<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
FORM 10-K/A
AMENDMENT TO APPLICATION OR REPORT
FILED PURSUANT TO SECTION 12, 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
COMMISSION FILE NO. 0-27192
ASCENT ENTERTAINMENT GROUP, INC.
(Exact name of registrant as specified in its charter)
Delaware 52-1930707
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Tabor Center
1200 Seventeenth Street, Suite 2800
Denver, Colorado 80202
(Address and Zip Code of principal executive offices)
Registrant's telephone number, including area code: (303) 626-7000
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
------------------- ------------------------
Common Stock, par value $.01 NASDAQ National Market
Securities registered pursuant to Section 12(g) of the Act: None.
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 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
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates of the
Registrant was $85.3 million based on a price of $14 7/8 per share, which was
the average of the bid and asked prices of such stock on March 1, 1996, as
reported on the NASDAQ National Market reporting system.
29,752,000 shares of Common Stock were outstanding on March 25, 1996.
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
FORM 10-K/A
FOR THE YEAR ENDED DECEMBER 31, 1995
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Annual Report on Form 10-K for
the fiscal year ended December 31, 1995 as set forth in the pages attached
hereto:
Part II
PAGE
Item 6. Selected Financial Data has been amended to reflect the
Company's restated historical financial statements and
also includes enhancements to the previous disclosures
contained therein. . . . . . . . . . . . . . . . . . . . . . . . . 2
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations has been amended
as a result of the restatement of the Company's
historical financial statements. . . . . . . . . . . . . . . . . . 4
Item 8. Financial Statements and Supplementary Data has been
amended to refer to the Company's restated financial
statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Part IV
Item 14: Exhibits, Financial Statement Schedules and Reports on
Form 8-K has been amended to include the Company's restated
historical financial statements. . . . . . . . . . . . . . . . . . 35
This Amendment No. 2 to the Company's Annual Report on Form 10-K/A is
being filed as a result of the Company's restatement of its consolidated
financial statements for the year ended December 31, 1995. To the extent
this amended filing is inconsistent with the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1995 as amended by Amendment No.
1 on Form 10-K/A (the "original filing"), the original filing is hereby
superseded and amended. To the extent the original filing is unaffected by
this restatement, the original filing has not been updated or corrected to
reflect events occurring subsequent to the date of the original filing.
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ITEM 6. SELECTED FINANCIAL DATA FOR THE REGISTRANT FOR EACH OF THE LAST FIVE
FISCAL YEARS.
Following is selected income statement data for the Company for the five
years ended December 31, 1995 and selected balance sheet data at December 31
of each of those years. As discussed in Note 16 to the Company's
Consolidated Financial Statements included in Item 8, the Company has
restated the consolidated financial statements for the year ended December
31, 1995.
FIVE YEAR FINANCIAL SUMMARY
(In thousands, except per share information)
<TABLE>
Year ended December 31,
-----------------------------------------------------------
Income Statement Data (1): 1991 1992 1993 1994 1995
------- -------- -------- -------- --------
(As Restated)
<S> <C> <C> <C> <C> <C>
Revenue:
Multimedia Distribution Revenue . . . . . $82,162 $ 81,093 $ 95,942 $120,536 $127,409
Entertainment Revenue . . . . . . . . . . -- 20,423 26,009 36,174 64,068(2)
------- -------- -------- -------- --------
Total Revenue . . . . . . . . . . . . . 82,162 101,516 121,951 156,710 191,477(2)
------- -------- -------- -------- --------
Operating expenses:
Cost of services. . . . . . . . . . . . . 59,740 72,894 82,268 98,686 144,335
Depreciation and amortization . . . . . . 16,797 22,386 27,227 38,820 53,675
General and administrative. . . . . . . . 2,716 7,089 7,967 9,203 10,002
Provision for restructuring . . . . . . . 15,318(3) -- -- 10,866(4)
------- -------- -------- -------- --------
Total operating expenses. . . . . . . . 79,253 117,687 117,462 146,709 218,878
------- -------- -------- -------- --------
Operating income (loss) . . . . . . . . . . 2,909 (16,171) 4,489 10,001 (27,401)
Other income (expense), net . . . . . . . . (7,456) (1,589) 18 695 (2,829)
Income tax benefit (expense). . . . . . . . 3,397 5,506 (2,416) (4,831) 9,835
Minority interest . . . . . . . . . . . . . -- 583 (362) (265) (628)
------- -------- -------- -------- --------
Income (loss) before cumulative effect
of accounting change. . . . . . . . . . . (1,150) (11,671) 1,729 5,600 (21,023)
Cumulative effect of accounting change
for income taxes. . . . . . . . . . . . . -- -- 941 -- --
------- -------- -------- -------- --------
Net income (loss) . . . . . . . . . . . . . $(1,150) $(11,671) $ 2,670 $ 5,600 $(21,023)
------- -------- -------- -------- --------
------- -------- -------- -------- --------
Weighted average number of common
shares outstanding (5). . . . . . . . . . 24,000 24,000 24,000 24,000 24,217
Net income (loss) per share (5) . . . . . . $(.05) $(.49) $.11 $.23 $(.87)
</TABLE>
2
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OTHER DATA:
<TABLE>
1991 1992 1993 1994 1995
-------- -------- -------- --------- -------------
(As Restated)
<S> <C> <C> <C> <C> <C>
Capital Expenditures:
MultiMedia Distribution . . . . . . . . . . $ 8,248 $ 17,700 $ 63,708 $ 89,073 $ 82,903
Entertainment . . . . . . . . . . . . . . . - 371 1,232 980 2,208
-------- -------- -------- --------- ---------
Total Capital Expenditures. . . . . . . . $ 8,248 $ 18,071 $ 64,940 $ 90,053 $ 85,111
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Cash Flow Data:
Net cash provided by
operating activities . . . . . . . . . . . . $ 16,913 $ 27,528 $ 27,713 $ 38,379 $ 52,009
Net cash used in
investing activities . . . . . . . . . . . . $(16,939) $(23,212) $(76,086) $(119,794) $(168,761)
Net cash provided by (used in)
financing activities . . . . . . . . . . . . $ 8,274 $ (3,512) $ 51,217 $ 81,554 $ 124,406
EBITDA: (6)
MultiMedia Distribution. . . . . . . . . . . $ 22,422 $ 31,227 $ 39,071 $ 53,031 $ 48,277
Entertainment. . . . . . . . . . . . . . . . - (2,695) 612 4,993 (1,135)
General & Administrative . . . . . . . . . . (2,716) (7,089) (7,967) (9,203) (10,002)
-------- -------- -------- --------- ---------
Total EBITDA . . . . . . . . . . . . . . . $ 19,706 $ 21,443 $ 31,716 $ 48,821 $ 37,140
-------- -------- -------- --------- ---------
-------- -------- -------- --------- ---------
Other:
Number of OCV installed on-demand rooms
(at end of period) . . . . . . . . . . . . . 11,000 37,000 124,000 248,000 361,000
OCV on-demand backlog (at end
of period)(7). . . . . . . . . . . . . . . . - 27,000 137,000 128,000 113,000
BALANCE SHEET DATA
(AT END OF PERIOD)(1):
Total assets . . . . . . . . . . . . . . . . $120,338 $203,085 $270,473 $ 372,580 $ 502,603
Total long-term debt . . . . . . . . . . . . - 2,570 1,024 207 70,000
Equity . . . . . . . . . . . . . . . . . . . 119,062 137,209 181,181 268,197 301,269
</TABLE>
(1) Includes the Nuggets and OCV on a consolidated basis starting in the year
ended December 31, 1992. Prior to that time, the Company accounted for its
interest in the Nuggets and OCV using the equity method. Certain prior
period amounts have been reclassified to conform with the current year's
presentation.
(2) Includes $9.2 million of NBA expansion fee revenue recorded in the second
quarter of 1995.
(3) Includes a restructuring charge of $15.3 million relating to the Company's
decision to shift its business focus from mid-priced hotels served by
Satellite Cinema's scheduled, satellite-delivered pay-per-view systems to
business and luxury hotels served by OCV's on-demand technology, and the
write-off of an equity investment in a company pursuing media ventures in
Russia and other countries in the Commonwealth of Independent States.
(4) Includes a $10.9 million restructuring charge resulting from the
discontinuation of Satellite Cinema's lower margin, scheduled,
satellite-delivered pay-per-view service.
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(5) Gives effect to the 24,000-for-1 stock split of the outstanding Common
Stock effected upon consummation of the Offering.
(6) EBITDA represents earnings before interest expense, income taxes,
depreciation and amortization. The most significant difference between
EBITDA and cash provided from operations is changes in working capital.
EBITDA is presented because it is a widely accepted financial indicator
used by certain investors and analysts to analyze and compare companies on
the basis of operating performance. In addition, management believes
EBITDA provides an important additional perspective on the Company's
operating results and the Company's ability to service its long-term debt
and fund the Company's continuing growth. EBITDA is not intended to
represent cash flows for the period, or to depict funds available for
dividends, reinvestment or other discretionary uses. EBITDA has not been
presented as an alternative to operating income or as an indicator of
operating performance and should not be considered in isolation or as a
substitute for measures of performance prepared in accordance with
generally accepted accounting principles, which are presented in the
financial statements in Item 8 and discussed in Item 7 under Liquidity and
Capital Resources. See the Consolidated Financial Statements and the Notes
thereto appearing elsewhere in this report. EBITDA for the years ended
December 31, 1992 and 1995 excludes the provisions for restructuring during
such periods.
(7) OCV backlog represents the approximate number of hotel rooms under contract
with OCV which are awaiting installation of OCV equipment.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL. The following discussion and analysis of the Company's financial
condition and results of operations should be read in conjunction with the
Consolidated Financial Statements and Notes thereto included elsewhere in this
Annual Report. As discussed more fully in Results of Operations and in Note 16
to the Consolidated Financial Statements at Item 8, the Company has restated its
Consolidated Financial Statements for the year ended December 31, 1995.
CERTAIN OF THE STATEMENTS THAT FOLLOW ARE FORWARD-LOOKING AND RELATE TO
ANTICIPATED FUTURE OPERATING RESULTS. STATEMENTS WHICH LOOK FORWARD IN TIME ARE
BASED ON 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.
ALTHOUGH THE COMPANY HAS ATTEMPTED TO IDENTIFY SOME OF THE IMPORTANT FACTORS
THAT MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE ANTICIPATED, THOSE
FACTORS SHOULD NOT BE VIEWED AS THE ONLY FACTORS WHICH MAY AFFECT FUTURE
OPERATING RESULTS.
OVERVIEW
The Company operates in two segments: Multimedia Distribution, which
consists of OCV and Ascent Network Services, and Entertainment, which consists
of the Denver Nuggets, the Colorado Avalanche and Beacon.
MULTIMEDIA DISTRIBUTION
The Company will continue to derive a majority of its revenues from OCV.
Revenue and income growth are expected from the continued installation of OCV
systems. Historically, the Company provided
4
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satellite-delivered pay-per-view movies on a scheduled basis to the lodging
industry through its Satellite Cinema division. In 1991, the Company
acquired its initial interest in OCV, which provides on-demand pay-per-view
service. At December 31, 1993, 1994 and 1995, the Company owned interests
representing 73.5%, 79.7%, and 84.7%, respectively, of OCV. At December 31,
1995, the Company owned 78.4% of OCV on a fully diluted basis. See Note 8 of
Notes to Consolidated Financial Statements.
In 1992, the Company decided to change the focus of its in-room
entertainment business from scheduled satellite-delivered service to higher
margin on-demand OCV service. At the same time, OCV continued to install
equipment into hotels under new seven-year contracts. As a result, from
December 31, 1992 to December 31, 1995, OCV's installed base of on-demand rooms
increased from approximately 37,000 rooms to approximately 361,000 rooms, while
the Company's installed base of satellite-delivered scheduled service rooms
decreased from approximately 264,000 rooms to approximately 151,000 rooms. In
the third quarter of 1995, the Company contributed substantially all of its
pay-per-view assets to OCV in exchange for OCV common stock (the
"Contribution"), raising the Company's ownership in OCV by approximately 5% to
84.7%. See Note 1 of Notes to Consolidated Financial Statements. In connection
with the Contribution, the Company converted, or is converting selected
Satellite Cinema hotel properties to higher margin OCV services and sold or
discontinued operations at the remaining hotel properties served by Satellite
Cinema. As a result of these actions, the Company recorded a $10.9 million
restructuring charge in the third quarter of 1995. Additional charges related
to the discontinued Satellite Cinema operations may be recorded in future
periods based upon actual salvage values or severance costs for additional
personnel. At December 31, 1995, OCV sold the contracts to provide pay-per-view
service to approximately 100,000 rooms and related equipment for a $4 million
Note. (see Note 11 of Notes to Consolidated Financial Statements)
In response to certain concerns with respect to the valuation of the
consideration received by OCV in the Contribution raised by OCV's largest
minority stockholder, who is also a significant customer of OCV, the Company,
COMSAT and such stockholder have entered into a letter agreement to address
those concerns by conducting an independent valuation (the "Valuation") and
taking certain other actions. COMSAT has agreed to indemnify the Company for
any costs to the Company of compensating OCV's stockholders arising out of the
Valuation. The Company does not believe that the letter agreement will have a
material adverse impact on its financial condition or results of operations.
Through ANS, the Company also provides satellite distribution support
services, principally to affiliates of the NBC television network. In
connection with an extension of the Company's agreement with NBC through 1999,
the Company agreed to reduce the amounts payable by NBC to the Company under the
contract, since the original contract provided for higher payments to the
Company to reimburse the Company for capital expenditures made in connection
with the purchase and construction of certain equipment. As a result of this
agreement, the Company expects that revenues from the NBC contract for each year
from 1995 through 1999 will be approximately $12 million less than in 1994. In
addition, NBC, with ANS's technical assistance, issued a request for information
to certain hardware vendors in July 1995 with respect to procuring equipment
necessary to upgrade the NBC distribution network to digital technology. The
Company anticipates that ANS will assist NBC in upgrading to digital technology,
which likely would involve significant capital expenditures on the part of the
Company and would be accompanied by an extension of ANS's contract with NBC.
ENTERTAINMENT
The Company made its initial investment in the Nuggets in 1989 with the
acquisition of a 62.5% interest in a limited partnership that acquired the
Nuggets. In 1991 and 1992, the Company acquired the
5
<PAGE>
remaining interests in the partnership. As discussed below, in December
1994, the Company acquired Beacon and, in July 1995, the Company acquired the
Avalanche. As a result, the Company's results of operations for the years
ended December 31, 1993 and 1994 do not include results of operations from
Beacon or the Avalanche (except, in the case of Beacon, for results of
operations for the month of December 1994). Similarly, the results of
operations for the year ended December 31, 1995 include results of operations
from the Avalanche only for the last six months.
In December 1994, the Company acquired Beacon at a cost of approximately
$29.1 million, consisting of $16.2 million in cash and liabilities assumed of
$12.9 million. The purchase agreement calls for future cash consideration,
which is contingent on the production and performance of up to 13 motion
pictures with a total pay-out not to exceed $16.9 million. In addition,
Beacon's employment agreements with its two senior executives provide for them
to receive annual bonuses equal to the greater of a fixed amount or a percentage
of Beacon's annual earnings before interest and taxes, with losses from prior
years carried forward, and for such executives to retain a carried interest in
Beacon's after-tax cash flows in excess of the Company's cumulative investment
in Beacon plus a specified return.
In July 1995, the Company acquired one of the 26 franchises in the NHL at a
cost of approximately $75.8 million. The Company has moved the franchise to
Denver to share Denver's McNichols Arena with the Nuggets, where the team has
commenced play under the Colorado Avalanche name. The financial performance of
the Nuggets and the Avalanche are, to a large extent, dependent on their
performance in their respective leagues. In addition, due to the limitations of
the facilities available at McNichols Arena, the Company expects the Avalanche
and the Nuggets to experience operating losses as long as both teams play in
McNichols Arena. The Company has proposed the construction of a new sports
arena and entertainment complex in which the Nuggets and Avalanche would play,
which is expected to result in increased revenues and improved operating results
for both the Nuggets and the Avalanche.
As a result of the operating losses expected to be incurred by the
Avalanche and the Nuggets and operating expenses at Beacon, the Company expects
to incur operating losses on a consolidated basis through the end of 1996.
However, the Company expects to record positive earnings before income taxes,
depreciation and amortization and positive operating cash flow during this
period.
NEW ACCOUNTING PRONOUNCEMENTS. Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of," and SFAS No. 123, "Accounting for
Stock-Based Compensations," were issued in 1995 and will be adopted by Ascent in
1996. Ascent has elected not to adopt the recognition and measurement provisions
of SFAS No. 123 but will implement the disclosure requirements beginning in
1996. The effect of adopting these statements in 1996 is not expected to be
material to Ascent.
6
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RESULTS OF OPERATIONS
RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS FOR 1995
The Company has restated its Consolidated Financial Statements for the year
ended December 31, 1995. Subsequent to the issuance of the Company's 1995
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, management determined that it had
incorrectly reported certain adjustments to the carrying value of two feature
films and certain development inventory acquired as part of the Beacon
acquisition as purchase price allocation adjustments (which was reported as an
increase to goodwill) rather than as a charge to operations in 1995. In the
restated financial statements, these adjustments have been recorded as an
increase to cost of services of $3,642,000. Further, the Company has determined
that the allocation of the Beacon purchase price, described in Note 4 to the
Consolidated Financial Statements in Item 8, should be reported as a correction
of the purchase price allocation based on information which existed at the time
of the acquisition of Beacon in December 1994. As a result of changing the
Beacon purchase price allocation to components of intangible assets with
different useful lives (increasing goodwill with a useful life of ten years
by $14,341,000 and decreasing by $14,341,000 to $7,000,000 a film
distribution agreement with a useful life of seven years) depreciation and
amortization in the restated financial statements decreased by $1,232,000.
The net effect of these adjustments was to increase the previously reported
1995 operating loss by $2,410,000, net loss by $1,567,000 (net of a tax
benefit of $843,000) and loss per common share by $.07. The restatement had
no effect on the Company's cash position. See Note 16 to the Consolidated
Financial Statements in Item 8.
1995 INTERIM INFORMATION. The impact of the restatement on previously
reported interim information was to decrease net loss for the nine months
ended September 30, 1995 by $416,000, or $.01 per share, and was to increase
net loss for the fourth quarter of 1995 by $1,983,000, or $.08 per share. In
addition, the corrections made to the Beacon purchase price allocation also
impacted the interim balance sheet as of September 30, 1995. The amount
previously reported in goodwill of $36,878,000 as of September 30, 1995 was
increased to $50,480,000, an increase of $13,670,000 over the amount
previously reported. Further, the amount previously reported for the film
distribution agreement of $20,034,000 was decreased by $13,867,000 to
$6,167,000.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
The following table sets forth certain data as a percentage of revenue and
the number of hotel rooms provided with pay-per-view service for the period
indicated:
<TABLE>
1994 1995
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
(DOLLARS IN THOUSANDS) (As Restated,
see Note 16 of
Consolidated
financial
statements)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue:
Multimedia Distribution.................. $120,536 76.9% $127,409 66.5%
Entertainment............................ 36,174 23.1 64,068 33.5
-------- ----- -------- -----
Total.................................. 156,710 100.0 191,447 100.0
Cost of services......................... 98,686 62.9 144,335 75.4
Depreciation and amortization............ 38,820 24.8 53,675 28.0
General and administrative............... 9,203 5.9 10,002 5.2
Provision for restructuring.............. -- -- 10,866 5.7
-------- ----- -------- -----
Operating income (loss).................. 10,001 6.4 (27,401) (14.3)
Other income (expense)................... 23 -- (3,454) (1.8)
Interest income.......................... 672 0.4 625 .3
Income tax benefit (expense)............. (4,831) (3.1) 9,835 5.1
Minority interest........................ (265) (0.2) (628) (.3)
-------- ----- -------- -----
</TABLE>
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<TABLE>
<S> <C> <C> <C> <C>
Net income (loss)........................ $ 5,600 3.6% $(21,023) (11.0)%
-------- ----- -------- -----
-------- ----- -------- -----
OTHER DATA
Pay-per-view rooms (approximate,
as of the end of period):
On-demand service........................ 248,000 361,000
Scheduled service........................ 194,000 51,000
-------- --------
Total.................................. 442,000 412,000
-------- --------
-------- --------
</TABLE>
REVENUE. Revenue increased by $34.8 million, or 22.2%, to $191.5 million for
the year ended December 31, 1995 from $156.7 million for the year ended December
31, 1994. Multimedia Distribution revenue increased by $6.9 million, or 5.7%,
to $127.4 million for the twelve months ended December 31, 1995 from
$120.5 million for the twelve months ended December 31, 1994 as a result of a
46% increase in installed on-demand rooms, offset in part by a 22% decrease in
installed scheduled service rooms (primarily as a result of conversion to OCV's
on-demand technology) and reduced revenue from NBC for network distribution
support services. See "Overview" above. Entertainment revenue increased by
$27.9 million, or 77.1%, to $64.1 million for the year ended December 31, 1995
from $36.2 million for the year ended December 31, 1994 as a result of the
Nuggets' share of NBA expansion fees of $9.2 million in connection with the
admission of two new teams to the NBA in 1995; the acquisition of Beacon on
December 1, 1994, which generated $6.5 million in revenue; and the acquisition
of the Colorado Avalanche in July 1995, which generated revenues of $12.3
million during the last six months of 1995.
COST OF SERVICES. Cost of services for Multimedia Distribution was
$79.1 million, or 62.1% of Multimedia Distribution revenue, for the year ended
December 31, 1995, compared to $67.5 million, or 56.0% of Multimedia
Distribution revenue, for the year ended December 31, 1994. The decline in
Multimedia Distribution margin is attributable to lower margins under the NBC
contract and the Company's Satellite Cinema division, offset in part by the
growth in the number of higher margin on-demand hotel rooms serviced by OCV. As
discussed above under "Overview," the Company agreed to reduce its margins under
the NBC contract in connection with the extension of such contract through 1999.
Cost of services for Entertainment was $65.3 million, or 102% of Entertainment
revenue, for the year ended December 31, 1995, compared to $31.2 million, or
86.2% of Entertainment revenue, for the year ended December 31, 1994. The
decline in Entertainment margin is attributable to negative operating margins
for both Beacon and the Colorado Avalanche, (as discussed above under
"Overview") partially offset by NBA expansion fees.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for Multimedia
Distribution was $45.4 million for the year ended December 31, 1995, compared to
$34.9 million for the year ended December 31, 1994. This increase in
depreciation and amortization is attributable to the capital investment
associated with installing on-demand service systems in hotels, coupled with
slightly higher installation costs per room as a result of the addition of
smaller hotels to the room base. Depreciation and amortization for
Entertainment was $8.3 million, or 12.9% of Entertainment revenue, for the year
ended December 31, 1995, compared to $3.9 million, or 10.9% of Entertainment
revenue, for the year ended December 31, 1994. This increase in depreciation
and amortization is attributable to the amortization of the intangible assets
acquired in the Beacon acquisition beginning in December 1994 and amortization
of the intangible assets acquired in the Avalanche acquisition beginning in July
1995.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended December 31, 1995 were $10.0 million, or 5.2% of revenues,
compared to general and administrative expenses of $9.2 million, or 5.9% of
revenues for the year ended December 31, 1994.
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PROVISION FOR RESTRUCTURING. The provision for restructuring during the year
ended December 31, 1995 resulted from the discontinuation of Satellite Cinema's
lower margin, scheduled, satellite-delivered pay-per-view service. See
"Overview -- Multimedia Distribution."
OPERATING INCOME. As a result of the above factors, operating income
(excluding the restructuring provision) for the Multimedia Distribution segment
was $2.9 million, or 2.3% of Multimedia Distribution revenue, for the year ended
December 31, 1995, compared to $18.1 million, or 15.0% of Multimedia
Distribution revenue, for the year ended December 31, 1994. Entertainment had
an operating loss of $9.4 million, or 14.7% of Entertainment revenue, for the
year ended December 31, 1995, compared to operating income of $1.1 million, or
2.9% of Entertainment revenue, for the year ended December 31, 1994.
OTHER INCOME (EXPENSE). Other expense for the year ended December 31, 1995 was
$3.5 million, an increase of $3.5 million from the year ended December 31, 1994
when there were no expenses recorded as other expense. This increase is
primarily due to the settlement of a lawsuit with a former employee of OCV and a
charge for expenses associated with the Company's portion of certain
site-specific plans for a new arena in Denver.
INTEREST INCOME (EXPENSE). Interest income for the year ended December 31,
1995 and the year ended December 31, 1994 remained constant at $0.6 million.
INCOME TAX BENEFIT (EXPENSE). Income tax benefit for the year ended December
31, 1995 was $9.8 million, compared to income tax expense of $4.8 million for
the year ended December 31, 1994. See Note 10 of Notes to the Consolidated
Financial Statements.
NET INCOME (LOSS). As a result of the foregoing, net loss for the year ended
December 31, 1995 was $21.0 million, compared to net income of $5.6 million for
the year ended December 31, 1994.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
The following table sets forth certain data as a percentage of revenue and
the number of hotel rooms provided with pay-per-view service for the periods
indicated:
<TABLE>
1993 1994
------------------ ------------------
AMOUNT PERCENT AMOUNT PERCENT
-------- ------- -------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenue:
Multimedia Distribution.................. $95,942 78.7% $120,536 76.9%
Entertainment............................ 26,009 21.3 36,174 23.1
------- ----- -------- -----
Total.................................. 121,951 100.0 156,710 100.0
Cost of Services......................... 82,268 67.5 98,686 62.9
Depreciation and amortization............ 27,227 22.3 38,820 24.8
General and administrative............... 7,967 6.5 9,203 5.9
Operating income......................... 4,489 3.7 10,001 6.4
Other income (expense)................... 18 - 23 -
Interest income (expense)................ - - 672 0.4
Income tax expense....................... (2,416) (2.0) (4,831) (3.1)
Minority interest........................ (362) (0.3) (265) (0.2)
------- ----- -------- -----
Net income before cumulative effect
of accounting change................. $ 1,729 1.4% $ 5,600 3.6%
------- ----- -------- -----
------- ----- -------- -----
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
OTHER DATA
Pay-per-view rooms (approximate, as
of the end of period):
On-demand service...................... 124,000 248,000
Scheduled service...................... 264,000 194,000
------- --------
Total................................ 388,000 442,000
------- --------
------- --------
</TABLE>
REVENUE. Revenue increased by $34.8 million, or 28.5%, to $156.7 million for
the year ended December 31, 1994 from $122.0 million for the year ended December
31, 1993. Multimedia Distribution revenue increased by $24.6 million, or 25.6%,
to $120.5 million for the year ended December 31, 1994 from $95.9 million for
the year ended December 31, 1993 as a result of a 39.5% increase in pay-per-view
hotel room revenue resulting from a 100.0% increase in the number of on-demand
installed rooms, offset by a 26.3% decrease in Satellite Cinema installed rooms.
Entertainment revenue increased $10.2 million, or 39.1%, to $36.2 million for
the year ended December 31, 1994 from $26.0 million for the year ended December
31, 1993 primarily as a result of a $5.3 million increase in gate receipts
attributable to higher attendance at Nuggets games and participation in the NBA
playoffs in the 1993-1994 season, as well as increases in sponsor, retail and
local television revenues totalling $2.9 million.
COST OF SERVICES. Cost of services for Multimedia Distribution was $67.5
million, or 56.0% of Multimedia Distribution revenue, for the year ended
December 31, 1994, compared to $56.9 million, or 59.3% of Multimedia
Distribution revenue, for the year ended December 31, 1993. The $10.6 million
increase is attributable to the increase in pay-per-view rooms served. The
decrease in cost of services as a percentage of revenues reflects utilization of
field service operations and other fixed costs associated with the hotel
pay-per-view operations over a greater number of installed rooms.
Cost of services for Entertainment was $31.2 million, or 86.2% of Entertainment
revenue, for the year ended December 31, 1994, compared to $25.4 million, or
97.6% of Entertainment revenue , for the year ended December 31, 1993. The
improvement in Entertainment margin is attributable to the relatively small
incremental costs associated with the increase in Nuggets' attendance and media
revenues, partially offset by an increase in Nuggets' player salaries.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization for Multimedia
Distribution was $34.9 million for the year ended December 31, 1994, compared to
$23.7 million for the year ended December 31, 1993. Depreciation and
amortization for Multimedia Distribution increased as a result of the capital
investment associated with installing on-demand service in hotel rooms.
On-demand rooms accounted for 56% of the installed room base for the year ended
December 31, 1994, compared to 32% of the installed base for the year ended
December 31, 1993. Depreciation and amortization for Entertainment was $3.9
million for the year ended December 31, 1994, compared to $3.5 million for the
year ended December 31, 1993.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses for
the year ended December 31, 1994 were $9.2 million, or 5.9% of revenue, compared
to $8.0 million, or 6.5% of revenue, for the year ended December 31, 1993.
OPERATING INCOME (LOSS). As a result of the above factors, operating income for
Multimedia Distribution was $18.2 million, or 15.1% of Multimedia Distribution
revenue, for the year ended December 31, 1994, compared to $15.3 million, or
16.0% of Multimedia Distribution revenue, for the year ended December 31, 1993.
Operating income for Entertainment was $1.1 million, or 2.9% of Entertainment
revenue, for the year ended December 31, 1994, compared to an operating loss of
$2.9 million, or 11.0% of Entertainment revenue, for the year ended December 31,
1993.
10
<PAGE>
OTHER INCOME (EXPENSE). Other income was not material for the year ended
December 31, 1994 and the year ended December 31, 1993.
INTEREST INCOME (EXPENSE). Interest income for the year ended December 31, 1994
was $0.7 million, compared to no interest income for the year ended December 31,
1993. The increase in interest income is primarily attributable to interest
from a receivable associated with the NBC contract.
INCOME TAX BENEFIT (EXPENSE). Income tax expense for the year ended December
31, 1994 was $4.8 million compared to income tax expense of $2.4 million for the
year ended December 31, 1993. See Note 10 of Notes to the Consolidated
Financial Statement.
NET INCOME (LOSS). As a result of the foregoing, net income before cumulative
effect of accounting change for the year ended December 31, 1994 was $5.6
million, compared to $1.7 million for the year ended December 31, 1993.
LIQUIDITY AND CAPITAL RESOURCES
Ascent consummated the Offering of its common stock on December 18, 1995.
After the Offering, COMSAT continues to own a majority (80.67%) of Ascent's
common stock and continues to control Ascent. In addition, Ascent's
relationship with COMSAT is governed by agreements entered into in connection
with the Offering, including an intercompany services agreement, a corporate
agreement and a tax allocation and indemnity agreement. These agreements
restrict the Company from issuing additional equity securities or incurring
additional indebtedness without the consent of COMSAT.
Prior to the Offering, the Company's operations and capital requirements
were financed though internally generated funds and funds provided by COMSAT.
For the years ended December 31, 1993, 1994 and 1995, the Company generated cash
from operations of $27.7 million, $38.4 million, and $52.0 million,
respectively. COMSAT provided financing of $41.3 million, $81.4 million, and
$115.1 million for the years ended December 31, 1993, 1994 and 1995,
respectively. These funds were used primarily for the acquisitions of Beacon
and the NHL hockey franchise and for the installation of video systems in hotels
for the Multimedia Distribution business. See "Overview" above. Property
additions for the Multimedia Distribution business were $63.7 million, $89.1
million and $82.9 million for the years ended December 31, 1993, 1994 and 1995,
respectively, primarily as a result of the growth of OCV on-demand service.
Immediately prior to the consummation of the Offering, the Company's
business equity, as reflected on the Company's consolidated balance sheet, was
reclassified to reflect a note payable to COMSAT (the "COMSAT Note") for
advances made by COMSAT to the Company, with the balance of such business equity
being allocated to stockholders' equity. The Company repaid the COMSAT Note
using the proceeds of the Offering and borrowing $70 million under the Company's
Credit Facility.
The Company's cash requirements through 1996 are expected to include (i)
the continued installation by OCV of on-demand systems, including to a limited
extent, the conversion of select hotels from satellite delivered service, (ii)
an investment in a new arena and entertainment complex in Denver for use by the
Nuggets and the Avalanche, (iii) the funding of the production of motion
pictures and television programming at Beacon and (iv) the payment of interest
under the Credit Facility.The Company anticipates that capital expenditures in
connection with the continued installation by OCV of on-demand service will
total approximately $60-70 million through 1996. In addition, although the
Company anticipates that the cost of a new arena will be approximately $150
million, the Company anticipates that
11
<PAGE>
such construction may be financed through a partnership with other regional
investors, with proceeds of corporate sponsorships or through project
financing and other methods and that the Company's financial participation
will be limited to a 10-20% equity participation, resulting in expenditures
totalling $15-30 million. Capital requirements with respect to the funding
of productions at Beacon will be dependent upon the number, nature and timing
of the projects that the Company determines to pursue in 1996. The Company
will continue to utilize the Sony Agreement or similar domestic financing and
distribution agreements and when appropriate, pre-sell a portion of the
international distribution rights to help fund motion picture production
costs. The Company expects that the net proceeds of the Offering, together
with anticipated cash flows from operations and borrowings under the Credit
Facility, will be sufficient for such purposes.
The Company's long-term capital requirements are expected to include
(i) capital expenditures to support the continued growth of OCV and to fund
productions at Beacon, (ii) ANS's potential participation in an upgrade of the
NBC affiliate network and (iii) the payment of interest and principle under the
Credit Facility. The Company expects to fund its long-term liquidity
requirements with cash flows from operations and, if necessary, additional
issuances of equity and additional incurrences of debt (subject, in each case,
to COMSAT's right to approve such issuances and incurrences as set forth in the
Corporate Agreement between the Company and COMSAT.)
In conjunction with the Offering, the Company entered into a $175 million
credit facility which consists of (i) a 364-day revolving credit and competitive
advance facility in the amount of $105 million, which, subject to certain
conditions, will be renewable for four 364-day periods, and (ii) a five year
revolving credit and competitive advance facility in the amount of $70 million,
including a $15 million letter of credit subfacility. See Note 5 of the Notes
to the Consolidated Financial Statements. Upon the consummation of the
Offering, the Company had approximately $105 million of available credit under
the Credit Facility.
As a consolidated subsidiary of COMSAT, the Company is subject to
restrictions on its debt structure as a result of regulations applicable to
COMSAT. Such regulations limit the ability of COMSAT to (i) incur consolidated
short-term debt in excess of $200 million, (ii) incur consolidated long-term
indebtedness in excess of 45% of COMSAT's total capitalization and (iii) incur
any obligation that would cause COMSAT's consolidated ratio of net income to
total interest expense to be less than 2.3 to 1. At December 31, 1995, COMSAT
had no short-term debt outstanding and its long-term indebtedness was 44.2% of
its total capitalization. Pursuant to the Corporate Agreement, the Company has
agreed not to incur any indebtedness, other than that under the Credit Facility
(and refinancings thereof) and indebtedness incurred in the ordinary course of
business which together shall not exceed $175 million in the aggregate, without
COMSAT's consent. Further, the Company has agreed, for so long as COMSAT owns
at least 50% of the outstanding Common Stock, to utilize reasonable cash
management procedures and to use its reasonable best efforts to minimize the
Company's excess cash holdings.
SEASONALITY
OCV's business is seasonal, with higher revenues realized during the summer
months and lower revenues realized during the winter months due to business and
vacation travel patterns. Conversely, because the NHL and NBA season extend
from the fall to late spring, the Company realizes the vast majority of its
revenues from the Nuggets and the Avalanche during such period.
12
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
To the Board of Directors of
Ascent Entertainment Group, Inc.:
We have audited the accompanying consolidated balance sheets of Ascent
Entertainment Group, Inc. and its subsidiaries (the "Company") as of
December 31, 1995 and 1994, and the related consolidated statements of income
(loss) and stockholders' equity and cash flows for each of the three years in
the period ended December 31, 1995. Our audit also included the financial
statement schedule listed in the Index at Item 14(a). These financial
statements and the financial statement schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements and the financial statement schedule based on our audits.
We did not audit the financial statements of On Command Video Corporation (a
consolidated subsidiary) for the year ended December 31, 1993, which statements
reflect total revenues constituting 19% of the related consolidated total for
the year ended December 31, 1993. Those statements were audited by other
auditors whose report has been furnished to us, and our opinion, insofar as it
relates to the amounts included for On Command Video Corporation for the year
ended December 31, 1993 is based solely on the report of such other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audits and, for 1993, the report of other
auditors, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Ascent Entertainment
Group and its subsidiaries as of December 31, 1995 and 1994, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995 in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects, the information set forth
therein.
As discussed in Note 10 to the consolidated financial statements, in 1993
the Company changed its method of accounting for income taxes to conform with
Statement of Financial Accounting Standards No. 109.
As discussed in Note 16 to the consolidated financial statements, the
accompanying December 31, 1995 financial statements have been restated.
Deloitte & Touche LLP
Washington, D.C.
February 14, 1996, except the second, third and fourth paragraphs of Note 15, as
to which the date is March 28, 1996, and Note 16, as to which the date is
February 19, 1997.
13
<PAGE>
REPORT OF INDEPENDENT AUDITOR'S
The Board of Directors and Stockholders
On Command Video Corporation
We have audited the balance sheet of On Command Video Corporation (a
majority owned subsidiary of Comsat Video Enterprises, Inc.) as of December 31,
1993, and the related statements of operations, stockholders' equity, and cash
flows for the year then ended (not separately presented herein). These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of On Command Video Corporation
at December 31, 1993, and the results of its operations and its cash flows for
the year then ended in conformity with generally accepted accounting principles.
Ernst & Young, LLP
San Jose, California
January 26, 1994
14
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
ASSETS
December 31,
------------
1994 1995
---- ----
(As restated,
see Note 16)
Cash ................................................ $ 3,358 $ 11,012
Receivables, net (Note 2) ........................... 39,216 41,331
Deferred income taxes ............................... 2,737 4,394
Other ............................................... 6,403 10,861
-------- --------
Total current assets .......................... 51,714 67,598
Property and equipment, net (Note 3) ................ 189,371 220,602
Investments ......................................... 2,891 6,628
Goodwill ............................................ 49,472 47,393
Franchise rights .................................... 39,120 107,962
Film costs, net (Note 1) ............................ 7,051 11,470
Other assets ........................................ 32,961 40,950
-------- --------
Total assets .................................. $372,580 $502,603
-------- --------
-------- --------
LIABILITIES AND EQUITY
Current maturity of long-term debt .................. $ 817 $ 207
Accounts payable and accrued liabilities ............ 35,595 43,172
Payable to COMSAT ................................... -- 7,217
Income taxes payable ................................ 3,298 --
Deferred income ..................................... 20,484 35,435
-------- --------
Total current liabilities ..................... 60,194 86,031
Long-term debt (Note 5) ............................. 207 70,000
Deferred income taxes -- non-current (Note 10) ...... 11,564 3,593
Other long-term liabilities (Note 6) ................ 8,292 13,843
Minority interest ................................... 24,126 27,867
Commitments and contingencies (Notes 6, 7, 14) ...... -- --
-------- --------
Total liabilities ............................. 104,383 201,334
Business equity ..................................... 268,197
Stockholders' equity
Preferred stock, par value $.01 per share,
5,000,000 shares authorized, none outstanding
Common stock, par value $.01 per share,
60,000,000 shares authorized, 29,752,000 issued
and outstanding ................................. 297
Additional paid-in capital .......................... 304,571
Accumulated deficit ................................. (3,599)
-------- --------
Total stockholders' equity .................... 268,197 301,269
-------- --------
Total liabilities and stockholders' equity .... $372,580 $502,603
-------- --------
-------- --------
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
Year ended December 31,
-------------------------------------
1993 1994 1995
-------- -------- -------------
(As restated,
See Note 16)
<S> <C> <C> <C>
Revenues......................................... $121,951 $156,710 $191,477
-------- -------- --------
Operating expenses
Cost of services.............................. 82,268 98,686 144,335
Depreciation and amortization................. 27,227 38,820 53,675
General and administration.................... 7,967 9,203 10,002
Provision for restructuring (Note 11)......... -- -- 10,866
-------- -------- --------
Total......................................... 117,462 146,709 218,878
-------- -------- --------
Operating income (loss).......................... 4,489 10,001 (27,401)
Other income (expense), net...................... 18 23 (3,454)
Interest income, net............................. -- 672 625
-------- -------- --------
Income (loss) before taxes, minority interest,
and cumulative effect of accounting change.... 4,507 10,696 (30,230)
Income tax benefit (expense) (Note 10)........... (2,416) (4,831) 9,835
-------- -------- --------
Income (loss) before minority interest and
cumulative effect of accounting change........ 2,091 5,865 (20,395)
Minority interest................................ (362) (265) (628)
-------- -------- --------
Income (loss) before cumulative effect of
accounting change............................. 1,729 5,600 (21,023)
Cumulative effect of accounting change for
income taxes.................................. 941 -- --
-------- -------- --------
Net income (loss)................................ $ 2,670 $ 5,600 $(21,023)
-------- -------- --------
-------- -------- --------
Earnings (loss) per share:
Before cumulative effect of
accounting change........................... $ .07 $ .23 $ (.87)
Cumulative effect of accounting change........ .04 -- --
-------- -------- --------
Net income (loss) per share................... $ .11 $ .23 $ (.87)
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
Additional Total
Business Common Paid-In Accumulated Stockholders'
Equity Stock Capital deficit Equity
--------- ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1993.................... $ 137,209 $297 $304,571 $(3,599) $301,269
Net income.................................. 2,670
Net transfers from COMSAT
and subsidiaries........................... 41,302
---------
Balance at December 31, 1993.................. 181,181
Net income.................................. 5,600
Net transfers from COMSAT
and subsidiaries........................... 81,416
---------
Balance at December 31, 1994.................. 268,197
Net loss (as restated, see Note 16)......... (17,424)
Net transfers from COMSAT
and subsidiaries........................... 115,110
---------
Balance at December 17, 1995 (as restated,
see Note 16)................................. 365,883
Repayment of COMSAT loan.................... (140,000)
Incorporation of Ascent Entertainment
Group, Inc. (as restated, see Note 16)..... (225,883) $240 $225,643 $225,883
Net proceeds from initial public
offering on December 18, 1995.............. 57 78,928 78,985
Net loss (as restated, see Note 16)......... $(3,599) (3,599)
--------- ---- -------- ------- --------
Balance at December 31, 1995 (as restated,
see Note 16)................................ -- $297 $304,571 $(3,599) $301,269
--------- ---- -------- ------- --------
--------- ---- -------- ------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
CONSOLIDATED CASH FLOW STATEMENTS
(IN THOUSANDS)
<TABLE>
Year ended December 31,
-----------------------
1993 1994 1995
---- ---- ----
(As restated,
see Note 16)
<S> <C> <C> <C>
Cash flow from operating activities
Net income (loss) ............................. $ 2,670 $ 5,600 $ (21,023)
Adjustments for noncash expenses:
Depreciation and amortization ............... 27,227 38,820 53,675
Provision for restructuring ................. -- -- 10,866
Changes in operating assets and liabilities:
Current assets .............................. (6,615) (7,860) (10,034)
Current liabilities ......................... 12,747 10,095 27,749
Noncurrent assets ........................... (11,274) (6,716) (8,730)
Noncurrent liabilities ...................... 3,153 (1,981) (1,280)
Other ......................................... (195) 421 786
-------- --------- ---------
Net cash provided by operating activities ... 27,713 38,379 52,009
-------- --------- ---------
Cash flow from investing activities:
Purchase of property and equipment ............ (61,131) (87,681) (89,487)
Investment in unconsolidated businesses ....... (1,644) -- (3,625)
Acquisitions .................................. (12,606) (33,148) (76,249)
Other ......................................... (705) 1,035 600
-------- --------- ---------
Net cash used in investing activities ....... (76,086) (119,794) (168,761)
-------- --------- ---------
Cash flow from financing activities:
Proceeds from issuance of long-term debt ...... 70,000
Repayment of long-term debt ................... (1,667) (1,348) (817)
Proceeds from issuance of subsidiary's stock .. 11,582 1,486 209
Repayment of COMSAT loan ...................... -- -- (140,000)
Net transfers from COMSAT and its
subsidiaries ................................ 41,302 81,416 115,110
Common stock issued ........................... -- -- 78,985
Other ......................................... -- -- 919
-------- --------- ---------
Net cash provided by financing activities ... 51,217 81,554 124,406
-------- --------- ---------
Net increase in cash .......................... 2,844 139 7,654
Cash, beginning of period ..................... 375 3,219 3,358
-------- --------- ---------
Cash, end of period ........................... $ 3,219 $ 3,358 $ 11,012
-------- --------- ---------
-------- --------- ---------
Supplemental cash flow information:
Interest paid ................................. $ 274 $ 293 $ 166
Income taxes paid ............................. 419 7,271 1,482
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(AS RESTATED, SEE NOTE 16)
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in conformity with generally
accepted accounting principles (GAAP). Certain amounts reported in the
financial statements and related notes have required the use of management's
estimates. Actual results could differ from those estimates. The significant
accounting policies that have guided the preparation of these financial
statements are:
BASIS OF PRESENTATION. The accompanying financial statements present the
financial position and results of operations of COMSAT Video Enterprises, Inc.
("CVE") which, until April 1995, was a wholly owned subsidiary of COMSAT
Corporation ("COMSAT"). In April 1995, COMSAT formed COMSAT Entertainment
Group, Inc. ("CEG") and contributed 100% of the stock of CVE to CEG.
Subsequently, CEG changed its name to Ascent Entertainment Group, Inc.
("Ascent"). The terms "Company" or "Ascent" refer to the operations of CVE up
to April 1995 and Ascent after that date.
Ascent consists of CVE and CVE's ownership of On Command Video Corporation
("OCV"), the Denver Nuggets Limited Partnership (the "Nuggets"), since
December 1, 1994 Beacon Communications Corp. ("Beacon") and, since July 1, 1995
the Colorado Avalanche LLC ("Avalanche"). (See Note 4) CVE and OCV provide
video distribution and pay-per-view video entertainment services to the lodging
industry, and video distribution services to the National Broadcasting Company
("NBC") television network and other private networks. The Nuggets own a
franchise in the National Basketball Association ("NBA"). The Avalanche own a
franchise in the National Hockey League ("NHL"). Beacon is a producer of motion
pictures and television programming.
Ascent executed an initial public offering (the "Offering") of its common
stock on December 18, 1995. Prior to the Offering, Ascent split each share of
common stock outstanding into 24,000 shares of common stock. Earnings per share
and share amounts for all prior periods have been restated to reflect this stock
split. After the Offering, COMSAT continues to own a majority (80.67%) of
Ascent's common stock and continues to control Ascent. In addition, Ascent's
relationship with COMSAT is governed by agreements entered into in connection
with the Offering, including an intercompany services agreement, a corporate
agreement and a tax allocation and indemnity agreement. These agreements
restrict the Company from issuing additional equity securities or incurring
additional indebtedness without the consent of COMSAT. (See Note 5)
In the third quarter of 1995, CVE contributed substantially all of its
pay-per-view video systems in hotels and related assets to OCV for OCV common
stock. This transfer of net assets and shares between companies under common
control has been accounted for at historical cost. This transaction raised
Ascent's ownership to 84.7%, an increase of 5%.
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the
accounts of Ascent and its majority-owned subsidiaries. Significant
intercompany transactions have been eliminated. Minority interest on the
balance sheet consists of the interest of other shareholders in OCV.
19
<PAGE>
CASH FLOW INFORMATION. Ascent considers highly liquid investments with a
maturity of three months or less at the time of purchase to be cash equivalents.
GOODWILL. The consolidated balance sheet includes goodwill related to the
acquisitions of OCV, the Nuggets and Beacon. Goodwill is amortized over 10 to
25 years. Accumulated goodwill amortization was $4,518,000 and $7,589,000 at
December 31, 1994 and 1995, respectively. Ascent reviews annually the balance
of goodwill for potential impairment and, if necessary, adjusts the balance to
its estimated net realizable value based on discounted cash flows.
FRANCHISE RIGHTS. Franchise rights were recorded in connection with the
purchases of the Nuggets beginning in 1989 and the Avalanche beginning in 1995.
Such rights are being amortized over 25 years. The amounts shown on the
consolidated balance sheet are net of accumulated amortization of $4,920,000 and
$8,317,000 at December 31, 1994 and 1995, respectively.
REVENUE AND COST RECOGNITION. OCV and CVE install pay-per-view video systems
in hotels, generally under five- to seven-year agreements, whereby they
recognize revenues at the time of viewing. Revenue from the sale of video
systems is recognized when the equipment is shipped.
The Nuggets and Avalanche game admission revenues are recognized as earned
per home game during the teams regular playing seasons, generally from October
to April of the following calendar year. The Nuggets and Avalanche broadcast
revenues are also recognized as earned per game during the teams regular playing
season. Other team and game costs, principally gate assessments, arena rentals
and user fees, are recorded and expensed on the same basis. Team costs,
principally player salaries, related fringe benefits and insurance, are
recognized on a per-day basis during the regular playing season. Accordingly,
advance ticket sales and advance payments on television, radio, concessionaire
and marketing contracts, and payments for team and game expenses not earned or
incurred, are recorded as deferred revenues and deferred game expenses,
respectively, and amortized ratably as regular season games are played.
Minimum guaranteed amounts from theatrical exhibition and revenues from
home videos, pay television and free television license agreements are
recognized when the applicable license period begins for each motion picture and
such motion picture is made available to the distributor for exploitation
pursuant to the terms of the applicable license agreement. Amounts in excess of
the minimum guarantee under such license agreements and other amounts (where no
minimum guarantee was given) are recognized when earned. Cash collected in
advance of the time of film availability is recorded as deferred revenue.
Costs incurred in connection with the acquisition of story rights, the
development of stories, production, print and advertising costs (which benefit
future periods) and allocable interest are capitalized as film costs. The
individual film forecast method is used to amortize film costs. Completed film
costs are amortized in the proportion that each film's current revenues bear to
management's estimates of total remaining ultimate revenues from all sources for
such film. Estimated liabilities for residuals and profit participation are
accrued based upon recognized film revenues and expensed in the same manner as
film cost inventories.
Film costs are stated at the lower of cost or net realizable value.
Revenue estimates and costs on a film-by-film basis are reviewed periodically by
management and are revised, if warranted, based upon management's appraisal of
current market conditions. Unamortized film costs are written down to net
20
<PAGE>
realizable value based on this appraisal, where applicable. When estimates of
total revenue indicate that a film will result in an ultimate loss, the entire
loss is recognized. It is reasonably possible that estimates of anticipated
future gross revenues and film carrying costs may be reduced materially in the
near term due to a significant degree of variability in the performance of
theatrical films.
Revenue from other services is recorded as services are provided.
INCOME TAXES. Ascent adopted Statement of Financial Accounting Standards
(SFAS) No. 109, "Accounting for Income Taxes," effective January 1, 1993. This
accounting standard requires the use of an asset and liability approach for
financial accounting and reporting for income taxes.
The provision for income taxes includes taxes currently payable and those
deferred because of differences between the financial statement and tax basis of
assets and liabilities.
EARNINGS (LOSS) PER SHARE. Earnings (loss) per share are computed using the
average number of shares outstanding during each period. The weighted average
number of shares used in the computation of earnings (loss) per share for each
year was 24,000,000, 24,000,000 and 24,217,000 for the years ended December 31,
1993, 1994 and 1995, respectively.
DEFERRED COMPENSATION COSTS. Certain current and former players of the Nuggets
and the Avalanche have contracts that provide for deferred compensation and
bonuses. Ascent records a charge to operations equal to the present value of
the future guaranteed payments in the period in which the compensation is
earned. In addition, certain players' contracts provide for guaranteed
compensation payments. (see Note 6)
BUSINESS EQUITY. Business equity represents the excess of assets over
liabilities of the Company on a historical cost basis, prior to the initial
public offering.
RESEARCH AND DEVELOPMENT COSTS. Research and development costs are charged to
operations as incurred. These costs are included in cost of services on the
income statements. The amounts charged were $1,677,000, $2,882,000, and
$2,734,000 for the years ended December 31, 1993, 1994 and 1995, respectively.
Included in these amounts were amounts for services purchased from COMSAT
affiliates of $455,000, $132,000 and $0 for the years ended December 31, 1993,
1994 and 1995, respectively.
NEW ACCOUNTING PRONOUNCEMENTS. SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and SFAS
No. 123, "Accounting for Stock-Based Compensations," were issued in 1995 and
will be adopted by Ascent in 1996. Ascent has elected not to adopt the
recognition and measurement provisions of SFAS No. 123 but will implement
the disclosure requirements beginning in 1996. The effect of adopting these
statements in 1996 is not expected to be material to Ascent.
RECLASSIFICATION. Certain prior period amounts have been reclassified to
conform with the current year's presentation.
21
<PAGE>
NOTE 2 -- RECEIVABLES
Receivables at the end of each period consist of:
1994 1995
-------- --------
(in thousands)
Trade receivables . . . . . . . . . . . . . . . $ 43,109 $ 44,571
Less allowance for doubtful accounts. . . . . . 3,893 3,240
-------- --------
Net receivables . . . . . . . . . . . . . . . . $ 39,216 $ 41,331
-------- --------
-------- --------
Ascent generates a substantial portion of its revenues from the guest
usage of pay-per-view video systems located in various hotels throughout the
United States and Canada. Ascent performs periodic credit evaluations of its
installed hotel locations and generally requires no collateral.
NOTE 3 -- PROPERTY AND EQUIPMENT
1994 1995
-------- --------
(in thousands)
Property and equipment at cost:
Installed video systems . . . . . . . . . . . $183,631 $249,845
Distribution systems to networks. . . . . . . 103,296 104,204
Furniture, fixtures and equipment . . . . . . 22,470 13,951
-------- --------
Total . . . . . . . . . . . . . . . . . . . 309,397 368,000
Less accumulated depreciation . . . . . . . . 150,407 181,648
-------- --------
Net property and equipment in service . . . . 158,990 186,352
Construction in progress. . . . . . . . . . . 30,381 34,250
-------- --------
Net property and equipment. . . . . . . . . . $189,371 $220,602
-------- --------
-------- --------
Installed video systems consist of video system equipment and related
costs of installation at hotel locations. Distribution systems to networks
consist of equipment at network affiliates and the related costs of
installation. Construction in progress consists of purchased and manufactured
parts of partially constructed video systems.
Depreciation is calculated using the straight-line method over the
estimated service life of each asset. The service lives for property and
equipment are: installed video systems, 5 to 7 years; distribution systems,
10 to 15 years; furniture, fixtures and equipment, 3 to 10 years.
Effective October 1, 1994, OCV changed the estimated useful life of its
installed video systems in hotels from five years for the entire installation
to five years for video system equipment and the term of contract with the
relevant hotel (five to seven years) for all other costs. The effect of this
change in the estimated useful life was to increase 1994 net income by
$315,000.
22
<PAGE>
NOTE 4 -- ACQUISITION AND INVESTMENTS
BEACON COMMUNICATIONS CORP. In December 1994, Ascent acquired the assets of
Beacon, a film and television production company based in Los Angeles. The
acquisition has been accounted for as a purchase and, accordingly, Beacon's
results of operations have been included in the accompanying consolidated
financial statements beginning on December 1, 1994. The cost of this
acquisition was $29,133,000, which was allocated to the net assets acquired,
principally a development, production and domestic distribution agreement
(the "Distribution Agreement"), two feature films and goodwill, based on
their estimated fair market values. The purchase price consisted of
$16,180,000 in cash and liabilities assumed of $12,953,000. The purchase
agreement also calls for future cash consideration, which is contingent on
the production and performance of up to thirteen motion pictures during the
next five years, with a total pay-out not to exceed $16,900,000. These
contingent payments, if made, will be accounted for in part, as additional
costs of the acquired assets and in part, as additional costs of the movies
to be made. As discussed in Note 16, in the restated financial statements
the Company has corrected its initial purchase price allocation and allocated
$14,341,000 to goodwill with a useful life of ten years, and allocated
$7,000,000 to the Distribution Agreement with a useful life of seven years.
UNAUDITED PRO FORMA INFORMATION. If Beacon had been acquired as of January
1, 1993, consolidated revenues would have been $140,091,000 and $183,205,000
for 1993 and 1994, respectively and the consolidated net loss would have been
$951,000 and $9,677,000 for 1993 and 1994, respectively. The consolidated
loss per share would have been $.04 and $.40 for 1993 and 1994, respectively.
COLORADO AVALANCHE LLC. In July 1995, Ascent acquired a NHL franchise and
related player contracts, management contracts and certain other assets from
Le Club de Hockey Les Nordiques located in Quebec, Canada. The franchise was
relocated to Denver, Colorado in time for the 1995-1996 NHL season, renamed
the Colorado Avalanche, and its results since July 1 have been included in
the accompanying consolidated financial statements.
The cost of the acquisition was $75,840,000 which was allocated
principally to franchise rights and player contracts. As part of the
purchase, Ascent assumed contractual commitments to players aggregating
$24,625,000 over the next three years.
INVESTMENTS. In the second quarter of 1995, Ascent made an investment of
$3,625,000 for a 13% limited partnership interest in New Elitch Gardens,
Ltd., ("Elitch") which operates an amusement park in Denver, Colorado. The
partnership interest is accounted for using the equity method.
23
<PAGE>
NOTE 5 -- DEBT
Long-term debt at December 31, 1994 and 1995 consists of the following:
1994 1995
------ -------
(in thousands)
Note payable to OCV minority stockholders,
14% due in monthly installments through 1996,
collateralized by equipment with a cost of
$3,875,000 . . . . . . . . . . . . . . . . . . . $1,024 $ 207
Credit Facility. . . . . . . . . . . . . . . . . . -- 70,000
Less: Current maturities. . . . . . . . . . . . . (817) (207)
------ -------
Total long-term debt . . . . . . . . . . . . . $ 207 $70,000
------ -------
------ -------
Total minimum payments on debt for the years subsequent to December 31,
1995 are as follows:
1996 . . . . . . . . . . . . . . . . . . . . . $207,000
2000 . . . . . . . . . . . . . . . . . . . . . $70,000,000
In conjunction with the Offering on December 18, 1995, Ascent entered
into an unsecured Competitive Advance and Revolving Credit Facilities
Agreement ("Credit Facility"). The Credit Facility is for $175,000,000 which
consists of a $70,000,000 five year facility and a $105,000,000 one year
facility. At December 31, 1995, $70,000,000 was outstanding under the five
year facility and is classified as long-term debt. The weighted average
interest rate on these borrowings was 6.2% at December 31, 1995. These
contingent payments, if made, will be accounted for as additional costs of
the acquired asset and amortized over the remaining life of the assets.
The Credit Facility restricts Ascent's ability to incur indebtedness and
precludes Ascent from paying cash dividends on common stock. Ascent must
also maintain certain ratios regarding interest coverage and total
indebtedness.
As a consolidated subsidiary of COMSAT, Ascent is subject to restrictions
on its debt structure as a result of Federal Communications Commission
regulations applicable to COMSAT.
NOTE 6 -- DEFERRED COMPENSATION
Deferred compensation, which is included in other long-term liabilities
on the balance sheet, consists of the following:
1994 1995
------ -------
(in thousands)
Deferred compensation contracts payable,
at varying interest rates, through 2001. . . . . $3,319 $3,571
Less: Imputed interest . . . . . . . . . . . . . . 837 808
Current maturities . . . . . . . . . . . . . 321 349
------ -------
Total. . . . . . . . . . . . . . . . . . . . $2,161 $2,414
------ -------
------ -------
24
<PAGE>
Total annual payments on long-term deferred compensation for the years
subsequent to December 31, 1995 are as follows:
1996....................................................... $ 349,000
1997....................................................... 436,000
1998....................................................... 1,154,000
1999....................................................... 520,000
2000....................................................... 647,000
Thereafter................................................. 465,000
----------
Total................................................... $3,571,000
----------
----------
NOTE 7 -- COMMITMENTS AND CONTINGENCIES
EMPLOYMENT AND CONSULTING AGREEMENTS. Ascent has employment and consulting
agreements with certain officers, coaches and players. Virtually all the player
agreements provide for guaranteed payments. Other contracts provide for
payments upon the fulfillment of their contractual terms and conditions, which
generally relate only to normal performance of employment duties.
Amounts required to be paid under such agreements (including approximately
$92,115,000 relating to player agreements) are as follows:
1996....................................................... $ 49,620,000
1997....................................................... 38,583,000
1998....................................................... 23,535,000
1999....................................................... 10,464,000
2000....................................................... 4,468,000
Thereafter................................................. 3,154,000
------------
Total................................................... $129,824,000
------------
------------
FACILITY LEASES. Ascent leases facilities in Maryland from COMSAT.
OCV leases its principal facilities from one of its minority stockholders
under a non-cancelable operating lease which expires in December 1999. In
addition to lease payments, OCV is responsible for taxes, insurance and
maintenance of the leased premises.
The Nuggets and the Avalanche have an agreement with the City and County of
Denver (the "City") for use of Denver's playing facility, McNichols Arena, as
well as offices and training rooms. The lease for the Nuggets extends through
June 30, 2008 and requires an annual rent payment of 5% of ticket sales revenue
with minimum and maximum guaranteed amounts of $250,000 and $350,000 per year,
respectively, through June 30, 1998. Thereafter, the $350,000 maximum payment
is no longer applicable. The term of the lease shall be shortened by one year,
with a maximum of two years, for each regular season that the Avalanche plays
its home games at McNichols Arena. The lease for the Avalanche is for two years
beginning with the 1995-1996 season with two one-year options (at the discretion
of the Avalanche). The rent will be a maximum of $350,000 per season in the
first two years, and $400,000 per season in the option years. The total payment
for McNichols Arena was $350,000 for the years ended December 31, 1993 and 1994
and $667,000 for the year ended December 31, 1995.
25
<PAGE>
Future minimum annual payments for all facility leases at December 31, 1995
are as follows:
1996....................................................... $1,803,000
1997....................................................... 1,861,000
1998....................................................... 1,511,000
1999....................................................... 1,261,000
2000....................................................... 370,000
Thereafter................................................. 1,925,000
----------
Total................................................... $8,731,000
----------
----------
Rental payments to COMSAT and the OCV minority stockholder referred to
above were approximately $1,159,000, $1,473,000 and $1,635,000 for the years
ended December 31, 1993, 1994 and 1995, respectively. Rental expense under all
facility leases was approximately $1,921,000, $2,566,000 and $3,125,000 for the
years ended December 31, 1993, 1994 and 1995, respectively.
CONCESSIONS AGREEMENT. In conjunction with the purchase of the Nuggets, Ascent
assumed the rights and obligations of a concessions agreement (the "Concessions
Agreement") with Ogden Allied Leisure Services, Inc. ("Ogden") and the City.
The Concessions Agreement expires in 2001 and provides for the Nuggets and the
City to share in concession revenues according to formulas contained in the
Agreement. (See Note 14).
PROPERTY AND EQUIPMENT. As of December 31, 1995, Ascent had noncancelable
commitments to purchase video systems totaling $7,543,000.
LITIGATION. The Company is a party to certain legal proceedings in the
ordinary course of its business. However, the Company does not believe that any
such legal proceedings will have a material adverse effect on the Company's
financial position or results of operations. In addition, through its ownership
of the Nuggets and the Avalanche, the Company is a defendant along with other
NBA and NHL owners in various lawsuits incidental to the operations of the two
professional sports leagues. The Company will generally be liable, jointly and
severally, with all other owners of the NBA or NHL, as the case may be, for the
costs of defending such lawsuits and any liabilities of the NBA or NHL which
might result from such lawsuits. The Company does not believe that any such
lawsuits, singly or in the aggregate, will have a material adverse effect on the
Company's financial condition or results of operations. The Nuggets, along with
three other teams, have also agreed to indemnify the NBA, its member teams and
other related parties against certain American Basketball Association ("ABA")
related obligations and litigation, including costs to defend such actions.
Management of Ascent believes that the ultimate disposition and the costs of
defending these or any other incidental NBA or NHL legal matters or of
reimbursing related costs, if any, will not have a material adverse effect on
the financial statements of the Company.
In 1990, a lawsuit was filed against OCV by a former employee alleging
wrongful termination and breach of contract. In March 1995, a verdict in a jury
trial was entered against OCV. In consideration for not appealing the verdict,
OCV entered into a settlement agreement with the plaintiff and recorded the
$856,000 after-tax cost of the settlement in the first quarter of 1995.
26
<PAGE>
NOTE 8 -- CAPITAL STOCK TRANSACTIONS AND STOCK INCENTIVE PLANS
PUT OPTION. In July 1993, OCV sold a number of shares of its common stock
representing a 10% ownership interest at the time to a single investor for
$10,264,000 pursuant to a stock purchase agreement. The stock purchase
agreement provides that the investor may sell the shares back to OCV at any time
from June 1, 1995 until May 1998 at a price equal to the original purchase price
plus interest from the date the shares were initially purchased at an interest
rate equal to the average of the one-year U.S. Treasury Bill rate compounded
annually. Through February 14, 1996, the investor had not exercised its put
option.
WARRANTS. In conjunction with the July 1993 sale of OCV common stock mentioned
above, the stockholder received warrants to purchase the same number of shares
at the initial purchase price, escalating 10% per year. The original value
ascribed to the warrants of $840,000 is included in other assets and is being
amortized over the estimated period of benefit of seven years. Amortization
expense was $70,000, $120,000 and $120,000 in 1993, 1994 and 1995, respectively.
The warrants are currently exercisable and expire in May 1998. If the warrants
were exercised at December 31, 1995, Ascent's ownership of OCV would have been
80.4%, a decrease of 4.3%.
In August 1991, OCV issued warrants to two stockholders to purchase 27,964
shares of common stock at $20.12 per share. The warrants are currently
exercisable and expire in August 1996.
STOCK OPTION PLAN. OCV has adopted a stock option plan (the "OCV Plan"),
expiring in June 1999, under which employees, directors and consultants of OCV
may be granted incentive or nonstatutory stock options for the purchase of
common stock of OCV. Incentive stock options are granted at fair value on the
date of grant as determined by the board of directors of OCV and nonstatutory
stock options are granted at a price per share fixed by the board of directors
of OCV but not less than 85% of the fair value on the date of grant. Options
generally vest over a five-year period and are exercisable in installments of
20% one year from the date of grant and ratably per month thereafter. Unvested
options are canceled upon termination of employment.
<TABLE>
Options Outstanding
----------------------------------------
Options
Available Number of
for Grant Shares Price per Share
--------- --------- ---------------
<S> <C> <C> <C>
Balance at January 1, 1993.............. 169,800 281,607 1.25 - 20.00
Granted.............................. (60,000) 60,000 25.00
Exercised............................ -- (135,656) 1.25 - 16.84
------- --------
Balance at December 31, 1993............ 109,800 205,951 5.00 - 25.00
Granted.............................. (20,000) 20,000 32.50
Exercised............................ -- (60,965) 5.00 - 20.00
Canceled............................. 3,085 (3,085) 20.00
------- --------
Balance at December 31, 1994............ 92,885 161,901 7.50 - 32.50
Exercised............................ -- 2,250 13.41 - 16.84
------- --------
Balance at December 31, 1995............ 92,885 159,651 7.50 - 32.50
------- --------
------- --------
</TABLE>
At December 31, 1995, options to purchase 100,154 shares of common stock
were exercisable.
27
<PAGE>
STOCK INCENTIVE PLANS. COMSAT has stock incentive plans which provide for the
issuance of stock options, restricted stock awards, stock appreciation rights
and restricted stock units. Qualifying employees of the Company have been
participants of these plans. The amount of expense charged to the Company for
participation in these plans in 1993, 1994 and 1995 was $1,049,000, $1,231,000
and $865,000, respectively.
Ascent adopted the 1995 Key Employee Stock Plan and the 1995 Non-Employee
Directors Stock Plan (the "Ascent Plans") contemporaneous with the Offering.
The Ascent Plans provide for the issuance of stock options, restricted stock
awards, stock appreciation rights and other stock based awards. The Ascent
Plans expire in 2006 with 1,610,000 common stock shares reserved for issuance.
At December 31, 1995, 925,500 shares have been granted but none were
exercisable. The exercise price is equal to the fair market value on the grant
date of $15.00 per share. Accordingly, no expense is recorded for these
options.
NOTE 9 -- PENSION AND OTHER BENEFIT PLANS
COMSAT sponsors a noncontributory defined benefit pension plan for
qualifying employees at CVE and Beacon. Pension benefits are based on years of
service and compensation prior to retirement. Ascent's policy is to fund the
minimum actuarially computed contributions required by law as determined by
COMSAT's actuaries. Ascent contributions to the plan charged to expense were
$326,000, $271,000 and $126,000 in 1993, 1994 and 1995, respectively. (see
Note 15)
COMSAT sponsors an unfunded supplemental pension plan for executives.
Ascent's expense for this plan was $0, $0, and $56,000 in 1993, 1994 and 1995,
respectively. (see Note 15)
COMSAT provides health and life insurance benefits to qualifying retirees.
The expected cost of these benefits is recognized during the years in which
employees render service. COMSAT charged Ascent $488,000, $425,000 and $314,000
in 1993, 1994 and 1995, respectively for Ascent's share of postretirement
benefit expense. (see Note 15)
The Nuggets contribute annually to the NBA's General Manager, Coaches and
Trainers Pension Plan as well as the NBA Players Association Players' Pension
Plan (collectively, the "NBA Plans"). These multi-employer plans are
administered by the NBA and require the Nuggets to make annual contributions to
the NBA Plans equal to an amount stated pursuant to the actuarial valuation.
Contributions to the General Manager, Coaches and Trainers Plan and charged to
expense were $27,000, $45,000 and $94,000 for the periods ended December 31,
1993, 1994 and 1995, respectively. Contributions to the Players' Plan and
charged to expense were $66,000, $78,000 and $132,000 for the periods ended
December 1993, 1994 and 1995, respectively. The Nuggets policy is to fund
pension costs determined by the NBA actuaries.
The NBA, in conjunction with the NBA Players Association, has established a
Pre-Pension Benefit Plan which is designed to pay benefits to players subsequent
to their retirement from the NBA but prior to the age of qualification for the
normal players' pension plan. Contributions charged to expense under this plan
were $424,000, $0 and $0 for the years ended December 31, 1993, 1994 and 1995,
respectively.
28
<PAGE>
OCV, CVE, the Nuggets, the Avalanche and Beacon have 401(k) plans for
qualifying employees. A portion of employee contributions is matched by the
Company. Matching contributions for the years ended December 31, 1993, 1994 and
1995 were $414,000, $557,000 and $600,000, respectively.
NOTE 10 -- INCOME TAXES
For the periods presented in these financial statements, Ascent has been a
member of COMSAT's consolidated tax group for federal income tax purposes. OCV,
however, filed separate returns until the third quarter of 1995, at which time
Ascent's ownership interest increased to 84.7%. (see Note 1) Ascent has
prepared its tax provision based on inclusion in COMSAT's consolidated return.
For years 1993 and thereafter, the provision as calculated would approximate the
provision if prepared on a separate return basis. In connection with the
Offering, Ascent and COMSAT entered into a tax allocation agreement that
provides for cross indemnification with respect to these periods.
The current and deferred tax expenses have been allocated according to each
entity's separately computed tax liability. Taxes payable or receivable are
settled with COMSAT annually. For the years ended December 31, 1994, and 1995,
Ascent's federal taxes payable to (receivable from) COMSAT were $3,414,000 and
($1,878,000), respectively.
Ascent adopted SFAS No. 109, "Accounting for Income Taxes," effective
January 1, 1993. This accounting statement changed the method for the
recognition and measurement of deferred tax assets and liabilities. The
cumulative effect of adopting SFAS No. 109 on Ascent's financial statements was
to increase income by $941,000 and was recorded in the first quarter of 1993.
Prior year financial statements were not restated.
The components of income tax expense for each year are:
1993 1994 1995
------- ------ -------
(in thousands) (As restated,
see Note 16)
Federal:
Current.............................. $(1,062) $4,386 $(1,589)
Deferred............................. 3,059 116 (8,125)
State and local........................ 419 329 (121)
------- ------ -------
Total.............................. $ 2,416 $4,831 $(9,835)
------- ------ -------
------- ------ -------
The difference between tax expense computed at the statutory federal tax
rate and Ascent's effective tax rate is:
1993 1994 1995
------- ------ -------
(in thousands) (As restated,
see Note 16)
Federal income taxes (benefits)
computed at the statutory rate........ $1,576 $3,743 $(10,580)
State income taxes, net of federal
income tax (benefit).................. 272 214 (72)
Goodwill............................... 514 742 831
Other.................................. 54 132 (14)
------ ------ --------
Income tax expense (benefit)........... $2,416 $4,831 $ (9,835)
------ ------ --------
------ ------ --------
29
<PAGE>
The net current and net non-current components of deferred tax accounts
as shown on the balance sheet at December 31, 1994 and 1995 are:
1994 1995
-------- -------
(in thousands)
(As Restated,
See Note 16)
Current deferred tax asset............. $ 2,737 $ 4,394
Non-current deferred tax liability..... (11,564) (3,593)
-------- -------
Net asset (liability).................. $ (8,827) $ 801
-------- -------
-------- -------
The deferred tax assets and liabilities at December 31, 1994 and 1995 are:
1994 1995
-------- --------
(in thousands)
(As Restated,
See Note 16)
Assets:
Accrued expenses..................... $ 3,138 $ 4,607
Alternative minimum tax credit....... 8,690 9,145
Post retirement benefits............. 499 608
Contract revenue..................... 467 649
Amortization of intangibles.......... 2,539
Other................................ 514 543
-------- --------
Total deferred tax assets............ 13,308 18,091
-------- --------
Liabilities:
Property and equipment............... (11,204) (10,380)
Franchise rights..................... (10,925) (6,593)
Prepaid.............................. (6) (210)
Other................................ - (107)
-------- --------
Total deferred tax liabilities......... (22,135) (17,290)
-------- --------
Net asset (liability).................. $ (8,827) $ 801
-------- --------
-------- --------
The Internal Revenue Service ("IRS") has examined the COMSAT returns
through 1989 and is currently examining federal income tax returns for 1990
through 1994. In the opinion of Ascent, adequate provision has been made for
income taxes for all periods through 1995.
NOTE 11 -- PROVISION FOR RESTRUCTURING
In the third quarter of 1995, management determined to discontinue the
Satellite Cinema scheduled movie operation. As a result of this decision, a
restructuring charge of $10,866,000 was recorded in the third quarter of 1995.
The principal components of the charge included a provision of $5,140,000 to
write down property and inventory to estimated salvage value, an accrual of
$1,010,000 for severance costs for 31 people in the broadcast operations and
finance areas, and a charge of $4,716,000 for costs related principally to
contractual commitments incurred to support the Satellite Cinema business that
will not be fulfilled. Additional charges related to the discontinued Satellite
Cinema operations may be recorded based upon actual salvage values or severance
costs for additional personnel. Revenues for the Satellite Cinema operations
were $41,325,000, $34,753,000 and $25,036,000
30
<PAGE>
for the years ended December 31, 1993, 1994 and 1995, respectively. Operating
income (loss) before allocation of general and administrative expenses was
$2,017,000, $3,897,000, and $(16,591,000) for the years ended December 31,
1993, 1994, and 1995, respectively.
In December 1995, the assets and contracts relating to approximately
100,000 Satellite Cinema rooms were sold for a $4,000,000 note receivable due in
1996. The assets sold consisted principally of installed video systems and
related equipment inventory. Payment of the note will depend on the buyer's
ability to deploy the purchased assets profitably. Accordingly, Ascent has not
recorded the note receivable and has included the net book value of the assets
sold of $1,689,000 in Other Long Term Assets in the accompanying balance sheet.
The remaining Satellite Cinema rooms are being converted to the OCV system or
have had service discontinued.
NOTE 12 -- BUSINESS SEGMENT INFORMATION
Ascent reports operating results and financial data in two business
segments: multimedia distribution and entertainment. The multimedia
distribution segment includes video distribution and on-demand video
entertainment services to the lodging industry, and video distribution
services to the NBC television network and other private networks. The
results for CVE and OCV are reported in the multimedia distribution segment.
The entertainment segment includes the Denver Nuggets and the Colorado
Avalanche franchises in the NBA and NHL, respectively, and Beacon, a producer
of theatrical films and television programming. Entertainment revenues in
1995 include $9,200,000 of NBA expansion fees.
<TABLE>
1993 1994 1995
---- ---- ----
(in thousands) (As Restated,
See Note 16)
<S> <C> <C> <C>
Revenue:
Multimedia Distribution ........... $ 95,942 $120,536 $127,409
Entertainment ..................... 26,009 36,174 64,068
-------- -------- --------
Total .......................... $121,951 $156,710 $191,477
-------- -------- --------
-------- -------- --------
Operating income (loss):
Multimedia Distribution ........... $ 15,327 $ 18,140 $ 2,885
Entertainment ..................... (2,871) 1,064 (9,418)
General and Administrative ........ (7,967) (9,203) (10,002)
Restructuring Reserve ............. - - (10,866)(1)
-------- -------- --------
Total .......................... $ 4,489 $ 10,001 $(27,401)
-------- -------- --------
-------- -------- --------
Identifiable assets:
Multimedia Distribution ........... $184,561 $251,724 $279,591
Entertainment ..................... 79,654 114,761 207,172
Other Corporate ................... 6,258 6,095 15,840
-------- -------- --------
Total .......................... $270,473 $372,580 $502,603
-------- -------- --------
-------- -------- --------
Property additions:
Multimedia Distribution ........... $ 63,708 $ 89,073 $ 82,903
Entertainment ..................... 1,232 980 2,208
-------- -------- --------
Total .......................... $ 64,940 $ 90,053 $ 85,111
-------- -------- --------
-------- -------- --------
</TABLE>
31
<PAGE>
Depreciation and amortization
Multimedia Distribution ........... $ 23,744 $ 34,891 $ 45,392
Entertainment ..................... 3,483 3,929 8,283
-------- -------- --------
Total .......................... $ 27,227 $ 38,820 $ 53,675
-------- -------- --------
-------- -------- --------
- -----------
(1) Applies to Multimedia Distribution segment.
Revenues from NBC were 22% and 18% of consolidated total revenues for the
years ended December 31, 1993 and 1994, respectively.
NOTE 13 -- RELATED PARTY TRANSACTIONS
Ascent is charged by COMSAT for certain general and administrative
services, such as treasury services, pension and insurance administration, legal
services, tax services, internal audit review, payroll and personnel benefits
administration, public relations and various other general corporate functions.
Prior to the Offering, the cost of administering these services was allocated to
Ascent using a formula which considers Ascent's proportionate share of sales,
payroll and properties. The amounts charged to Ascent under this method for
services were $3,047,000, $3,073,000 and $4,540,000 for the years ended
December 31, 1993, 1994 and 1995, respectively. (See Note 7 for rent expense
with related parties.) Management believes that the allocation methods with
respect to all charges are reasonable. For periods subsequent to the Offering,
the charges for these services from COMSAT are determined pursuant to the
intercompany services agreement.
From April through July 1995, Ascent loaned $2,000,000 to one of its
directors. The loan, plus interest thereon at the prime rate plus one percent,
was repaid in full in November 1995.
OCV earned revenues of $4,400,000, $10,800,000 and $12,800,000 for the
years ended December 31, 1993, 1994 and 1995, respectively, from a company and
its affiliates, which company is a minority stockholder of OCV.
NOTE 14 - OFF-BALANCE-SHEET RISKS
At December 31, 1995, Ascent was contingently liable to banks for
$1,195,000 for outstanding letters of credit securing performance of certain
contracts. The majority of these guarantees expire in 1999. At December 31,
1995, under the terms of the Concessions Agreement, the Nuggets were
contingently liable for approximately $2,569,000, plus other reasonable damages,
if the Nuggets terminate the agreement. The Nuggets have no present intention
of terminating this agreement so long as the Nuggets continue to play in
McNichols Arena, and Odgen has expressed its willingness to enter into a new
agreement if the Nuggets relocate to a new arena in Denver. The estimated fair
value of these instruments is not significant.
NOTE 15 -- SUBSEQUENT EVENTS
On January 1, 1996, Ascent elected to terminate its participation in the
COMSAT defined benefit pension plan, COMSAT's postretirement benefit plan and
the COMSAT supplemental pension plan for executives.
32
<PAGE>
On March 28, 1996, Ascent entered into an agreement with The Anschutz
Corporation ("TAC") pursuant to which Ascent purchased all of TAC's interests in
the proposed arena development project in Denver and related goodwill, rights,
plans, specifications, drawings, contracts, relationships, approvals, permits
and other work product of every kind that had been generated by the efforts of
TAC and Ascent with respect to the proposed arena (the "Arena Assets"), and TAC
agreed to use reasonable efforts to facilitate the development and construction
of the proposed arena. Ascent and TAC had worked together on the proposed arena
development from early 1994 until September 1995. In consideration for TAC's
interest in the Arena Assets and its agreement to facilitate development of the
proposed arena, Ascent paid TAC $6,600,000 in cash. On a contingent and
non-interest bearing basis Ascent agreed to pay an additional $5,000,000 and
grant a paid-up suite license, both linked to the construction and occupancy of
the proposed arena.
Also pursuant to the agreement with TAC, Ascent purchased all of TAC's
interests in New Elitch Gardens, Ltd. ("Elitch Gardens"), a company which owns
and operates an amusement park in downtown Denver, for $4,100,000 million in
cash. This purchase increased Ascent's interest in Elitch from 13% to 26% of the
outstanding partnership units.
On March 28, 1996, Ascent entered into a Land Purchase Agreement with
Southern Pacific Transportation Company ("SPT") pursuant to which Ascent would
purchase approximately 49 acres in downtown Denver as a site for the proposed
arena and entertainment complex for a purchase price of $20,000,000.
Consummation of the transaction is subject to several conditions, including
obtaining satisfactory financing and reaching agreements with the City and
County of Denver regarding the construction of the proposed arena and the
release of the Nuggets and the Avalanche from their current leases at McNichols
Arena. The Land Purchase Agreement also provides for SPT to effect a
state-approved environmental clean-up plan on the site, and provide continuing
indemnification with regard to certain environmental liabilities.
NOTE 16 -- RESTATEMENT OF CONSOLIDATED FINANCIAL STATEMENTS
The Company has restated its Consolidated Financial Statements for the year
ended December 31, 1995. Subsequent to the issuance of the Company's 1995
Consolidated Financial Statements in the Company's Annual Report on Form 10-K
for the year ended December 31, 1995, management determined that it had
incorrectly reported certain adjustments to the carrying value of two feature
films and certain development inventory acquired as part of the Beacon
acquisition as purchase price allocation adjustments (which resulted in an
increase to goodwill) rather than as a charge to operations in 1995. In the
restated financial statements, these adjustments have been recorded as an
increase to cost of services of $3,642,000. Further, the Company has determined
that the allocation of the Beacon purchase price (see Note 4), should be
reported as a correction of the purchase price allocation based on information
which existed at the time of the acquisition of Beacon in December 1994. As a
result of changing the Beacon purchase price allocation to components of
intangible assets with different useful lives (goodwill with a useful life of
ten years and a film distribution agreement with a useful life of seven years)
depreciation and amortization in the restated financial statements decreased by
$1,232,000. The impact of these adjustments, net of taxes, was to increase the
previously reported 1995 net loss by $1,567,000 (net of a tax benefit of
$843,000) and loss per common share by $.07. The restatement had no effect on
the Company's cash position.
33
<PAGE>
The summary of the significant effects of the restatement is as follows (dollar
amounts in thousands, except per share data):
<TABLE>
AS PREVIOUSLY AS
REPORTED RESTATED
<S> <C> <C>
FOR THE YEAR ENDED DECEMBER 31, 1995:
Cost of services. . . . . . . . . . . . . . . . . . $140,693 $144,335
Depreciation and amortization . . . . . . . . . . . 54,907 53,675
Total operating expenses. . . . . . . . . . . . . . 216,468 218,878
Operating loss. . . . . . . . . . . . . . . . . . . (24,991) (27,401)
Loss before income tax benefit. . . . . . . . . . . (27,820) (30,230)
Income tax benefit. . . . . . . . . . . . . . . . . 8,992 9,835
Net loss. . . . . . . . . . . . . . . . . . . . . . (19,456) (21,023)
Net loss per common share . . . . . . . . . . . . . ( 0.80) ( 0.87)
AT DECEMBER 31, 1995:
Goodwill. . . . . . . . . . . . . . . . . . . . . . $ 49,803 $ 47,393
Total Assets. . . . . . . . . . . . . . . . . . . . 505,013 502,603
Deferred income tax liability . . . . . . . . . . . 4,436 3,593
Total liabilities . . . . . . . . . . . . . . . . . 202,177 201,334
Additional paid-in capital. . . . . . . . . . . . . 303,771 304,571
Accumulated deficit . . . . . . . . . . . . . . . . (1,232) (3,599)
Total stockholders' equity. . . . . . . . . . . . . 302,836 301,269
Total liabilities and stockholders' equity. . . . . 505,013 502,603
</TABLE>
As a result of the Company's restatement of its Report on Form 10-K for the
year ended December 31, 1995, the corrections made to the Beacon purchase
price allocation also impacted previously reported interim balance sheet
information as of September 30, 1995. The summary of the significant effects
of the restatement on the September 30, 1995 balance sheet is as follows:
<TABLE>
AS PREVIOUSLY AS
REPORTED RESTATED
<S> <C> <C>
Goodwill, net . . . . . . . . . . . . . . . . . . . $ 36,878 $ 50,480
Film Distribution Agreement, net. . . . . . . . . . 20,034 6,167 (1)
</TABLE>
(1) The Film Distribution Agreement has been included as a component of
Other Assets in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) DOCUMENTS FILED AS PART OF THIS AMENDMENT.
PAGE
----
1. Consolidated Financial Statements and Supplementary
Data of Registrant . . . . . . . . . . . . . . . . . . . . . . . 13
Reports of Independent Auditors. . . . . . . . . . . . . . . . . . 14
Consolidated Balance Sheets as of December 31, 1994 and 1995
(as restated). . . . . . . . . . . . . . . . . . . . . . . . . . 15
Consolidated Statements of Income (Loss) for the years ended
December 31, 1993, 1994 and 1995 (as restated) . . . . . . . . . .16
Consolidated Statement of Stockholders' Equity for the years
ended December 31, 1993, 1994 and 1995 (as restated) . . . . . . 17
Consolidated Cash Flow Statements for the years ended
December 31, 1993, 1994 and 1995 (as restated) . . . . . . . . . 18
Notes to Consolidated Financial Statements . . . . . . . . . . . . 19
2. Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for the
years ended December 31, 1993, 1994 and 1995. . 39
(b) REPORTS ON FORM 8-K. None.
(c) EXHIBITS: The following exhibits are listed according to the number
assigned in the table in Item 601 of Regulation S-K.
3.1 Amended and Restated Certificate of Incorporation of the Registrant*
3.2 Amended and Restated Bylaws of the Registrant**
10.1 Development, Production and Domestic Distribution Agreement, dated as
of April 15, 1993 and amended as of August 11, 1993 and November 12,
1993, between Beacon Communications Corp. and SONY Pictures
Entertainment, Inc. (confidential treatment granted).***
10.2 Assignment, Assumption, Consent and Amendment, dated as of October 27,
1994, by and among Beacon Communications Corp., BCC Funding
Corporation, COMSAT Corporation and SONY Pictures Entertainment, Inc.
(confidential treatment granted).***
35
<PAGE>
10.3 Purchase and Option Agreement, dated as of July 7, 1993, between On
Command Video Corporation and Hilton Hotels Corporation.*
10.3.a Form of Letter Agreement, dated as of December 8, 1995, among the
Registrant, COMSAT Video Enterprises, Inc., On Command Video
Corporation, COMSAT Corporation and Hilton Hotels Corporation, as
amended by an amendment thereto.
10.4 Employment Agreement, dated as of December 1, 1994, by and among
COMSAT Corporation, BCC Funding Corporation and Armyan Bernstein.**
10.5 Employment Agreement, dated as of December 1, 1994, by and among
COMSAT Corporation, BCC Funding Corporation and Marc Abraham.**
10.6 Master Services Agreement, dated as of August 3, 1993, by and
between Marriott International, Inc., Marriott Hotel Services, Inc.
and On Command Video (confidential treatment granted).***
10.7 Consent Agreement, dated as of July 1, 1995, by and among the
National Hockey League, Le Club de Hockey Les Nordiques, Les
Nordiques de Quebec 1988, Marcel Aubut, COMSAT Hockey Enterprises,
LLC, COMSAT Video Enterprises, Inc., the Registrant and COMSAT
Corporation.**
10.8 Basketball Agreement, dated as of July 15, 1992, by and between the
City and County of Denver and the Denver Nuggets Limited
Partnership.**
10.9 Amendatory Agreement by and between the City and County of Denver
and the Denver Nuggets Limited Partnership.**
10.10 User Agreement by and between the City and County of Denver and the
Colorado Avalanche LLC.**
10.11 Employment and Consulting Agreement, dated as of November 20, 1991,
between On Command Video Corporation and Robert Snyder.**
10.12 Employment and Consulting Agreement Modification, dated as of
March 3, 1994, between On Command Video Corporation and Robert
Snyder.**
10.13 Services Agreement by and between the Registrant and COMSAT
Corporation.+
10.14 Corporate Agreement by and between the Registrant and COMSAT
Corporation.+
10.15 Tax Sharing Agreement by and between the Registrant and COMSAT
Corporation.+
10.16 Employment Agreement between the Registrant and Charles Lyons.+
10.17 Ascent Entertainment Group, Inc. 1995 Key Employee Stock Plan.+
36
<PAGE>
10.18 Ascent Entertainment Group, Inc. 1995 Non-Employee Directors Stock
Plan.+
10.19 Competitive Advance and Revolving Credit Facilities Agreement dated
as of December 18, 1995 among the Registrant, the Lenders named
therein and Chemical Bank, as Agent.+
21.1 Subsidiaries of the Registrant.+
23.1 Consents of Deloitte & Touche LLP.
23.2 Consents of Ernst & Young LLP.
* Incorporated by reference from the exhibit of the same number to Amendment
No. 4 to the Registrant's Registration Statement on Form S-1 (No. 33-98502)
filed on December 12, 1995.
** Incorporated by reference from the exhibit of the same number to the
Registrant's Registration Statement on Form S-1 (No. 33-98502) filed on
October 23, 1995.
*** Incorporated by reference from the exhibit of the same number to Amendment
No. 2 to the Registrant's Registration Statement on Form S-1 (No. 33-98502)
filed on November 13, 1995.
+ Previously filed.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this amendment to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City and
County of Denver, State of Colorado on February __, 1997.
ASCENT ENTERTAINMENT GROUP, INC.
By:
------------------------------------
David A. Holden
Controller
(Principal Accounting Officer)
38
<PAGE>
ASCENT ENTERTAINMENT GROUP, INC.
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
Balance at
beginning of
year
Balance at end Charged to Charged to other
of year expenses accounts(a) Deductions(b)
-------------- ---------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
1993: Allowance for loss on
accounts receivable .............. $4,449 $683 $ 4 $ 675 $4,461
------ ---- ----- ------ ------
------ ---- ----- ------ ------
1994: Allowance for loss on
accounts receivable .............. $4,461 $660 $(818) $ 410 $3,893
------ ---- ----- ------ ------
------ ---- ----- ------ ------
1995: Allowance for loss on
accounts receivable .............. $3,893 $711 $ (94) $1,270 $3,240
------ ---- ----- ------ ------
------ ---- ----- ------ ------
</TABLE>
(a) Recoveries of amounts previously reserved and other adjustments.
(b) Uncollectible amounts written-off.
39
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-09067 of Ascent Entertainment Group, Inc. on Form S-8 of our report dated
February 14, 1996 (except as to the second, third, and fourth paragraphs of
Note 15, as to which the date is March 28, 1996, and Note 16, as to which the
date is February 19, 1997), appearing in this Annual Report on Form 10K/A of
Ascent Entertainment Group, Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 19, 1997
<PAGE>
Exhibit 23.1a
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
33-09053 of Ascent Entertainment Group, Inc. on Form S-8 of our report dated
February 14, 1996 (except as to the second, third and fourth paragraphs of
Note 15, as to which the date is March 28, 1996, and Note 16, as to which the
date is February 19, 1997), appearing in this Annual Report on Form 10K/A of
Ascent Entertainment Group, Inc. for the year ended December 31, 1995.
DELOITTE & TOUCHE LLP
Denver, Colorado
February 19, 1997
<PAGE>
Exhibit 23.2
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement (Form
S-8 No. 33-09053) pertaining to the 1995 Key Employee Stock Plan of Ascent
Entertainment Group, Inc. of our report on On Command Video Corporation dated
January 26, 1994, included in the Ascent Entertainment Group, Inc. Annual
Report (Form 10K/A) for the year ended December 31, 1995, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
February 19, 1997
<PAGE>
Exhibit 23.2a
CONSENT OF ERNST & YOUNG, LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in Registration Statement
(Form S-8 No. 33-09067) pertaining to the 1995 Non-Employee Directors Stock
Plan of Ascent Entertainment Group, Inc. of our report on On Command Video
Corporation dated January 26, 1994, included in the Ascent Entertainment
Group, Inc. Annual Report (Form 10K/A) for the year ended December 31, 1995,
filed with the Securities and Exchange Commission.
ERNST & YOUNG LLP
San Jose, California
February 19, 1997
