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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
May 6, 1999
Date of Report (Date of earliest event reported)
@ Entertainment, Inc.
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(Exact name of Registrant as Specified in Charter)
Delaware 000-22877 06-1487156
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(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
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(Registrant's telephone number,
including area code)
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Item 5. Other Events.
On May 6, 1999, @ Entertainment, Inc. (the "Company") issued a
press release related to the Company's financial results for the quarter ended
March 31, 1999. 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
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<S> <C>
99 Press Release of @ Entertainment, Inc.
dated May 6, 1999.
</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: May 6, 1999 By: /s/ DONALD MILLER-JONES
--------------------------------
By: Donald Miller-Jones
Its: Chief Financial Officer
4
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EXHIBIT INDEX
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<CAPTION>
NUMBER DESCRIPTION PAGE
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<S> <C> <C>
99. Press Release of @ Entertainment, Inc. dated May 6, 1999.
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5
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Exhibit 99
@ENTERTAINMENT, INC. REPORTS FINANCIAL RESULTS
FOR 1999'S FIRST QUARTER
130,000 DIGITAL SATELLITE SUBSCRIBERS
TOTAL CABLE SUBSCRIBERS INCREASE TO OVER 948,000
HARTFORD, CT., May 6, 1999 -- @Entertainment today announced its results for the
quarter ended March 31, 1999.
Operations Highlights
- - Total cable and DTH subscribers increase to 1,078,000
- - DTH launch on plan - 137,600 package sales through 3/31/99, 130,000
connected subscribers
- - Average DTH revenue per basic subscriber of $12.35 ahead of plan
- - Continued growth in cable TV - total subscribers up 14.2% YOY
- - Basic cable rates up 19.5% YOY
Operations Initiatives
- - Licensing of 2 additional exclusive basic channels - E!Entertainment
and Wizja Le Cinema
- - Addition of TVN terrestrial channel to basic DTH channel line-up
- - Purchase of 30% of Hoop Pekaes Pruszkow basketball team
- - Exclusive live rights to Legia Warsaw football club home games
- - Exclusive live football rights to Polish Cup and Super Cup
Financial Highlights
- - First quarter revenues of $18.8 million, up 48% year-over-year
- - EBITDA of ($15.5 million) for the first quarter of 1999
- - Net loss of $34.2 million for the first quarter of 1999
- - Net loss per share of $1.05 for the first quarter of 1999
- - Total of $160 million in financing completed during Q1
- - Cash balance of $128 million at March 31 1999
Bob Fowler, Chief Executive Officer, commented: "We are extremely pleased with
our first quarter results that reflect the continued development of our
programming, cable television and DTH operations. During the quarter, we have
significantly strengthened our position as the leading provider of local sports
programming in the Polish market with the signing of key license agreements. We
have also further differentiated our program line-up through the addition of
three new basic channels. Including cable viewers the Wizja TV programme package
is now viewed in over 816,700 homes. Based on telemetry data from our Cable and
D-DTH households, the viewing share of the Wizja TV package is averaging 17.4%,
a strong validation of the value of this programming to our customers ".
<PAGE>
Mr. Fowler continued, "We are gratified by the continued successful on plan
rollout of our DTH product. With 130,000 connected subscribers, all of which are
new to our business, we have firmly established our DTH operation as one of
Europe's fastest growing digital platforms. We remain on target to reach 375,000
DTH sales by year-end."
"We are also pleased with the development of our cable television
operations, to which we added 7,837 basic subscribers during what has
historically been a very slow period for sales. Subscriber churn continues to
normalise after basic rate increases of 19.5% during the past 12 months. We are
continuing the technical upgrade of our cable systems to allow advanced
interactive services and plan to conduct Internet access trials on our networks
by the end of the second quarter."
"Our competitive position is solid and we are well positioned to
benefit from the ongoing growth of Poland's multichannel television
marketplace."
As presented below, in recognition of the organization of the Company into two
operating groups following the launch of its D-DTH service, the Company reports
its results in two operating segments, cable television and digital
direct-to-home television services and programming. Prior period information has
been restated to be consistent with the new presentation. Effective June 5th,
1998, with the availability of the Wizja TV programming package, the cable
segment began to purchase Wizja programming from the D-DTH segment.
SEGMENT RESULTS OF OPERATIONS (Unaudited, in millions):
<TABLE>
<CAPTION>
REVENUES OPERATING PROFIT (LOSS) EBITDA
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THREE MONTHS ENDED MARCH 31, 1999 1998 1999 1998 1999 1998
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<S> <C> <C> <C> <C> <C> <C>
CABLE 14.8 12.1 (4.0) (0.9) 1.7 3.9
DDTH AND PROGRAMMING 9.1 0.6 (18.9) (10.6) (15.5) (10.5)
CORPORATE AND OTHER - - (1.7) (2.8) (1.7) (2.8)
INTER SEGMENT ELIMINATION (5.1) - - - - -
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TOTAL 18.8 12.7 (24.6) (14.3) (15.5) (9.4)
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</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 1999 results with the pro forma results for 1998.
CABLE SEGMENT:
Basic subscribers increased 12.5% over the prior year period to 706,179
reflecting continuing buildout of the Company's networks and an increase in
Basic penetration from 41.7% to 43.5%. Average basic subscription rates
increased by 19.5% to $6.20. Annualized subscriber churn normalized from 16.8%
in the fourth quarter of 1998 after the implementation of rate increases in
September 1998 to 16.4% in the first quarter of 1999. HBO premium take-up
decreased by 2,283 subscribers during the quarter due to continuing system
security issues, which are being addressed through the deployment of analogue
decoders for premium customers and the encryption of the signal in the second
half of 1999.
Revenue increased $2.7 million or 22.3% from $12.1 million for the three months
ended March 31, 1998 to $14.8 million for the three months ended March 31, 1999.
This increase was primarily attributable to the increase in basic and
intermediate subscribers to approximately 739,800 at March 31, 1999, as well as
the increase in average monthly subscription rates.
<PAGE>
Revenue from monthly basic and intermediate subscription fees represented 83.5%
and 90.5% of cable television revenue for the three months ended March 31, 1998
and 1999, respectively. Installation fee revenue for the three months ended
March 31, 1999 decreased by 53.6%, from $457,000 to $212,000.
Direct operating expenses grew by $6.4 million during the three months ended
March 31, 1999. These increases are primarily due to the cost of purchase of the
Wizja TV programming package from the D-DTH segment, which amounted to $5.1
million for the quarter.
Selling, general and administrative expenses decreased $1.5 million or 33.3%
from $4.5 million for the three months ended March 31, 1998 to $3.0 million for
the three months ended March 31, 1999. This decrease was attributable to
operating efficiencies realized by the Cable segment in the three months ended
March 31, 1999.
EBITDA for cable increased by $5.8 million to $1.7 million for the first quarter
of 1999 compared to a negative $4.1 million in the fourth quarter of 1998. This
improvement was due to the impact of price increases implemented during the
fourth quarter to pay for the introduction of Wizja TV to basic cable
subscribers.
Operating loss amounted to $0.9 million for the three months ended March 31,
1998 and $4.0 million for the three months ended March 31, 1999.
Cable subscriber analysis is presented in the table below.
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31,
1999 1998 1998 1998 1998
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<S> <C> <C> <C> <C> <C>
Homes Passed 1,624,119 1,591,981 1,565,287 1,546,540 1,505,256
Basic Subscribers 706,179 698,342 658,584 660,067 627,713
Subscriber Growth (three month period)
Organic 38,226 70,935 41,904 57,007 26,868
Through Acquisitions - - (10,245) (1) 1,363 16,360
Churn (30,389) (31,177) (33,142) (26,016) (22,145)
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TOTAL NET GROWTH 7,837 39,758 (1,483) 32,354 21,083
------------- ---------------- --------------- -------------- --------------
Basic penetration 43.5% 43.9% 42.1% 42.7% 41.7%
Intermediate subscribers 33,587 40,037 42,538 43,204 48,077
------------- ---------------- --------------- -------------- --------------
BASIC AND INTERMEDIATE SUBSCRIBERS 739,766 738,379 701,122 703,271 675,790
------------- ---------------- --------------- -------------- --------------
Broadcast subscribers 208,457 196,961 186,334 167,859 154,860
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TOTAL SUBSCRIBERS 948,223 935,340 887,456 871,130 830,650
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Premium subscribers - HBO 34,332 36,615 39,035 45,674 47,298
Premium penetration - HBO 4.9% 5.2% 5.9% 6.9% 7.5%
Basic revenue / basic sub./month $6.20 $5.69 $5.19 $4.99 $5.19
Total revenue/ basic sub/month $6.97 $6.75 $6.42 $6.08 $6.42
</TABLE>
(1) 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.
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D-DTH and PROGRAMMING SEGMENT:
The company sold a total of 12,462 packages to dealers and connected an
estimated 34,622 basic D-DTH customers during the quarter. As of the
quarter-end, HBO premium sales totalled 58,705 subscribers, reflecting
pay-to-basic penetration of 45%. Average monthly revenue per D-DTH subscriber
was $12.35.
D-DTH revenue increased $8.5 million from $0.6 million for the three months
ended March 31, 1998 to $9.1 million for the three months ended March 31, 1999.
Because the Company started supplying its Wizja TV programming package over its
cable systems on June 5, 1998 and its D-DTH service in July 1998, there was no
subscription revenue from this segment for the three months ended March 31,
1998.
Revenue from monthly subscription fees represented 40% of D-DTH revenue for the
three months ended March 31, 1999. Advertising revenue for the three months
ended March 31, 1999 represented 4% of D-DTH revenue. The Company recognizes
subscription revenues at the time of installation to the extent of direct
selling costs incurred, and the balance is deferred and amortized to income over
the remaining term of the subscription. Revenue from supplying the Wizja TV
programming package to the Company's cable systems, which eliminates on
consolidation, represented 56.0% of D-DTH revenue for the three months ended
March 31, 1999.
Direct operating expenses amounted to $13.0 million for the three months ended
March 31, 1999, of which $9.9 million represents programming cost and $2.3
million represents expenses related to operating the up-link facility for the
Company's D-DTH platform.
Depreciation charge for the three months ended March 31, 1999 amounted to $3.4
million. This primarily relates to D-DTH production equipment and decoders being
leased to customers. Production equipment and decoders comprise 86% of total
D-DTH property, plant and equipment as of 31 March 1999.
EBITDA was negative for D-DTH and Programming, improving from a loss of $23.5
million in the fourth quarter of 1998 to a loss of $ 15.5 million in the first
quarter of 1999, reflecting the continuing investment in developing our
subscriber base.
Operating loss amounted to $18.9 million for the three months ended March 31,
1999
D-DTH subscriber analysis is presented in the table below:
@ ENTERTAINMENT, INC.
Summary of Selected Operating Statistics
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, SEPTEMBER 30,
DDTH 1999 1998 1998
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<S> <C> <C> <C>
Boxes sold to dealers 137,629 125,167 34,699
Installed subscribers 130,000 95,378 23,390
Churn - -
TOTAL SUBSCRIBERS 130,000 95,378 23,390
Premium subscribers - HBO - promotional 56,162 76,633 23,390
Premium subscribers - HBO - paying 58,705 15,555 -
HBO churn 15,133 3,190 -
HBO churn 25.8% 20.5% -
</TABLE>
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COMBINED RESULTS:
Interest expense increased $8.1 million, or 219%, from $3.7 million for the
three months ended March 31, 1998 to $11.8 million for the three months ended
March 31, 1999, due to the accrual of interest expense on the Notes issued by
the Company in July 1998 and January 1999.
Interest and investment income increased $0.6 million, or 67%, from $0.9 million
for the three months ended March 31, 1998 to $1.5 million for the three months
ended March 31, 1999, primarily due to investment of a part of the proceeds from
the Notes issuances.
Net loss for the three months ended March 31, 1999 and 1998 was $34.2 million
and $17.3 million, respectively.
Net loss applicable to common stockholders increased from a loss of $17.3
million for the three months ended March 31, 1998 to a loss of $35.0 million for
the three months ended March 31, 1999 due to the factors discussed above. For
the three months ended March 31, 1999, net loss applicable to common
stockholders included $0.8 million related to the accretion of redeemable
preferred stock.
The Company had negative cash flows from operating activities for the three
months ended March 31, 1998 and the three months ended March 31, 1999 of $11.8
million and $32.1 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 and cable television service, as well as the
prospects for and the speed of the continued rollout of these businesses. 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 approximately 948,000
subscribers as of March 31, 1999. 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 Wizja TV SP, a company that
invests in the Polish television and film industry. @Entertainment is traded on
the Nasdaq Stock Market under the symbol: ATEN.
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@ ENTERTAINMENT, INC.
FIRST QUARTER PRESS RELEASE
Selected Financial Data (Unaudited)
(Thousands of Dollars, excluding per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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MOVEMENT
1999 1998 %
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<S> <C> <C> <C>
REVENUES
Basic cable 13,148 9,907 32.7%
Intermediate 316 195 62.1%
Broadcast 327 205 59.5%
Premium 585 792 (26.1%)
Installation 212 457 (53.6%)
D-DTH revenue 4,016 593 577.2%
Other 195 537 (63.7%)
TOTAL REVENUES 18,799 12,686 48.2%
OPERATING EXPENSES
Programming costs 12,130 2,523 380.8%
Plant operations 5,887 6,125 (3.9%)
Sales and Marketing 9,313 4,202 121.6%
General and administrative 6,809 8,808 (22.7%)
Other, net 133 437 (69.6%)
Amortization of sport and program rights -
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DIRECT OPERATING EXPENSES 34,272 22,095 55.1%
Depreciation 9,147 4,949 84.8%
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TOTAL OPERATING EXPENSES 43,419 27,044 60.5%
OPERATING LOSS (24,620) (14,358) 71.5%
Interest expense (11,845) (3,649) 224.6%
Interest and investment income 1,494 850 75.8%
Foreign exchange loss - net (248) 73 (439.7%)
Profit of unconsolidated subsidiary 1,025 270 279.6%
LOSS BEFORE INCOME TAXES (34,194) (16,814) 103.4%
Income taxes (19) (333) (94.3%)
Minority interest (149) -
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NET LOSS (34,213) (17,296) 97.8%
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Dividends on preffered stock (791) - -
NET LOSS APPLICABLE TO HOLDERS
OF COMMON STOCK (35,004) (17,296) 102.4%
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# # #
FOR FURTHER INFORMATION PLEASE CONTACT:
<TABLE>
<S> <C>
Robert E. Fowler, III Mike Smargiassi/Chris Plunkett
Chief Executive Officer Brainerd Communicators, Inc.
+44 171 478 3821 212 986 6667
Donald Miller-Jones Richard Oldworth / Alison Howard
Chief Financial Officer Buchanan Communications
+44 171 478 3810 +44 171 466 5000
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