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): July 28, 1997
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-27192 52-1930707
(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File No.) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address of principal executive offices)
(303) 626-7000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events
On July 28, 1997, Ascent Entertainment Group, Inc. ("Ascent" or the
"Company") issued a press release reporting its second quarter 1997 financial
results. A copy of the release is attached hereto as Exhibit 20 and incorporated
herein by reference.
In addition, in a teleconference call with investors on July 28, 1997 to
discuss the attached press release, Ascent also discussed the distribution
agreements for the film, Air Force One, which was produced by Ascent's wholly
owned subsidiary, Beacon Communications Corp. ("Beacon"). As previously
disclosed in Ascent's Annual Report on Form 10-K for 1996, Air Force One is
being distributed domestically pursuant to Beacon's development, production and
domestic distribution agreement with Sony Pictures Entertainment, Inc. ("Sony"),
and it is being distributed internationally pursuant to Beacon's agreement with
Buena Vista International, Inc., a division of the Walt Disney Company
("Disney"). Pursuant to the domestic distribution agreement with Sony, Sony and
Beacon co-financed approximately one-half of the total production cost of the
film and Beacon and Sony will share in all domestic revenues subject to Sony
recouping its releasing expenses, certain overhead expenses and a nominal
distribution fee. Pursuant to the international distribution agreement with
Disney, Disney advanced a majority of the total production cost of the film and
is entitled to charge a modest distribution fee, and recoup its advance and its
international releasing expenses, after which Beacon retains the remainder of
the international revenues subject to the participation interests of Harrison
Ford and Wolfgang Peterson. In addition, Beacon has retained the copyright to
the film and pursuant to the foregoing distribution agreements Sony's domestic
distribution rights for the film continue until the later of 14 years or the end
of the film's second television syndication cycle (but in no event later than 23
years) and Disney's foreign distribution rights continue in perpetuity.
After describing the distribution agreements, on the teleconference call
Ascent discussed a model that could be used to estimate Ascent's possible
financial results from the film. This proprietary model incorporates assumptions
based on historical trends and confidential terms of the domestic and foreign
distribution agreements for the film to estimate total domestic and foreign
theatrical, video, pay and network television and other revenues based solely on
the reported amounts of gross domestic box office receipts. The assumptions in
the model are confidential and proprietary, were developed specifically for this
film, would not be applicable to any other film and were not disclosed in the
teleconference call.
Based on the model, Ascent stated that it could estimate that it would
eventually receive sufficient revenues from all sources to break even on its
investment in the film if the film achieved domestic box office receipts of
approximately $70 million. In other words, domestic box office receipts of $70
million would be indicative that eventual revenues to Ascent from all sources
would allow Ascent to recoup its investment in the film. Furthermore, Ascent
stated that, based on the model, eventual revenues to Ascent from all sources in
excess of Ascent's investment in the film could be estimated as approximately
40% of domestic box office receipts in excess of $70 million. For example, if
the film were to reach $100 million in domestic box office receipts, then an
estimate of the eventual revenues to Ascent from all sources in excess of
Ascent's investment would be approximately 40% of $30 million, or approximately
$12 million.
The estimates contained in the preceding paragraph are based on
proprietary and confidential assumptions which management of Ascent believes are
reasonable, but there can be no assurance that these assumptions will be
accurate. To the contrary, certain of the assumptions are based on entertainment
and economic trends which are subject to change and cannot be predicted with
certainty. Actual results can and will vary from those described in the
preceding paragraph, and may vary materially.
Item 7. Financial Statements and Exhibits
(c) Exhibits (listed according to the number assigned in Item 601 of
Regulation (S-K).
Exhibit No. Description
20 Press Release dated July 28, 1997
Some of the statements in this Form 8-K are forward-looking and relate to
anticipated future operating results. Forward-looking statements are based upon
Ascent's management's current assumptions, which may be affected by subsequent
developments and business conditions, and necessarily involve risks and
uncertainties. Therefore, there can be no assurance that actual future results
will not differ materially from anticipated results. Readers should refer to
Ascent's other disclosure documents filed with the Securities and Exchange
Commission, including the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1996 and Quarterly Report on Form 10-Q for the fiscal
quarter ended March 31, 1997, for specific details on some of the factors that
may affect operating results.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Ascent Entertainment Group, Inc.
By:/s/ Arthur M. Aaron
Arthur M. Aaron
Vice President, Business and Legal Affairs
Date: July 29, 1997
<PAGE>
Exhibit Index
Exhibit No. Description
20 Press Release of Ascent Entertainment
Group, Inc. dated July 28, 1997
<PAGE>
EXHIBIT 20
Ascent Entertainment Reports Record 2nd Quarter EBITDA & 56 Percent Higher
Revenues
"Air Force One" Breaks Several Box Office Records
For Release 7:30 a.m. NYT
Monday, July 28, 1998
Contact: Media: Media & Analysts: Analysts
Paul Jacobson Karen Amrhine Jim Cronin
Ascent Sard, Verbinnen Ascent
(303) 626-7060 (212) 687-8080 (303) 626-7010
Denver, Colo. Ascent Entertainment Group, Inc. (NASDAQ:GOAL) today reported
second quarter earnings before interest, taxes, depreciation and amortization
(EBITDA) of $16.4 million, a record amount and an increase of 80 percent
compared to $9.1 million for the second quarter of 1996. Revenues for the second
quarter 1997 were a $87.6 million, up 56 percent from 1996 second quarter
revenues of $56.0 million. The company reported a net loss for the 1997 second
quarter of $9.8 million, or $0.33 per common share, compared with a net loss of
$6.3 million, or $0.21 per common share, for the second quarter of 1996.
"A solid quarter --Ascent generated record EBITDA and strong revenue growth
during the quarter," said Charlie Lyons, chairman and CEO of Ascent. "Now, with
the spin off from COMSAT complete, Ascent will sharpen its focus on creating
shareholder value. The integration of SpectraVision is on course and our new
feature film Air Force One has been launched and already set several box office
records."
Air Force One, starring Harrison Ford and produced by Ascent's Beacon
Communications, opened Friday and led the weekend domestic box office by earning
$37.1 million, the biggest opening ever for an R-rated movie. Additionally, Air
Force One is the biggest opening ever for the second half (July 4 weekend
onward) of the summer movie-going season and is the biggest opening ever for
Harrison Ford. Revenues from Air Force One will not begin to be reported until
the third quarter of 1997.
The increase in second quarter revenues was due to a larger room installation
base at Ascent's 57 percent-owned On Command Corporation, resulting primarily
from the acquisition of SpectraVision, Inc. assets in October 1996. The
quarter-to-quarter EBITDA increase is attributable to On Command and an improved
EBITDA margin at the Colorado Avalanche. The increase in the net loss is
primarily due to increased losses incurred at On Command and the Denver Nuggets
and an increase in financing costs at both On Command and Ascent.
MultiMedia Distribution
Second quarter 1997 revenues for this segment, which includes On Command
Corporation and Ascent Network Services, were $61.2 million, up 69 percent from
$36.3 million in the comparable 1996 quarter. Second quarter EBITDA for this
segment was $18.7 million, up 24 percent from $15.1 million in the second
quarter of 1996. The segment reported an operating loss for the 1997 second
quarter of $3.4 million compared to an operating profit of $1.9 million in the
second quarter of 1996.
Revenues increased due to a higher installed room base at On Command resulting
primarily from the acquisition of SpectraVision, Inc. assets as well as the
continued growth of the On Command Video (OCV) room base. Movie revenues from
the SpectraVision acquired assets were $20.1 million in the second quarter of
1997. The increase in the operating loss in the second quarter is attributable
to increased depreciation expense due to the significant capital expenditures
made by OCV during the past 12 months as it increased its room base, an increase
in depreciation relating to the SpectraVision in-room assets and the
amortization of goodwill arising from the SpectraVision transaction.
As of June 30, 1997, On Command's room installation base was 921,000. The total
number of on-demand rooms was 733,000. The number of scheduled pay-per-view
rooms was 188,000. One year earlier, On Command had total installed rooms of
419,000, consisting entirely of OCV's on-demand rooms. Shortly after the quarter
ended, On Command sold contracts to provide guest services in approximately
70,000 hotel rooms to Skylink Cinema Corporation. All of the rooms sold were not
sufficiently compatible with On Command's target hotel profile. Although there
will be a modest revenue decrease in the third quarter, On Command expects
operating profitability to increase as a result of the sale and the conversion
of satellite-delivered pay-per-view to less expensive land based systems.
Entertainment
Second quarter 1997 revenues for this segment, which includes the NHL Colorado
Avalanche, the NBA Denver Nuggets and Beacon Communications, increased 34
percent to $26.4 million from $19.7 million in the second quarter of 1996. In
the second quarter of 1997 Beacon received revenue of $6.8 million from the
delivery of the motion picture Playing God to its distributors. In addition,
while the Colorado Avalanche realized increased revenues from their
participation in the 1997 Stanley Cup playoffs in spite of two less home playoff
games, these increases were substantially offset by declining revenues from the
Denver Nuggets, primarily due to a decrease in attendance and two less home
games during the quarter compared to the same period last year. The segment's
operating loss of $4.2 million for the 1997 second quarter compares to a $6.0
million loss in the second quarter of 1996. This decreased loss is attributable
to an improvement in the operating margins from the Avalanche partially offset
by an increase in operating losses at the Nuggets which are attributable to
higher operating costs and lower revenues.
Ascent Consolidated
Interest expense for the second quarter of 1997 was $5.6 million compared to
$2.0 million in the second quarter of 1996. This increase is attributable to the
additional borrowings incurred during 1996 and the first half of 1997 for
capital expenditures, investment requirements (primarily the assumption of debt
in the SpectraVision transaction) and the funding of operating requirements of
Ascent and its subsidiaries. In conjunction with the SpectraVision transaction,
Ascent Entertainment and On Command each obtained new credit facilities that
were subsequently amended in March of 1997 to modify certain provisions of the
facilities.
Ascent's effective tax benefit rate in the second quarter of 1997 decreased to
15 percent as compared to an effective tax benefit rate of 30 percent in the
second quarter of 1996. This decline in the company's effective tax benefit rate
is primarily due to the losses incurred by On Command during the second quarter
of 1997, in which no tax benefit was recognized due to uncertainties regarding
On Command's ability to realize a portion of the benefits associated with future
deductible temporary differences (deferred tax assets) and net operating loss
carry forwards prior to their expiration.
Cash and Liquidity
Cash and cash equivalents increased $4.8 million in the quarter to $14.8
million. Bank borrowings under the $140.0 million Ascent credit facility and the
$150.0 million On Command credit facility have increased $33.0 million in total
since year end 1996 to a total of $226.0 million at June 30, 1997, primarily due
to continued capital expenditures at On Command to support business growth and
for the operating requirements of Ascent. If Ascent does not commence
construction on the proposed Denver arena project prior to August 31, 1997, the
Ascent credit facility will be in default. In addition, the Company may only
renew the Ascent credit facility for an additional two years beyond October 9,
1997 if, before that date, Ascent has received $50.0 million in subordinated
debt financing. Although Ascent management believes progress in negotiations
with the City and County of Denver on the Denver arena project has been made,
Ascent will not be able to break ground by August 31, 1997. Ascent is continuing
discussions with its lenders to obtain an extension of time past August 31 by
which it would need to commence construction on the arena. Although management
believes these discussions will be successful, there can be no assurances that
other contingencies will not arise which could impact Ascent's ability to reach
final agreements with its lenders and obtain the additional subordinated
financing or that such financing will be available on terms acceptable to
Ascent.
Other
On June 27, 1997, COMSAT Corporation completed the spin-off of Ascent as a
tax-free dividend to its shareholders. The spin-off was intended, among other
things, to afford Ascent more flexibility in obtaining debt financing to meet
its growing needs without regard to certain capital structure and debt financing
restrictions imposed by COMSAT. As a result, Ascent's financial leverage may
increase in the future subject to the resolution of the bank financing issues
discussed above. In addition, pursuant to the distribution agreement between
Ascent and COMSAT which governs the transaction, certain restrictions have been
put in place to protect the tax-free status of the spin-off. Among the
restrictions, Ascent will not be allowed to sell or otherwise issue stock or
instruments convertible into stock of Ascent until one year after the date of
the spin-off.
As a result of the spin-off, Ascent is no longer part of COMSAT's consolidated
tax group and, accordingly, Ascent may be unable to recognize tax benefits and
will not receive cash payments from COMSAT resulting from Ascent's anticipated
operating losses during the second half of 1997.
Ascent Entertainment Group's principal business is providing pay-per-view
entertainment and information services through its 57 percent-owned On Command
Corporation. In addition, Ascent is involved in other entertainment-related
businesses including ownership and operation of the NBA Denver Nuggets and NHL
Colorado Avalanche, and Beacon Communications, a motion picture and television
production company.
Some of the statements in this news release are forward-looking and relate to
anticipated future operating results. Forward-looking statements are based on
Ascent management's current expectations and assumptions, which may be affected
by subsequent developments and business conditions, and necessarily involve
risks and uncertainties. Therefore, there can be no assurance that actual future
results will not differ materially from anticipated results.
Readers should refer to Ascent's disclosure documents filed with the Securities
and Exchange Commission, including the company's 1996 form 10-K and the form
10-Q for the first quarter of 1997 for specific details on some of the factors
that may affect operating results.
###
For a menu of Ascent Entertainment Group's news releases available by fax 24
hours (no charge) or to retrieve a specific release, please call 1-800-758-5804,
ext. 152850, or access the address http://www.prnewswire.com on the internet.
<PAGE>
<TABLE>
ASCENT ENTERTAINMENT GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(Dollar amounts in millions, except per share information)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues $87.6 $56.0 $177.5 $128.4
Operating expenses 71.2 46.9 159.2 107.5
Depreciation and amortization 25.2 16.0 50.6 31.7
Loss from operations (8.8) (6.9) (32.3) (10.8)
Interest expense (5.6) (2.0) (10.2) (3.6)
Other income (expense), net 0.2 0.1 0.4 (0.2)
Loss before taxes
and minority interest (14.2) (8.8) (42.1) (14.6)
Income tax benefit 2.1 2.6 7.3 4.4
Loss before minority interest (12.1) (6.2) (34.8) (10.2)
Minority interest in (income)
loss of subsidiary 2.3 (0.1) 7.4 (0.3)
Net loss ($9.8) ($6.3) ($27.4) ($10.5)
EBITDA $16.4 $9.1 $18.3 $20.9
Net loss per common share ($0.33) ($0.21) ($0.92) ($0.35)
EBITDA per share $0.55 $0.31 $0.62 $0.70
Weighted average number 29.8 29.8 29.8 29.8
of common shares
outstanding
</TABLE>
<PAGE>
<TABLE>
ASCENT ENTERTAINMENT GROUP, INC.
SELECTED FINANCIAL DATA
UNAUDITED
(Dollar amounts in millions, except for rooms data)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES:
Multimedia Distribution $61.2 $36.3 $118.3 $ 71.5
Entertainment 26.4 19.7 59.2 56.9
Total $87.6 $56.0 $177.5 $128.4
EBITDA:
Multimedia Distribution $18.7 $15.1 $30.4 $29.8
Entertainment (1.1) (3.2) (8.9) (3.9)
General & Administrative (1.2) (2.8) (3.2) (5.0)
Total $16.4 $9.1 $18.3 $20.9
OPERATING INCOME (LOSS):
Multimedia Distribution ($3.4) $1.9 ($13.1) $4.1)
Entertainment (4.2) (6.0) ($16.0) (9.9)
General & Administrative (1.2) (2.8) (3.2) (5.0)
Total ($8.8) ($6.9) ($32.3) ($10.8)
Other Data (at end of period):
Total Number of Guest-pay rooms
On-demand 733,000 419,000
Schedule only 188,000 0
921,000 419,000
June 30, Dec. 31,
1997 1996
Balance Sheet Data:
Total Debt Outstanding $226.0 $193.0
</TABLE>
