<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
November 5, 1998
Date of Report (Date of earliest event reported)
@Entertainment, Inc.
- -------------------------------------------------------------------------------
(Exact name of Registrant as Specified in Charter)
Delaware 000-22877 06-1487156
- ------------------------- ------------- -------------------
(State or Other Juris. of (Commission (IRS Employer
Incorporation) File Number) Identification No.)
One Commercial Plaza
Hartford, Connecticut 06103-3585
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(Address of Principal
Executive Offices)
(860) 549-1674
-------------------------------
(Registrant's telephone number,
including area code)
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Item 5. Other Events.
On November 5, 1998, @Entertainment, Inc. (the "Company") issued a
press release related to the Company's financial results for the quarter
ended September 30, 1998. A copy of the press release is attached as Exhibit
99 and is incorporated herein by reference.
2
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial statements of businesses acquired.
Not applicable.
(b) Pro forma financial information.
Not applicable.
(c) Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<S> <C>
99 Press Release of @Entertainment, Inc.
dated November 5, 1998.
</TABLE>
3
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its
behalf by the undersigned hereunto duly authorized.
@Entertainment, Inc.
Date: November 6, 1998 By: /s/ Przemyslaw Szmyt
--------------------------------
By: Przemyslaw Szmyt
Its: Vice President, Secretary
and General Counsel
4
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EXHIBIT INDEX
NUMBER DESCRIPTION PAGE
99. Press Release of @Entertainment, Inc. dated November 5, 1998.
5
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@ENTERTAINMENT, INC. REPORTS FINANCIAL RESULTS
FOR 1998'S THIRD QUARTER
61,000 Digital Satellite Subscription Packages Sold
Total Cable Subscribers Increase to 887,000
HARTFORD, CT., November 5, 1998 -- @Entertainment, Inc. (Nasdaq: ATEN) today
announced that revenues for the quarter ended September 30, 1998 increased
29% over the same period last year, rising from $10.4 million to $13.4
million. This increase resulted primarily from organic growth in subscribers
via increased penetration and build-out of existing networks, increases in
cable subscription rates, the launch of the Wizja TV programming platform and
sales of advertising time. The Company reported a net loss of $27.4 million
for the quarter, which was mainly attributable to investments related to the
launch of its Wizja TV programming service and its digital satellite
direct-to-home platform (D-DTH). The Company reported a net loss of $0.82 per
share for the quarter ending September 30, 1998, as compared to a net loss of
$0.53 per share for the quarter ending September 30, 1997.
During the third quarter the Company successfully launched its Wizja TV D-DTH
service and programming package and by November 3rd had sold 61,000 packages
to distributors, with 35,000 subscribers installed. Total cable subscribers
grew to over 887,000, an increase of over 23% during the last twelve months,
while growth in total revenue per basic subscriber per month was up almost
16% over the same period.
As presented below, in recognition of the organisation of the Company into
two operating groups following the launch of D-DTH service, the Company has
changed its reporting to segregate two segments of its business, cable
television operations and digital - direct to home television services. Prior
period information has been restated to be consistent with the new
presentation. Effective June 5th, with the availability of the Wizja TV
programming package, the cable business began to purchase Wizja programming
from the D-DTH business. Consistent with the Company's business plan, the
Company offered the additional programming to basic cable subscribers without
an increase in rates for approximately 75 days after introduction. The
Company subsequently increased basic rates in early September by
approximately 20%, which increases will be reflected in the Company's results
in subsequent periods.
Robert Fowler, Chief Executive Officer, commented: "Our third quarter results
reflect continued strong growth of our cable systems, as well as the
successful launch of Wizja TV, Poland's first DTH platform. Beginning in
September quarter, we began to successfully roll-out higher subscription
pricing in our cable systems to offset Wizja TV's programming costs and to
support pricing of Wizja TV in the broader market. These price increases
raised basic revenue per basic subscriber by over 9% in the third quarter and
will have a further impact in quarter four. Since we began offering Wizja TV
to our cable subscribers, we have realised a 2.7% increase in our cable
subscriber base and the momentum has continued into the fourth quarter.
Mr. Fowler continued, "Supported by very strong consumer interest, we are
exceeding our expectations in virtually every facet of the Wizja TV roll-out.
Through October 31, we have sold a total of 61,000 digital satellite
subscription packages to the trade and have connected a total of
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Page 2 of 6
35,000 customers. Based on telemetry data from PTK households, the viewing
share of the Wizja TV package is averaging 17%, which we believe is a strong
validation of the value of this programming to our customers. On November
1st, we increased our retail distribution base to 1,224 outlets and we are on
track to sell 130,000 DTH packages by year-end. We are aggressively
fulfilling our strategy of building a first-to-market advantage in Poland's
DTH industry. Our competitive position is solid and we are well positioned to
benefit from the ongoing growth of Poland's multichannel television
marketplace."
The Company is also announcing that it has signed letters of intent with two
independent Polish cable associations to supply the Wizja TV programming
package to their members covering over 2 million cable households.
"Distribution of the Wizja TV programming package to independent cable
television operators is a critical part of our business strategy and we
regard this agreement as a major first step towards further establishing
Wizja TV as the leading programming provider in the market. One of our major
competitive benefits is the significant number of cable television exclusive
channels in our lineup. We expect to use these channels as a means of
establishing strong partnerships with the other cable operators in Poland",
said Fowler.
SEGMENT RESULTS OF OPERATIONS
The following table presents the segment results of the Company's operations
for the three and nine months ended September 30, 1998 and 1997. Earnings
before interest, taxes, depreciation and amortization (EBITDA) is presented
in the tables because it is a widely accepted financial indicator of a
company's ability to incur and service debt and is a measure used by the
Company's management to assess the performance of the business. It is
commonly used in the media as a measure of cash flows. EBITDA differs from
operating cash flows primarily because it does not consider certain changes
in assets and liabilities from period to period.
SEGMENT RESULTS OF OPERATIONS (Unaudited, in millions)
<TABLE>
<CAPTION>
Revenues Operating Profit (Loss) EBITDA
- --------------------------------------------------------------------------------------------------------------------------------
Nine Months Ended September 30, 1998 1997 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cable 37,836 26,801 (12,060) (14,394) 3,259 (3,447)
DDTH 9,179 0 (46,081) (3,105) (44,471) (3,106)
Corporate and Other 0 0 (7,202) (11,127) (6,345) (11,127)
Inter Segment Elimination (8,138) 0 0 0
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Total 38,877 26,801 (65,343) (28,626) (47,557) (17,680)
- --------------------------------------------------------------------------------------------------------------------------------
Revenues Operating Loss EBITDA
- --------------------------------------------------------------------------------------------------------------------------------
Three Months Ended September 30, 1998 1997 1998 1997 1998 1997
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cable 13,265 10,390 (8,520) (4,229) (3,121) 195
DDTH 6,548 0 (11,962) (2,915) (11,037) (2,916)
Corporate and Other 0 0 (2,125) (8,149) (1,592) (8,149)
Inter Segment Elimination (6,413) 0 0 0 0 0
- --------------------------------------------------------------------------------------------------------------------------------
Total 13,400 10,390 (22,607) (15,293) (15,750) (10,870)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The reported results for each of the segments include depreciation and
amortization of specifically identifiable assets based on their fair values
when acquired. Where appropriate, the separate business discussions that
follow provide comparisons of actual 1998 results with the pro forma results
for 1997.
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Page 3 of 6
CABLE SEGMENT:
Revenue increased $2.9 million or 27.9% from $10.4 million in the three
months ended September 30, 1997 to $13.3 million in the three months ended
September 30, 1998 and $11.0 million or 41.0% from $26.8 million in the first
nine months of 1997 to $37.8 million in the first nine months of 1998. This
increase was primarily attributable to a 18.2% increase in the number of
basic and intermediate subscribers from approximately 593,000 at September
30, 1997 to approximately 701,100 at September 30, 1998, as well as an
increase in monthly subscription rates. Approximately 27% of the increase in
basic and intermediate subscribers was the result of acquisitions and the
remainder was due to build-out of the Company's existing cable networks.
Revenue from monthly subscription fees represented 91.7% and 80.4% of cable
television revenue for the three months ended September 30, 1997 and 1998,
respectively. Monthly subscription revenue constituted 88.3% and 83.7% of
cable television revenue for the nine months ended September 30, 1997 and
1998, respectively. Installation fee revenue for the three months ended
September 30, 1998 decreased by 71.4%, from $0.7 to $0.2 and decreased by
60.5% for nine months ended September 30, 1998, from $2.1 million to $0.8,
compared to the corresponding period in 1997. During the three months ended
September 30, 1998 the Company experienced churn in HBO premium services due
to seasonal fluctuations in demand, with penetration falling by 6,600
subscribers (-14.5%). Year-on-year HBO premium service penetrations grew by
over 11,200 subscribers (+40.5%).
Direct operating expenses grew by $10,112 during the third quarter and by
$15,282 for the nine months ended September 30, 1998. These increases are
primarily due to the cost of purchase of the Wizja TV programme package,
which amounted to $6,413 for the quarter, and $8,138 for the year-to-date.
Other increases in expenses were due to the continued cost of integrating
recently acquired networks.
Selling, general and administrative expenses decreased $4.1 million or 54.7%
from $7.4 million for the three months ended September 30, 1997 to $3.4
million for the three months ended September 30, 1998 and decreased $9.5
million or 44.1% from $21.5 million for the nine months ended September 30,
1997 to $12.0 million for the nine months ended September 30, 1998. A portion
of this decrease was attributable to non-recurring, non-cash compensation
expense recorded in the three and nine months ended September 30, 1997 in
connection with stock options granted to certain employees.
Operating loss amounted to $ 8.9 million and $ 12.4 million for the three and
the nine months ended September 30, 1998.
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Cable subscriber analysis is presented in the table below.
@ Entertainment, Inc.
Summary of Selected Operating Statistics
<TABLE>
<CAPTION>
September 30, June 30, March 31, December 31, September 30,
Cable 1998 1998 1998 1997 1997
------------- --------- ---------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Homes Passed 1,565,287 1,546,540 1,505,256 1,408,099 1,355,456
Basic Subscribers 658,584 660,067 627,713 606,630 566,246
Subscriber Growth
Organic 64,049 34,862 26,868 50,487 N/A
Through Acquisitions (10,245)(1) 1,363 16,360 18,098 N/A
Churn (55,287) (26,016) (22,145) (28,201) N/A
Total net growth (1,483) 10,209 21,083 40,384 N/A
Basic penetration 42.1% 42.7% 41.7% 43.1% 41.8%
Basic and intermediate subscribers 701,122 703,271 675,790 636,283 592,978
Intermediate subscribers 42,538 43,204 48,077 29,653 26,732
Broadcast subscribers 186,334 167,859 154,860 132,618 124,934
Total Subscribers 887,456 871,130 830,650 768,901 717,912
Premium subscribers-HBO 39,035 45,674 47,298 45,079 27,773
Premium penetration-HBO 5.9% 6.9% 7.5% 7.4% 4.9%
Basic revenue/basic sub/month 5.78 5.29 5.19 4.99 4.82
Total revenue/basic sub/month 6.70 6.47 6.42 6.08 5.79
</TABLE>
As part of the purchase of a minority interest in one of the Company's cable
systems, an isolated part of that system was sold back to the previous owner.
D-DTH SEGMENT:
D-DTH revenue amounted to $6.5 million and to $9.2 million for the three and
nine months ended September 30, 1998. Because the Company started supplying
its Wizja programming package over its cable systems on June 5, 1998 and its
D-DTH service in July 1998, there was no revenue from this segment in 1997.
Revenue from monthly subscription fees represented 29.8% of D-DTH revenue for
the nine months ended September 30, 1998. Advertising revenue for the nine
months ended September 30, 1998 represented 53.4% of D-DTH revenue.
Revenue from supplying the Wizja programming package in the Company's cable
systems, which eliminates, on consolidation, represented 97.9% and 88.7% of
D-DTH revenue for the three months and the nine months ended September 30,
1998, respectively.
Operating loss amounted to $ 12.0 million and $ 46.1 million for the three
and the nine months ended September 30, 1998.
COMBINED RESULTS:
Interest expense increased $4.5million, or 196%, from $2.3 million for the
three months ended September 30, 1997 to $6.8 million for the three months
ended September 30, 1998. Interest expense increased $3.9 million, or 39.4%,
from $9.9 million for the nine months ended September 30, 1997 to 13.8
million for the nine months ended September
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Page 5 of 6
30, 1998 mainly as a result of issuance of $252 million of @Entertainment
Senior Discount Notes issued on July 14 1998.
Interest and investment income increased $0.6 million, or 85.7%, from $0.7
million for the three months ended September 30, 1997 to $1.3 million for the
three months ended September 30, 1998, primarily due to investment of part of
proceeds from the notes issuance.
Foreign exchange loss for the three months ended September 30, 1998 and 1997,
foreign exchange loss amounted $0.4 million and to $0.5 million, respectively.
Minority interest in subsidiary income was $0.1 million for the three months
ended September 30, 1998, compared to minority interest in subsidiary income
of $0.3 million for the corresponding period in 1997.
Net Loss for the three months ended September 30, 1997 and 1998 was $6.8
million and $28.3 million, respectively.
Net loss applicable to common stockholders increased from a loss of $7.9
million for the three months ended September 30, 1997 to a loss of $27.4
million for the three months ended September 30, 1998 due to the factors
discussed above. For the three months ended September 30, 1997, net loss
applicable to common stockholders included $1.1 million related to the
accretion of redeemable preferred stock.
The Company had negative cash flows from operating activities for the year
ended December 31, 1997 and the nine months ended September 30, 1998 of $15.8
million and $70.2 million, respectively, due to the significant operating
costs associated with the development and launch of its D-DTH service and the
Wizja TV programming package.
The aforementioned remarks contain forward-looking statements that involve
risks and uncertainties including without limitation those related to the
costs and revenue of operating and marketing the Company's digital satellite
direct-to-home broadcasting service, those relating to pending and future
transactions and those relating to regulatory approvals. The Company's actual
results could differ materially from those discussed above.
@Entertainment, Inc. is the leading provider of pay television services in
Poland. The Company owns and operates Polska Telewizja Kablowa (PTK), the
largest cable television network in Poland with 887,000 subscribers as of
September 30, 1998. The Company also owns and operates Wizja TV, Poland's
first digital DTH broadcasting service, which was officially launched on
September 18, 1998. @Entertainment also owns DTC Productions, a company which
invests in the Polish television and film industry. @Entertainment is traded
on the Nasdaq Stock Market under the symbol: ATEN.
# # #
For further information please contact:
- ---------------------------------------
Robert E. Fowler, III Mike Smargiassi/Chris Plunkett
Chief Executive Officer Brainerd Communicators, Inc.
011-44-171-478-3800 212-986-6667
Donald Miller-Jones
Chief Financial Officer
011-44-171-478-3800
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@Entertainment, Inc.
Second Quarter Press Release
Selected Financial Data (Unaudited)
(Thousands of Dollars, including per share data)
<TABLE>
<CAPTION>
Nine months ended Three months ended
September 30, September 30,
------------------------- ------------------------------
Movement Movement
1998 1997 % 1998 1997 %
------ ------ -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
Revenues
Basic cable 31,665 21,658 46.2% 11,465 8,078 41.9%
Intermediate 910 368 147.3% 347 131 164.9%
Broadcast 819 399 105.3% 353 147 140.1%
Premium (HBO, C+) 2,410 393 513.2% 739 307 140.7%
Installation 842 2,134 (60.5%) 249 664 (62.5%)
DDTH revenues 1,041 0 135 0
Other 1,190 1,849 (35.6%) 112 1,063 (89.5%)
------ ----- ------- ------ ------ -------
Total revenue 38,877 26,801 45.1% 13,400 10,390 29.0%
Operating expenses
Programming costs 18,652 2,899 543.4% 12,928 1,170 1,005.0%
Plant operations 24,420 6,030 305.0% 3,471 2,631 31.9%
Marketing 11,191 4,337 158.0% 5,466 2,188 149.8%
General and administrative 22,749 29,495 (22.9%) 5,486 14,445(1) (62.0%)
Other, net 6,057 1,720 252.2% 18 826 (97.8%)
Amortization of sport and program rights 3,263 1,779
------- ------ ------- ------ ------- -------
Direct operating expenses 86,432 44,481 94.3% 29,148 21,260 37.1%
Depreciation 17,786 10,946 62.5% 6,857 4,423 55.0%
------- ------- ------- ------ ------- -------
Total operating expenses 104,218 55,427 88.0% 36,005 25,683 40.2%
Operating loss (65,341) (28,626) 128.3% (22,605) (15,293) 47.8%
Interest expense (13,814) (9,880) 39.8% (6,812) (2,293) 197.1%
Interest and investment income 2,811 3,879 (27.5%) 1,266 1,760 (28.1%)
Foreign exchange loss - net (399) (851) (53.1%) (351) (429) (18.2%)
Loss of subsidiary 1,632 0 N/A 911 0 N/A
Loss before income taxes (75,111) (35,478) 111.7% (27,591) (16,255) 69.7%
Income taxes (496) (368) 38.5% 66 (246) (126.8%)
Minority interest (117) 2,256 (105.2%) 90 (343) (126.2%)
------- ------ ------- ------ ------- --------
Net loss (75,724) (33,580) 125.5% (27,435) (16,844) 62.9%
------- ------ ------- ------ ------- --------
Accretion of redeemable preferred stock 2,028
Net loss applicable to holders of common stock (75,724) (33,580) 125.5% (27,435) (14,816) 85.2%
------- ------ ------- ------ ------- --------
------- ------ ------- ------ ------- --------
Basic and dividend loss per common share (2.27) (1.52) (0.82) (0.53)
</TABLE>
(1) Includes non-cash compensation expense in 1997
