UNITED STATES
SECURITIES AND EXCHANGE COMMISISION
Washington, D.C. 20549
_____________________________
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from___________to___________
333-24881
(Commission file number)
_____________________________
OPTEL, INC.
(Exact name of Registrant as specified in its charter)
_____________________________
DELAWARE OPTEL, INC. 95-4495524
1111 W. MOCKINGBIRD LANE
DALLAS, TEXAS 75247
(214) 634-3800
(State or other juris- (Name, address, including (I.R.S. Employer
diction of incorporation Zip code of Identification No.)
or organization) principal executive offices)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days
Yes X No
--- ---
COMMON STOCK AS OF DECEMBER 31, 1997
Common Stock Authorized Issued and Outstanding
CLASS A COMMON STOCK, $.01 PAR VALUE 8,000,000 -
CLASS B COMMON STOCK, $.01 PAR VALUE 6,000,000 2,353,498
CLASS C COMMON STOCK, $.01 PAR VALUE 300,000 225,000
OPTEL, INC.
QUARTERLY PERIOD ENDED NOVEMBER 30, 1997
CONTENTS
PAGE
PART I - FINANCIAL INFORMATION............................................ 1
ITEM 1. FINANCIAL STATEMENTS............................................. 1
UNAUDITED CONSOLIDATED BALANCE SHEETS................................ 1
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS...................... 2
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS...................... 3
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY............. 4
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS............. 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS..................................................... 6
BUSINESS............................................................. 6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS............................................ 7
PART II - OTHER INFORMATION............................................... 10
ITEM 1. LEGAL PROCEEDINGS........................................... 10
ITEM 2. CHANGES IN SECURITIES....................................... 10
ITEM 3. DEFAULTS UPON SENIOR SECURITIES............................. 10
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 10
ITEM 5. OTHER INFORMATION........................................... 10
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............................ 10
SIGNATURES................................................................ 10
OPTEL, INC.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
UNAUDITED CONSOLIDATED BALANCE SHEETS
NOVEMBER 30, AUGUST 31,
1997 1997
----------- ---------
(IN THOUSANDS)
ASSETS
Cash and cash equivalents $ 30,231 $ 87,305
Restricted investments 68,186 67,206
Accounts receivable, net 4,757 4,044
Prepaid expenses, deposits and other assets 2,014 1,836
Property and equipment, net 185,398 160,442
Intangible assets, net 108,575 82,583
-------- --------
TOTAL $399,161 $403,416
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 12,994 $ 7,927
Accrued expenses and other liabilities 14,946 13,969
Deferred revenue and customer deposits 3,251 2,978
Convertible notes payable to stockholder 134,451 129,604
Notes payable and long-term obligations 222,399 221,653
Deferred acquisition liabilities 7,025 6,920
-------- --------
Total liabilities 395,066 383,051
COMMITMENTS AND CONTINGENCIES - -
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value;
1,000,000 shares authorized;
none issued and - -
Class A common stock, $.01 par value;
8,000,000 shares authorized;
none issued and outstanding - -
Class B common stock, $.01 par value;
6,000,000 shares authorized;
2,353,498 issued and outstanding 24 24
Class C common stock, $.01 par value;
300,000 shares authorized;
225,000 issued and outstanding 2 2
Additional paid-in capital 97,683 97,683
Accumulated deficit (93,614) (77,344)
-------- --------
Total stockholders' equity 4,095 20,365
-------- --------
TOTAL $399,161 $403,416
======== ========
See notes to the Unaudited Consolidated Financial Statements
1
OPTEL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
----------- -----------
(IN THOUSANDS)
REVENUES:
Cable television $ 11,473 $ 8,374
Telecommunications 779 702
-------- -------
Total revenues 12,252 9,076
OPERATING EXPENSES:
Cost of services 5,765 4,265
Customer support, general and administrative 7,977 5,668
Depreciation and amortization 5,006 2,760
-------- -------
Total operating expenses 18,748 12,693
-------- -------
LOSS FROM OPERATIONS (6,496) (3,617)
OTHER (EXPENSE) INCOME
Interest expense on convertible notes
payable to stockholder (4,847) (3,102)
Other interest expense (6,897) (178)
Interest income 1,970 3
-------- -------
NET LOSS $(16,270) $(6,894)
======== =======
NET LOSS PER COMMON SHARE $ (6.31) $ (2.99)
======== =======
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 2,578 2,304
======== =======
See notes to the Unaudited Consolidated Financial Statements
2
OPTEL, INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
NOVEMBER 30, NOVEMBER 30,
1997 1996
------------ ------------
(IN THOUSANDS)
OPERATING ACTIVITIES:
Net loss $(16,270) $ (6,894)
Adjustments to reconcile net loss to net
cash flow used in operating activities:
Depreciation and amortization 5,006 2,760
Non cash interest expense 5,171 3,198
Increase (decrease) in cash from changes in
operating assets and liabilities, net of
effect of business combinations:
Accounts receivable (607) (461)
Prepaid expenses, deposits and other assets (208) (654)
Deferred revenue and other liabilities (153) 81
Accounts payable and accrued expenses 5,984 (422)
-------- --------
Net cash flows provided by (used in) operating
activities (1,077) (2,392)
-------- --------
INVESTING ACTIVITIES:
Purchases of businesses (35,825) (2,500)
Acquisitions of intangible assets (3,938) (2,537)
Purchases of restricted investments (980) -
Purchases and construction of property and equipment (14,975) (6,726)
-------- --------
Net cash flows used in investing activities (55,718) (11,763)
-------- --------
FINANCING ACTIVITIES:
Proceeds from convertible notes - 16,000
Payments on notes payable and long-term obligations (279) (139)
-------- --------
Net cash flows provided by (used in) financing
activities (279) 15,861
-------- --------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (57,074) 1,706
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 87,305 1,677
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 30,231 $ 3,383
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 112 $ 89
======== ========
Increase in capital lease obligations $ 806 $ 196
======== ========
See notes to the Unaudited Consolidated Financial Statements
3
OPTEL, INC.
UNAUDITED CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
CLASS B COMMON STOCK CLASS C COMMON STOCK
------------------------- ---------------------
ADDITIONAL
SHARES SHARES PAR PAID-IN ACCUMULATED
OUTSTANDING PAR VALUE OUTSTANDING VALUE CAPITAL DEFICIT
Balance at September 1, 1997 2,353 $ 24 225 $ 2 $ 97,683 $ (77,344)
Net loss - - - - - (16,270)
----------- --------- ----------- ----- ---------- -----------
Balance at November 30, 1997 2,353 $ 24 225 $ 2 $ 97,683 $ (93,614)
=========== ========= =========== ===== ========== ===========
See notes to the Unaudited Consolidated Financial Statements
4
OPTEL, INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management,
the unaudited consolidated financial statements contain all adjustments,
consisting solely of adjustments of a normal recurring nature, necessary to
present fairly the financial position, results of operations and cash flows
for the periods presented. Operating results for the three month period
ended November 30, 1997 are not necessarily indicative of the results that
may be expected for the entire fiscal year or any other interim period.
2. NET LOSS PER COMMON SHARE
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share", which is effective for periods ending after December 15, 1997,
requires that companies disclose basic earnings per share using only the
weighted average number of common shares outstanding during a period.
Currently common stock equivalents are included in the computation if they
are material. Fully diluted earnings per share will continue to be
calculated in a manner similar to the current calculation. Compliance with
SFAS No. 128 will have no significant impact on the Company's earnings
per share.
3. ACQUISITION OF PHONOSCOPE
On October 27, 1997, the Company purchased the residential cable television
and associated fiber optic network assets of Phonoscope Ltd. and the
stock of several affiliated entities (collectively "Phonoscope"). The
operations of Phonoscope are in Houston, Texas. The purchase price consisted
of $36.5 million in cash and was recorded as a purchase acquisition. At
November 30, 1997, the allocation of the purchase price is recorded on a
preliminary basis and is subject to adjustment.
4. SUBSEQUENT EVENT
In December 1997 the Company, through subsidiaries, secured a $150 million
senior secured credit facility (the "Senior Facility") from a syndicate
of financial institutions which will be used to fund future development.
The Senior Facility consists of a term loan in the amount of $125
million (funded on December 15, 1997) bearing interest at LIBOR plus
3.5% and a $25 million revolving credit commitment. The Senior Facility
is secured by a first fixed and floating lien on substantially all of
the assets of the Company and its subsidiaries. Availability under the
Senior Facility will be subject to the Company meeting certain
performance criteria and the Company is subject to customary covenants
that include, among others, limitations on incurrence of additional
indebtedness, limitations on certain payments, investments and
distributions and limitations on liens and on certain asset sales.
5
OPTEL, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BUSINESS
OpTel, Inc. ("OpTel" or the "Registrant" or the "Company") is the largest
provider of private cable television services to residents of multiple dwelling
unit developments ("MDUs") in the United States and is expanding the
telecommunications services it offers to MDU residents. The Registrant provides
cable television and, where currently offered, telecommunications services to
MDU residents principally under long term contracts ("Rights of Entry") with
owners of MDUs. The Registrant's Rights of Entry are generally for a term of
ten to fifteen years (five years for Rights of Entry with condominium
associations). The weighted average unexpired term of the Registrant's cable
television Rights of Entry was approximately seven years as of November 30,
1997. The Registrant currently provides cable television services in the
metropolitan areas of Houston, Dallas - Fort Worth, San Diego, Phoenix, Chicago,
Denver, San Francisco, Los Angeles, Miami - Ft Lauderdale, Tampa and Austin.
The Registrant also provides telecommunications services as a residential
competitive local exchange carrier ("CLEC") in Houston and as a shared tenant
services ("STS") reseller in Houston, Dallas - Fort Worth, Austin, Denver, Los
Angeles and Miami - Ft. Lauderdale.
For regulatory purposes the Registrant is considered to be a private cable
television operator in most of the markets it serves. Private cable television
operators deliver video services to consumers without hard-wire crossings of
public rights of way. Consequently, private cable operators are not required to
obtain cable television franchises and are subject to considerably less
regulatory oversight than are traditional franchise cable television operators.
As a result, they have significant latitude in terms of system coverage, pricing
and customized delivery of services to selected properties. The Registrant has
no universal service obligations and generally does not incur capital costs to
build its networks until it has entered into Rights of Entry from which it
reasonably expects to build an appropriate customer base.
The Registrant offers a full range of multichannel video programming
(including basic and premium services) which the Registrant believes is
competitive in both content and pricing with the programming packages offered by
its major competitors. The Registrant currently provides its telecommunications
services as a residential CLEC in Houston using its own class 5 central office
telephone switch and in other markets as an STS operator through private branch
exchange ("PBX") switches. The Registrant offers customers access to telephone
services comparable in scope and price to those provided by the incumbent local
exchange carrier and long distance carrier. The Registrant's telecommunications
strategy includes replacing its PBX switches with its own networked central
office switches.
The Registrant invests in networks because it believes that networks provide
the optimal mechanism for delivering bundled cable television and
telecommunications services. The Registrant's networks use technologies that
are capable of bi-directional transmission. The Registrant provides its
networked video programming to MDUs principally through 18-Gigahertz microwave
("18GHz") and fiber optic networks and non-networked programming through
Satellite Master Antenna Television ("SMATV") systems. As of November 30, 1997,
approximately 69% of the 314,744 units passed for cable television are served
by the Registrant's networks. These networks generally provide up to 72
channels of video programming. The Registrant intends to convert substantially
all of its SMATV systems to 18GHz or fiber optic networks by the end of fiscal
2000. The Registrant's networks will also facilitate delivery of voice signal
from each MDU to the central office switches intended to be deployed by the
Registrant in its major markets. The Registrant intends to license additional
spectrum, which it currently anticipates principally will be in the 23-Gigahertz
("23GHz") band, which it will use to provide bi-directional voice transmission.
OpTel was incorporated in the State of Delaware in July 1994, as the
successor to a Delaware corporation that was founded in April 1993. The
Registrant's principal offices are located at 1111 W. Mockingbird Lane, Dallas,
Texas 75247, and its telephone number is (214) 634-3800.
OpTel is majority owned by Le Groupe Videotron Ltee ("GVL"), owners of the
second largest cable television operator in Canada. Key members of the
Registrant's management team gained considerable experience in developing and
operating cable television and combined cable television/telecommunications
businesses while serving as executives of GVL and its affiliates in Canada and
GVL's former affiliates in the United Kingdom.
6
OPTEL, INC.
INTRODUCTION
Set forth below is a discussion of the financial condition and results of
operations of the Registrant for the three months ended November 30, 1997 (the
"first quarter of fiscal 1998"). This discussion should be read in conjunction
with the Unaudited Consolidated Financial Statements and notes thereto for the
three months ended November 30, 1997 included herein and the Registrant's Form
10-K for the fiscal year ended August 31, 1997. References to fiscal years are
to OpTel's fiscal years which end on August 31 of each calendar year.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain unaudited
information derived from the Registrant's Unaudited Consolidated Statements of
Operations, included herein, expressed as a percentage of total revenues:
THREE MONTHS ENDED
NOVEMBER NOVEMBER
30 30
1997 1996
-------- --------
STATEMENT OF OPERATIONS DATA:
REVENUES:
Cable television 93.6% 92.3%
Telecommunications 6.4 7.7
-------- --------
Total revenues 100.0 100.0
OPERATING EXPENSES:
Cost of services 47.0 47.0
Customer support, general and administrative 65.1 62.5
Depreciation and amortization 40.9 30.4
-------- --------
Total operating expenses 153.0 139.9
-------- --------
Loss from operations (53.0) (39.9)
Interest Expense, net (79.8) (36.1)
-------- --------
Net loss (132.8)% (76.0)%
======== ========
OTHER DATA:
EBITDA (12.1)% (9.4)%
======== ========
EBITDA represents loss from operations before interest, income taxes, and
depreciation and amortization.
THREE MONTHS ENDED NOVEMBER 30, 1997 COMPARED WITH THREE MONTHS ENDED NOVEMBER
30, 1996
TOTAL REVENUES. Total revenues for the first quarter of fiscal 1998
increased by $3.2 million or 35% to $12.3 million compared to revenues of
$9.1 million for the first quarter of fiscal 1997. Compared to the preceding
quarter total revenues increased by 15% from $10.7 million. Of this latter
increase, approximately $0.8 million is attributable to the acquisition of
Phonoscope in Houston which was consummated on October 27, 1997.
7
OPTEL, INC.
CABLE TELEVISION. Cable television revenues in the first quarter of fiscal
1998 increased by $3.1 million, or 37%, to $11.5 million from $8.4 million in
the comparable period in fiscal 1997, reflecting both a 41% increase in the
number of customers and a 16% increase in the average monthly revenue per
customer which rose from $22.70 in the first quarter of fiscal 1997 to $26.30 in
the first quarter of fiscal 1998. The increase in revenue per customer resulted
from a combination of rate increases following property upgrades, a change in
mix of customers to favor the cities with higher revenues per customer and
increased premium revenues as the Registrant's pay to basic ratio improved from
64.7% to 85.2%. 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. The Registrant also continued to grow basic
penetration which increased by 2.3 percentage points compared to the first
quarter of fiscal 1997 and by almost 2 percentage points over the preceding
quarter.
TELECOMMUNICATIONS. Telecommunications revenues in the first quarter of
fiscal 1998 increased by 11% to $0.8 million, from $0.7 million in the
comparable period in the preceding year and increased by 8% on the preceding
quarter. The Registrant has chosen not to promote its telecommunications
services in advance of the planned roll out of its own switching capacity,
except in Houston where the Registrant recently installed and launched its own
central office telephone switch. In Houston the Registrant is currently in the
process of linking properties previously served by PBXs to the central office
switch. While this conversion process is taking longer than originally
expected, substantially all of the Houston PBX properties are expected to be
converted to the central office switch by the end of March 1998.
The reduction in average monthly telephone revenue per customer to $37.80 in
the first quarter of fiscal 1998 from $54.80 in the first quarter of the
preceding year is largely due to an increase in the proportion of total
telephone lines supplied to student accommodation 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 lower usage contracts the average
monthly revenue per customer increased over the period to $55.80, despite having
made substantial rate reductions in fiscal 1997 in line with general market
trends. The Company is currently in the process of installing a central office
telephone switch in Dallas and is reviewing a series of alternatives for rapid
switch deployment in other markets.
OPERATING EXPENSES AND MARGINS. Gross margins, which represent total
revenues less cost of services, remained flat over the period at around 53%,
resulting from an increase in basic cable margins offset by an increase in the
penetration of lower margin premium services. Compared to the preceding quarter,
gross margins improved from 51.6%.
Expenses (customer support, general and administrative expenses) were $8.0
million for the first quarter of fiscal 1998 compared to $5.7 million in the
first quarter of fiscal 1997. The increase in customer support, general and
administrative expenses was in line with the Registrant's budget and was largely
due to an increase in personnel associated with the expansion of the
Registrant's operations and recruitment for the roll out of the Registrant's
telecommunications services.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
$5.0 million for the first quarter of fiscal 1998, an increase of $2.2 million
over depreciation and amortization expense of $2.8 million for the first quarter
of fiscal 1997. The increase is proportional to the increased capital
expenditures for the continuing construction of the Registrant's cable
television and telecommunications networks.
LOSS FROM OPERATIONS AND EBITDA. Loss from operations increased from $3.6
million in the first quarter of fiscal 1997 to $6.5 million in the first quarter
of fiscal 1998. As a result of controlling expenses while increasing revenues
the Registrant's negative EBITDA declined from $2.4 million (before one-time
charges) in the preceding quarter to $1.5 million. In addition the full
impact of the results of Phonescope have not been realized as Phonescope was
only included for one month during the quarter. Compared to the comparable
period of the preceding year EBITDA losses increased from $0.9 million to $1.5
million, largely due to the expansion of the Company's operations in
anticipation of the roll out of telecommunications services. Negative EBITDA
represented 12.1% of total revenues for the quarter ended November 30, 1997
compared to 9.4% of total revenues for the quarter ended November 30, 1997.
INTEREST AND INCOME TAXES. Interest expense (net of interest income and
amounts capitalized) was $9.8 million for the first quarter of fiscal 1998, an
increase of $6.5 million over net interest expense of $3.3 million for the first
8
OPTEL, INC.
quarter of fiscal 1997, reflecting the increase in the Registrant's debt
incurred principally to fund the build out of its network.
The Registrant recorded no income tax expense for the first quarter of
fiscal 1998. The Registrant has significant tax loss carryforwards which can be
carried forward for up to fifteen years and does not anticipate paying any
income taxes for the next several years. Deferred tax assets are fully reserved
because realization is uncertain.
LIQUIDITY AND CAPITAL RESOURCES
The Registrant has generated net losses since its inception, resulting in an
accumulated deficit of $93.6 million as of November 30, 1997. During the past
year, the Registrant has required external funds to finance capital expenditures
associated with the completion of acquisitions in strategic markets, expansion
of its networks and operating activities. Net cash used in building the
Registrant's cable television and telecommunications networks and related
business activities was $55.9 million for the first three months of fiscal 1998
(including $36 million for the adquisition of Phonoscope) and $ 11.8 million for
the first three months of fiscal 1997.
From inception and until the issuance of the Senior Notes, Registrant relied
primarily on investments from GVL, its principal stockholder, in the form of
equity and convertible notes (the "Convertible Notes') to fund its operations.
Convertible Notes due to GVL (including accrued interest) amounted to $134.5
million at November 30, 1997. None of the Registrant's stockholders or
affiliates are under any contractual obligation to provide additional financing
to the Registrant. In February, 1997, the Registrant issued the Senior Notes
along with 225,000 shares of non - voting Class C Common Stock for aggregate net
proceeds of $220.2 million. Of this amount approximately $79.6 million was
placed in an escrow account in order to cover the first six semi - annual
interest coupons on the Senior Notes and of which $68.2 million remained at
November 30, 1997. The Convertible Notes mature three months following the
maturity or indefeasible payment in full of the Senior Notes and are
subordinated in right of payment to the Senior Notes under certain
circumstances. In July 1997 the Registrant announced that it had successfully
completed an exchange offer where 100% of the Senior Notes were exchanged for
13% Senior Notes due 2005, Series B. The terms of the Notes are substantially
identical in all material respects (including interest rate and maturity) to the
Senior Notes except that the Series B Senior Notes do not contain certain
transfer restrictions and registration rights relating to the Senior Notes.
In December 1997 the Registrant executed an agreement with group of
financial institutions for a $150 million senior secured credit facility (the
"Senior Facility") which will be used to provide capital to fund future
development. The Senior Facility consists of a $125 million term loan (funded
on December 15, 1997) bearing interest at LIBOR plus 3.5% and a $25 million
revolving credit commitment. The Senior Facility is secured by a first fixed
and floating lien on substantially all of the assets of the Registrant.
Availability under the Senior Facility will be subject to the Registrant meeting
certain performance criteria and the Registrant is subject to customary
covenants that include, among others, limitations on additional indebtedness,
limitations on certain payments, investments and distributions and limitations
on liens and certain asset sales. The convertible notes are subordinated in
right of payment to payment in full of the Senior Facility.
The Registrant's future results of operations will be materially impacted by
its ability to finance its planned business strategies. In addition to the
existing sources of capital the Registrant expects it will need an additional
$235 million in financing over the next five years in order to maximize its
potential within its targeted markets in the United States. A considerable
proportion of OpTel's capital expenditure requirements is scaleable dependent
upon the number of ROE contracts that the Registrant signs. The capital
expenditure requirements will be larger or smaller depending whether OpTel is
able to achieve its expected market share amongst the potential MDUs in its
markets. The Registrant plans to raise future financings from additional
subordinated debt, a public equity offering and/or private equity infusions.
The foregoing estimates are based on certain assumptions, including the timing
of the signing of Rights of Entry, the conversion of MDUs currently served by
SMATV systems to the networks and the telecommunications roll out, each of which
may vary significantly from the Registrant's plan. There can be no assurance
that the Registrant will be successful in obtaining any necessary financing on
reasonable terms or at all.
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 REGISTRANT'S EXPANSION PLANS.
9
OPTEL, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
-------------
11. Statement of computation of per share earnings.
(b) Reports on Form 8-K
------------------------
[Phonoscope 8K]
SIGNATURES
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.
OPTEL, INC.
-----------
By: /s/ Bertrand Blanchette
--------------------------------------
(Signature)
BERTRAND BLANCHETTE
Chief Financial Officer
(Duly authorized officer and principal financial officer of the Registrant)
Date: January 13, 1998
10