995, interest expense increased 38.8% to $1.8 million as compared to the same quarter in 1994. This increase was primarily attributable to increased bank borrowings under the Company's revolving line of credit of $100 million at June 30, 1995 compared to $97.2 million at June 30, 1994. In addition, the Company experienced higher interest rates under its revolving line of credit during the second quarter of 1995 as a result of the March 22, 1995 amendment to the Company's credit agreement and overall increases in market interest rates. OTHER Other expenses were approximately $1.1 million for the year to date which includes approximately $0.9 million recorded for the proposed settlement of the shareholders' lawsuit (see Note 8 to the accompanying consolidated financial statements) as well as approximately $0.2 of losses for the Company's equity interest in an unconsolidated affiliate. No such expenses were incurred in 1994. PROVISION FOR INCOME TAXES The Company recorded a valuation allowance of approximately $0.8 million for tax assets generated during the second quarter of 1995. For the six months ended June 30, 1995, the tax benefit from continuing operations was approximately $0.2 million as compared to $1.1 million for the same period in the prior year. This decrease is due primarily to the valuation allowance established by the Company during the second quarter of 1995. NET INCOME (LOSS) FROM CONTINUING OPERATIONS The Company had a net loss from continuing operations of approximately $2.1 million and $2.4 million for the three months and six months ended June 30, 1995, respectively, compared to a net loss from continuing operations of approximately $1.4 million and $2.4 million for the same periods in 1994. EXTRAORDINARY ITEM The Company had an extraordinary loss from the write-off of deferred financing costs associated with the early extinguishment of debt of approximately $4.6 million, before the related income tax benefit of $1.7 million, which is included in the financial results of the Company for the six months ended June 30, 1995. 13 EARNINGS BEFORE INTEREST, TAXES, DEPRECIATION AND AMORTIZATION EBITDA is not presented as an alternative to operating results or cash flow from operations as determined by Generally Accepted Accounting Principles (GAAP), but rather to provide additional information related to the ability of the Company to meet current trade obligations and debt service requirements. EBITDA should not be considered in isolation from, or construed as having greater importance than, GAAP operating income or cash flows from operations as a measure of an entity's performance. EBITDA from continuing operations increased by approximately $0.9 million to $4.5 million for the quarter ended June 30, 1995, compared to the same period in 1994. EBITDA for the six months ended June 30, 1995 was approximately $10.2 million as compared to $7.3 million for the same period in 1994. This increase was primarily attributable to the growth in the Company's installed base of public pay telephones and the decrease in telephone charges as a percentage of revenue as a result of the settlement with a service provider mentioned above, which was partially offset by the increase in commission expense noted above. LIQUIDITY AND CAPITAL RESOURCES During the second quarter of 1995, the Company financed its operations primarily from operating cash flow. For the quarter ended June 30, 1995, the Company's operating cash flow was $5.7 million compared to $(5.1) million for the same period in 1994. The Company's working capital was approximately $28.5 million, with a current ratio of 1.99 to 1, at June 30, 1995. This is compared to working capital of $16.4 million and a current ratio of 1.38 to 1 at December 31, 1994. The increase in the Company's working capital and current ratio was primarily attributable to approximately $12 million of debt repayments which, as of June 30, 1995 were reclassified as long-term obligations due to the Company's refinancing transaction as discussed below. In an effort to extend its debt maturities to reflect the long-term nature of its assets and to provide increased operational and financial flexibility to take advantage of growth opportunities in its core public pay telephone business, the Company completed a private placement of $100 million in Senior Notes due 2002 (the "Senior Notes") and $15 million of Cumulative Convertible Preferred Stock (the "Preferred Stock") in July 1995. In addition to the above transactions the Company entered into a new $40 million revolving credit facility. Proceeds from the sale of the Senior Notes together with the proceeds from the sale of the Preferred Stock were used to repay the existing credit facility and various other obligations of the Company. Upon completion of the refinancing, the Company had $40 million undrawn and available under the new credit facility. DISCONTINUED OPERATIONS During December 1994, in an effort to return its focus to its core public pay telephone business, the Company's Board of Directors approved the divestiture of its inmate telephone and cellular telephone rental operations. The Company is in the process of divesting the remaining business segments and has recorded provisions for the estimated impairment of asset values and losses from January 1, 1994 through the estimated divestiture date for its inmate telephone and cellular telephone rental operations in the December 31, 1994 financial statements. (See Note 6 to the accompanying consolidated financial statements). 14 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS Reference is made to Item 3 - Legal Proceedings of the Company's Annual Report on Form 10-K for the year ended December 31, 1994, as amended. During July 1995, the Company and the directors and officers of the Company named as defendants in a class action lawsuit brought by two shareholders in the United States District Court, Southern District of Florida, reached an agreement in principle for the settlement of the lawsuit (the "Proposed Settlement"). Pursuant to the Proposed Settlement, the Company will pay approximately $925,00 and the balance of the Proposed Settlement will be paid by the carrier providing directors' and officers' liability insurance to the Company. The Proposed Settlement is subject to approval by the District Court. Item 2. CHANGES IN SECURITIES Information regarding the issuance of the Senior Notes and the Preferred Stock and the execution of the Loan Agreement is incorporated herein by reference to Exhibit 99 to this Report on Form 10-Q. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: EXHIBIT DESCRIPTION ------- ----------- 4.1 Amended and Restated Certificate of Incorporation adopted on November 30, 1987 (incorporated herein by reference to the Company's Registration Statement on Form 10, File No. 0-16479 (the "Form 10"). 4.2 Amendments to Certificate of Incorporation adopted on March 8, 1990 and March 15, 1990, respectively (incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1989) (File No. 0-16479). 4.3 Amendment to Certificate of Incorporation adopted on June 29, 1990 (incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1990 (File No. 0-16479)). 4.4 Amendment to Certificate of Incorporation filed on July 18, 1995 (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.5 Restated Bylaws adopted on November 30, 1987 (incorporated herein by reference to the Form 10). 4.6 Fourth Amended and Restated Loan and Security Agreement dated as of July 19, 1995 by and among the Company, the lenders named therein and Creditanstalt-Bankverein (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.7 Letter Agreement, dated July 3, 1995, between the Company and Creditanstalt American Corporation, with respect to the amendment of the Second Amended and Restated Warrant Agreement dated February 17, 1994 (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 15 4.8 Indenture, dated as of July 15, 1995, between the Company and First Union National Bank of North Carolina (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.9 Registration Rights Agreement, dated July 19, 1995, between the Company and Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.10 Letter Agreement, dated July 18, 1995, among the Company, UBS Capital Corporation, UBS Partners, Inc. and Appian Capital Partners, L.L.C., amending the Securities Purchase Agreement, dated as of July 3, 1995 among the Company, UBS Capital Corporation and Appian Capital Partners, L.L.C. (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.11 Form of Stock Purchase Warrant issued on July 19, 1995 to Appian Capital Partners, L.L.C. (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.12 Form of Contingent Stock Purchase Warrant issued on July 19, 1995 to UBS Partners, Inc. (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.13 Registration Rights Agreement dated as of July 19, 1995 between the Company and UBS Partners, Inc. (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 4.14 Securities Purchase Agreement between UBS Capital Corporation, Appian Capital Partners, L.L.C. and the Company, and Exhibits A through F (incorporated by reference to the Company's Current Report on Form 8-K dated July 3, 1995 (File No. 0-16479)). 4.15 Form of Second Amended and Restated Warrant Agreement dated as of February 17, 1994 between the Company and Creditanstalt American Corporation (incorporated by reference to the Company's Form 10-K for the fiscal year ended December 31, 1993 (File No. 0-16479)). 10 Exchange Agreement, dated as of May 3, 1995, by and between the Company and Creditanstalt Corporate Finance, Inc. (incorporated by reference to the Company's Current Report on Form 8-K dated July 19, 1995 (File No. 0-16479)). 27 Financial Data Schedule 99 Information regarding the issuance of certain securities of the Company. (b) Reports on Form 8-K: (1) Current Report on Form 8-K dated May 10, 1995, relating to Item 5 - Other Events. (2) Current Report on Form 8-K dated June 19, 1995 relating to Item 5 - Other Events. 16 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 thereunto duly authorized. PEOPLES TELEPHONE COMPANY, INC. ------------------------------- REGISTRANT Date: August 14, 1995 /S/ BONNIE S. BIUMI ------------------------------- Bonnie S. Biumi Chief Financial Officer EX-99 2 INFORMATION RE ISSUANCE OF CERTAIN SECURITIES EXHIBIT 99 In order to extend its debt maturities and to provide increased operational and financial flexibility to take advantage of growth opportunities in its core public pay telephone business, the Company refinanced its indebtedness (approximately $95.5 million) under the Third Amended and Restated Loan Agreement by and among the Company, Creditanstalt-Bankverein ("Creditanstalt") and other financial institutions, dated February 17, 1994 (the "Prior Credit Agreement") and repaid certain notes payable ($105.1 million in the aggregate) with proceeds from the sale of the Senior Notes (as defined below) and the Preferred Stock (as defined below") (collectively, the "Refinancing"). The Refinancing, which was consummated on July 19, 1995, included the following elements: SENIOR NOTES The Company sold $100,000,000 aggregate principal amount of its 12 1/4% Senior Notes due 2002 (the "Senior Notes") in a private placement pursuant to Rule 144A under the Securities Act of 1933, as amended ("the Securities Act"). The indenture governing the Senior Notes (the "Indenture") contains certain covenants, including, but not limited to, covenants with respect to the following matters: limitations on additional indebtedness, limitations on restricted payments, including the payment of dividends on the Company's Common Stock, par value $.01 per share ("Common Stock"), limitations on the incurrence of liens, limitations on transactions with affiliates, the application of the proceeds of certain asset sales, restrictions on the issuance of preferred stock of certain subsidiaries, limitations on the creation of restrictions on the ability of certain subsidiaries to make certain distributions and payments to the Company and other subsidiaries, and limitations on the merger, consolidation or transfer of all or substantially all of the assets of the Company and certain subsidiaries with or to another person. Holders of Senior Notes will also have the right to require the Company to repurchase Senior Notes in the event of certain changes in control. The Senior Notes are senior unsecured obligations of the Company and rank PARI PASSU in right of payment with other senior indebtedness of the Company. PREFERRED STOCK The Company issued 150,000 shares of its Series C Cumulative Convertible Preferred Stock (the "Preferred Stock") to UBS Partners, Inc. ("UBS"), a wholly-owned subsidiary of Union Bank of Switzerland, for gross proceeds of $15.0 million. The Preferred Stock cumulates dividends at an annual rate of 7%, subject to increase up to 11% under certain circumstances, including accelerations of indebtedness of the Company and material breaches of representations, warranties and covenants, which are payable in cash or, at the Company's option during the first three years after issuance, will continue to cumulate. The Preferred Stock is immediately convertible, at the option of the holders, into approximately 2,857,143 shares of Common Stock (or approximately 15.1% of the outstanding Common Stock as of June 30, 1995 determined in accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) at a conversion price of $5.25 per share, subject to reduction pursuant to antidilution adjustments in connection with, among other things, certain issuances of shares of, or rights to acquire, Common Stock at less than the Conversion Price of the Preferred Stock. The Preferred Stock is subject to (i) mandatory redemption by the Company 10 years after issuance or, subject to the prior payment in full of the Company's indebtedness under the New Credit Agreement (as defined below) and the Senior Notes, in the event of certain bankruptcy or related events relating to the Company, (ii) redemption at the Company's option, and (iii) upon the occurrence of a change of control (as defined in the Indenture), redemption, at the option of the holders thereof, in all cases at its liquidation preference ($15.0 million in the aggregate) plus accrued and unpaid dividends. The holders of the Preferred Stock are entitled to elect two members of the six member Board of Directors of the Company. The two directors initially will be Charles J. Delaney, President of UBS Capital Corporation ("UBS Capital"), also a wholly-owned subsidiary of Union Bank of Switzerland, and Jeffrey Keenan, a managing director of UBS Capital and a vice president and a director of UBS. Mr. Delaney was elected on July 19, 1995 to fill the vacancy created by the resignation of Ronald Gelber and UBS has advised the Company that it will elect Mr. Keenan at or about the time of the Company's 1995 Annual Meeting of Shareholders. The Preferred Stock is also entitled to vote on all other matters submitted to the stockholders for a vote together with the holders of the Common Stock voting as a single class with each share of Preferred Stock entitled to one vote for each share of Common Stock issuable upon conversion. In connection with the Preferred Stock, the Company has agreed to certain affirmative and negative covenants with respect to the conduct of its business, among other matters. For so long as 25% of the shares of Preferred Stock or the Common Stock into which such Preferred Stock is convertible remain outstanding and have not been sold publicly, the Company has agreed with UBS and Appian Capital Partners, L.L.C. ("Appian") to observe certain negative covenants, including that the Company will not: (a) (i) amend its Certificate of Incorporation or bylaws in a way which would adversely affect the rights of holders of the Preferred Stock or underlying Common Stock or subordinate the rights of the holders of the Preferred Stock to the rights of other holders of capital stock of the Company; (ii) to the extent not prohibited by the Company's Amended and Restated Certificate of Incorporation, except in an underwritten public offering, or issuances of Common Stock pursuant to options, warrants and other rights outstanding on the date of the Securities Purchase Agreement relating to the Preferred Stock or employee stock options, and issuances of Common Stock in certain permitted acquisitions, sell capital stock of the Company unless holders of the Preferred Stock, the underlying Common Stock or the Warrants (as hereinafter defined) are given the right to purchase such capital stock to maintain such holders' percentage interest in the Company's Common Stock; or (iii) effect a fundamental change, including (a) the sale or transfer of more than 40% of the consolidated assets of the Company and its subsidiaries and (b) mergers and consolidations other than those in which the Preferred Stock is unaffected and the holders of the majority of the voting power to elect the Board of Directors continue to own such majority voting power unless such fundamental change provides that upon the consummation thereof, the Company shall have purchased all such shares of the Preferred Stock tendered to the Company for purchase at a price per share equal to its liquidation preference of $100 per share plus accrued and unpaid dividends thereon pursuant to an offer to purchase given to the holders of the Preferred Stock not less than 15 days prior to the date such fundamental change is to be consummated; or (b) Without the approval of 75% of the members of the Board of Directors: (i) engage in transactions with stockholders, directors, officers, employees or defined affiliates which transactions would require disclosure under Rule 404 of Regulation S-K under the Securities Act; (ii) issue (a) debt securities which are convertible into the Company's Common Stock or with equity features such as warrants unless such equity features meet certain tests or (b) capital stock or other equity securities senior to or on a parity with the Preferred Stock or having a voting power equivalent to or greater than one vote per share of Common Stock; (iii) merge or consolidate or, except for certain permitted acquisitions or dispositions, allow a subsidiary to merge or consolidate; (iv) sell, lease or otherwise dispose of assets of the Company or its subsidiaries involving consideration greater than $5 million; (v) liquidate, dissolve or effect a recapitalization or reorganization; (vi) acquire an interest in or assets of any other company involving aggregate consideration greater than $5 million; (vii) own, manage or operate any business other than the domestic pay telephone business; or (vii) hire, elect or replace the Company's Chief Executive Officer, President, Chief Financial Officer or Chief Operating Officer or change the terms of employment or compensation thereof. Notwithstanding the foregoing, the Company may sell certain discontinued operations and enter into and borrow under the New Credit Agreement. So long as any shares of the Preferred Stock remain outstanding, without the prior consent of the holders of a majority of the then outstanding shares of Preferred Stock, the Company is prohibited from redeeming, purchasing or otherwise acquiring junior securities (including Common Stock), paying or declaring any dividend or making any distribution on any other capital stock of the Company (other than dividends payable solely in the securities in respect of which such dividends are paid). In addition, UBS has been issued a contingent warrant, exercisable only if the Company redeems the Preferred Stock pursuant to its optional redemption rights. Such warrant is exercisable initially for the same number of shares and at the same price as provided in the conversion terms of the Preferred Stock being redeemed, all determined as of the redemption date of such Preferred Stock. Such contingent warrant has anti-dilution provisions comparable to the Preferred Stock. UBS also has the right to have its Preferred Stock and underlying Common Stock repurchased by the Company (at the original purchase price thereof, plus accrued and unpaid dividends thereon), if the Company violates certain regulations regarding an investee of a Small Business Investment Company. UBS has agreed, subject to certain limitations and restrictions, that for up to 10 years from the date of the closing of the Preferred Stock, it will not, without the consent of the Company's Board of Directors, acquire beneficial ownership (determined in accordance with Rule 13d-3 under the Exchange Act) of more than 25% of the Company's voting securities, offer or solicit any other person to acquire the Company or conduct a proxy solicitation with respect to the Company. Appian, which provided financial consulting services in connection with the Preferred Stock, was issued warrants to purchase up to 275,000 shares of Common Stock at an initial exercise price of $5.25 per share (the "Warrants") and was paid a fee of $400,000. The Company has also agreed to register for resale under the Securities Act the Common Stock issuable upon conversion of the Preferred Stock or upon exercise of the Warrants. THE NEW CREDIT AGREEMENT The Company entered into an amendment and restatement of the Prior Credit Agreement (as amended and restated, the "New Credit Agreement"), with Creditanstalt, providing for a revolving credit facility for the benefit of the Company in the aggregate amount of $40.0 million. The New Credit Agreement has a term of four years. Creditanstalt has informed the Company that it intends to syndicate a portion of the loan. The following is a summary of the terms of the New Credit Agreement. BORROWING BASE. The Company may use borrowings under the New Credit Agreement for internal growth and to fund future acquisitions, although Creditanstalt has the right to approve any acquisition for consideration in excess of $3.0 million. Borrowings under the New Credit Agreement may not exceed the sum of (i) 75.0% of the Company's eligible accounts receivable plus (ii) an amount equal to $1,200 multiplied by the number of eligible installed pay telephones, in the aggregate up to the total limit of $40.0 million. INTEREST. Interest on the principal balance outstanding under the New Credit Agreement accrues at the option of the Company at the rate of (i) 1.5% above the greater of (a) Creditanstalt's prime lending rate at its principal office in New York, New York and (b) the federal funds rate plus 0.5% or (ii) 3.0% above the rate quoted by Creditanstalt as the average London interbank offered rate for one, two, three and six-month Eurodollar deposits. In the event of a default under the New Credit Agreement, at Creditanstalt's option, the interest rate on the borrowings under the New Credit Agreement can increase to 2.0% per annum above the then applicable rate. SECURITY. As security for the indebtedness under the New Credit Agreement, the Company has granted to Creditanstalt a first priority security interest in substantially all existing and future assets of the Company, whether tangible or intangible, including, without limitation, accounts receivable, inventory and equipment. CERTAIN COVENANTS. In addition to customary covenants, the New Credit Agreement contains various restrictive financial and other covenants including, without limitation, (i) prohibitions on the incurrence of additional indebtedness, (ii) restrictions on the creation of additional liens, (iii) certain limitations on dividends and distributions by the Company, (iv) restrictions on mergers and sales of assets, investments and transactions with affiliates and (v) certain financial maintenance tests. Such financial maintenance tests, include, among others, (i) a minimum of earnings before interest, taxes, depreciation and amortization ("EBITDA") test of $5.0 million for the quarter ending June 30, 1995, $10.0 million for the two quarter period ending September 30, 1995 and $15.0 million for the three quarter period ending December 31, 1995, and, thereafter, a minimum annual EBITDA test (tested quarterly for the prior four quarters) beginning at $19.0 million for the quarter ended March 31, 1996 and increasing over time to $26.0 million after December 31, 1997, (ii) a minimum ratio of annual EBITDA to interest expense (tested quarterly) beginning at 1.5 to 1 and increasing over time to 2.5 to 1 after December 31, 1997, (iii) a minimum net worth test beginning at $47.0 million and increasing over time to $67.0 million after December 31, 1998, (iv) a maximum ratio of debt to net worth of 3.25 to 1 for the first two years and decreasing to 3.0 to 1 for the remaining two years, and (v) maximum ratio of bank debt to EBITDA of 2.0 to 1 (tested quarterly using EBITDA from the prior four quarters). For purposes of the foregoing covenants, EBITDA includes EBITDA from the Company's inmate telephone and cellular telephone rental operations and net worth includes the Preferred Stock. EVENTS OF DEFAULT. The events of default under the New Credit Agreement are customary for facilities of such nature and include payment and non-payment defaults and certain events of bankruptcy or insolvency of the Company. FEES. In connection with the execution of the Loan Agreement, the Company agreed to pay a loan origination fee of up to $200,000. The New Credit Agreement also provides for a monthly fee based on the unused portion of the New Credit Agreement and an annual agency fee. EX-27 3 FINANCIAL DATA SCHEDULE
5 0000819694 PEOPLES TELEPHONE COMPANY, INC. 3-MOS DEC-31-1995 APR-01-1995 JUN-30-1995 5,820,000 0 20,652,000 (4,623,000) 3,820,000 57,330,000 121,420,000 (48,249,000) 180,888,000 28,840,000 0 159,000 0 0 58,259,000 43,502,000 29,523,000 29,523,000 23,956,000 28,733,000 1,034,000 0 1,831,000 (2,075,000) 0 (2,075,000) 0 0 0 (2,075,000) (.13) (.13)