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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C., 20549
_____________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
_______________________
Date of Report (Date of
Earliest event reported): March 30, 1998
OPTEL, INC.
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(Exact name of registrant as specified in its charter)
Delaware 95-4495524
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
333-24881
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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) 634-3800
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ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
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On March 30, 1998, the Registrant issued the press releases attached hereto
as Exhibit "A" announcing Registrant's second quarter fiscal 1998 results.
ITEM 7. EXHIBITS
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Press Release, dated March 30, 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: April 1, 1998
OpTel, Inc.
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(Registrant)
By: /s/ BERTRAND BLANCHETTE
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Name: Bertrand Blanchette
Title: Chief Financial Officer
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EXHIBIT INDEX
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Exhibit
No. Description Page No.
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20 Press Release, dated March 30, 1998
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EXHIBIT 20
[LOGO OF OPTEL APPEARS HERE]
OPTEL, INC REPORTS RESULTS FOR SECOND QUARTER AND FIRST HALF OF FISCAL 1998
POSITIVE EBITDA FOR OPTEL
DALLAS, March 30, 1998 - OpTel, Inc ("OpTel") today announced its unaudited
financial results for the second quarter and the first half of the fiscal year
ending August 31, 1998 ("fiscal 1998"). Operating and financial highlights (in
thousands of dollars where appropriate) are set out below.
OPERATING HIGHLIGHTS - COMPARED TO SECOND QUARTER OF FISCAL 1997
UNITS UNDER CONTRACT
. Over 433,000 units under contract, up 48%
. 40% increase in units under contract for cable television from 265,518 to
372,138
. 123% increase in units under contract for telecommunications from 27,373 to
61,082
CUSTOMER NUMBERS
. Cable television customers up 38% to 172,643
. Telecommunications lines up 38% to 8,319 lines
PENETRATION
. Cable television penetration up 1.7 percentage points from 52.2% to 53.9%
. Telecommunications lines penetration up 5.5 percentage points from 41.8% to
47.3%
<TABLE>
<CAPTION>
Three Months Ended
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February November Percent February Percent
-------- -------- ------- -------- -------
28, 1998 30, 1997 increase 28, 1997 increase
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<S> <C> <C> <C> <C> <C>
FINANCIAL HIGHLIGHTS
TOTAL REVENUE 14,639 12,252 19.5% 9,546 53.4%
Cable television 13,774 11,473 20.1% 8,834 56.0%
Telecommunications 865 779 11.0% 712 21.5%
EBITDA 107 (1,485) - (1,490) -
</TABLE>
Commenting on the Company's results, Louis Brunel, President and Chief Executive
Officer, said:
"Over the last year I was pleased to report strong growth in each quarter. I am
excited by a further continuation of this excellent performance in all areas of
the Company. We have achieved a great deal in the last year, increasing
revenues by over a half and enlarging our contract base by almost the same
amount. I am particularly pleased with the speed and efficiency with which we
have managed this tremendous growth. As a result of the synergy benefit and
cost control we became EBITDA positive during this last quarter, fulfilling
another of our promises to the financial community."
1
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Mr Brunel continued "I am particularly proud of the fast and efficient manner in
which we successfully integrated Phonoscope into our business and the positive
results from this acquisition are already beginning to show themselves. As a
result of a strong core management infrastructure we were able to absorb this
acquisition with a negligible increase in SG&A costs. We have successfully
reduced our SG&A expenses to a little over 50% of revenues, compared with 70%
one year ago. I am excited by the opportunity which the proposed acquisition of
the majority of the ICS assets gives us for further positive and rapid growth.
These results demonstrate that our focussed strategy is having a significant and
positive impact on our business."
OpTel is the largest provider of private cable television services to residents
of MDU developments in the United States and is expanding the telecommunications
services it offers to MDU residents. The Company provides cable television
services and (in certain markets) telecommunications services, to MDU residents
principally under long term contracts with owners of MDUs in eleven major cities
(Houston, Dallas - Fort Worth, San Diego, Phoenix, Chicago, Denver, San
Francisco, Los Angeles, Miami - Ft. Lauderdale, Tampa and Austin). OpTel is
majority owned by Le Groupe Videotron Ltee ("GVL"), owners of the second largest
cable television operator in Canada.
# # #
For further information, please contact:
Bertrand Blanchette
Chief Financial Officer
214-637-8716
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OpTel, Inc
FINANCIAL RESULTS FOR THE SECOND QUARTER OF FISCAL 1998
TOTAL REVENUES. Total revenues for the second quarter of fiscal 1998 increased
by $5.1 million or 53% to $14.6 million compared to revenues of $9.5 million
for the first quarter of fiscal 1997. Compared to the preceding quarter, total
revenues increased by 19% from $12.3 million.
CABLE TELEVISION. Cable television revenues in the second quarter of fiscal
1998 increased by $5.0 million, or 56%, to $13.8 million from $8.8 million in
the comparable period in fiscal 1997, reflecting both a 38% increase in the
number of customers and a 15% increase in the average monthly revenue per
customer which rose from $23.9 in the second quarter of fiscal 1997 to $27.5 in
the second quarter of fiscal 1998. Compared to the previous quarter revenue per
customer increased by 5% from $26.3. This increase results from a combination of
rate increases, a change in mix of customers to favor the cities with higher
revenues per customer and, over the last year, increased premium revenues as the
Company's pay to basic ratio improved substantially from 68.5% to 83.9%. The
Company also continued to grow basic penetration which increased by 1.7
percentage points compared to the second quarter of fiscal 1997. The slight
reduction in penetration compared to the previous quarter is not considered to
be indicative.
TELECOMMUNICATIONS. Telecommunications revenues in the second quarter of
fiscal 1998 increased by 21% to $0.9 million, from $0.7 million in the
comparable period in the preceding year. The Company enjoyed a respectable rise
in telecommunication lines penetration over the comparable period rising 5.5
percentage points to 42.3%. In Houston the Company has almost completed its
conversion of properties previously served by PBXs to the central office switch.
In addition, the Company is currently testing a further central office switch in
Dallas and commercial launch is expect in May 1998. The Company is also
reviewing a series of alternatives for rapid switch deployment in other markets.
The reduction in average monthly telephone revenue to $41.6 in the second
quarter of fiscal 1998 from $51.3 in the second quarter of the preceding year is
largely due to an increase in the proportion of total telephone lines supplied
to student accommodation (from 25% of total lines to 35%) where usage is
substantially lower than average and has been decreasing. As the number of
telephone lines is increased management expect the influence of the lower usage
contract to be substantially reduced. After adjusting for this lower usage
contract the average monthly revenue per customer increased over the period to
$56.4, despite having made substantial rate reductions in fiscal 1997 in line
with general market trends. The increase in revenue per subscriber from the
previous quarter is partly due to the increase in revenue generated by the
conversion of subscribers to the central office switch.
COST OF SERVICES. Gross margins improved by 1.1 percentage points over the same
period last year, reflecting an increase in basic cable margins, an improvement
of telecommunications margins in respect of customers served by the Houston
central office switch, partially offset by an increase in the penetration of
lower margin premium services.
EXPENSES. Expenses (customer support, general and administrative expenses) were
$7.9 million for the second quarter of fiscal 1998 compared to $6.6 million in
the second quarter of fiscal 1997. The increase in customer support, general and
administrative expenses was in line with the Company's budget and was largely
due to an increase in personnel associated with the expansion of the Company's
operations and recruitment for the roll out of the Company's telecommunications
services. Despite the considerable increase in the scale of the business,
management has exercised tight control and the level of expenses have been
constant over the last three quarters.
EBITDA. Tight expense control combined with a sharp increase in revenues
resulted in the Company reporting break even EBITDA results this quarter. The
Company's EBITDA for the quarter amounted to $107,000, compared to negative
EBITDA of $1.5 million in the preceding quarter and a similar level of negative
EBITDA in the comparable quarter of the preceding year. The Company's management
believes this is a sustainable positive trend.
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OpTel, Inc
FINANCING. Interest expense (net of interest income and amounts capitalized)
was $11.1 million for the second quarter of fiscal 1998, an increase of $6.3
million over net interest expense of $4.8 million for the second quarter of
fiscal 1997, reflecting the increase in the Company's net debt incurred
principally to fund the build out of its network. In December 1997 the Company
executed a $150 million senior credit facility with a syndicate of lenders in
order to provide for its financial needs for approximately the next eighteen
months. Under the terms of this facility $125 million was drawn down at closing
of the facility and placed on deposit. Debt, net of cash and amounts held in
escrow under the terms of the Company's Senior Notes due 2005, amounted to
$169.4 million at February 28, 1998. This amount excludes $139.2 million of
convertible debt payable to the parent Company which will be shortly converted
into preferred shares.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
February May 28, August 31, November February
28,1997 1997 1997 30, 1997 28,1998
Cable television
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<S> <C> <C> <C> <C> <C>
Units under contract 265,518 280,683 295,149 361,873 372,138
As a % of market (Note 1) 10.6% 11.2% 11.8% 14.5% 14.9%
Units passed 239,801 252,481 254,032 314,744 320,288
Basic subscribers 125,090 134,147 132,556 170,646 172,643
Penetration 52.2% 53.1% 52.2% 54.2% 53.9%
Pay to basic ratio (Note 2) 68.5% 69.9% 72.7% 85.2% 83.9%
Average monthly revenue per subscriber (Note 3) $ 23.9 $ 25.0 $ 25.0 $ 26.3 $ 27.5
Telecommunications
---------------------------------------------- -------- -------- -------- -------- --------
Units under contract 27,373 29,934 39,831 49,938 61,082
As a % of market (Note 1) 1.1% 1.2% 1.6% 2.0% 3.4%
Units passed 14,416 15,248 16,572 17,120 17,551
Subscribers 4,791 5,080 6,825 6,922 6,932
Lines 6,039 6,403 8,190 8,306 8,319
Penetration (subscribers) 33.3% 33.3% 41.2% 40.4% 39.4%
Penetration (lines) 41.8% 41.9% 49.4% 48.5% 47.3%
Average monthly revenue per subscriber (Note 3) $ 51.3 $ 53.2 $ 40.3 $ 37.8 $ 41.6
-------- -------- -------- -------- --------
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Notes:
1. Based on an estimated 2.5 million units in MDUs with greater than 150 units
located in the Company's markets as estimated by REIS Reports Inc and
updated using Company estimates as necessary
2. 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.
3. Calculated quarter by quarter
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OpTel, Inc
<TABLE>
<CAPTION>
UNAUDITED STATEMENT OF OPERATIONS
(US$ IN THOUSANDS - UNDER US GAAP)
QUARTER ENDED SIX MONTHS ENDED
FEBRUARY 28, FEBRUARY 28,
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES
Cable Television $ 13,774 $ 8,835 $ 25,247 $ 17,208
Telecommunications 865 711 1,644 1,413
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14,639 9,546 26,891 18,621
Cost of services (6,654) (4,437) (12,419) (8,701)
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Gross profit 7,985 5,109 14,472 9,920
General operating expenses (7,878) (6,599) (15,850) (12,267)
-------- -------- -------- --------
EBITDA 107 (1,490) (1,378) (2,347)
Depreciation and amortization (5,753) (3,061) (10,759) (5,820)
Net interest expense (12,112) (4,849) (21,885) (8,126)
-------- -------- -------- --------
NET LOSS $(17,758) $ (9,399) $(34,022) $(16,293)
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</TABLE>
<TABLE>
<CAPTION>
UNAUDITED CONSOLIDATED BALANCE SHEETS
(US$ in thousands - under US GAAP) FEBRUARY 28,
1998 1997
<S> <C> <C>
ASSETS
Cash and short term investments $129,542 $135,015
Restricted investments 54,509 79,803
Property, Plant & Equipment 203,778 122,041
Other assets 117,342 80,822
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Total $505,171 $417,681
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LIABILITIES & STOCKHOLDERS' EQUITY
Accounts payable & other liabilities $ 26,166 $ 19,357
Drawn portion of long term bank debt 125,000 -
Notes payable & deferred acquisition liabilities 228,423 227,331
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Total liabilities 379,589 246,688
Convertible Notes payable to stockholder 139,244 121,006
Stockholders' Equity (13,662) 49,987
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Stockholders' Equity and other capital contributions 125,582 170,993
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Total $505,171 $417,681
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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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