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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of
Earliest event reported): October 21, 1998
OPTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 90-4495524
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) number)
333-24891
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(Commission File Number)
1111 West Mockingbird Lane, Suite 1000, Dallas, Texas 75247
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 634-3000
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ITEM 5: OTHER MATERIALLY IMPORTANT EVENTS
On October 21, 1998, the Registrant issued the press release attached
hereto as Exhibit "A" announcing Registrant's financial results for its fiscal
year ended August 31, 1998.
ITEM 7. EXHIBITS
Press Release, dated October 21, 1998.
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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.
Date: October 21, 1998
OpTel, Inc.
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(Registrant)
By:/s/ MICHAEL E. KATZENSTEIN
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Name: Michael E. Katzenstein
Title: Vice President, Legal Affairs,
General Counsel and
Secretary
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EXHIBIT INDEX
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Exhibit
No. Description Page No.
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99 Press Release dated October 21, 1998
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OPTEL, INC. ANNOUNCES $200 MILLION OFFERING OF SENIOR NOTES
Dallas, Texas - June 12, 1998 - Optel, Inc. ("Optel") today announced that it
intends to offer $200 million gross proceeds of its Senior Notes due 2008.
The proceeds of the Notes will be used to refinance the Company's Senior Credit
Facility and for capital expenditures related to the purchase and installation
of communications equipment and for general corporate purposes, including
working capital related to its expansion into new markets.
The Senior Notes will not be registered under the Securities Act of 1933, as
amended, and may not be offered or sold in the United States absent
registration or an applicable exemption therefrom.
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OpTel, Inc
[OPTEL LOGO]
OPTEL, INC REPORTS RESULTS FOR FOURTH QUARTER AND FULL FISCAL YEAR 1998
OPTEL FIRMLY ESTABLISHES ITSELF AS PREEMINENT INDUSTRY LEADER
DALLAS, October 21, 1998 - OpTel, Inc ("OpTel") today announced its financial
results for the fourth quarter and for the full year ended August 31, 1998
("fiscal 1998"). Operating and financial highlights (in thousands of dollars
where appropriate) are as follows:
OPERATING HIGHLIGHTS - COMPARED TO 1997
UNITS UNDER CONTRACT
o 527,293 units under contract, up 57.4%
o 46.7% increase in units under contract for cable television from 295,149
to 432,955
o 136.8% increase in units under contract for telecommunications from 39,831
to 94,338
CUSTOMER NUMBERS
o Cable television customers up 63.1% to 216,249
o Telecommunications lines up 49.5% to 9,244
PENETRATION
o Cable television penetration up 2.0 percentage points from 52.2% to 54.2%
o Telecommunications lines penetration 25.9%
<TABLE>
<CAPTION>
Three Months Ended
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August 31, May 31, Percent February 8, Percent
1998 1998 increase 1998 increase
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<S> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
TOTAL REVENUE 20,047 18,025 11% 14,639 37%
Cable television 18,886 16,948 11% 13,774 37%
Telecommunications 1,161 1,077 8% 865 34%
EBITDA 632 1,042 -39% 107 491%
</TABLE>
Commenting on the Company's results, Louis Brunel, President and Chief
Executive Officer, said:
"I am very pleased with our growth over the last two years. Since 1996, we have
more than doubled the size of our company and today, with 527,293 total units
under contract, we are larger than all of the other major private cable
operators combined. In our territories, we enjoy a 15% cable market share (in
our target markets of MDU's greater than 150 units) and we are rapidly growing
our telephone business. We more than doubled the units we have under contract
for phone to 94,338 and are positioned to capture a significant portion of the
residential MDU phone market. In 1998, we launched two Lucent 5-ESS switches in
Houston and Dallas and have plans to deploy six additional switches in 1999.
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OpTel, Inc
In 1998 we continued our explosive growth and closed two major acquisitions: ICS
and Phonoscope. During the most recent quarter our efforts were focused on the
high yield note offering and the integration of the ICS operations. I am
pleased to report that we successfully integrated ICS's consented customer base
into our call center in Dallas and converted all of their consented customers
to OpTel's billing system. These activities slowed our growth during the
quarter, but positioned us to aggressively attack the marketplace in 1999."
Commenting on the Company's 1998 financing activities Brunel added:
"During the fourth quarter we completed our second high yield note offering and
retired our Senior Credit Facility. I believe that the successful consummation
of this financing, particularly in light of the market conditions at the time
of pricing, is indicative of the financial community's support for our
efforts. As a result our funding is secure for fiscal 1999."
OpTel is a leading network based provider of integrated communications
services, including local and long distance telephone and cable television
services, to residents of multiple dwelling units in the United States. The
Company currently provides cable television and telecommunications services in
several metropolitan areas including Los Angeles, San Diego, San Francisco,
Phoenix, Denver, Houston, Dallas-Fort Worth, Austin, Chicago, Indianapolis,
Atlanta, Miami-Ft. Lauderdale, Tampa, and Orlando. OpTel is majority owned by
Le Groupe Videotron Ltee ("GVL"), owner of the second largest cable television
operator in Canada.
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For further information, please contact:
Andy Jent
Treasurer
214-879-8257
2
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OpTel, Inc
FINANCIAL RESULTS FOR THE FULL YEAR AND FOURTH QUARTER OF FISCAL 1998
TOTAL REVENUES. Total revenues for 1998 increased by $25.1 million or 63.1% to
$65.0 million. Compared to the fourth quarter of the previous year total
revenues increased by $9.3 million or 86.9% to $20.0 million. Sequentially,
from the quarter ended May 31, 1998 total revenues increased by 11.2% from
$18.0 million.
CABLE TELEVISION. Cable television revenues for 1998 increased by $24.2 million
or 65.5% to $61.1 million. Compared to the fourth quarter of the previous year,
cable television revenues increased by $8.9 million, or 88.9%, to $18.9 million.
This increase reflects a 63.1% increase in the number of subscribers and a 16.5%
increase in the average monthly revenues per subscriber which rose $4.11 from
$24.94 to $29.05. These increases result from a combination of rate increases,
a change in the mix of customers from bulk to retail, a shift in mix to the
cities with higher revenues per customer and, over the last year, increased
premium revenues as the Company's pay to basic the ratio improved substantially
from 71.8% to 84.5%. The Company also continued to grow basic penetration,
which increased by 2.0 percentage points compared to the fourth quarter of 1997.
TELECOMMUNICATIONS. Telecommunications revenues for 1998 increased by $1.0
million or 32.9% to $3.9 million. Compared to the fourth quarter of the
previous year, telecommunications revenue increased by $.4 million or 61.1%, to
$1.2 million. These revenue increases are mainly due increases in the number of
lines in each of the respective periods. Compared to the third quarter of
fiscal 1998 revenue per line decreased $4.54 because of certain launch incentive
programs in conjunction with the Company's CLEC offering.
PROGRAMMING, ACCESS FEES AND REVENUE SHARING. Programming, access fees and
revenue sharing for 1998 increased by $9.6 million or 50.1% to $28.8 million.
Compared to the fourth quarter of the previous year, programming, access fees
and revenue sharing rose 66.0% to $8.6 million. Substantially all of the
increased cost is attributed to the subscriber growth mentioned above.
EXPENSES. Expenses (customer support, general and administrative expenses) for
1998 increased $6.9 million or 23.9% to $35.8 million. Compared to the fourth
quarter of the previous year, expenses increased 18.9% to $10.8 million. As a
percent of revenues, expenses for the year declined from 72.6% to 55.2%. The
increase in overall SG&A expenses was largely due to an increase in personnel
associated with the increase in the number of subscribers and for the roll out
of the Company's telecommunications services.
EBITDA. The Company's EBITDA for 1998 was $0.3 million compared to a negative
$8.3 million in 1997. Compared to fourth quarter of the previous year, EBITDA
increased by $4.2 million to $0.6 million, from a negative $3.6 million.
NET INTEREST EXPENSE. Net interest expense increased $13.8 million or 53.7% to
$39.6 million. Compared to the fourth quarter of the previous year, net
interest expense increased 15.5% to $10.1 million. The increases in net
interest expense for both periods can be attributed to the Company's additional
indebtedness associated with its Senior Credit Facility which was retired in
July of 1998 and its 11.5% Senior notes due 2008 which were issued in July of
1998.
EXTRAORDINARY LOSS. The Company incurred an extraordinary loss of $6.6 million
in 1998. This loss can be directly attributed to the repayment of the Senior
Credit Facility, which was retired in July of 1998. Included in the
extraordinary loss are $5.3 million for write off of debt issue costs and $1.3
million associated with the prepayment penalty.
CAPITAL EXPENDITURES. Capital Expenditures for 1998 relating to property and
intangibles increased by $141.4 million (including $75.6 million of non-cash
acquisition cost) to $218.5 million. Excluding acquisitions, 1998 capital
expenditures increased $29.2 million. For the fourth quarter of 1998 the
Company incurred $35.1 million in capital expenditures.
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OpTel, Inc
FINANCIAL & OPERATIONAL DATA
<TABLE>
<CAPTION>
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August 31, November 30, February 28, May 31, August 31,
1997 1997 1998 1998 1998(1)
CABLE TELEVISION
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<S> <C> <C> <C> <C> <C>
Units under contract (Note 2) 295,149 361,873 372,138 431,387 432,955
As a % of market (Note 3) 9.9% 12.1% 12.5% 14.4% 14.4%
Units passed 254,032 314,744 320,288 397,281 399,210
Basic subscribers 132,556 170,646 172,643 217,106 216,249
Penetration 52.2% 54.2% 53.9% 54.6% 54.2%
Pay to basic ratio (Note 4) 71.8% 85.2% 83.9% 86.7% 84.5%
Average monthly revenue per subscriber (Note 5) $ 24.94 $ 26.30 $ 27.57 $ 27.74 $ 29.05
TELECOMMUNICATIONS
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Units under contract 39,831 49,938 61,082 89,731 94,338
As a % of market (Note 3) 1.3% 1.7% 2.0% 3.0% 3.1%
Units passed 16,572 17,120 17,551 33,131 35,671
Lines 6,185 6,262 6,375 7,700 9,244
Penetration (lines) 37.3% 36.6% 36.3% 23.2% 25.9%
Average monthly revenue per line (Note 5) $ 47.23 $ 41.70 $ 43.64 $ 50.63 $ 46.09
========== ========= ============ ========= ==========
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</TABLE>
1. These figures include 16,232 units under contract (15,156 cable and 1,076
telephone) for which owner consents have to be delivered by ICS. These
figures include 8,317 cable television customers and 254 telecommunication
lines for which owner consents have to be delivered by ICS. Although
consents for these properties have not been received, the Company services
these units and receives the revenue for these customers.
2. Units under contract represents the number of units currently passed and
additional units for with respect to which the Company has entered into
Rights of Entry for the provision of cable television and telecommunication
services, respectively, but which the Company has not yet passed and which
the Company expects to pass within the next five years.
3. Based on an estimated 3.0 million units (as of March 25, 1998) in MDU's
with greater than 150 units located in the Company's markets as estimated
by REIS Reports Inc and updated using Company estimates as necessary.
4. In common with most other cable television providers the Company has
revised the method of reporting premium penetration to include all premium
units in the calculation. Historically the calculation excluded premium
channels that were provided to customers as part of an expanded basic line
up or other special arrangements.
5. Represents average monthly revenue per the average number of basic
subscribers/lines for the fiscal periods ended as of the date shown.
4
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OpTel, Inc
STATEMENT OF OPERATIONS
($'S IN THOUSANDS)
<TABLE>
<CAPTION>
Quarter Ended Year Ended
August 31 August 31
1998 1997 1998 1997
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REVENUES
<S> <C> <C> <C> <C>
Cable Television $ 18,886 $ 10,000 $ 61,081 $ 36,915
Telecommunications 1,161 720 3,882 2,922
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Total revenues 20,047 10,720 64,963 39,837
OPERATING EXPENSES:
Programming, access
fees and revenue
sharing (8,612) (5,186) (28,825) (19,202)
General operating
expenses (10,803) (9,084) (35,847) (28,926)
Depreciation and
amortization (10,049) (4,571) (28,481) (14,505)
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Total Operating
Expenses (29,464) (18,841) (93,153) (62,633)
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LOSS FROM OPERATIONS (9,417) (8,121) (28,190) (22,796)
OTHER
Net interest expense (10,104) (8,746) (39,564) (25,739)
Extraordinary loss
on debt extinguishment (6,644) (6,644)
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NET LOSS $ (26,165) $ (16,867) $ (74,398) $ (48,535)
========= ========= ========= =========
Earnings attributable
to preferred stock (4,680) -- (8,748) --
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NET LOSS ATTRIBUTABLE
TO COMMON EQUITY $ (30,845) $ (16,867) $ (83,146) $ (48,535)
========= ========= ========= =========
CONSOLIDATED BALANCE SHEETS
($'S IN THOUSANDS)
August 31,
1998 1997
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ASSETS
Cash and short term investments $ 123,774 87,305
Restricted Investments 63,207 67,206
Property, Plant & Equipment 268,044 160,442
Intangibles 160,370 82,583
Other assets 11,775 5,880
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Total $ 627,170 $ 403,416
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LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 37,116 $ 24,874
Convertible Notes payable to stockholder -- 129,604
Notes payable & deferred acquisition liabilities 429,278 228,573
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Total liabilities 466,394 383,051
Stockholders' Equity 160,776 20,365
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Total $ 627,170 $ 403,416
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</TABLE>
The foregoing includes certain forward looking statements that are identified by
words such as "expect" and similar expressions. Achievement of such expectations
is subject to various risks and uncertainties, including, among others, the
availability of additional financing on a timely basis and on reasonable terms,
obtaining various regulatory approvals and successful management of the
Company's expansion plans.
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