<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
------------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER
0-21631
TICKETMASTER GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
ILLINOIS 36-3597489
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
3701 WILSHIRE BOULEVARD, 7TH FLOOR, LOS ANGELES, CALIFORNIA 90010
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(213) 381-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(NOT APPLICABLE)
(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
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 Exchange 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 _ No X
The number of shares outstanding of the registrant's Common Stock as of
October 31, 1996 was 15,310,405.
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<PAGE> 2
TICKETMASTER GROUP, INC.
INDEX
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Independent Auditors' Review Report.............................................. 2
Consolidated Balance Sheets -- January 31, 1996 and October 31, 1996............. 3
Consolidated Statements of Operations -- Three and nine months ended
October 31, 1995 and 1996 (including Pro Forma Financial Information for the
three and nine months ended October 31, 1996)................................... 4
Consolidated Statements of Cash Flows -- Nine months ended October 31, 1995 and
1996............................................................................ 5
Condensed Notes to Consolidated Financial Statements............................. 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations (including Pro Forma Financial Information for the three and nine
months ended October 31, 1996)................................................... 10
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K............................................ 22
Signatures............................................................................ 23
</TABLE>
1
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INDEPENDENT AUDITOR'S REVIEW REPORT
The Board of Directors
Ticketmaster Group, Inc.:
We have reviewed the consolidated balance sheet of Ticketmaster Group, Inc. and
subsidiaries as of October 31, 1996, the consolidated statements of operations
for the three and nine month periods ended October 31, 1995 and 1996, and the
related statements of cash flows for the nine month periods ended October 31,
1995 and 1996. These consolidated financial statements are the responsibility of
the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the consolidated financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of Ticketmaster Group, Inc. and
subsidiaries as of January 31, 1996, and the related consolidated statements of
operations, shareholders' deficiency, and cash flows for the year then ended
(not presented herein); and in our report dated March 8, 1996, except for the
first paragraph of Note 9, which is as of June 12, 1996, and Notes 7 and 14,
which are as of September 19, 1996, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth in
the accompanying consolidated balance sheet as of January 31, 1996, is fairly
stated, in all material respects, in relation to the consolidated balance sheet
from which it has been derived.
KPMG PEAT MARWICK LLP
Los Angeles, California
December 9, 1996
2
<PAGE> 4
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
ASSETS
<TABLE>
<CAPTION>
OCTOBER 31,
1996
JANUARY 31, -----------
1996
----------- (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 34,004 $ 61,293
Accounts receivable, ticket sales.................................. 8,644 11,066
Accounts receivable, other......................................... 3,783 8,419
Inventory.......................................................... 623 4,795
Prepaid expenses................................................... 5,491 6,750
----------- -----------
Total current assets....................................... 52,545 93,323
Property, equipment and leasehold improvements, net.................. 12,776 30,016
Investments in and advances to affiliates............................ 9,784 8,636
Cost in excess of net assets acquired................................ 13,645 38,640
Intangible and other assets, net..................................... 11,447 18,107
Deferred income taxes, net........................................... 5,200 5,670
----------- -----------
$ 105,397 $ 193,392
========= =========
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
Current liabilities:
Current portion of long-term bank debt............................. $ 45 $ 206
Accounts payable, trade............................................ 5,352 9,449
Accounts payable, clients.......................................... 31,318 42,510
Accrued expenses................................................... 6,691 20,338
Deferred income.................................................... 5,165 12,365
----------- -----------
Total current liabilities.................................. 48,571 84,868
Long-term bank debt, net of current portion.......................... 159,864 203,958
Deferred rent and other.............................................. 3,627 5,828
Minority interests................................................... 1,128 1,116
Exchangeable Promissory Note......................................... -- 5,000
Shareholders' deficiency:
Preferred stock.................................................... -- --
Common stock, no par value, authorized 80,000,000 shares, issued
and outstanding 15,310,405 shares............................... -- --
Additional paid-in capital......................................... -- --
Accumulated deficit, net of foreign currency translation
adjustment...................................................... (107,793) (107,378)
----------- -----------
Total shareholders' deficiency............................. (107,793) (107,378)
----------- -----------
$ 105,397 $ 193,392
========= =========
</TABLE>
See condensed notes to consolidated financial statements.
3
<PAGE> 5
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------- -------------------------
1995 1996 1995 1996
---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenue:
Ticket operations....................... $ 36,595 $ 52,157 $ 116,365 $ 144,827
Concession control systems.............. -- 6,205 -- 6,205
Publications............................ 837 2,967 2,602 7,479
Merchandising........................... 374 463 1,629 1,858
Sales of Ticketing Equipment............ 390 786 1,330 2,168
---------- ---------- ---------- ----------
38,196 62,578 121,926 162,537
---------- ---------- ---------- ----------
Operating costs, expenses and other items:
Ticketing operations.................... 22,691 30,455 74,074 89,110
Ticketing selling, general and
administrative....................... 8,579 9,272 22,310 25,550
Concession control systems operations... -- 3,577 -- 3,577
Concession control systems selling,
general and administrative........... -- 3,368 -- 3,368
Publications............................ 1,595 4,596 4,962 13,711
Merchandising........................... 285 447 1,350 1,673
Corporate general and administrative.... 3,362 3,707 10,234 12,103
Depreciation and amortization........... 2,277 3,215 7,040 8,144
Equity in net income of unconsolidated
affiliates........................... (845) (804) (2,189) (2,940)
---------- ---------- ---------- ----------
Operating income................ 252 4,745 4,145 8,241
Other (income) expenses:
Interest expense, net................... 3,169 3,177 9,696 9,094
Minority interests...................... (97) 135 185 261
Gain on sale of unconsolidated
affiliate............................ -- (3,195) -- (3,195)
---------- ---------- ---------- ----------
Income (loss) before income taxes....... (2,820) 4,628 (5,736) 2,081
Income tax provision (benefit)............ (160) 1,779 (750) 1,650
---------- ---------- ---------- ----------
Net income (loss)....................... $ (2,660) $ 2,849 $ (4,986) $ 431
========== ========== ==========
----------
Net income (loss) per share............... $ (0.17) $ 0.19 $ (0.33) $ 0.03
========== ========== ========== ==========
Proforma net income (loss) per............ $ (0.11) $ 0.11 $ (0.20) $ 0.02
========== ========== ========== ==========
Weighted average number of common shares
outstanding............................. 15,310,405 15,350,041 15,310,405 15,350,041
========== ========== ========== ==========
Proforma weighted average number of common
shares outstanding...................... 24,739,715 24,779,351 24,739,715 24,779,351
========== ========== ========== ==========
</TABLE>
See condensed notes to consolidated financial statements.
4
<PAGE> 6
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
OCTOBER 31,
--------------------
1995 1996
------- -------
(UNAUDITED)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)..................................................................... $(4,986) $ 431
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Depreciation and amortization....................................................... 7,040 8,144
Income attributable to minority interests........................................... 185 261
Equity in income of unconsolidated affiliates....................................... (2,189) (2,940)
Gain on sale of unconsolidated affiliate............................................ -- (3,195)
Deferred income taxes............................................................... (350) (470)
Changes in operating assets and liabilities net of effects from purchase of
venturers' interests:
Accounts receivable, ticket sales................................................ (445) (251)
Accounts receivable, other....................................................... (889) 197
Inventory........................................................................ (40) (278)
Prepaid expenses................................................................. 1,139 (174)
Accounts payable, trade.......................................................... (1,039) (754)
Accounts payable, clients........................................................ (1,033) 7,451
Accrued expenses................................................................. (901) 7,958
Deferred income.................................................................. 4,092 5,471
Deferred rent and other.......................................................... 771 2,934
------- -------
Net cash provided by operating activities...................................... 1,355 24,785
------- -------
Cash flows provided by (used in) investing activities:
Proceeds from sale of unconsolidated affiliate........................................ -- 6,600
Purchase of property, equipment and leasehold improvements............................ (2,625) (18,364)
Investments in affiliates............................................................. (3,437) (3,768)
Return on investments in affiliates................................................... 4,635 3,190
Cost in excess of net assets acquired................................................. (2,225) (1,650)
Intangible and other assets........................................................... (1,692) (294)
Payment for acquisitions of venturers' and licensees' interests, net of cash
acquired............................................................................ -- (18,979)
------- -------
Net cash used in investing activities.......................................... (5,344) (33,265)
------- -------
Cash flows provided by (used in) financing activities:
Proceeds from long-term debt.......................................................... 2,520 42,404
Reduction of long-term debt........................................................... -- (6,346)
Distributions to minority shareholders................................................ (523) (273)
------- -------
Net cash provided by financing activities...................................... 1,997 35,785
------- -------
Effect of exchange rate changes on cash and cash equivalents.......................... -- (16)
------- -------
Net increase (decrease) in cash and cash equivalents........................... (1,992) 27,289
Cash and cash equivalents, beginning of period.......................................... 38,752 34,004
------- -------
Cash and cash equivalents, end of period................................................ $36,760 $61,293
======= =======
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest............................................................................ $10,384 $10,050
Income taxes........................................................................ 904 1,042
======= =======
</TABLE>
Supplemental schedule of noncash investing and financing activities:
During the nine months ended October 31, 1996, the Company acquired the 50%
interest of its partners in the European Joint Venture and
Pacer/CATS/CCS -- a Wembley/Ticketmaster Joint Venture (the Pacer Joint
Venture) and the license rights and related assets of its Philadelphia,
Pennsylvania licensee. In conjunction with the acquisitions, liabilities
were assumed as follows:
<TABLE>
<S> <C>
Fair value of assets acquired.................................................. $48,300
Cash paid for venturers' interest.............................................. 25,000
Exchangeable promissory note issued for venturer's interest.................... 5,000
-------
Liabilities assumed.......................................................... $18,300
=======
</TABLE>
See condensed notes to consolidated financial statements.
5
<PAGE> 7
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements include the
accounts of Ticketmaster Group, Inc. and subsidiaries (the "Company") for the
three and nine months ended October 31, 1995 and 1996 have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the rules and regulations of the Securities and Exchange
Commission. The consolidated balance sheet presented herein for January 31, 1996
was derived from the Company's audited consolidated financial statements for the
fiscal year then ended. The financial statements presented herein for the three
and nine months ended October 31, 1995 and 1996 include all material adjustments
(consisting of normal and recurring matters) which are, in the opinion of
management, necessary for a fair presentation of the financial position, results
of operations and cash flows for such periods. However, these results are not
necessarily indicative of results for any other interim period or for the
results that may be expected for the full year.
Certain information and footnote disclosures normally included in financial
statements in accordance with generally accepted accounting principles have been
omitted pursuant to the rules and regulations of the Securities and Exchange
Commission. Management believes that the disclosures included in the
accompanying interim financial statements and footnotes are adequate to make the
information not misleading, but that they should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
Registration Statement on Form S-1, (Registration No. 333-12413) which was
declared effective by the Securities and Exchange Commission on November 18,
1996.
(2) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS, NET
Property, equipment and leasehold improvements consisted of the following
(in thousands):
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1996 1996
----------- -----------
<S> <C> <C>
Computer equipment.................................... $ 17,203 $ 23,780
Telephone equipment and furnishings................... 7,688 11,324
Building.............................................. -- 11,237
Transportation equipment.............................. 642 935
Leasehold improvements................................ 3,516 3,731
-------- --------
29,049 51,007
Less accumulated depreciation and amortization........ (16,273) (20,991)
-------- --------
$ 12,776 $ 30,016
======== ========
</TABLE>
(3) INVESTMENTS IN AND ADVANCES TO AFFILIATES
Investments in Joint Ventures, which the Company refers to also as
"affiliates" or "affiliated companies", consisted of the following (in
thousands):
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1996 1996
----------- -----------
<S> <C> <C>
Investments in Ticketing Joint Ventures............... $ 7,458 $ 8,050
Investment in Pacer/CATS/CCS.......................... (2,430) --
Advances to Pacer/CATS/CCS............................ 2,000 --
Investment in and advances to VJNIL (defined below)... 2,270 --
Other investments..................................... 486 586
------- ------
$ 9,784 $ 8,636
======= ======
</TABLE>
6
<PAGE> 8
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(3) INVESTMENTS IN AND ADVANCES TO AFFILIATES (CONTINUED)
All of the above investments are accounted for under the equity method. The
Company is managing general partner of each of the Joint Ventures.
Summarized financial information of the unconsolidated ticketing joint
ventures is presented below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------- -------------------
1995 1996 1995 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
COMBINED RESULTS OF OPERATIONS
Revenues............................ $13,520 $13,553 $42,574 $46,824
Operating income.................... 2,973 1,773 9,420 8,431
Net Income.......................... 2,998 1,865 9,467 8,402
</TABLE>
Summarized financial information of the Pacer Joint Venture is presented
below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------ -------------------
1995 1996 1995 1996
------ ------- ------- -------
<S> <C> <C> <C> <C>
COMBINED RESULTS OF OPERATIONS
Revenues............................. $5,175 $ -- $15,930 $12,964
Loss from Operations................. (680) -- (2,428) (689)
Net Loss............................. (917) -- (3,189) (1,173)
</TABLE>
The Pacer Joint Venture partner's interest was acquired on July 29, 1996,
and accordingly the results of operations are included in the consolidated
results of operations for the period from July 29, 1996 through October 31,
1996.
Video Jukebox Network International Limited (VJNIL)
On June 30, 1995, the Company acquired 50% of the common stock in VJNIL for
$2.2 million in cash and commitments for future management services equivalent
to $1 million. Also, on June 30, 1995, the Company loaned VJNIL $1.5 million. On
October 29, 1996, the Company received $5.0 million for its interest in VJNIL
and $1.6 million as repayment of the note plus interest.
(4) STOCK SPLIT
On August 21, 1996, the Board of Directors authorized a one-for-three
reverse stock split of the Company's common stock which subsequently was
approved by the shareholders. All references in the consolidated financial
statements to the number of common shares and per share amounts have been
retroactively restated to reflect the decreased number of common shares
outstanding.
(5) ACQUISITIONS AND SUBSEQUENT EVENTS
On February 12, 1996 the Company completed the acquisition of certain
assets of Tennessee Performing Arts Center Management Corporation, which manages
a ticket selling business within the state of Tennessee, for a purchase price of
$1.6 million.
On June 7, 1996, the Company acquired the minority interests held by its
joint venture partner in Ticketmaster UK Limited and Ticketmaster Europe Group
(collectively referred to as the European Joint Venture). The purchase
consideration was $6 million in cash and an Exchangeable Promissory Note (the
7
<PAGE> 9
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(5) ACQUISITIONS AND SUBSEQUENT EVENTS (CONTINUED)
Note) in the principal amount of $5 million, bearing interest at the prime rate
(8.25% at October 31, 1996). The Note plus interest was paid in full in November
1996.
On July 29, 1996, the Company acquired the remaining 50% equity interest of
its partner in the Pacer Joint Venture. Consideration paid by the Company in
connection with its initial 50% interest in the Pacer Joint Venture and the
subsequent purchase of the remaining 50% interest aggregated approximately $16
million in cash and the Joint Venture's assumption of $7.5 million of debt.
On August 31, 1996, the Company purchased certain assets of its
Albuquerque, New Mexico licensee for $150,000.
On October 3, 1996, the Company acquired the license rights and related
assets of its Philadelphia, Pennsylvania licensee (Delaware Valley) for $19
million in cash. This acquisition has been recorded as a purchase transaction;
accordingly, the purchase price was allocated to the net assets acquired based
on their estimated fair market values. Five million dollars was allocated to
purchased user agreements; the excess of the estimated fair value of net assets
acquired amounted to approximately $13.8 million, which has been accounted for
as goodwill and is being amortized over 30 years using the straight line method.
The accompanying consolidated statements of operations include the results of
operations since the effective date of the acquisition.
On October 10, 1996, the Company acquired a 27% equity interest in the
Company's Mexican licensee from a third party for $1.8 million in cash and 5% of
net distributions (as defined) received from the Mexican operation through
December 31, 1998.
On November 15, 1996, the Company acquired the 50% equity interest of its
partner in Ticketmaster-Indiana. In connection with this transaction,
Ticketmaster-Indiana purchased newly issued convertible preferred stock of the
Company (the Preferred Stock) in exchange for Ticketmaster-Indiana's promissory
note in the principal amount of $27 million. The conversion features of this
Preferred Stock provided that in the event of an initial offering of the
Company's Common Stock to the general public (the "Offering"), the Partner would
receive shares of Common Stock having an aggregate value of $27 million based on
the price per share used in the Offering. On November 22, 1996, the Preferred
Stock was exchanged for 1,862,069 shares of Common Stock.
On November 25, 1996, the Company acquired the 20% equity interest of its
minority shareholder in Southwest Ticketing, Inc., the Company's operating
subsidiary in Texas, for $6 million in cash.
Also, on November 25, 1996, the Company acquired the 20% equity interest of
its minority shareholder in Ticketmaster-Florida, Inc., the Company's operating
subsidiary in Florida, for $4.6 million in Common Stock (317,241 shares) based
on the price per share used in the Offering.
The following pro forma information presents a summary of consolidated
results of the Company, the European Joint Venture, the Pacer Joint Venture, and
the Delaware Valley and Mexico licensees for the three and nine months ended
October 31, 1996, assuming the acquisitions had been made as of February 1,
1996, with pro forma adjustments to give effect to amortization of goodwill and
purchased user agreements, and interest expense on the note payable and bank
debt issued in connection with the European Joint Venture and
8
<PAGE> 10
TICKETMASTER GROUP, INC.
AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(5) ACQUISITIONS AND SUBSEQUENT EVENTS (CONTINUED)
Delaware Valley acquisitions. The pro forma financial information is not
necessarily indicative of the results of operations as they would have been had
the transactions been effective on February 1, 1996.
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
OCTOBER 31, OCTOBER 31,
1996 1996
------------ -----------
(IN THOUSANDS, EXCEPT
SHARE AND PER SHARE AMOUNTS)
<S> <C> <C>
Total Revenue....................................... $ 64,627 $ 187,206
Net income (loss)................................... 3,014 (290)
Income (loss) per share............................. 0.20 (0.02)
Weighted average shares of Common Shares
Outstanding....................................... 15,350,041 15,350,041
</TABLE>
Pro forma results of operations have not been presented for the New Mexico
acquisition because the pro forma effect of this acquisition is not significant.
9
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISKS
The following contains forward-looking statements. These forward-looking
statements are based largely on the Company's expectations and are subject to a
number of risks and uncertainties, certain of which are beyond the Company's
control. Actual results could differ materially from those anticipated by these
forward-looking statements as a result of various factors. In light of these
risks and uncertainties, there can be no assurance that events anticipated by
the forward-looking statements contained below will in fact transpire.
GENERAL
The Company's Managed Businesses are comprised of the Consolidated
Businesses (i.e., its wholly and majority owned subsidiaries) together with the
Unconsolidated Joint Ventures (i.e., those Unconsolidated Joint Ventures in
which it acts as managing partner). The Company seeks to optimize the
performance of each of the Managed Businesses regardless of its percentage
ownership. The Company provides the same scope of ticket inventory control and
management, distribution and dedicated marketing and support services to it
ticketing joint ventures as it does to its wholly owned ticketing operating
subsidiaries. Consequently, certain aspects of the performance of the Managed
Businesses are better understood by measuring their performance as a whole
without regard to the Company's ownership interest. Where relevant, certain
aspects of the performance of the Managed Businesses are also discussed with
regard to the Consolidated Businesses and Unconsolidated Joint Ventures
separately.
PRO FORMA FINANCIAL INFORMATION
As described in Note 5 of the Consolidated Financial Statements, the
Company acquired (by purchase, redemption or otherwise) various Joint Venture
partners' and licensees' interests both during and subsequent to the nine months
ended October 31, 1996. Accordingly, the following pro forma financial
information (the "Pro Forma Financial Information") has been prepared to
illustrate the effects of these acquisitions and the application of the proceeds
of an Initial Public Offering completed on November 22, 1996. The Pro Forma
Financial Information does not purport to represent what the Company's results
of operations actually would have been if such transactions had in fact occurred
on such dates. The pro forma adjustments are based on currently available
information and upon certain assumptions that management believes are reasonable
under current circumstances. The Pro Forma Financial Information and
accompanying notes should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto.
10
<PAGE> 12
TICKETMASTER GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TICKETMASTER ACQUIRED
CONSOLIDATED TICKETING PRO FORMA COMBINED
BUSINESS BUSINESSES ADJUSTMENTS PRO FORMA
------------ ---------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C>
Revenues:
Ticketing operations.................. $ 52,157 $5,982 $ (32)(1) $ 58,107
Concession Control Systems............ 6,205 6,205
Publications.......................... 2,967 2,967
Merchandising......................... 463 463
Sales of Ticketing Equipment.......... 786 786
----------- ------ -----------
62,578 5,982 68,528
Operating costs, expenses and other
items:
Ticketing operations.................. 30,455 3,442 (32)(1) 33,865
Ticketing selling, general and
administrative..................... 9,272 1,125 10,397
Concession Control Systems
operations......................... 3,577 3,577
Concession Control Systems selling,
general and administrative......... 3,368 3,368
Publications.......................... 4,596 4,596
Merchandising......................... 447 447
Corporate general and
administrative..................... 3,707 3,707
Depreciation and amortization......... 3,215 241 1,040 (2) 4,566
70 (3)
Equity in net loss (income) of
unconsolidated affiliates.......... (804) (308) 303 (4) (809)
----------- ------ -----------
Operating income.............. 4,745 1,482 4,814
Other (income) expenses:
Interest expense, net................. 3,177 (94) (1,039)(5) 2,044
Minority interests.................... 135 (93)(6) 42
Gain on sale of unconsolidated
affiliate.......................... (3,195) (3,195)
----------- ------ -----------
Income before income taxes.... 4,628 1,576 5,923
Income tax provision.................. 1,779 590 (7) 2,369
----------- ------ -----------
Net income.................... $ 2,849 $1,576 $ 3,554
=========== ====== ===========
Net income per share.................. $ 0.19 $ 0.14
=========== ===========
Weighted average number of common
shares outstanding(10)............. 15,350,041 24,779,351
=========== ===========
Supplemental Financial Information:
EBITDA(8)..................................................................... $ 8,571
Attributable EBITDA(9)........................................................ 9,830
Net cash provided by operating activities..................................... 22,194
Net cash used in investing activities......................................... (28,828)
Net cash provided by financing activities..................................... 25,528
</TABLE>
Notes following
11
<PAGE> 13
TICKETMASTER GROUP, INC.
PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED OCTOBER 31, 1996
(IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
TICKETMASTER ACQUIRED OTHER ACQUIRED
CONSOLIDATED TICKETING BUSINESS- PRO FORMA COMBINED
BUSINESS BUSINESSES PACER/CATS/CCS ADJUSTMENTS PRO FORMA
------------ -------- -------------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues:
Ticketing operations...................... $ 144,827 $ 26,335 $ $ (128)(1) $ 171,034
Concession Control Systems................ 6,205 12,964 19,169
Publications.............................. 7,479 176 7,655
Merchandising............................. 1,858 1,858
Sales of Ticketing Equipment.............. 2,168 2,168
----------- -------- -------- -----------
162,537 26,511 12,964 201,884
Operating costs, expenses and other items:
Ticketing operations...................... 89,110 15,140 (128)(1) 104,122
Ticketing selling, general and
administrative.......................... 25,550 4,455 30,005
Concession Control Systems operations..... 3,577 8,462 12,039
Concession Control Systems selling,
general and administrative.............. 3,368 4,687 8,055
Publications.............................. 13,711 100 13,811
Merchandising............................. 1,673 1,673
Corporate general and administrative...... 12,103 12,103
Depreciation and amortization............. 8,144 1,116 504 3,219 (2) 13,194
211 (3)
Equity in net loss (income) of
unconsolidated affiliates............... (2,940) (365) 864 (4) (2,441)
----------- -------- -------- -----------
Operating income (loss)............ 8,241 6,065 (689) 9,323
Other (income) expenses:
Interest expense, net..................... 9,094 (69) 484 (2,767)(5) 6,742
Minority interests........................ 261 (191)(6) 70
Gain on sale of unconsolidated
affiliate............................... (3,195) (3,195)
----------- -------- -------- -----------
Income (loss) before income
taxes............................ 2,081 6,134 (1,173) 5,706
Income tax provision...................... 1,650 632 (7) 2,282
----------- -------- -------- -----------
Net (loss) income.................. $ 431 $ 6,134 $ (1,173) $ 3,424
=========== ======== ======== ===========
Net income per share...................... $ 0.03 $ 0.14
=========== ===========
Weighted average number of common shares
outstanding(10)......................... 15,350,041 24,779,351
=========== ===========
Supplemental Financial Information:
EBITDA(8)....................................................................................... $ 20,076
Attributable EBITDA(9).......................................................................... 23,875
Net cash provided by operating activities....................................................... 38,786
Net cash used in investing activities........................................................... (34,618)
Net cash provided by financing activities....................................................... 35,870
</TABLE>
Notes following
12
<PAGE> 14
TICKETMASTER GROUP, INC.
NOTES TO PRO FORMA FINANCIAL INFORMATION
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(1) Represents the elimination of license fees paid by Delaware Valley
(Philadelphia) to the Company during the respective period.
(2) Represents amortization arising from the purchased user agreements and
excess purchase price paid for the net assets of a joint venture partner's
50% equity interest in the European Joint Venture, a joint venture
partner's 50% equity interest in Ticketmaster-Indiana, a licensee's 100%
equity interest in Delaware Valley (Philadelphia), a minority shareholder's
20% equity interest in the Company's Florida operating subsidiary, a
minority shareholder's 20% equity interest in the Company's Texas operating
subsidiary and a licensee's 50% equity interest in its Mexico licensee. The
purchased user agreements are being amortized using a discounted cash flow
method through the expiration date of the underlying contracts
(amortization totals $674 and $2,023 for the three and nine months ended
October 31, 1996, respectively). The cost in excess of net assets acquired
is being amortized over a 30 year period (amortization totals $366 and
$1,196 for the three and nine months ended October 31, 1996, respectively).
(3) Represents depreciation arising from the purchase of the building which
will serve as corporate headquarters.
(4) Represents the consolidation of income earned by Ticketmaster-Indiana and
the European Joint Venture, aggregating $303 and $2,037 for the three and
nine months ended October 31, 1996, respectively, and losses incurred by
the Pacer Joint Venture, totaling $0 and $1,173 for the three and nine
months ended October 31, 1996, respectively.
(5) Represents the reduction in interest expense resulting from the repayment
of indebtedness under the Company's Credit Agreement ($1,039 and $2,767 for
the three and nine months ended October 31, 1996, respectively) at
approximate rates of interest incurred by the Company during the respective
periods, approximately 7.0%.
(6) Represents a decrease in the minority interests held by the Company's
minority shareholders in its Florida and Texas operating subsidiaries.
(7) Represents the related income tax effect of the pro forma adjustments
utilizing a statutory rate of 40%.
(8) Defined as revenue less operating costs before interest, depreciation and
amortization, and taxes. EBITDA does not represent cash flows from
operations, as defined by generally accepted accounting principles, and
should not be considered to be an alternative to net income as an indicator
of operating performance or to cash flows from operations as a measure of
liquidity. Management believes that an EBITDA presentation is an important
factor in evaluating the amount of cash available for repayment of debt,
future investments, dividends and in determining cash available for future
distributions.
(9) Defined as the Company's pro rata share of its Consolidated Businesses and
Unconsolidated Joint Ventures' revenue less operating costs before
interest, depreciation, amortization and taxes. EBITDA does not represent
cash flows from operations, as defined by generally accepted accounting
principles, and should not be considered to be an alternative to net income
as an indicator of operating performance or to cash flows from operations
as a measure of liquidity. Management believes that an EBITDA presentation
is an important factor in evaluating the amount of cash available for
repayment of debt, future investments, dividends and in determining cash
available for future distributions.
(10) Includes 15,350,041 pro forma weighted average common and common equivalent
shares outstanding at January 31, 1996 and October 31, 1996, 7,250,000
shares of Common Stock issued by the Company in connection with the
Offering, and 1,862,069 and 317,241 shares of Common Stock issued in
connection with the acquisition, by purchase, redemption or otherwise, of
it joint venture partner's 50% equity interest in Ticketmaser-Indiana and
its minority shareholder's 20% equity interest in the Company's Florida
operating subsidiary, respectively.
13
<PAGE> 15
RESULTS OF OPERATIONS
FOR THE QUARTER ENDED OCTOBER 31, 1996 COMPARED WITH THE QUARTER ENDED OCTOBER
31, 1995
The following tables set forth unaudited operating results for the
Consolidated Businesses and the Unconsolidated Joint Ventures, collectively, the
Managed Businesses. The amounts shown for the Unconsolidated Joint Ventures
represent the full balance for each line item and do not give effect to the
Joint Venture ownership interests held by entities other than the Company.
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31, 1995 THREE MONTHS ENDED OCTOBER 31, 1996
------------------------------------------ ------------------------------------------
TICKETMASTER UNCONSOLIDATED TOTAL TICKETMASTER UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESS(1) VENTURES(2) BUSINESSES BUSINESS(1) VENTURES(2) BUSINESSES
------------ -------------- ---------- ------------ -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Ticketing operations........ $ 36,595 $ 13,068 $ 49,663 $ 52,157 $ 13,553 $ 65,710
Concession Control
Systems................... -- 5,175 5,175 6,205 -- 6,205
Publications................ 837 452 1,289 2,967 -- 2,967
Merchandising............... 374 -- 374 463 -- 463
Sales of Ticketing
Equipment................. 390 -- 390 786 -- 786
-------- -------- -------- -------- ------- --------
Total Revenues....... 38,196 18,695 56,891 62,578 13,553 76,131
-------- -------- -------- -------- ------- --------
Operating costs:
Ticketing operations........ 22,691 7,230 29,921 30,455 7,590 38,045
Ticketing selling, general
and administrative........ 8,579 2,199 10,778 9,272 3,301 12,573
Concession Control Systems
operations................ -- 3,157 3,157 3,577 -- 3,577
Concession Control Systems
selling, general and
administrative............ -- 2,476 2,476 3,368 -- 3,368
Publications................ 1,595 283 1,878 4,596 -- 4,596
Merchandising............... 285 -- 285 447 -- 447
Corporate general and
administrative............ 3,362 -- 3,362 3,707 -- 3,707
Depreciation and
amortization.............. 2,277 1,057 3,334 3,215 889 4,104
-------- -------- -------- -------- ------- --------
Total operating
costs.............. 38,789 16,402 55,191 58,637 11,780 70,417
-------- -------- -------- -------- ------- --------
(593) $ 2,293 $ 1,700 3,941 $ 1,773 $ 5,714
======== ======== ======= ========
Equity in net income of
unconsolidated
affiliates................ (845) (804)
-------- --------
Operating income.............. 252 4,745
Interest expense and other.... 3,072 3,312
Gain on sale of unconsolidated
affiliate................... -- (3,195)
Income tax provision
(benefit)................... (160) 1,779
-------- --------
Net (loss) income............. $ (2,660) $ 2,849
======== ========
Supplemental information:
EBITDA(3)................. $ 1,684 $ 3,350 $ 5,034 $ 7,156 $ 2,662 $ 9,818
======== ======== ======== ======== ======= ========
Attributable EBITDA(4).... $ 2,823 $ 8,052
======== ========
Net cash provided by
operating activities.... $ 4,133 $ 7,913 $ 12,046 $ 17,328 $ 7,507 $ 24,835
Net cash provided by (used
in) investing
activities.............. (904) (529) (1,433) (28,607) 3,595 (25,012)
Net cash provided by (used
in) financing
activities.............. (1,850) (2,469) (4,319) 25,438 (753) 24,685
Number of tickets sold.... 8,913 3,846 12,759 11,454 3,482 14,936
Gross dollar value of
tickets sold............ $270,198 $109,543 $379,741 $358,432 $ 94,800 $453,232
</TABLE>
Notes following
14
<PAGE> 16
Notes:
(1) Defined as results of operations from businesses included in the Company's
Consolidated Financial Statements included elsewhere in this Form 10-Q,
which include the accounts of the Company, its wholly owned subsidiaries and
majority (80% or greater) owned companies and joint ventures. Investments in
companies and joint ventures, in which ownership ranges from 33 1/3%-50% and
in which the Company exercises significant influence over operating and
financial policies, are accounted for using the equity method.
(2) Defined as the combined results of operations from unconsolidated ticketing
joint ventures. Ticketmaster's ownership interest in these businesses range
from 33 1/3%-50% and are in companies and joint ventures in which
Ticketmaster exercises significant influence over operating and financial
policies, and are accounted for under the equity method included in the
Consolidated Businesses.
(3) Defined as revenue less operating costs before interest, depreciation and
amortization, and taxes. Managed Business EBITDA does not represent cash
flows from operations, as defined by generally accepted accounting
principles, and should not be considered to be an alternative to net income
as an indicator of operations performance or to cash flows from operations
as a measure of liquidity. Management believes that an EBITDA presentation
is an important factor in evaluating the amount of cash available for
repayment of debt, future investment, dividends and in determining cash
available for future distributions.
(4) Defined as Ticketmaster's pro rata share in the results of its Consolidated
Businesses and Unconsolidated Joint Ventures' revenue less operating costs
before interest, depreciation and amortization, and taxes. EBITDA does not
represent cash flows from operations, as defined by generally accepted
accounting principles, and should not be considered to be an alternative to
net income as an indicator of operating performance or to cash flows from
operations as a measure of liquidity. Management believes that an EBITDA
presentation is an important factor in evaluating the amount of cash
available for repayment of debt, future investments, dividends and in
determining cash available for future distributions.
CONSOLIDATED BUSINESSES
Ticket operations revenues increased by $15.6 million, or 43%, to $52.2
million versus $36.6 million for the same quarter of the prior year. The
increase is attributed to an increase of 29% in ticket sales (from 8.9 million
to 11.5 million tickets) and a $3.1 million, or 338%, increase in sponsorship
and promotions revenue. Increased ticket sales were largely attributed to,
acquisition of a Joint Venture partner's interest in (and subsequent
consolidation of) the Ticketmaster Europe operations in June 1996, the
acquisition of the Company's Nashville and Delaware Valley (Philadelphia)
licensees in February 1996 and October 1996, respectively, and an overall
increase in the number of events made available for sale to the consumer and
subsequent demand for live entertainment events. Increased sponsorship and
promotions revenue is primarily attributed to an increase in activity with
strategic marketing partners resulting from the Company's efforts to create
integrated marketing opportunities around live events, its call centers, ticket
stock and envelopes and event promotional material and in additional media
outlets such as Ticketmaster Online and Ticketmaster Travel.
Publications revenues increased by $2.1 million, or 254%, to $3.0 million
versus $0.8 million for the same quarter of the prior year. The increase is
attributed to Ticketmaster Publications launch of Live! magazine, a monthly
consumer oriented entertainment magazine, which distributed its first issue in
February of 1996. Live! was created as an extension of the Entertainment Guide
which was published and distributed without significant advertising revenue as a
stand alone publication by the Company through fiscal 1996. With the February
1996 launch of Live! magazine, the subscription base has remained relatively
constant with the increase in revenues resulting from increases in annual
subscription rates and advertising revenues.
Revenues generated by Concession and Control Systems (included in the
results of Consolidated Businesses for the three months ended October 31, 1996,
resulting from the acquisition of the remaining joint venture partner's interest
on July 29, 1996) increased by $1 million, or 20%, to $6.2 million from $5.2
million
15
<PAGE> 17
for the same quarter in the prior year (of which the results of operations were
included in Unconsolidated Joint Ventures). The increase is primarily attributed
to increased sales related to the release of new products.
Ticketing operations costs increased by $7.8 million, or 34%, to $30.5
million versus $22.7 million for the same quarter of the prior year, which is
consistent with an increase in ticket operations revenue of 43%. As a percentage
of ticket operations revenues, these expenses decreased from 62% to 58% which is
primarily attributed to cost savings related to volume discounts resulting from
increased activity in call centers. The percentage relationship of costs to
revenue is also favorably affected by increased revenue generated from increased
sponsorship and promotion activity which yields higher margins.
Ticketing selling, general & administrative costs increased by $0.7
million, or 8%, to $9.3 million versus $8.6 million for the same quarter of the
prior year. The increase was largely attributed to the increase in markets
serviced by Consolidated Businesses resulting from the acquisitions of
Ticketmaster-Nashville, the European Joint Venture, Ticketmaster-New Mexico and
Ticketmaster-Delaware Valley (Philadelphia).
Publications costs increased by $3.0 million, or 188%, to $4.6 million
versus $1.6 million for the same quarter of the prior year. The increase is
attributed to the increased production costs resulting from the launch of
Live!magazine.
Concession and Control Systems operating costs increased by $0.4 million,
or 13%, to $3.6 million versus $3.2 million for the same quarter of the prior
year (the results of which are included in Unconsolidated Joint Ventures). As a
percentage of Concession Control Systems revenues, these costs decreased from
61% to 58% which is attributed to the mix of products.
Corporate general & administrative costs increased by $0.3 million, or 10%,
to $3.7 million versus $3.4 million for the same quarter of the prior year. The
increase resulted from increased compensation expense associated with growth in
administrative functions necessary to support the development of the Company's
principal business, and more recent development efforts in Ticketmaster
Publications, Ticketmaster Online and Ticketmaster Travel; the increase in
compensation expense was partially offset by decreases in legal fees.
Depreciation and amortization increased by $0.9 million, or 41%, to $3.2
million versus $2.3 million for the same quarter of the prior year. The increase
is attributed to additional amortization of cost in excess of net assets
acquired.
The Company recognized a gain from the sale of its interest in an
unconsolidated affiliate of $3.2 million.
The income tax provision of $1.8 million in the current quarter compared to
an income tax benefit of $0.2 million for the same quarter of the prior year, is
primarily attributed to taxes on the gain of the sale of an unconsolidated
affiliate.
As a result of the foregoing, the Company had net income of $2.8 million in
the current quarter compared to net losses of $2.7 million for the same quarter
of the prior year.
UNCONSOLIDATED JOINT VENTURES
Ticket operations revenues increased by $0.5 million, or 4%, to $13.6
million versus $13.1 million for the same quarter of the prior year. The
increase is largely attributed to the acquisition of an interest in the
Company's Australian licensee in December 1995 where convenience charges per
ticket are generally higher than in the domestic markets serviced by the
Unconsolidated Joint Ventures.
Publications revenues decreased by $0.5 million, or 100%, to $0 due to the
discontinued distribution of the monthly Entertainment Guide, which has been
replaced with Live! magazine, a publication of Ticket-
master Publications, all costs and revenues of which are included in the
Consolidated Businesses.
The discussion and analysis with respect to results of operations from
Concession and Control Systems is included in Consolidated Businesses.
Ticketing operations costs increased by $0.4 million, or 5%, to $7.6
million versus $7.2 million for the same quarter of the prior year, which is
consistent with the increase in ticket operations revenue of 4%. As a percentage
of ticketing operations revenues, these expenses increased from 55% to 56%.
16
<PAGE> 18
Ticketing selling, general and administrative costs increased by $1.1
million, or 50%, to $3.3 million versus $2.2 million for the same quarter of the
prior year. The increase was largely attributed to the acquisition of an
interest in the Company's Australian licensee in December 1995.
Publications costs decreased by $0.3 million, or 100%, to $0 for the same
quarter of the prior year due to the discontinued distribution of the monthly
Entertainment Guide, which has been replaced with Live! magazine, a publication
of Ticketmaster Publications, all costs and revenues of which are included in
the Consolidated Businesses.
Depreciation and amortization decreased by $0.2 million, or 16%, to $0.9
million versus $1.1 million for the same quarter of the prior year.
As a result of the foregoing, net income from Unconsolidated Joint Ventures
decreased by $0.2 million, or 10%, to $1.9 million versus $2.1 million for the
same quarter of the prior year.
MANAGED BUSINESSES
Aggregate revenues for the Managed Businesses increased by $19.2 million,
or 34%, to $76.1 million versus $56.9 million for the same quarter of the prior
year. The increase is primarily attributed to an increase of $16.0 million, or
32%, to $65.7 million in ticket operation revenue.
As a result of the foregoing, EBITDA for the Managed Businesses increased
by $4.8 million, or 95%, to $9.8 million versus $5.0 million for the same
quarter of the prior year.
17
<PAGE> 19
RESULTS OF OPERATION
FOR THE NINE MONTHS ENDED OCTOBER 31, 1996 COMPARED WITH THE NINE MONTHS ENDED
OCTOBER 31, 1995
The following tables set forth unaudited operating results for the
Consolidated Businesses and the Unconsolidated Joint Ventures, collectively, the
Managed Businesses. The amounts shown for the Unconsolidated Joint Ventures
represent the full balance for each line item and do not give effect to the
Joint Venture ownership interests held by entities other than the Company.
<TABLE>
<CAPTION>
NINE MONTHS ENDED OCTOBER 31, 1995 NINE MONTHS ENDED OCTOBER 31, 1996
------------------------------------------- -------------------------------------------
TICKETMASTER UNCONSOLIDATED TOTAL TICKETMASTER UNCONSOLIDATED TOTAL
CONSOLIDATED JOINT MANAGED CONSOLIDATED JOINT MANAGED
BUSINESS(1) VENTURES(2) BUSINESSES BUSINESS(1) VENTURES(2) BUSINESSES
------------ -------------- ----------- ------------ -------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Ticketing operations........ $116,365 $ 41,113 $ 157,478 $144,827 $ 46,648 $ 191,475
Concession Control
Systems.................. -- 15,930 15,930 6,205 12,964 19,169
Publications................ 2,602 1,461 4,063 7,479 176 7,655
Merchandising............... 1,629 -- 1,629 1,858 -- 1,858
Sales of Ticketing
Equipment................ 1,330 -- 1,330 2,168 -- 2,168
-------- -------- ---------- -------- -------- ----------
Total Revenues...... 121,926 58,504 180,430 162,537 59,788 222,325
-------- -------- ---------- -------- -------- ----------
Operating costs:
Ticketing operations........ 74,074 22,882 96,956 89,110 25,934 115,044
Ticketing selling, general
and administrative....... 22,310 6,832 29,142 25,550 9,359 34,909
Concession Control Systems
operations............... -- 10,403 10,403 3,577 8,462 12,039
Concession Control Systems
selling, general and
administrative........... -- 7,225 7,225 3,368 4,687 8,055
Publications................ 4,962 894 5,856 13,711 128 13,839
Merchandising............... 1,350 -- 1,350 1,673 -- 1,673
Corporate general and
administrative........... 10,234 -- 10,234 12,103 -- 12,103
Depreciation and
amortization............. 7,040 3,276 10,316 8,144 3,476 11,620
-------- -------- ---------- -------- -------- ----------
Total operating
costs............. 119,970 51,512 171,482 157,236 52,046 209,282
-------- -------- ---------- -------- -------- ----------
1,956 $ 6,992 $ 8,948 5,301 $ 7,742 $ 13,043
======== ========== ======== ==========
Equity in net income of
unconsolidated
affiliates............... (2,189) (2,940)
-------- --------
Operating income.............. 4,145 8,241
Interest expense and other.... 9,881 9,355
Gain on sale of unconsolidated
affiliate................... -- (3,195)
Income tax provision
(benefit)................... (750) 1,650
-------- --------
Net (loss) income............. $ (4,986) $ 431
======== ========
Supplemental information:
EBITDA(3)................ $ 8,996 $ 10,268 $ 19,264 $ 13,445 $ 11,218 $ 24,663
======== ======== ========== ======== ======== ==========
Attributable EBITDA(4)... $ 13,248 $ 18,120
========== ==========
Net cash provided by
operating activities... $ 1,355 $ 13,611 $ 14,966 $ 24,785 $ 14,228 $ 39,013
Net cash (used in)
investing activities... (5,344) (1,610) (6,954) (33,265) (3,256) (36,521)
Net cash provided by
(used in) financing
activities............. 1,997 (7,886) (5,889) 35,785 (4,696) 31,089
Number of tickets sold... 28,543 11,392 39,935 33,034 12,305 45,339
Gross dollar value of
tickets sold........... $841,407 $311,689 $1,153,096 $978,238 $344,988 $ 1,323,226
</TABLE>
Notes following
18
<PAGE> 20
Notes:
(1) Defined as results of operations from businesses included in the Company's
Consolidated Financial Statements included elsewhere in this Form 10-Q,
which include the accounts of the Company, its wholly owned subsidiaries and
majority (80% or greater) owned companies and joint ventures. Investments in
companies and joint ventures, in which ownership ranges from 33 1/3%-50% and
in which the Company exercises significant influence over operating and
financial policies, are accounted for using the equity method.
(2) Defined as the combined results of operations from unconsolidated ticketing
joint ventures. Ticketmaster's ownership interest in these businesses range
from 33 1/3%-50% and are in companies and joint ventures in which
Ticketmaster exercises significant influence over operating and financial
policies, and are accounted for under the equity method included in the
Consolidated Businesses.
(3) Defined as revenue less operating costs before interest, depreciation and
amortization, and taxes. Managed Business EBITDA does not represent cash
flows from operations, as defined by generally accepted accounting
principles, and should not be considered to be an alternative to net income
as an indicator of operations performance or to cash flows from operations
as a measure of liquidity. Management believes that an EBITDA presentation
is an important factor in evaluating the amount of cash available for
repayment of debt, future investment, dividends and in determining cash
available for future distributions.
(4) Defined as Ticketmaster's pro rata share in the results of its Consolidated
Businesses and Unconsolidated Joint Ventures' revenue less operating costs
before interest, depreciation and amortization, and taxes. EBITDA does not
represent cash flows from operations, as defined by generally accepted
accounting principles, and should not be considered to be an alternative to
net income as an indicator of operating performance or to cash flows from
operations as a measure of liquidity. Management believes that an EBITDA
presentation is an important factor in evaluating the amount of cash
available for repayment of debt, future investments, dividends and in
determining cash available for future distributions.
CONSOLIDATED BUSINESSES
Ticket operations revenues increased by $28.5 million, or 24%, to $144.8
million versus $116.4 million for the same period of the prior year. The
increase is attributed to an increase of 16% in ticket sales (from 28.5 million
to 33.0 million tickets) and a $6.9 million, or 370%, increase in sponsorship
and promotions revenue. Increased ticket sales were largely attributed to,
acquisition of a Joint Venture partner's interest in (and subsequent
consolidation of) the Ticketmaster Europe operations in June 1996, an increase
related to new clients including a number of Major League Soccer teams, the
acquisition of the Company's Nashville and Delaware Valley (Philadelphia)
licensees in February 1996 and October 1996, respectively, and an overall
increase in the number of events made available for sale to the consumer and
subsequent demand for live entertainment events. Increased sponsorship and
promotions revenue is primarily attributed to an increase in activity with
strategic marketing partners resulting from the Company's efforts to create
integrated marketing opportunities around live events, its call centers, ticket
stock and envelopes and event promotional material and in additional media
outlets such as Ticketmaster Online and Ticketmaster Travel.
Publications revenues increased by $4.9 million, or 187%, to $7.5 million
versus $2.6 million for the same period of the prior year. The increase is
attributed to Ticketmaster Publications launch of Live! magazine, a monthly
consumer oriented entertainment magazine, which distributed its first issue in
February of 1996. Live! was created as an extension of the Entertainment Guide
which was published and distributed without significant advertising revenue as a
stand alone publication by the Company through fiscal 1996. With the February
1996 launch of Live! magazine, the subscription base has remained relatively
constant with the increase in revenues resulting from increases in annual
subscription rates and advertising revenues.
Revenues generated from Concession and Control Systems for the three months
ended October 31, 1996 are included in Consolidated Businesses while the
revenues generated for the first six months ended July 31, 1996 are included in
Unconsolidated Joint Ventures due to the acquisition of the remaining joint
venture
19
<PAGE> 21
partner's interest on July 29, 1996. Accordingly, the discussion and analysis
included herein is based upon the increase in combined revenues of the
Consolidated Businesses and Unconsolidated Joint Ventures of $3.2 million, or
20%, to $19.2 million versus $15.9 million of the same period of the prior year.
The increase is primarily attributed to increased sales related to the release
of new products. The combined operating costs of Concession and Control Systems
increased by $1.6 million, or 16%, to $12.0 million versus $10.4 million for the
same period of the prior year, which is consistent with the increase in revenue
of 20%. As a percentage of Concession and Control System revenue, these expenses
decreased from 65% to 63% which is primarily attributed to the mix of products.
Ticketing operations costs increased by $15.0 million, or 20%, to $89.1
million versus $74.1 million for the same period of the prior year, which is
consistent with increased ticket operations revenue of 24%. As a percentage of
ticketing operations revenues, these expenses decreased from 64% to 62% which is
primarily attributed to cost savings related to volume discounts resulting from
increased activity in call centers. The percentage relationship of costs to
revenue is also favorably affected by increased revenue generated from increased
sponsorship and promotion activity which yields higher margins.
Ticketing selling, general & administrative costs increased by $3.2
million, or 15%, to $25.6 million versus $22.3 million for the same period of
the prior year. The increase was largely attributed to the increase in markets
serviced by Consolidated Businesses resulting from the acquisitions of
Ticketmaster-Nashville, the European Joint Venture, Ticketmaster-New Mexico and
Ticketmaster Delaware Valley (Philadelphia).
Publications costs increased by $8.7 million, or 176%, to $13.7 million
versus $5.0 for the same period of the prior year. The increase is attributed to
the increased production costs resulting from the launch of Live! magazine.
Corporate general & administrative costs increased by $1.9 million, or 18%,
to $12.1 million versus $10.2 million for the same period of the prior year.
Much of the increase resulted from increased compensation expense associated
with growth in administrative functions necessary to support the development of
the Company's principal business, and more recent development efforts in
Ticketmaster Publications, Ticketmaster Online and Ticketmaster Travel; the
increase in compensation expense was partially offset by decreases in legal
fees.
Depreciation and amortization increased by $1.1 million, or 16%, to $8.1
million versus $7.0 million for the same period of the prior year. The increase
is attributed to additional amortization of costs in excess of net assets
acquired.
The income tax provision of $1.7 million in the current period compared to
an income tax benefit of $0.8 million for the same period of the prior year, is
primarily attributed to taxes on the gain of the sale of an unconsolidated
affiliate.
As a result of the foregoing, the Company had net income of $0.4 million in
the current period compared to net losses of $5.0 million for the same period of
the prior year.
UNCONSOLIDATED JOINT VENTURES
Ticket operations revenues increased by $5.5 million, or 13%, to $46.6
million versus $41.1 million for the same period of the prior year. The increase
is attributed to an increase of 8% in ticket sales (from 11.4 million to 12.3
million tickets). Increased ticket sales were largely attributed to the
acquisition of an interest in the Company's Australian licensee in December 1995
and an increase related to new clients including a number of Major League Soccer
teams, offset by a decrease attributed to the sale of the Company's Joint
Venture interest in the Ticketmaster Europe operations in June 1996.
Publications revenues decreased by $1.3 million, or 88%, to $0.2 million
versus $1.5 million for the same period of the prior year due to the
discontinued distribution of the monthly Entertainment Guide, which has been
replaced with Live! magazine, a publication of Ticketmaster Publications, all
costs and revenues of which are included in the Consolidated Businesses.
20
<PAGE> 22
The discussion and analysis with respect to results of operations from
Concession and Control Systems is included in Consolidated Businesses.
Ticketing operations costs increased by $3.1 million, or 13%, to $25.9
million versus $22.9 million for the same period of the prior year, which is
consistent with increased ticket operations revenue of 13%. As a percentage of
ticketing operations revenues, these expenses totaled 56% in both periods.
Ticketing selling, general & administrative costs increased by $2.5
million, or 37%, to $9.4 million versus $6.8 million for the same period of the
prior year. The increase was largely attributed to the increase in markets
serviced by Unconsolidated Joint Ventures resulting from the acquisition of
interests in Ticketmaster-Australia and Ticketmaster-Mexico.
Publications costs decreased by $0.8 million, or 86%, to $0.1 million
versus $0.9 million for the same period of the prior year due to the
discontinued distribution of the monthly Entertainment Guide, which has been
replaced with Live! magazine, a publication of Ticketmaster Publications, all
costs and revenues of which are included in the Consolidated Businesses.
Depreciation and amortization increased by $0.2 million, or 6%, to $3.5
million versus $3.3 million for the same period of the prior year. The increase
is primarily attributed to additional amortization of purchased user agreements
from the Ticketmaster-Australia acquisition.
As a result of the foregoing, net income from Unconsolidated Joint Ventures
increased by $1.0 million, or 15%, to $7.2 million versus $6.3 million for the
same period of the prior year.
MANAGED BUSINESSES
Aggregate revenues for the Managed Businesses increased by $41.8 million,
or 23%, to $222.3 million versus $180.4 million for the same period of the prior
year. The increase is primarily attributed to an increase of $34.0 million, or
22%, to $191.5 million in ticket operation revenue.
As a result of the foregoing, EBITDA for the Managed Businesses increased
by $5.4 million, or 28%, to $24.7 million versus $19.3 million for the same
period of the prior year.
FINANCIAL CONDITION
The following table sets forth selected cash flow information for the
periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------ ------------------
1995 1996 1995 1996
------- -------- -------- -------
<S> <C> <C> <C> <C>
Net cash provided by operating
activities............................ $ 4,133 $ 17,328 $ 1,355 $24,785
Net cash (used in) investing
activities............................ (904) (28,607) (5,344) (33,265)
Net cash provided by (used in) financing
activities............................ (1,850) 25,438 1,997 35,785
</TABLE>
Historically, the Company's principal sources of cash have been cash flow
from operations and borrowings under its bank credit facilities. For the first
nine months of fiscal 1997, the Company generated an aggregate of $24.8 million
in cash from operating activities.
As of October 31, 1996, the Company had cash and cash-equivalents of $18.8
million for its own account, separate from funds held in accounts on behalf of
venues and promoters and working capital of $8.5 million. The Company
historically has had small positive or negative working capital balances,
depending upon the timing of the use of cash for the purchase of property and
equipment or investments in other income producing noncurrent assets.
Cash used in investing activities has been primarily to fund investments in
property of $11.2 million and equipment and other assets aggregating $7.2
million for the nine months ended October 31, 1996. Excluding the acquisitions
and formations of new venture investment activity, the Company's anticipated
annual capital expenditures are expected to include $3.0 million for
improvements to its recently acquired corporate
21
<PAGE> 23
headquarters building, $5.0 million of replacements or upgrades, $4.0 million in
expanded call center capacity and additional amounts which management determines
are necessary in order to maintain the Company's competitive position or to
otherwise achieve its business strategies.
Amounts available under the Credit Agreement are limited to the lower of
the commitment amount or a borrowing base calculated as a multiple of cash flow
as defined in the Credit Agreement. As of October 31, 1996, the Company had
$91.4 million in outstanding bank borrowings under its $100 million revolving
bank credit line, $75 million outstanding on a bank term loan and $30 million
outstanding on a bank term bridge loan. As of that date, the borrowing base
calculation did not restrict the Company's availability under the Credit
Agreement. The Company's Credit Agreement contains other covenants and
restrictions, all of which the Company was in compliance at October 31, 1996.
Also as of October 31, 1996, the Pacer Joint Venture had indebtedness of
$7.5 million outstanding under a bank term loan, with monthly interest payments
only due through June 1997 and principal and interest payable monthly from July
1997 through June 1999. The loan agreement is secured by all of Pacer/CATS/CCS's
assets and contains certain restrictions and covenants, with which the joint
venture is in full compliance.
As of October 31, 1996, the Company's future commitments included a $5
million Promissory Note due in June 1997, as well as annual office and equipment
leases of approximately $5.5 million. In addition, the Company had entered into
definitive agreements to acquire the 20% equity interest of its minority
shareholder in its Texas operating subsidiary and to acquire the 20% equity
interest of its minority shareholder in its Florida operating subsidiary,
totaling an aggregate consideration of approximately $10.6 million in cash or
Common Stock.
On November 22, 1996, the Company completed an Initial Public Offering (the
Offering) of 7.25 million shares of Common Stock at a price of $14.50 per share
which resulted in net proceeds of $97.8 million. The Company used the net
proceeds of the Offering (i) to repay outstanding indebtedness under the
Exchangeable Promissory Note, (ii) to purchase an interest not previously owned
by the Company in its operating subsidiary in Texas, (iii) to repay outstanding
indebtedness on the bank term bridge loan, (iv) to repay a portion of the
remaining outstanding indebtedness under the Credit Agreement, and (v) for
general corporate purposes. As a result of the completion of the Offering and
after the repayment of a portion of the outstanding indebtedness under the
Company's bank credit facilities noted above, the Credit Agreement was amended
to provide that all the existing revolving loans, term loans and term bridge
loans be converted into a single revolving line with an initial maximum
availability of $175 million decreasing to $165 million as of December 31, 1997
and further reducing to $150 million as of December 31, 1998.
The Company anticipates that funds from operations and from its bank
lending facilities will be sufficient to meet its working capital, capital
expenditure and debt service requirements through the expiration of the Credit
Agreement (December 31, 1999). However, to the extent that such funds are
insufficient, the Company may need to incur additional indebtedness and/or
refinance existing indebtedness. The Company's ability to do so may be
restricted by borrowing base calculations and other financial covenants
described within the Credit Agreement.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
10.38 First Amendment to First Amended and Restated Credit Agreement
dated as of November 14, 1996
10.39 Employment Agreement dated as of October 18, 1996 between the
Company and Layne Britton
11. Computation of Earnings Per Share
(b) REPORTS ON FORM 8-K:
None
22
<PAGE> 24
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TICKETMASTER GROUP, INC.
Date: December 12, 1996 By: /s/ PETER B. KNEPPER
---------------------------------
Peter B. Knepper
Senior Vice President and
Chief Financial Officer
(Principal Financial and Accounting
Officer and Duly Authorized Officer)
23
<PAGE> 1
EXHIBIT 10.38
FIRST AMENDMENT TO FIRST AMENDED AND RESTATED CREDIT AGREEMENT
This first amendment to first amended and restated credit
agreement ("Amendment") is made and entered into as of November 14, 1996, by
and between PACER/CATS/CCS - a Delaware joint venture ("Borrower") and U. S.
BANK OF WASHINGTON, NATIONAL ASSOCIATION ("U. S. Bank").
R E C I T A L S :
A. On July 31, 1996, U. S. Bank and Borrower entered
into that certain first amended and restated credit agreement (together with
all supplements, exhibits, modifications, and amendments thereto, the "Credit
Agreement"), whereby U. S. Bank agreed to extend certain credit facilities to
Borrower on the terms and conditions set forth in the Credit Agreement.
B. Borrower has requested U. S. Bank to modify the
Tangible Net Worth covenant and to waive certain violations of the Credit
Agreement. The purpose of this Amendment is to set forth the terms and
conditions upon which U. S. Bank will grant Borrower's requests.
ARTICLE I. DEFINITIONS
As used herein, capitalized terms shall have the meanings
given to them in the Credit Agreement, except as otherwise defined herein or as
the context otherwise requires.
ARTICLE II. AMENDMENT
The Credit Agreement, as well as all of the other Loan
Documents, are hereby amended as set forth herein. Except as specifically
provided for herein, all of the terms and conditions of the Credit Agreement
and each of the other Loan Documents shall remain in full force and effect
throughout the terms of the Loans, as well as any extensions or renewals
thereof.
ARTICLE III. WAIVERS
U. S. Bank hereby agrees to waive Borrower's violation of the
Net Worth Covenant as of September 30, 1996. U. S. Bank also hereby agrees to
waive the requirement set forth in Section 5.1(c) of the Credit Agreement that
Borrower deliver to U. S. Bank unqualified audited financial statements of
Borrower for Borrower's fiscal year ended December 31, 1995.
- 1 -
<PAGE> 2
ARTICLE IV. MODIFICATION OF COVENANTS
Section 6.15 of the Credit Agreement is hereby deleted in its
entirety, and is replaced with the following:
6.15 Tangible Net Worth. As of the end of each fiscal
quarter of Borrower, permit Tangible Net Worth to be less than the
following:
<TABLE>
<CAPTION>
FISCAL QUARTER TANGIBLE NET
OF BORROWER WORTH
<S> <C>
3rd & 4th 1996 ($3,750,000)
1st & 2nd 1997 ($3,250,000)
3rd & 4th 1997 ($2,750,000)
1st & 2nd 1998 ($2,250,000)
3rd & 4th 1998 ($1,600,000)
1st & 2nd 1999 ($1,000,000)
</TABLE>
ARTICLE V. GENERAL PROVISIONS
5.1 Representations and Warranties. Borrower hereby
represents and warrants to U. S. Bank that as of the date of this Amendment,
there exists no Default or Event of Default, with the exception of the
violations of the Credit Agreement that are waived in Article III of this
Amendment. All representations and warranties of Borrower contained in the
Credit Agreement and the other Loan Documents, are true and correct as of the
date of this Amendment. Borrower acknowledges and agrees that all of
Borrower's Indebtedness to U. S. Bank is payable in accordance with the Credit
Agreement, and that Borrower has no offset, defense, or counterclaim as of the
date of this Amendment.
5.2 Collateral. All Loan Documents under the Credit
Agreement evidencing U. S. Bank's security interest in the Collateral shall
remain in full force and effect and shall secure the payment and performance of
all Indebtedness of Borrower to U. S. Bank.
5.3 Counterparts. This Amendment may be executed in one
or more counterparts, each of which shall constitute an original agreement, but
all of which together shall constitute one and the same agreement.
- 2 -
<PAGE> 3
5.4 STATUTORY NOTICE. ORAL AGREEMENTS OR ORAL
COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING
REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON LAW.
IN WITNESS WHEREOF, U. S. Bank and Borrower have caused this
Amendment to be duly executed by their respective duly authorized signatories
as of the date first above written.
PACER/CATS/CCS - a Delaware joint venture
By: Ticketmaster Cinema Group, Ltd.,
managing joint venture partner
By /s/ Ned S. Goldstein
-----------------------------
Title Senior Vice President
--------------------------
U. S. BANK OF WASHINGTON, NATIONAL
ASSOCIATION
By /s/ Ann B. Caldwell
---------------------------------
Title Vice President
------------------------------
- 3 -
<PAGE> 1
EXHIBIT 10.39
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of October 18, 1996, between Ticketmaster Group,
Inc., an Illinois Corporation (the "Company"), and Layne Leslie Britton
("Executive").
W I T N E S S E T H:
WHEREAS, the Company is desirous of employing Executive, and Executive
is desirous of being employed by the Company, on the terms and subject to the
conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby mutually acknowledged, the parties
hereto agree as follows:
1. DEFINITIONS. The following terms shall have the indicated
meanings when used in this Agreement, unless the context requires otherwise:
(a) "BASE SALARY AMOUNT" shall mean $106,250 for the
first Contract Year (provided that such amount shall be appropriately
reduced if Executive's employment commences after November 1, 1996),
$425,000 during the second Contract Year, $475,000 during the third
Contract Year, $500,000 during the fourth Contract Year, and $525,000
during the fifth Contract Year.
(b) "BENEFIT PLAN" shall mean each vacation pay, sick
pay, retirement, welfare, medical, dental, disability, life insurance,
deferred compensation, incentive compensation, stock option, stock
appreciation right, restricted stock, profit sharing, pension or other
employee benefit plan, program or arrangement, if any.
(c) "BOARD OF DIRECTORS" shall mean the Board of
Directors of the Company.
(d) "CAUSE" shall have the meaning ascribed to that term
in Section 7.
(e) "COMMON STOCK" shall mean the Common Stock, no par
value, of Ticketmaster Group, Inc., the parent of the Company.
(f) "CONTRACT YEAR" shall mean for the first Contract
Year the period commencing on or after November 1, 1996 (but not later
than November 30, 1996) and ending January 31, 1997, and for each
Contract Year thereafter, the twelve month period commencing each
February 1 and ending on the immediately following January 31.
<PAGE> 2
(g) "CUSTOMER" shall have the meaning ascribed to that
term in Section 9(d).
(h) "DISABILITY" shall have the meaning ascribed to that
term in Section 6(a).
(i) "DISABILITY PERIOD" shall have the meaning ascribed
to that term in Section 6(a).
(j) "PROPRIETARY INFORMATION OF THE COMPANY" shall have
the meaning ascribed to that term in Section 10(a).
(k) "TERMINATION PERIOD" shall have the meaning ascribed
to that term in Section 7(a).
(l) "TICKETMASTER BUSINESSES" shall have the meaning
ascribed to that term in Section 9(b).
(m) "VENTURE" shall have the meaning ascribed to that
term in Section 4.
2. EMPLOYMENT. The Company hereby employs Executive, and
Executive hereby accepts employment with the Company, on the terms and subject
to the conditions set forth herein.
3. TERM OF EMPLOYMENT. The term of employment hereunder shall be
for a period commencing on November 1, 1996 and ending on January 31, 2001,
subject to early termination as herein provided.
4. POSITION AND DUTIES. Executive shall serve as an Executive
Vice President of the Company, and, upon organization of Ticketmaster Ventures,
Inc. ("Venture"), a wholly owned subsidiary of the Company, the President and
Chief Operating Officer thereof. The Company agrees to organize and incorporate
Venture within 30 days of the date of this Agreement. Subject to the authority
of the Board of Directors and the Chief Executive Officer of the Company, the
Executive shall have responsibility for (i) the travel, television, cable, and
radio businesses developed by the Company and Venture, (ii) program
development, production and distribution, (iii) all new businesses of the
Company and Venture other than those related to the ticketing, merchandising,
marketing, ad sales and LIVE magazine businesses of the Company, and (iv) such
other powers and duties as may from time to time be prescribed by the Board of
Directors or the Chief Executive Officer of the Company. Executive shall
report exclusively and directly to the President and Chief Executive Officer
and the Board of Directors of the Company. Executive agrees to serve without
further compensation, if elected or appointed thereto, as an officer or a
director of any of the Company's domestic and foreign subsidiaries and
affiliates. During Executive's employment by the Company and Venture, he will
be entitled to indemnification as an officer of the Company (and, if so
elected, as an officer or
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<PAGE> 3
director of any of the Company's domestic and foreign subsidiaries or
affiliates) in the manner provided by the Illinois Business Corporation Act of
1983, as amended, and the Company's Articles of Incorporation and By-Laws, as
amended.
5. EXCLUSIVE DUTIES. During Executive's employment by the
Company, Executive shall devote his entire working time, attention and energies
to the business of the Company and will not take any actions of the kind
described in Sections 9(b), 9(c) and 9(d). Notwithstanding the foregoing,
nothing shall preclude the Executive from (i) serving on the boards of
directors of a reasonable number of other corporations, trade associations
and/or charitable organizations with the consent of the Board of Directors of
the Company, which consent will not be unreasonably withheld, (ii) engaging in
charitable activities and community affairs, and (iii) managing his personal
investments and affairs, provided that such activities do not materially
interfere with the proper performance of his duties and responsibilities to the
Company and Venture and would not result in Executive taking any actions of the
kind described in Sections 9(b), 9(c) and 9(d).
6. COMPENSATION AND OTHER BENEFITS.
(a) BASE SALARY. During each Contract Year of the term
hereof, the Company shall pay to Executive the Base Salary Amount.
The Base Salary Amount shall be paid to Executive in accordance with
the Company's regular payroll practices with respect to senior
management compensation.
In the event that Executive shall become disabled as a result
of bodily injury or physical or mental illness (whether or not
occupational) to such extent that in the sole opinion of the Board of
Directors, based upon competent medical advice, he can no longer
perform the duties of Senior Vice President of the Company or
President and Chief Operating Officer of Ventures (a "Disability"),
the Company shall only be obligated to continue to pay the Base Salary
Amount to Executive for the 120-day period immediately following the
date as of which the Board of Directors determines Executive have
incurred a Disability (the "Disability Period"). The right to receive
salary payments during the Disability Period, if applicable, shall
survive any termination of employment by virtue of Disability pursuant
to Section 7.
(b) ANNUAL PERFORMANCE BONUSES. During each Contract
Year, commencing with the second Contract Year, the Company shall pay
Executive an annual performance bonus as determined by the Board of
Directors or its Compensation Committee in its sole discretion, the
determination of which shall be based upon such standards, guidelines
and factual circumstances as the Board of Directors or its
Compensation Committee deems relevant, including, without limitation,
the operating results
-3-
<PAGE> 4
for the Company during such Contract Year, the importance of the
efforts of Executive in achieving such operating results and the
achievement by the Company and/or Executive of performance goals
previously established by the Board of Directors for such Contract
Year; provided, however, that in no event shall the bonus for any full
Contract Year of the term hereof be less than $115,000 for the second
Contract Year, $125,000 for the third Contract Year, or $150,000 for
each Contract Year thereafter.
(c) EXPENSES. Executive shall be entitled to receive
prompt reimbursement from the Company for all documented business
expenses incurred by him in the performance of his duties hereunder,
provided that Executive properly accounts therefor in accordance with
the Company's reimbursement policy as applicable to other senior
executives, including, without limitation, the submission of
supporting evidence as reasonably requested by the Company. While
traveling on Company business, Executive shall be entitled to
transportation and accommodations consistent with his position with
the Company.
(d) FRINGE BENEFITS. During the term hereof, Executive
shall be entitled (i) to participate in and receive benefits under all
of the Company's Benefit Plans generally available to senior
management of the Company and (ii) to receive an automobile allowance
in the amount of $1,200 per month. To the extent not covered by the
Company's Benefit Plans.
(e) INSURANCE. The Company agrees to maintain in effect
during the term hereof insurance on Executive's life payable to his
estate or his named beneficiary or beneficiaries in the amount of
$2,000,000; provided, however, that Executive shall reimburse the
Company for any and all premiums paid by the Company with respect to
such insurance in excess of the preferred or select premium rate for
non-smokers. In addition, so long as Executive is insurable at
standard insurable rates (which rates shall in no event increase
during any Contract Year by a percentage greater than the percentage
increase in the consumer price index for all urban workers (1967=100)
over the indexed figure for the immediately preceding Contract Year,
in each case measured as of the month of February), the Company agrees
to also maintain in effect during the term hereof a disability
insurance policy with coverage substantially equivalent to the
coverage under the disability insurance policy now in effect with
respect to Executive; provided, however, that in the event Executive
is not insurable at such standard insurable rates, the Company will
nevertheless maintain such disability insurance policy (if available)
so long as Executive pays the difference in premium.
-4-
<PAGE> 5
(f) VACATIONS. During the term hereof, Executive shall
be entitled to sick leave and paid holidays consistent with the
Company's sick leave and holiday policy for senior management and up
to three weeks paid vacation during each Contract Year except for the
first Contract Year (or such other vacation time as is consistent with
the Company's policy for senior management).
(g) STOCK OPTIONS. Pursuant to the terms and conditions
of the Ticketmaster Stock Plan (the "Stock Plan"), as heretofore
amended and restated, Executive shall be entitled to receive
non-statutory stock options to purchase 75,000 shares of Common Stock
at an exercise price equal to $14.145 per share or, if an initial
public offering of Common Stock is completed prior to May 1, 1997, the
price per share offered to the public. The stock options will only be
exercisable to the extent that Executive is then vested in such stock
options. Executive shall vest in 12,500 of the stock options on
January 31, 1997, 6,250 of the stock options on February 1, 1998
(provided that Executive shall not have exercised his right to
terminate this Agreement pursuant to Section 7(a) during the
Termination Period) and the remaining 56,250 stock options shall vest
monthly pro rata over the 36 month period immediately following
February 1, 1998. Executive shall be entitled to participate in
additional stock option grants or plans as may be available to
executives of the Company from time to time, in the sole discretion of
the Compensation Committee of the Board of Directors of the Company or
the Parent.
(h) OFFICE. Executive's office shall be located near the
office of the Chief Executive Officer of the Company in the Company's
principal corporate offices.
7. TERMINATION.
(a) Termination for Any Reason. The Company or Executive may
terminate the employment of Executive for any reason during the period
commencing December 10, 1997 and ending January 31, 1998 ("Termination
Period").
(b) Disability, Death or Cause. The Company or Executive may
terminate the employment of Executive upon the occurrence of a Disability (as
defined in Section 6(a)) for a period of no less than 120 days during any
consecutive twelve-month period. The Company may also terminate the employment
of Executive hereunder upon Executive's death or for Cause. For purposes
hereof, "Cause" shall mean (i) fraud, theft, misappropriation of funds or
conviction of a felony, (ii) Executive's engagement in illegal conduct tending
to place Executive or the Company in disrepute, (iii) dereliction or gross
misconduct in Executive's performance of his duties as an employee of the
Company or the Venture or the
-5-
<PAGE> 6
failure of Executive to perform his duties in a manner consistent with the
instructions of the Board of Directors or the Chief Executive Officer of the
Company or (iv) violation by Executive of any of his material covenants
contained in this Agreement, including, without limitation, Section 10.
Notwithstanding the foregoing, before the Company may terminate the employment
of Executive for Cause, the Company shall deliver to Executive not less than
ten business days prior written notice of the Company's intention to terminate
Executive's employment together with a statement of the basis for such
termination, and Executive shall be afforded (i) an opportunity to respond to
the Company during such ten-business day period and (ii) in the event that the
basis for such termination is clause (iii) or (iv) above, and the situation
resulting in the Company's determination to terminate for Cause is
non-repetitive in nature, the right to remedy such situation so that such
termination is no longer effective.
(c) Severance. Upon the termination of Executive's employment
under Section 7(a) during the Termination Period by either Company or
Executive, then Company shall pay Executive his Base Salary until the earlier
of January 31, 1999, or the date Executive commences employment with another
employer and between the date of employment with another employer and January
1, 1999, the Company shall continue to pay Executive an amount equal to the
difference between the Base Salary otherwise payable and his compensation
payable by the other employer. Upon the termination of Executive's employment
under Section 7(b), Executive shall be entitled to receive all compensation
(including, without limitation, a pro rata portion of the minimum annual
performance bonus, unless such termination is for Cause) for the then current
Contract Year through the date of such termination plus all accrued but
unreimbursed expenses. Termination of Executive's employment shall not affect
Executive's ability to exercise stock options that have vested prior to the
date of termination. In addition, upon the termination of Executive's
employment after the expiration of the Termination Period for any reason other
than for or by virtue of Cause, death, Disability or Executive's voluntary
termination of employment, the Company shall continue to be responsible for the
payment of all Base Salary Amount and minimum annual performance bonuses for
the remainder of the term hereof; provided, however, that Executive shall have
a duty to mitigate (as to a new position comparable to Executive's position and
salary hereunder) commencing on the first anniversary of the date of
termination; and further provided that Executive shall perform his covenants,
duties and obligations under Sections 9(b), 9(c) and 9(d) during the remainder
of the term hereof. Termination of Executive's employment for any reason
whatsoever shall not affect Executive's vested status under any Benefit Plan or
Executive's ability to exercise stock options that have vested prior to the
date of termination.
8. DEVELOPMENTAL RIGHTS. Executive agrees that any developments
by way of invention, design, copyright, trademark or
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<PAGE> 7
other matters which may be developed or perfected by him during the term
hereof, and which relate to the business of the Company or its subsidiaries or
affiliates, shall be the property of the Company without any interest therein
by Executive, and he will, at the request and expense of the Company, apply for
and prosecute letters patent thereon in the United States or in foreign
countries if the Company so requests, and will assign and transfer the same to
the Company together with any letters patent, copyrights, trademarks and
applications therefor; provided, however, that the foregoing shall not apply to
an invention that Executive develops entirely on his own time without using the
Company's equipment, supplies, facilities or trade secret information except
for those inventions that either:
(a) relate at the time of conception or reduction to
practice of the invention to the Company's business, or actual or
demonstrably anticipated research or development of the Company; or
(b) result from any work performed by Executive for the
Company.
9. CONSULTING.
(a) CONSULTING SERVICES. During the two-year period
commencing immediately upon the termination of Executive's employment
for any reason (other than Executive's death) (the "Consulting
Period"), Executive shall be available for consultation with the
Company and its subsidiaries and affiliates concerning their general
operations and the industries in which they engage in business. In
addition, during the Consulting Period, consultant will aid, assist
and consult with the Company and its subsidiaries and affiliates with
respect to their dealings with clients and the enhancement of their
recognition and reputation. During the Consulting Period, Executive
shall devote such time and energies to the affairs of the Company as
may be reasonably required to carry out his duties hereunder without
jeopardizing Executive's then full-time, non-Ticketmaster Business
employment opportunities; provided, however, that Executive shall not
be obligated to devote more than 50 hours per year to the performance
of such duties. In consideration of Executive's consulting services,
and in consideration of Executive's covenants contained in this
Section 9, the Company shall pay to Executive $30,000 during each full
year of the Consulting Period, payable in equal monthly installments.
The Company further agrees to reimburse Executive for all reasonable
and necessary business expenses incurred by Executive in the
performance of his consulting services in accordance with the
Company's reimbursement policy, including, without limitation, the
submission of supporting evidence as reasonably required by the
Company.
-7-
<PAGE> 8
(b) COVENANT NOT TO COMPETE. During the Consulting
Period, Executive shall not, without the prior written consent of the
Company, directly or indirectly engage in or assist any activity which
is the same as, similar to or competitive with the Ticketmaster
Businesses (other than on behalf of the Company or any of its
subsidiaries or affiliates) including, without limitation, whether
such engagement or assistance is as an officer, director, proprietor,
employee, partner, investor (other than as a holder of less than 5% of
the outstanding capital stock of a publicly traded corporation),
guarantor, consultant, advisor, agent, sales representative or other
participant, anywhere in the world that the Company or any of its
subsidiaries or affiliates has been engaged, including, without
limitation, the United States, Canada, Mexico, England, Ireland,
Scotland, Europe and Australia. Nothing herein shall limit
Executive's ability to own interests in or manage entities which sell
tickets as an incidental part of their primary businesses (e.g. cable
networks, on-line computer services, sport teams, arenas, hotels,
cruise lines, theatrical and movie productions and the like) and which
do not hold themselves out generally as competitors of the Company and
its subsidiaries and affiliates. The "Ticketmaster Businesses" shall
mean the computerized sale of tickets for sporting, theatrical,
cinematic, live theatrical, musical or any other events on behalf of
various venues and promoters through distribution channels currently
being utilized by the Company or any of its subsidiaries or affiliates
(as such term is defined in Rule 405 of Regulation C promulgated under
the Securities Act of 1933, as amended).
(c) SOLICITATION OF EMPLOYEES. During the Consulting
Period, Executive shall not (i) directly or indirectly induce or
attempt to induce (regardless of who initiates the contact) any person
then employed (whether part-time or full-time) by the Company or any
of its subsidiaries or affiliates, whether as an officer, employee,
consultant, adviser or independent contractor, to leave the employ of
the Company or to cease providing or otherwise alter the services then
provided to the Company or to any of its subsidiaries or affiliates or
(ii) in any other manner seek to engage or employ any such person
(whether or not for compensation) as an officer, employee, consultant,
adviser or independent contractor in connection with the operation of
any business which is the same as or similar to any of the
Ticketmaster Businesses.
(d) NON-SOLICITATION OF CUSTOMERS. During the Consulting
Period, Executive shall not solicit any Customers of the Ticketmaster
Businesses or encourage (regardless of who initiates the contact) any
such Customers to use the facilities or services of any Competitor of
the Company or any of its subsidiaries or affiliates. "Customer"
shall mean any
-8-
<PAGE> 9
person who engages the Company or any of its subsidiaries or
affiliates to sell, on its behalf as agent, tickets to the public.
10. CONFIDENTIALITY. Executive shall not at any time (during or
for a period of sixty (60) months after termination of employment) disclose
(except as may be required by law) or use, except in the pursuit of the
business of the Company or any of its subsidiaries or affiliates, any
Proprietary Information of the Company. "Proprietary Information of the
Company" means all information known or intended to be known only to employees
of the Company or any of its subsidiaries or affiliates in a confidential
relationship with the Company or any of its subsidiaries or affiliates relating
to technical matters pertaining to the business of the Company or any of its
subsidiaries or affiliates, but shall not include any information within the
public domain. Executive agrees not to remove any documents, records or other
information from the premises of the Company or any of its subsidiaries or
affiliates containing any such proprietary information, except in the pursuit
of the business of the Company or any of its subsidiaries or affiliates, and
acknowledges that such documents, records and other information are the
exclusive property of the Company or its subsidiaries or affiliates. Upon
termination of Executive's employment, Executive shall immediately return all
Proprietary Information of the Company and all copies thereof to the Company.
11. GENERAL PROVISIONS.
(a) EXPENSES. All costs and expenses incurred by either
of the parties in connection with this Agreement and any transactions
contemplated hereby shall be paid by that party.
(b) NOTICES. All notices, demands and other
communications hereunder shall be in writing and shall be given or
made (and shall be deemed to have been duly given or made upon
receipt) by delivery in person, by overnight courier service, by
cable, by telecopy, by telegram, by telex or by registered or
certified mail to the respective parties at the following addresses
(or at such other address for a party as shall be specified in a
notice given in accordance with this Section 11(b)):
(i) If to the Company:
Ticketmaster Group, Inc.
3701 Wilshire Boulevard
7th Floor
Los Angeles, California 90010
Attention: Chairman of the Board
Telecopy No.: (213) 382-1146
-9-
<PAGE> 10
With a copy to:
Neal, Gerber & Eisenberg
Two North LaSalle Street
Chicago, Illinois 60602
Attention: Charles Evans Gerber
Telecopy No.: (312) 269-1747
(ii) If to Executive:
Layne Leslie Britton
3677 Boise Avenue
Los Angeles, California 90066
Telecopy No.: (310) 398-2177
With a copy to:
Gang, Tyre, Ramer & Brown
132 South Rodeo Drive
Beverly Hills, California 50213
Attention: Jeffrey Mandel and
Bruce Ramer
Telecopy No.: (310) 777-4801
(c) HEADINGS. The descriptive headings contained in this
Agreement are for convenience of reference only and shall not affect
in any way the meaning or interpretation of this Agreement.
(d) SUCCESSORS; BINDING AGREEMENT. This Agreement shall
be binding upon and inure to the benefit of the parties hereto and
their respective heirs, devisees, legatees, executors, administrators,
successors and personal or legal representatives. If Executive is
domiciled in a community property state or a state that has adopted
the Uniform Marital Property Act or equivalent or if Executive is
domiciled in a state that grants to his spouse any other marital
rights in Executive's assets (including, without limitation, dower
rights or a right to elect against Executive's will or to claim a
forced share of Executive's estate), this Agreement shall also inure
to the benefit of, and shall also be binding upon, his spouse. If
Executive should die while any amounts would still be payable to him
hereunder if he had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms
of this Agreement to Executive's designee or, if there be no such
designee, to Executive's heirs, devisees, legatees or executors or
administrators of Executive's estate, as appropriate.
(e) SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under existing or future
laws effective during the term of this Agreement, such
-10-
<PAGE> 11
provisions shall be fully severable, the Agreement shall be construed
and enforced as if such illegal, invalid or unenforceable provision
had never comprised a part of this Agreement, and the remaining
provisions of this Agreement shall remain in full force and effect and
shall not be affected by the illegal, invalid or unenforceable
provision or by its severance from this Agreement. Furthermore, in
lieu of such illegal, invalid or unenforceable provision, there shall
be added automatically as part of this Agreement a provision as
similar in terms to such illegal, invalid or unenforceable provision
as may be possible and be legal, valid and enforceable.
(f) ENTIRE AGREEMENT. This Agreement (together with any
applicable option agreements pursuant to Section 6(g)) constitutes the
entire agreement of the parties hereto with respect to the subject
matter hereof and thereof and supersedes all prior agreements and
understandings, both written and oral, between the Company and
Executive with respect to the subject matter hereof and thereof.
(g) ASSIGNMENT. This Agreement and the rights and duties
hereunder are not assignable by Executive. This Agreement and the
rights and duties hereunder may not be assigned by the Company without
the express written consent of Executive (which consent may be granted
or withheld in the sole discretion of Executive), except that such
consent shall not be required in order for the Company to assign this
Agreement or the rights or duties hereunder to an affiliate (as such
term is defined in Section 9(b)) of the Company, as long as the
Company remains liable for all obligations hereunder, or to a third
party in connection with the merger or consolidation of the Company
with, or the sale of all or substantially all of the assets or
business of the Company to, that third party.
(h) AMENDMENT; WAIVER. This Agreement may not be amended
or modified except by an instrument in writing signed by, or on behalf
of, the Company and Executive. Either party to this Agreement may (a)
extend the time for the performance of any of the obligations or other
acts of the other party or (b) waive compliance with any of the
agreements or conditions of the other party contained herein. Any
such extension or waiver shall be valid only if set forth in an
instrument in writing signed by the party to be bound thereby. Any
waiver of any term or condition shall not be construed as a waiver of
any subsequent breach or a subsequent waiver of the same term or
condition, or a waiver of any other term or condition, of this
Agreement. The failure of any party to assert any of its rights
hereunder shall not constitute a waiver of any such rights.
-11-
<PAGE> 12
(i) GOVERNING LAW. This Agreement shall be governed by,
and construed in accordance with, the laws of the State of Illinois,
applicable to contracts executed in and to be performed entirely
within that state.
(j) JURISDICTION AND VENUE. The parties hereto agree
that all actions or proceedings initiated by either party hereto and
arising directly or indirectly out of this Agreement which are brought
pursuant to judicial proceedings shall be litigated in a Federal or
state court located in the State of California. The parties hereto
expressly submit and consent in advance to such jurisdiction and agree
that service of summons and complaint or other process or papers may
be made by registered or certified mail addressed to the relevant
party at the address to which notices are to be sent pursuant to
Section 11(b) of this Agreement. The parties hereto waive any claim
that a Federal or state court located in the State of California is an
inconvenient forum or an improper forum based on lack of venue.
(k) EQUITABLE RELIEF. Executive acknowledges that the
covenants contained in Sections 9 and 10 are reasonable and necessary
to protect the legitimate interests of the Company, that in the
absence of such covenants the Company would not have entered into this
Agreement, that any breach or threatened breach of such covenants will
result in irreparable injury to the Company and that the remedy at law
for such breach or threatened breach would be inadequate.
Accordingly, the Executive agrees that the Company, in addition to any
other rights or remedies which it may have, shall be entitled to seek
such equitable and injunctive relief as may be available from any
court of competent jurisdiction to restrain the Executive from any
breach or threatened breach of such covenants.
(l) ATTORNEYS' FEES. If any legal action or other
proceeding is brought for the enforcement of this Agreement, the
prevailing party shall be entitled to recover reasonable attorneys'
fees and other costs incurred in that action or proceeding, in
addition to any other relief to which it may be entitled.
(m) COUNTERPARTS. This Agreement may be executed in one
or more counterparts, and by the parties hereto in separate
counterparts, each of which when executed shall be deemed to be an
original while all of which taken together shall constitute one and
the same instrument.
-12-
<PAGE> 13
IN WITNESS WHEREOF, the Company and Executive have executed this
Agreement as of the date and year first written above.
TICKETMASTER GROUP, INC.
By: /s/ Fredric D. Rosen
------------------------------
Title: President
/s/ Layne Leslie Britton
----------------------------------
LAYNE LESLIE BRITTON
-13-
<PAGE> 1
EXHIBIT 11.
TICKETMASTER GROUP, INC.
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE INFORMATION) (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------- -------------------------
1995 1996 1995 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Weighted average number of
common shares outstanding ....... 15,310,405 15,310,405 15,310,405 15,310,405
Common Stock equivalents
from outstanding stock options... n/a 39,636 n/a 39,636
----------- ----------- ----------- -----------
15,310,405 15,350,041 15,310,405 15,350,041
=========== =========== ----------- -----------
Net income (loss).................. $ (2,660) $ 2,849 $ (4,986) $ 431
=========== =========== ----------- -----------
Net income (loss) per share........ $ (0.17) $ 0.19 $ (0.33) $ 0.03
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-1996
<PERIOD-START> FEB-01-1996
<PERIOD-END> OCT-31-1996
<CASH> 61,293
<SECURITIES> 0
<RECEIVABLES> 11,066
<ALLOWANCES> 0
<INVENTORY> 4,795
<CURRENT-ASSETS> 92,323
<PP&E> 30,016
<DEPRECIATION> (20,991)
<TOTAL-ASSETS> 193,392
<CURRENT-LIABILITIES> 84,868
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> (107,378)
<TOTAL-LIABILITY-AND-EQUITY> 193,392
<SALES> 162,537
<TOTAL-REVENUES> 162,537
<CGS> 149,092
<TOTAL-COSTS> 149,092
<OTHER-EXPENSES> 5,204
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,094
<INCOME-PRETAX> 2,081
<INCOME-TAX> 1,650
<INCOME-CONTINUING> 431
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 431
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.03
</TABLE>
