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: March 31, 1997

                                       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       (I.R.S. Employer
              of incorporation or                  I.D. No.)
                  organization) 

                 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 May 12, 1997: 16,195,434 shares.

<PAGE>
<TABLE>
<CAPTION>

Part I.  FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS

                         PEOPLES TELEPHONE COMPANY, INC.
                           CONSOLIDATED BALANCE SHEET
                                 (in thousands)

                                                 March 31,       December 31,
             Assets                                1997              1996     
                                              ------------       ------------ 
                                               (Unaudited)
<S>                                           <C>               <C> 
Current assets
  Cash and cash equivalents.................  $     4,367        $    12,556
  Accounts receivable, net of allowance 
   for doubtful accounts of $4,147 and 
   $4,037...................................       16,407             11,598
  Inventory.................................        2,366              2,412
  Prepaid expenses  and other current assets        2,910              2,665
                                              ------------       ------------ 
      Total current assets..................       26,050             29,231
Property and equipment, net.................       61,591             65,067
Location contracts, net.....................       27,681             27,465
Goodwill, net...............................        5,189              5,660
Intangible assets, net......................        1,557              1,768
Other assets, net...........................        6,365              6,610
Deferred income taxes.......................        3,407              3,407
Investments.................................        1,790              1,662
                                              ------------       ------------ 
     Total assets...........................  $   133,630        $   140,870
                                              ============       ============
    Liabilities and Shareholders' Equity

Current liabilities
  Notes payable and current maturities 
   of long-term debt........................  $       565        $       548
  Current portion of obligations under 
   capital leases...........................          852                952
  Accounts payable and accrued expenses.....       19,268             19,240
  Accrued interest payable..................        2,632              5,697
  Taxes payable.............................        2,379              2,418
                                              ------------       ------------ 
     Total current liabilities..............       25,696             28,855
Notes payable and long-term debt............      100,491            100,657
Obligations under capital leases............          426                573
                                              ------------       ------------ 
     Total liabilities......................      126,613            130,085
 Commitments and contingencies..............        -                  -
 Preferred Stock
 Cumulative convertible preferred stock, 
   Series C, $.01 par value, 160 shares 
   authorized; 150 shares issued and 
   outstanding..............................      13,586              13,556
 Preferred stock dividends payable .........       1,785               1,523
                                              ------------       ------------ 
     Total preferred stock.................       15,371              15,079
                                              ============       ============
Shareholders' equity
  Preferred stock; $.01 par value; 4,240 
    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; 75,000 shares 
    authorized; 16,195 and 16,108 shares 
    issued and outstanding..................         162                 162
  Capital in excess of par value............      60,163              60,453
  Accumulated deficit ......................    (67,336)            (63,438)
  Unrealized loss on investments............     (1,343)             (1,471)
                                              ----------        ------------ 
     Total shareholders' deficit............     (8,354)             (4,294)
                                              ----------        ------------ 
     Total liabilities and shareholders' 
       equity...............................  $ 133,630         $    140,870
                                              ===========       ============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
</TABLE>

 
                                        2
<PAGE>
<TABLE>
<CAPTION>

                         PEOPLES TELEPHONE COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                (unaudited, in thousands, except per share data)

                                            For the three months ended 
                                                    March  31,         
                                          -----------------------------
                                             1997              1996     
                                          ----------       ------------ 
<S>                                      <C>               <C> 
Revenues
  Coin calls ..........................  $    17,940       $     18,141
  Non-coin calls.......................       13,668             12,355
                                          ----------       ------------- 
      Total revenues...................       31,608             30,496

Costs and expenses
  Telephone charges....................        9,153              9,863
  Commissions..........................        8,764              8,267
  Field service and collection.........        5,012              4,790
  Selling, general and administrative..        3,074              2,981
  Depreciation and amortization........        6,155              5,827
                                          ----------       ------------- 
     Total costs and expenses..........       32,158             31,728
                                          ----------       ------------- 
Operating loss.........................        (550)            (1,232)

Other (income) and expenses:
  Interest expense, net................        3,348              3,263
  (Gain) loss on disposal of prepaid 
    calling card and international 
    telephone centers..................         -                 (545)
  Other................................         -                   550
                                          ----------       ------------
     Total other (income) and expenses, 
       net.............................        3,348              3,268
                                          ----------       ------------
Loss before income taxes...............       (3,898)            (4,500)
Benefit from income taxes..............         -                  -
                                          ----------       ------------
Net loss...............................  $    (3,898)      $     (4,500)
                                         ============      =============
Earnings (loss) per common share both 
   primary and fully diluted...........  $      (.26)      $       (.29)
                                         ============      =============
Weighted average common and common 
 equivalent shares outstanding.........        16,195             16,173
                                         ============      =============
</TABLE>










The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

 
                                        3

<PAGE>
<TABLE>
<CAPTION>


                         PEOPLES TELEPHONE COMPANY, INC.
                      STATEMENTS OF CONSOLIDATED CASH FLOWS
                            (Unaudited, in thousands)

                                           For the three months ended, 
                                                     March 31,        
                                          -----------------------------
                                             1997             1996    
                                          ----------       ------------ 
<S>                                          <C>              <C> 
Cash flow from operating activities:
  Net loss................................   $   (3,898)      $    (4,500)
  Adjustments to reconcile net loss 
      to net cash used by operating 
      activities:
      Depreciation and amortization.......        6,155              5,827
      Amortization of deferred financing 
       costs..............................          285                201
      Gain on sale of assets..............         -                  (545)
      Change in assets and liabilities:
           (Increase) decrease in accounts 
             receivable...................       (4,922)                158
           Decrease (increase) in 
             inventory....................            46               (197)
           (Increase) decrease in prepaid 
             expenses and other current 
             assets.......................          (245)               369
           (Increase) decrease in other 
             assets.......................          (159)               313
           Increase (decrease) in accounts 
               payable and accrued expenses           28               (54)
           Decrease in accrued  interest..        (3,065)           (2,929)
           (Decrease) increase in taxes 
             payable......................           (39)               103
                                               ----------        ----------- 
Net cash used by  operating activities.....       (5,814)           (1,254)

Cash flow from investing activities:
    Payments for acquisitions and certain 
     contracts.............................       (1,690)           (1,303)
    Property and equipment additions.......         (419)             (754)
    Proceeds from sale of assets...........           233               800
                                               ----------        ----------- 
Net cash used in investing activities......       (1,876)            (1,257)

Cash flow from financing activities:
    Net payments under note payable to 
     bank..................................         (150)              (165)
    Principal payments under capital lease 
     obligations...........................         (351)              (229)
    Exercise of stock options and warrants.             2              -    
                                               ----------       ------------ 
Net cash used in  financing activities.....         (499)              (394)
                                               ----------       ------------ 

Net decrease in cash and cash equivalents..       (8,189)            (2,905)
Cash and cash equivalents at beginning of 
 period....................................        12,556            12,366
                                               ----------       ------------ 
Cash and cash equivalents at end of period.   $     4,367      $      9,461
                                              ============     =============
</TABLE>

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

 
                                        4
<PAGE>


                         PEOPLES TELEPHONE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1997 AND MARCH 31, 1996
                                   (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 preparation
of  financial  statements  in  conformity  with  generally  accepted  accounting
principles requires management to make estimates and assumptions that affect the
reported  amounts  of  assets  and  liabilities  at the  date  of the  financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from those estimates.

The  results of  operations  for the three  months  ended March 31, 1997 are not
necessarily  indicative  of the  results  to be  expected  for the  year  ending
December 31, 1997.

The  interim  unaudited  consolidated  financial  statements  should  be read in
conjunction with the audited consolidated financial statements and notes thereto
for the year ended  December 31, 1996 as set forth in the Company's  1996 Annual
Report on Form 10-K.

NOTE 2 - INVESTMENTS

The Company's investment in Global Telecommunications Solutions, Inc. ("GTS") is
accounted for in accordance with Statement No. 115 ("SFAS 115"),  Accounting for
Certain Investments in Debt and Equity Securities.  Accordingly, this investment
is reported at fair value with unrealized gains or losses,  net of tax, recorded
as a separate component of Shareholders' Equity. The fair value of the Company's
investment in GTS common stock at March 31, 1997 was approximately  $1.8 million
which is net of approximately $1.3 million of unrealized investment losses.

NOTE 3 - EARNINGS PER SHARE

The treasury  stock method was used to determine the dilutive  effect of options
and  warrants  on  earnings  per share  data.  For 1997 and 1996,  common  stock
equivalents were excluded since the effect would be anti-dilutive.

See primary and fully diluted  earnings  (loss) per common share  calculation as
summarized on page 7.

NOTE 4 - LONG-TERM DEBT
 
During March 1997,  the Company  executed an amendment to the Fourth Amended and
Restated Loan and Security  Agreement  increasing  the credit  facility to $20.0
million.  The interest rate on balances  outstanding  under the credit  facility
vary based upon the leverage ratio  maintained by the Company.  All  outstanding
principal  balances  are due in full in 2000.  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  assets  and  contains  certain  restrictive
covenants  which,  among other things,  require the Company to maintain  certain
cash flow levels and interest coverage ratios and places certain restrictions on
the payment of dividends.





 
                                        5


<PAGE>

                         PEOPLES TELEPHONE COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        MARCH 31, 1997 AND MARCH 31, 1996
                                   (unaudited)

NOTE 5 - SHAREHOLDERS' EQUITY

In March 1997, the Company's  shareholders approved an increase in the number of
authorized shares of the Company's Preferred Stock and Common Stock to 5 million
and 75 million shares, respectively.

NOTE 6 - INCOME TAXES

For the quarters ended March 31, 1997 and 1996, the Company  recorded  valuation
allowances of  approximately  $1.5 million and $1.7 million against deferred tax
assets  generated  during the periods.  Valuation  allowances  were  provided to
reduce the deferred tax assets to a level which,  more likely than not,  will be
realized.








 
                                        6

<PAGE>
<TABLE>
<CAPTION>


                         PEOPLES TELEPHONE COMPANY, INC.
            COMPUTATION OF PRIMARY AND FULLY-DILUTED EARNINGS (LOSS)
                                PER COMMON SHARE
                (unaudited, in thousands, except per share data)

                                                            For The
                                                      Three Months Ended
                                                          March 31,
                                                  -------------------------
                                                     1997           1996     
                                                  ---------     -----------     

<S>                                              <C>            <C>

Net loss..................................       $   (3,898)     $   (4,500)

Less:
 Cumulative preferred stock dividends.....             (262)           (262)
                                                  ---------     -----------    
   Net loss for per share computations....       $   (4,160)    $    (4,762)
                                                 ===========    ============
Number of shares:
Weighted average shares used in the per 
 share computation........................            16,195          16,173
                                                 ===========    ============
Primary loss per common and common 
  equivalent share........................       $     (.26)    $      (.29)
                                                 ===========    ============
</TABLE>
<TABLE>
<CAPTION>
                                                            For The
                                                      Three Months Ended
                                                           March 31, 
                                                ----------------------------
                                                     1997           1996     
                                                 ------------     ---------- 
<S>                                              <C>              <C>       
Net loss..................................       $   (3,898)      $  (4,500)

Less:
 Cumulative preferred stock dividends......            (262)           (262)
                                                  ---------     -----------    
   Net loss for per share computations.....      $   (4,160)      $  (4,762)
                                                 ===========    ============
Number of shares:
Weighted average shares used in the per 
  share computation........................           16,195          16,173
                                                 ===========    ============
Fully diluted loss per common and common 
  equivalent share.........................      $     (.26)      $    (.29)
                                                 ===========    ============
</TABLE>


                                        7

<PAGE>


ITEM 2. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

     The following  discussion and analysis compares the quarter ended March 31,
1997 to the quarter ended March 31, 1996 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 for the year ended December 31, 1996.

     Statements in Management's Discussion and Analysis relating to matters that
are not historical facts are forward-looking  statements.  Such  forward-looking
statements  involve  known and unknown  risks,  uncertainties  and other factors
which may cause the actual  results,  performances  or  achievements  of Peoples
Telephone  Company,  Inc. to be materially  different  from any future  results,
performances  or  achievements  expressed  or implied by such  forward-  looking
statements.  Such  known and  unknown  risks,  uncertainties  and other  factors
include,  but are not  limited  to, the  following:  the impact of  competition,
especially  in a  deregulated  environment,  uncertainties  with  respect to the
implementation  and  effect  of the  Telecommunications  Act of 1996,  including
potential  litigation  seeking to modify or  overturn  the order of the  Federal
Communications  Commission  implementing  such act,  or  portions  thereof,  the
ongoing  ability of the Company to deploy its phones in favorable  locations and
the Company's ability to continue to implement  operational  improvements.  Such
factors and others are set forth more fully in the Company's  1996 Annual Report
on Form  10-K,  Quarterly  Reports on Form 10-Q and the  consolidated  financial
statements and notes there to appearing elsewhere in this report.
 
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 56.8 %
and 59.5% of total  consolidated  revenues for the quarters ended March 31, 1997
and 1996, respectively.  Coin revenue decreased 1.1% to $17.9 million during the
quarter ended March 31, 1997, compared to the same period in 1996. The Company's
average installed public pay telephone base was approximately  38,400 phones and
38,300  phones  for the three  month  periods  ended  March  31,  1997 and 1996,
respectively.  Coin  revenue  on a per  phone  basis  decreased  by 1.3% for the
quarter  ended March 31, 1997,  respectively,  as compared to the same period in
1996.  The decrease in coin revenue is primarily  attributable  to a decrease in
the number of days in February  1997 (28) as  compared  to  February  1996 (29).
After  adjusting for the difference in number of days,  coin revenue,  per phone
basis,  remained  relatively  consistent  during  the first  quarter  of 1997 as
compared to the same period in the prior year.

     While  the  Company's  coin  revenue  on a per  phone  basis  has  remained
relatively  consistent,  the Company believes that the number of coin calls made
at its public pay  telephones may remain flat or decrease over time. The Company
believes that the decreases will primarily  result from among other things,  the
increased usage of alternative  methods of calling such as prepaid calling cards
and wireless  technologies  and the  operation of more public pay  telephones in
closer  proximity to the  Company's  telephones.  The Company also believes that
these decreases may be offset,  over time, by increases in local coin call rates
as  a  result  of  potential  regulatory  changes,  although  there  can  be  no
assurances.

     On November  8, 1996,  the Federal  Communications  Commission  (the AFCC@)
issued  its final  order on  reconsideration  (the  AOrder@)  setting  forth and
affirming regulations implementing Section 276 of the federal Telecommunications
Act of 1996,  previously  issued on September 20, 1996. As a result of an appeal
of the Order, the ultimate  implementation  and details of the Order are subject
to the outcome of an action  pending  before the United  States Court of Appeals
for the  District of Columbia.  See  "Business - Public Pay  Telephone  Industry
Overview" and "Business - Regulation"  appearing in the Company's  Form 10-K for
the year ended  December 31, 1996.  The  regulations  in the Order,  among other
things,  set forth a plan for the  deregulation  of local coin calling  rates by
October 1997. The Order allows states to request  modification or exemption from
deregulation upon a detailed showing in


 
                                        8

<PAGE>

support of such  request by the state.  Although  neither  the  Company  nor the
industry can predict exactly what will happen in such a deregulated environment,
trends  indicate  that  there  should  be a move  by the  public  pay  telephone
operators toward increased local coin calling rates in states where deregulation
is  implemented.  This trend is  evidenced  by the fact that five states  (Iowa,
Nebraska,  Wyoming,  Michigan  and South  Dakota)  have  deregulated  local coin
calling rates and four of those five states now have local coin calling rates of
$0.35.  In addition,  Illinois and Wisconsin,  although still under  regulation,
have also increased their local coin calling rates to $0.35 through  approval of
rate/tariff applications filed by pay telephone operators in such states.

     Non-coin  revenue is derived from  calling  card calls,  credit card calls,
collect calls and third-party  billed calls placed from the Company's public pay
telephones and inmate telephones.  The Company currently uses AT&T to act as its
primary national operator service  provider.  When the call is completed through
the third-party  operator service  provider,  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.  In May 1996,  AT&T began paying a specified per call amount for interLATA
(800) dial around calls as opposed to a percentage  of the revenue  generated by
those calls.  The Company  estimates that the impact on non-coin  revenue of the
change in the  compensation  structure under the AT&T contract was a decrease of
approximately $1.4 million for the three months ended March 31, 1997.

     In  addition to the change in  compensation  under the AT&T  contract,  the
Company is continuing  to experience a shift in call traffic from 0+ calls,  for
which the Company receives a percentage of the revenue generated by those calls,
to access code calls for which the Company receives a flat rate per phone or per
call  compensation   amount.   Due  to  aggressive   advertising   campaigns  by
long-distance  companies  promoting  the use of access code  calls,  the Company
believes  that the  decrease  in  non-coin  revenue  due to the  changes in call
traffic patterns is likely to continue.  Subject to possible  changes  resulting
from the appeal of the Order,  these decreases in non-coin revenue are currently
being  offset by changes in the amount of  compensation  received by the Company
for access code calls as well as (800)  subscriber  calls, as required under the
Order.  The Order  mandates  dial around  compensation  to public pay  telephone
providers for both types of calls at a flat-rate of $45.85 per pay telephone per
month  beginning  November  6, 1996.  This flat rate will be  effective  through
October  1997, at which time,  compensation  will begin on a per call basis at a
rate of $0.35  per  call or such  other  rate  negotiated  by the pay  telephone
provider and the carriers.

     Non-coin  revenue  represented  approximately  43.2 % and  40.5%  of  total
revenues from  continuing  operations  for the quarters ended March 31, 1997 and
1996, respectively. For the quarter ended March 31, 1997, revenues from non-coin
calls increased 10.6% to  approximately  $13.7 million,  compared to the quarter
ended March 31, 1996. This increase was primary  attributable to the increase in
compensation received for dial-around calls as a result of the implementation of
the  Order,  partially  offset by (i) the change in the  Company's  compensation
structure under the AT&T contract discussed above, and; (ii) the decrease in the
number of inmate telephone lines operated by the Company. During the three month
period  ended March 31,  1997,  the Company  operated an average of 1,700 inmate
telephone lines compared to approximately 2,100 during the same period of 1996.

     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 paid to Local Exchange Carriers
which  include  the 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  and
correctional  facilities  for  revenues  generated by the  Company's  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


 
                                        9

<PAGE>


operating  expenses were  approximately  82.3% and 84.9% of total  revenues from
continuing   operations  for  the  quarters  ended  March  31,  1997  and  1996,
respectively.

     Telephone  charges  decreased  as  a  percentage  of  total  revenues  from
continuing operations to 29.0% for the quarter ended March 31, 1997, compared to
32.3% for the same  period in 1996.  The  decrease  in  telephone  charges  as a
percentage  of total  revenue can be  primarily  attributed  to the  increase in
non-coin revenue related to dial-around compensation earned in the first quarter
of 1997 for which no telephone  charges are incurred.  In addition,  the Company
continues to experience  decreased  telephone  charges as a result of regulatory
changes and competition within the local/intraLATA service market.

     Commissions  as a percentage of total revenues from  continuing  operations
for the three months ended March 31, 1997  increased to  approximately  27.7% as
compared  to 27.1% for the same  period  of the  prior  year.  The  increase  in
commissions  as a  percentage  of revenues  for the three  months was  primarily
attributable  to an increase in  commission  rates paid in  connection  with the
Atlanta Hartsfield  International Airport account and increased commission rates
for new and renewed  contracts due to increasing  competition  in the public pay
telephone and inmate telephone markets.
 
     Field service and  collection  expenses as a percentage  of total  revenues
from  continuing  operations were 15.9% and 15.7% for the first quarters of 1997
and  1996,  respectively.   Field  service  and  collection  expenses  increased
approximately  4.7% to approximately $5.0 million for the first quarter of 1997,
as compared to the same period in 1996. This increase was primarily attributable
to  additional  costs  incurred  for the  addition  of  certain  key  operations
employees who are needed to implement certain  initiatives which are intended to
result in  achieving  further  operational  efficiencies.  Selling,  general and
administrative expenses were constant at approximately $3.0 million for both the
first quarter of 1997 and 1996.

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 for
public  pay  telephones  and a  five-year  useful  life for  inmate  telephones.
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 twenty
years.  Depreciation and amortization  increased to $6.2 million for the quarter
ended  March 31,  1997,  compared  to $5.8  million for the same period in 1996,
primarily attributable to additional amortization expense related to acquisition
and renewal costs of location contracts.

Operating Loss

     Operating   losses  for  the  three   months  ended  March  31,  1997  were
approximately  $0.6 million as compared to $1.2 million for the first quarter of
1996.

Interest Expense
 
     For the first  quarter of 1997,  interest  expense was  approximately  $3.3
million which is relatively consistent with interest expense in the same quarter
in 1996.

Gain on Disposal of Prepaid Calling Card and International Telephone Centers

     The three  months  ended  March 31,  1996  includes a gain on  disposal  of
prepaid calling card and international  telephone centers of approximately  $0.3
million  received in  connection  with the sale of the  Company's  international
telephone  center  operations  and  approximately  $0.3  million  recognized  in
connection  with the  merger  of  Global  Link  Teleco  Corporation  and  Global
Telecommunications Solutions, Inc.


 
                                       10

<PAGE>

Other

     Other   expense  for  the  three  months  ended  March  31,  1996  includes
approximately  $0.6 million of severance  obligations  incurred under employment
agreements with certain key executives.

Benefit from Income Taxes
 
     The Company  recorded  valuation  allowances  for 100% of the  deferred tax
assets generated from operating losses. The Company recorded deferred tax assets
and deferred tax asset  valuation  allowances of  approximately  $1.5 million as
compared  to $1.7  million for the three  months  ended March 31, 1997 and 1996,
respectively.

Net Loss from Continuing Operations before Extraordinary Item
 
     The  Company had a net loss from  continuing  operations  of  approximately
$(3.9)  million and $(4.5) million for the three months ended March 31, 1997 and
1996, respectively.

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 was  approximately  $5.6 million for the
quarter  ended March 31,  1997,  compared to $4.6 million for the same period in
1996.  The  increase  in  EBITDA  is  attributable   to  increased   dial-around
compensation, partially offset by decreased compensation received under the AT&T
contract and the decrease in the Company's  installed  base of inmate  telephone
lines, as noted above. 

Liquidity and Capital Resources
 
     During the first  quarter of 1997,  the  Company  continued  to finance its
operations  from operating cash flow. For the three months ended March 31, 1997,
the Company's  operating cash flow was $(5.8) million compared to $(1.3) million
for the same period in 1996.  The decrease in the Company's  operating cash flow
is  primarily  attributable  to an increase  of  approximately  $4.8  million of
accounts receivable related to the accrual of dial-around compensation.
 
     The Company's net working capital was  approximately  $0.4 million,  with a
current  ratio of 1.0 to 1, at  March  31,  1997.  This is  consistent  with the
Company's liquidity position at December 31, 1996.

During March 1997,  the Company  executed an amendment to the Fourth Amended and
Restated Loan and Security  Agreement  increasing  the credit  facility to $20.0
million.  The interest rate on balances  outstanding  under the credit  facility
vary based upon the leverage ratio  maintained by the Company.  All  outstanding
principal  balances  are due in full in 2000.  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  assets  and  contains  certain  restrictive
covenants  which,  among other things,  require the Company to maintain  certain
cash flow levels and interest coverage ratios and places certain restrictions on
the payment of dividends.  At March 31, 1997, the Company was in compliance with
the amended covenants and had no amounts borrowed under the facility.


 
                                       11

<PAGE>


Based  upon  current  expectations,  the  Company  believes  that cash flow from
operations, together with amounts which may be borrowed under the amended credit
facility,  will be  adequate  for it to meet its working  capital  requirements,
pursue its business  strategy and service its obligations with respect to its 12
1/4% Senior Notes,  although there can be no assurances  that it will be able to
do so.

     The  preceding  forward  looking  information  is  subject  to a variety of
factors and uncertainties,  including the impact of competition on the Company's
operations, the ultimate implementation and effect of the Telecommunications Act
of 1996,  the ongoing  ability of the Company to deploy its phones in  favorable
locations and to continue to implement operational improvements.


 
                                       12

<PAGE>


Part II       OTHER INFORMATION

Item 4.       Submission of Matters to a Vote of Security Holders

At the Company's  Special Meeting of Shareholders  held on February 14, 1997 and
adjourned to, and reconvened on, March 7, 1997, the  shareholders of the Company
voted:

     1. to amend the Company's Restated Certificate of Incorporation, as amended
(the  "Charter"),  in order to increase the number of  authorized  shares of the
Company's common stock to 75,000,000  shares and the number of authorized shares
of the Company's preferred stock to 5,000,000 shares;

     2. to amend the  Charter to permit  the  Company  to grant  preemptive  and
preferential rights to acquire shares of the Company's capital stock pursuant to
contractual agreements;

     3. to ratify  the grant of certain  stock  options  granted  outside of the
Company's stock option plans.

     The number of votes on each  proposal  cast for,  against,  abstaining  and
broker non-votes was as follows:

                            For         Against     Abstain    Broker Non-Votes
                        ------------  ----------- -----------  ----------------

a)  Proposal One        10,024,036     3,026,655     61,230          -
b)  Proposal Two         9,641,669     3,389,442     79,585          -
c)  Proposal Three       9,673,007     2,591,008     63,891          -

Item 6. Exhibits and Reports on Form 8-K
 
(a)     Exhibits:

Exhibit       Description

27            Financial Data Schedule

(b)     Reports on Form 8-K:

        None




 
                                       13
<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 thereunto duly authorized.


                                       PEOPLES TELEPHONE COMPANY, INC.
                                       ----------------------------------------
                                       Registrant


Date:    May 14, 1997                  /s/  Bonnie S. Biumi
                                       ----------------------------------------
                                       Bonnie S. Biumi
                                       Chief Financial Officer