<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTIONS 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
February 23, 1999
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
- ------------------------------
(Address of Principal
Executive Offices)
(860) 549-1674
-------------------------------
(Registrant's telephone number,
including area code)
<PAGE>
Item 5. Other Events.
On February 23, 1999, @ Entertainment, Inc. (the "Company") issued a
press release related to the Company's financial results for the quarter and
the year ended December 31, 1998. A copy of the press release is attached as
exhibit 99 and is incorporated herein by reference.
2
<PAGE>
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 February 23, 1999.
</TABLE>
3
<PAGE>
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: February 23, 1999 By: /s/ DONALD MILLER-JONES
--------------------------------
By: Donald Miller-Jones
Its: Chief Financial Officer
4
<PAGE>
EXHIBIT INDEX
NUMBER DESCRIPTION PAGE
99. Press Release of @ Entertainment, Inc. dated February 23, 1999.
<PAGE>
Exhibit 99
@ENTERTAINMENT, INC. REPORTS FINANCIAL RESULTS FOR 1998
OVER 1,000,000 TOTAL CABLE AND D-DTH SUBSCRIBERS
HARTFORD, CT., February 23, 1999 -- @Entertainment, Inc. (Nasdaq: ATEN) today
announced that revenues for the full year ended December 31, 1998 increased
62.8% over the prior year, rising from $38.1 million to $62.1 million and for
the fourth quarter increased 106.3% over the same period in the prior year,
rising from $11.3 million to $23.4 million. These increases resulted primarily
from organic growth in cable subscribers via increased penetration and build-out
of existing networks, increases in cable subscription rates, the launch of the
Company's digital direct-to-home (D-DTH) satellite service and the Wizja TV
programming platform, and sales of advertising time. The Company reported a net
loss of $124.8 million for the year, and $48.6 million for the quarter, which
were mainly attributable to the launch of its Wizja TV programming platform and
its D-DTH service. The Company reported a net loss of $3.75 per share for the
year and a net loss of $1.46 per share for the quarter ending December 31, 1998,
as compared to a net loss of $3.68 per share for the prior year and $0.28 per
share for the quarter ending December 31, 1997.
During the fourth quarter the Company continued with the successful launch of
its D-DTH service and its Wizja TV programming platform, and by December 31,
1998 had sold over 125,000 packages to distributors with over 95,000 subscribers
installed. Total cable subscribers grew to over 935,000, an increase of over 21%
during the last twelve months, while growth in total revenue per basic
subscriber per month increased more than 17% over the same period.
As presented below, in recognition of the organisation of the Company following
the launch of D-DTH service, the Company has changed its reporting to segregate
the two operating segments of its business: cable television operations and
D-DTH and programming services. 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 business began to
purchase Wizja TV 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
1998 by approximately 20%, which increases are reflected in the Company's fourth
quarter results.
Robert Fowler, Chief Executive Officer, commented: "During 1998, we successfully
launched Wizja TV, Poland's first D-DTH platform. Customer demand for our
product has been very strong with over 125,000 D-DTH packages sold and over
95,000 customers connected. Our 1998 financial results reflect the continued
strong growth of our cable systems, as well as the robust roll-out of Wizja TV.
Combining our D-DTH subscribers with our cable customer base of 935,000,
@Entertainment now delivers multichannel content and distribution services to
over one million subscribers."
Mr. Fowler continued, "The momentum in both our D-DTH and cable businesses has
continued into the first quarter of 1999. In addition, we recently raised $160
million in concurrent debt and equity offerings. With this financing in place
and our D-DTH product now available in over 1,200 Philips'
<PAGE>
Page 2 of 6
outlets in Poland, the outlook remains excellent for the continued expansion of
Wizja TV. As a result of our first-to-market advantage in D-DTH, combined with
our leadership position in cable television, we are in an optimum position to
benefit from the continued rapid development of Poland's commercial television
market."
SEGMENT RESULTS OF OPERATIONS
The following tables present the segment results of the Company's operations for
the three and twelve months ended December 31, 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.
PRELIMINARY SEGMENT RESULTS OF OPERATIONS (Unaudited, in thousands)
<TABLE>
<CAPTION>
REVENUES OPERATING LOSS EBITDA
-------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998 1997 1998 1997 1998 1997
CABLE 52,971 38,138 (21,488) (20,828) (797) (4,558)
DDTH AND PROGRAMMING 22,385 - (71,808) (7,775) (67,949) (7,751)
CORPORATE AND OTHER 168 - (11,092) (14,067) (9,256) (14,067)
INTER SEGMENT ELIMINATION (13,432) - - - - -
-------- -------- -------- -------- -------- --------
TOTAL 62,092 38,138 (104,388) (42,670) (78,002) (26,376)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
REVENUES OPERATING LOSS EBITDA
-------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
THREE MONTHS ENDED DECEMBER 31, 1998 1997 1998 1997 1998 1997
CABLE 15,135 11,337 (9,428) (6,434) (4,056) (1,111)
DDTH AND PROGRAMMING 13,206 - (25,728) (4,670) (23,479) (4,645)
CORPORATE AND OTHER 168 - (3,890) (2,940) (2,911) (2,940)
INTER SEGMENT ELIMINATION (5,119) - - - - -
-------- -------- -------- -------- -------- --------
TOTAL 23,390 11,337 (39,046) (14,044) (30,446) (8,696)
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</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 results for 1997.
CABLE SEGMENT:
Revenue increased $14.9 million or 39.1% from $38.1 million in the year ended
December 31, 1997 to $53.0 million in the year ended December 31, 1998 and $3.8
million or 33.6% from $11.3 million in the fourth quarter of 1997 to $15.1
million in the fourth quarter of 1998. This increase was primarily attributable
to a 16% increase in the number of basic and intermediate subscribers from
approximately 636,000 at December 31, 1997 to approximately 738,000 at December
31, 1998, as well as an increase in monthly subscription rates. Approximately
7,500 of the basic and intermediate subscriber increase was the result of
acquisitions and over 94,000 of the increase was due to build-out of the
Company's existing cable networks and increased penetration.
<PAGE>
Page 3 of 6
Revenue from monthly subscription fees represented 84.0% and 88.9% of cable
television revenue for the year ended December 31, 1997 and 1998, respectively.
Monthly subscription revenue constituted 77.9% and 90.7% of cable television
revenue for the fourth quarter of 1997 and 1998, respectively. During the year
ended December 31, 1998 the Company experienced churn in HBO premium services
with penetration falling by 8,464 subscribers (18.8%). The Company is planning
to encrypt the HBO service on cable and install state-of-the art analog decoders
for all premium subscribers during 1999.
Direct operating expenses grew by $23.0 million during the year ended December
31, 1998 and by $7.9 million for the fourth quarter of 1998. These increases are
primarily due to the cost of purchase of the Wizja TV programming package from
the D-DTH segment, which amounted to $4.7 million for the quarter, and $12.9
million for the period from June 5, the date of Wizja TV launch on cable, to
December 31, 1998. Other significant increases in expenses were due to the
continued cost of integrating recently acquired networks.
Selling, general and administrative expenses decreased $12.5 million or 41.1%
from $30.4 million for the year ended December 31, 1997 to $17.9 million for the
year ended December 31, 1998 and decreased $1.7 million or 22.1% from $7.7
million for the quarter ended December 31, 1997 to $6.0 million for the three
months ended December 31, 1998. A portion of this decrease was attributable to
non-recurring, non-cash compensation expense of $18.1 million recorded in the
year ended December 31, 1997 in connection with stock options granted to certain
employees.
Operating loss amounted to $21.5 million and $9.4 million for the year and the
quarter ended December 31, 1998.
Cable subscriber analysis is presented in the table below:
@ENTERTAINMENT, INC.
Summary of Selected Operating Statistics
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, JUNE 30, MARCH 31, DECEMBER 31,
CABLE 1998 1998 1998 1998 1997
------------ ------------- --------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Homes Passed 1,591,981 1,565,287 1,546,540 1,505,256 1,408,099
Basic Subscribers 698,342 658,584 660,067 627,713 606,630
Subscriber Growth
Organic 70,935 41,904 57,007 26,868 50,487
Through Acquisitions - (10,245) (1) 1,363 16,360 18,098
Churn (31,177) (33,142) (26,016) (22,145) (28,201)
TOTAL NET GROWTH 39,758 (1,483) 32,354 21,083 40,384
Basic penetration 43.9% 42.1% 42.7% 41.7% 43.1%
Intermediate subscribers 40,037 42,538 43,204 48,077 29,653
BASIC AND INTERMEDIATE SUBSCRIBERS 738,379 701,122 703,271 675,790 636,283
Broadcast subscribers 196,961 186,334 167,859 154,860 132,618
TOTAL SUBSCRIBERS 935,340 887,456 871,130 830,650 768,901
Premium subscribers - HBO 36,615 39,035 45,674 47,298 45,079
Premium penetration - HBO 5.2% 5.9% 6.9% 7.5% 7.4%
Basic revenue/basic sub./month 6.36 5.78 5.29 5.19 4.99
Total revenue/basic sub/month 7.13 6.70 6.47 6.42 6.08
</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.
<PAGE>
Page 4 of 6
D-DTH AND PROGRAMMING SEGMENT:
D-DTH revenue amounted to $22.4 million and $13.4 million for the year and the
quarter ended December 31, 1998. 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 revenue from this segment in 1997.
Revenue from monthly subscription fees represented 34.8% and 56% of D-DTH
revenue for the year and the quarter ended December 31, 1998.
Revenue from supplying the Wizja TV programming package in the Company's cable
systems, which eliminates on consolidation, represented 57.6% and 38.8% of D-DTH
revenue for the year and the quarter ended December 31, 1998, respectively.
Operating loss amounted to $71.8 million and $25.7 million for the year and the
quarter ended December 31, 1998.
D-DTH subscriber analysis is presented in the table below:
@ENTERTAINMENT, INC.
SUMMARY OF SELECTED OPERATING STATISTICS
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
D-DTH 1998 1998
----------- -------------
<S> <C> <C>
Boxes sold to dealers 125,167 34,699
Installed subscribers 95,378 23,390
Churn - -
TOTAL SUBSCRIBERS 95,378 23,390
Premium subscribers-HBO-promotional 76,633 23,390
Premium subscribers-HBO-paying 15,555 -
HBO churn 3,190 -
HBO churn 17% -
</TABLE>
NON-OPERATING RESULTS:
Interest expense increased $7.6 million, or 54.9%, from $13.9 million for the
year ended December 31, 1997 to $21.5 million for the year ended December 31,
1998. Interest expense increased $3.7 million, or 92.0%, from $4.0 million for
the quarter ended December 31, 1997 to $7.7 million for the quarter ended
December 31, 1998 mainly as a result of issuance of $252 million in principal
amount at maturity of @Entertainment Senior Discount Notes due 2008 issued on
July 14 1998.
Interest and investment income decreased $2.7 million, or 47.2%, from $5.8
million for the year ended December 31, 1997 to $3.0 million for the year ended
December 31, 1998, due to reduced cash balances resulting from spending
attributable to the launch of the Wizja TV programming platform and D-DTH
service.
<PAGE>
Page 5 of 6
Foreign exchange loss amounted $1.0 million and $53,000 for the years ended
December 31, 1997 and 1998, respectively.
Minority interest in subsidiary income was $0 for the year ended December 31,
1998, due to the acquisition of the minority interest in the Gosat cable system
during September 1998, compared to $3.6 million for the corresponding period in
1997.
Net Loss for the years ended December 31, 1997 and 1998 was $54.8 million and
$124.8 million, respectively.
Net loss applicable to common stockholders increased from a loss of $91.1
million for the year ended December 31, 1997 to a loss of $124.8 million for the
year ended December 31, 1998 due to the factors discussed above. For the year
ended December 31, 1997, net loss applicable to common stockholders included
$2.4 million related to the accretion of redeemable preferred stock and $33.8
million related to excess of consideration paid for preferred stock over
carrying value.
The Company had negative cash flows from operating activities for the year ended
December 31, 1998 and the year ended December 31, 1997 of $80.8 million and
$18.8 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 the Company's cable television service,
as well as the prospects for and the speed of the continued growth 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 over 935,000 subscribers as of
December 31, 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 Wizja TV Sp., 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
<PAGE>
Page 6 of 6
@ENTERTAINMENT, INC.
YEAR END PRESS RELEASE
Preliminary Selected Financial Data (Unaudited)
(Thousands of Dollars, excluding per share data)
<TABLE>
<CAPTION>
FULL YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
------------------------------ ------------------------------
MOVEMENT MOVEMENT
1998 1997 % 1998 1997 %
------- ------- -------- ------ ------ --------
<S> <C> <C> <C> <C> <C> <C>
REVENUES
Cable
Basic 44,679 30,836 44.9% 13,014 8,399 54.9%
Intermediate 1,243 525 136.8% 334 142 135.2%
Broadcast 1,180 651 81.3% 361 221 63.3%
Premium 3,082 997 209.1% 672 604 11.3%
Installation 1,014 3,047 (66.7%) 172 886 (80.6%)
Other 1,771 2,082 (14.9%) 581 1,085 (46.5%)
D-DTH
Basic 7,797 - 7,486 -
Premium 166 - 166 -
Advertising 666 - 338 -
Other 326 - 98 -
Other 168 - 168 -
------- ------- -------- ------ ------ --------
TOTAL REVENUES 62,092 38,138 62.8% 23,390 11,337 106.3%
OPERATING EXPENSES
Programming costs 31,878 4,348 633.2% 13,226 1,449 812.8%
Plant operations 27,596 9,642 186.2% 3,186 2,223 43.3%
Sales and Marketing 31,079 10,234 203.7% 20,052 2,797 616.9%
General and adminstrative 34,792 40,290 (13.6%) 12,043 12,714 (5.3%)
Other, net 7,629 - 1,572 850 84.9%
Amortization of sport and
program rights 7,120 - 3,757 -
------- ------- -------- ------ ------ --------
DIRECT OPERATING EXPENSES 140,094 64,514 117.2% 53,836 20,033 168.7%
Depreciation 26,386 16,294 61.9% 8,600 5,348 60.8%
------- ------- -------- ------ ------ --------
TOTAL OPERATING EXPENSES 166,480 80,808 106.0% 62,436 25,381 146.0%
OPERATING LOSS (104,388) (42,670) 144.6% (39,046) (14,044) 178.0%
Interest expense (21,535) (13,902) 54.9% (7,721) (4,022) 92.0%
Interest and investment income 3,036 5,754 (47.2%) 225 1,875 (88.0%)
Foreign exchange loss-net (520) (1,027) (49.4%) 346 (176) (296.6%)
Loss of subsidiary (1,264) (368) 243.5% (2,896) (368) 687.0%
LOSS BEFORE INCOME TAXES (124,671) (52,213) 138.8% (49,092) (16,735) 193.3%
Income taxes (157) 975 (116.1%) 339 1,333 (74.6%)
Minority interest - (3,586) (100.0%) 117 (5,842) (102.0%)
------- ------- -------- ------ ------ --------
NET LOSS (124,828) (54,824) 127.7% (48,636) (21,244) 128.9%
------- ------- -------- ------ ------ --------
ACCRETION OF REDEEMABLE
PREFERRED STOCK - (2,436) - (2,436)
EXCESS OF CONSIDERATION PAID
FOR PREFERRED STOCK OVER
CARRYING VALUE - (33,806) - -
NET LOSS APPLICABLE TO HOLDERS
OF COMMON STOCK (124,828) (91,066) 37.1% (48,636) (23,680) 105.4%
------- ------- ------ ------
------- ------- ------ ------
BASIC AND DILUTED LOSS PER
COMMON SHARE (3.75) (3.68) (1.46) (0.28)
</TABLE>
