<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
---------------
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported):
September 11,1998 (July 2, 1998)
------------------------------
SFX ENTERTAINMENT, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
<TABLE>
<S> <C> <C>
Delaware 0-24017 13-3977880
- ------------------------------- ---------------------------- -------------------------------------
(State or Other Jurisdiction (Commission File No.) (IRS Employer Identification No.)
of Incorporation)
</TABLE>
650 Madison Avenue, 16th Floor, New York, New York 10022
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 838-3100
N/A
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
This Form 8-K/A amends the Form 8-K of SFX Entertainment, Inc. ("SFX"
or the "Company") filed on July 10, 1998 and supplies pro forma financial
information regarding the acquisition of Blackstone Entertainment, LLC ("Don
Law") by the Company in July of 1998.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS
(a) Financial Statements of Businesses Acquired
The required financial statements of Don Law are incorporated herein
by reference from the Company's Prospectus filed with the Securities and
Exchange Commission ("SEC") on June 30, 1998 pursuant to Rule 424(b) of the
Securities Act of 1933, as amended.
(b) Pro Forma Financial Information
The pro forma financial statements of the Company, attached hereto as
Annex A, give effect to the acquisition by the Company of Don Law, and are
incorporated herein by reference.
(c) Exhibits.
2.1 Asset Purchase Agreement, dated April 29, 1998, by and among
Blackstone Entertainment LLC, its members, DLC Acquisition
Corp., and SFX Entertainment, Inc. (incorporated by reference
to Exhibit 10.83 to Amendment No.1 to Form S-1 (File No. 333-
50079) filed with the SEC on May 5, 1998)
2
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following Unaudited Pro Forma Condensed Combined Financial Statements
and notes thereto contain forward-looking statements that involve risks and
uncertainties, therefore, the actual results of the Company may differ
materially from those discussed herein. The Company undertakes no obligation to
publicly release the result of any revisions to these forward-looking
statements that may be made to reflect any future events or circumstances.
In the opinion of management, all adjustments necessary to fairly present
this pro forma information have been made. The Unaudited Pro Forma Condensed
Combined Financial Statements of SFX are based upon, and should be read in
conjunction with, the historical financial statements of the Company, Don Law
and certain of the businesses previously acquired by the company and the
respective notes to such financial statements previously filed with the SEC.
The pro forma information is based upon tentative allocations of purchase price
and does not purport to be indicative of the results that would have been
reported had such events actually occurred on the date specified, nor is it
indicative of the Company's future results. Purchase accounting is based upon
preliminary asset valuations, which are subject to change.
The Company entered the live entertainment business in January 1997 with
the acquisition of Delsener/Slater Enterprises, LTD. ("Delsener/Slater"). In
March 1997, the Company acquired the Meadows Music Theater ("Meadows") and in
June 1997 the Company acquired Sunshine Promotions, Inc. and certain other
related companies ("Sunshine Promotions"). The acquisitions of Delsener/Slater,
Sunshine Promotions and the Meadows are collectively referred to herein as the
"1997 Acquisitions."
In January 1998, the Company acquired Westbury Music Fair. In February
1998, the Company acquired PACE Entertainment Corporation ("PACE"), Pavilion
Partners ("Pavilion"), The Contemporary Group of Companies ,
(collectively "Contemporary"), BG Presents, Inc. ("BGP"), and Album Network,
Inc., SJS Entertainment Corporation and the Network 40 (collectively
"Network"). In March 1998, the Company acquired Concert/Southern Promotions
("Concert/Southern") and United Sports of America Motor Sports ("USA
Motorsports"). In May 1998, the Company acquired Irvine Meadows Amphitheater,
New Avalon, Inc., TBA Media, Inc. and West Coast Amphitheater (collectively
"Avalon"). In June 1998 the Company acquired Oakdale Concerts, LLC and Oakdale
Development Limited Partnership (collectively "Oakdale") and Falk Associates
Management Enterprises, Inc. and Financial Advisory Management Enterprises,
Inc. (collectively "FAME"). The acquisitions of Westbury Music Fair, PACE,
Pavilion Partners, Contemporary, BGP, Network, Concert/Southern, USA
Motorsports, Avalon, Oakdale and FAME are collectively referred to herein as
the "Transactions."
Since June 30, 1998, the Company has completed the acquisition of Don Law
for an aggregate consideration of approximately $92.2 million and has also
completed the acquisition of five other entertainment related companies in the
theatrical and music segments, principally in the areas of programming, the
acquisition of tours and merchandising (the "Other Subsequent Acquisitions")
for an aggregate purchase price of $101.6 million. Don Law and the Other
Subsequent Acquistions are collectively referred to herein as the "Subsequent
Acquisitions."
The Unaudited Pro Forma Condensed Combined Balance Sheet at June 30, 1998
is presented as if the Company had completed the Don Law and the Other
Subsequent Acquisitions as of June 30, 1998.
The Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1997 and the six months ended June 30, 1998 are
presented as if the Company had completed the 1997 Acquisitions, the
Transactions and the Subsequent Acquisitions as of January 1, 1997.
In addition, the Unaudited Pro Forma Condensed Combined Financial
Statements do not reflect certain purchase price adjustments and future
contingent payments, which may be payable pursuant to the various acquisition
agreements.
3
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR THE
SUBSEQUENT
ACQUISITIONS
I
SFX ------------------------------ PRO FORMA
ENTERTAINMENT DON LAW OTHER ADJUSTMENTS
(ACTUAL) A B II PRO FORMA
--------------- ---------------- ------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Current assets ...................... $350,396 $ (73,101) $ (67,724) $ 68,000 $ 277,571
Property and equipment, net ......... 235,664 27,481 2,659 -- 265,804
Intangible assets, net .............. 625,125 62,761 97,067 -- 784,953
Other assets ........................ 31,976 149 584 32,709
--------------- ---------------- ------------- ------------- -----------
TOTAL ASSETS ........................ $1,243,161 $ 17,290 $ 32,586 $ 68,000 $1,361,037
=============== ================ ============= ============= ===========
LIABILITIES & STOCKHOLDERS'
EQUITY:
Current liabilities ................. 275,938 16,234 19,951 -- 312,123
Deferred taxes ...................... 47,358 -- 10,000 -- 57,358
Senior Subordinated Notes ........... 350,000 -- -- -- 350,000
Credit Facility ..................... 150,000 -- -- 68,000 218,000
Other long-term debt ................ 23,743 170 -- -- 23,913
Capital lease obligations ........... 6,042 -- -- -- 6,042
Other liabilities ................... 2,835 886 510 -- 4,231
Minority interest ................... 3,023 2,125 -- 5,148
Temporary equity--stock subject to
redemption ......................... 16,500 -- -- -- 16,500
Stockholders' equity ................ 367,722 -- -- -- 367,722
--------------- ---------------- ------------- ------------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY ............... $1,243,161 $ 17,290 $ 32,586 $ 68,000 $1,361,037
======== ========== ========== ========= ==========
</TABLE>
4
<PAGE>
I. PRO FORMA FOR THE SUBSEQUENT ACQUISITIONS
A. DON LAW
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998
(IN THOUSANDS)
-----------------------------------------------------
DON LAW PRO FORMA
AS REPORTED ADJUSTMENTS DON LAW
------------- ------------------- -------------
<S> <C> <C> <C>
ASSETS:
Current assets ................................... $19,098 $ (92,199)(a) $ (73,101)
Property and equipment, net ...................... 10,223 17,258 (b) 27,481
Intangible assets, net ........................... -- 62,761 (c) 62,761
Other assets ..................................... 149 149
------------- ------------------- -------------
TOTAL ASSETS ..................................... $29,470 $ (12,180) $ 17,290
============= =================== =============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities .............................. $16,234 -- $ 16,234
Long-term debt ................................... 8,940 (8,770)(a) 170
Other liabilities ................................ 886 -- 886
Minority interest ................................ --
Stockholders' equity ............................. 3,410 (3,410)(d) --
------------- ------------------- -------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY ......... $29,470 $ (12,180) $ 17,290
============= ================== =============
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS
(a) To reflect the Don Law acquisition for $92,199,000 in cash
(including the repayment of $8,770,000 of the seller's debt).
(b) To reflect the increase in fair value allocated to certain fixed
assets, primarily the Great Woods Amphitheater.
(c) To reflect the excess of the purchase price paid over the fair value
of net tangible assets acquired of $62,761,000.
(d) To reflect the elimination of Don Law's historical stockholders'
equity.
B. OTHER SUBSEQUENT ACQUISITIONS
Reflects the combined historical balance sheets of the five businesses acquired
by the Company in July and August of 1998. In the aggregate, such acquisitions
are not material to the Company's financial position or results of operations.
<TABLE>
<CAPTION>
AS OF JUNE 30, 1998 (000'S)
(IN THOUSANDS)
-----------------------------------------
OTHER
SUBSEQUENT OTHER
ACQUISITIONS PRO FORMA SUBSEQUENT
AS REPORTED ADJUSTMENTS ACQUISITIONS
------------ ------------ ------------
<S> <C> <C> <C>
ASSETS:
Current assets $33,862 $(101,586)(a) $(67,724)
--
--
--
Property and equipment, net 2,659 -- 2,659
--
Intangible assets, net 512 86,555 (d) 97,067
10,000 (g) --
--
--
--
Other assets 584 -- 584
--
----------- ------------ -----------
TOTAL ASSETS $37,617 $ (5,031) $ 32,586
=========== ============ ===========
LIABILITIES & STOCKHOLDERS' EQUITY:
Current liabilities $17,951 $ 2,000 (f) $ 19,951
Deferred taxes -- 10,000 (g) 10,000
Long-term debt 10,000 (10,000)(e) --
Other liabilities 510 510
Minority Interest -- 2,125 (b) 2,125
Stockholders' equity 9,156 (9,156)(c) --
----------- ------------ -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $37,617 $ (5,031) $ 32,586
=========== ============ ===========
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the Other Subsequent Acquisitions for $101,586,000 in cash.
(b) To record minority interest for the 20% of a certain entity not purchased
by the Company.
(c) To reflect the elimination of the historical stockholders' equity of the
Other Subsequent Acquisitions.
(d) To reflect the excess purchase price paid over the fair value of net
tangible assets acquired.
(e) To reflect the repayment of debt.
(f) To reflect expected future acquisition related payments based on projected
future earnings.
(g) To reflect deferred taxes of $10,000,000 associated with the differences
between the book and tax basis of assets and liabilities acquired.
II. PRO FORMA ADJUSTMENTS:
Represents an additional $68,000,000 borrowed under the Company's
credit facility to finance the Subsequent Acquisitions.
5
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR
THE SUBSEQUENT ACQUISITIONS
PRO FORMA III
SFX FOR THE 1997 PRO FORMA FOR ---------------------------
ENTERTAINMENT ACQUISITIONS THE TRANSACTIONS DON LAW OTHER
(ACTUAL) I II A B
--------------- -------------- ------------------ ---------------------------
<S> <C> <C> <C> <C> <C>
Revenue $96,144 $14,243 $ 590,913 $50,588 $93,050
Operating expenses 83,417 13,293 520,944 43,741 89,240
Depreciation & amortization 5,431 1,402 43,414 5,322 7,877
Corporate expenses, net of Triathlon
Fees 2,206 3,000 -- --
------------ ----------- -------------- ------------- ----------
Operating income (loss) 5,090 (452) 23,555 1,525 (4,067)
Interest expense 1,590 171 -- --
Other (income) expenses (295) (1) (521) -- (31)
Equity (income) loss from investments (509) -- (4,908) -- (1,561)
Other expenses -- -- (38) (329) --
------------ ----------- -------------- ------------- ----------
Income/(loss) before
income tax expense 4,304 (622) 29,022 1,854 (2,475)
Income tax expense (benefit) 490 -- 4,200 -- 22
------------ ----------- -------------- ------------- ----------
Net income (loss) 3,814 (622) 24,822 $ 1,854 $(2,497)
=========== ============== ============= ==========
Accretion on put option --
------------
Net income (loss) applicable to common
share $ 3,814
============
Net income (loss) per common share $ .26
============
Weighted average common shares
outstanding 14,445
============
</TABLE>
[RESTUBBED TABLE CONTINUED FROM ABOVE]
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
IV PRO FORMA (1)
------------- ------------------
<S> <C> <C>
Revenue $ 844,938
Operating expenses 750,635
Depreciation & amortization 63,446
--
--
Corporate expenses 5,206
----------- -----------------
Operating income (loss) 25,651
Interest expense $ 50,800 52,561
Other (income) expenses (848)
Equity (income) loss from investments (6,978)
Other expenses (367)
----------- -----------------
Income/(loss) before
income tax expense (50,800) (18,717)
Income tax expense (benefit) 4,712
----------- -----------------
Net income (loss) $(50,800) (23,429)
===========
Accretion on put option (3,300)
-----------------
Net income (loss) applicable to common
share $ (26,729)
=================
Net income (loss) per common share $ (0.90)
=================
Weighted average common shares
outstanding (2) 30,090
=================
</TABLE>
(1) The Pro Forma Financial Statements do not include expected cost savings in
connection with certain acquisitions associated with the elimination of
duplicitive staffing and general and administrative expenses of $5,740,000.
(2) Includes 500,000 shares of Class A Common Stock issued to the PACE sellers
in connection with the Fifth Year Put Option (such shares are not included
in calculating the net loss per common share).
6
<PAGE>
I. PRO FORMA FOR THE 1997 ACQUISITIONS
The Company acquired Delsener/Slater, the Meadows Music Theater and
Sunshine Promotions on January 2, 1997, March 20, 1997 and June 24, 1997,
respectively. These adjustments represent the historical operating results of
the Meadows Music Theater and Sunshine Promotions prior to their respective
acquisitions by the Company.
7
<PAGE>
II. PRO FORMA FOR THE TRANSACTIONS
The Company acquired Pace and Pavilion, Contemporary, BGP, Network,
Concerts/Southern, and FAME on February 25, 1998, February 27, 1998, February
24, 1998, February 27, 1998, March 4, 1998, and June 4, 1998, respectively.
In June 1998, the Company acquired Avalon and Oakdale, herein referred to
as the Other Acquisitions. The following represents the historical operating
results of these companies prior to their acquisition by the Company.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
--------------------------------------------------------------------------
PACE
AND CONCERTS/
PAVILION CONTEMPORARY BGP NETWORK SOUTHERN
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
A B C D E
-------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenue $284,360 $103,300 $105,553 $28,322 $14,797
Operating expenses 260,256 91,220 96,630 19,577 12,520
Depreciation & amortization 6,053 1,320 1,027 351 79
Corporate expenses -- -- -- -- --
--------------------------------------------------------------------------
Operating income (loss) 18,051 10,760 7,896 8,394 2,198
Interest expense 6,772 266 917 195 --
Other (income) expenses 1,328 (357) (270) (78) (60)
Equity (income) loss from
investments (7,399) -- -- -- 48
Other expenses (38) -- -- -- --
--------------------------------------------------------------------------
Income (loss) before income tax
expense 17,388 10,851 7,249 8,277 2,210
Income tax expense (benefit) 3,569 -- 1,687 127 --
--------------------------------------------------------------------------
Net income (loss) $ 13,819 $ 10,851 $ 5,562 $ 8,150 $ 2,210
==========================================================================
[Restubbed Table Continued From Above]
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
-----------------------------------------------
FAME OTHER PRO FORMA PRO FORMA
ACQUISITION ACQUISITIONS ADJUSTMENTS FOR THE
F G H TRANSACTIONS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue $ 10,881 $ 43,700 $ -- $ 590,913
Operating expenses 3,457 37,284 -- 520,944
Depreciation & amortization 115 461 34,008 (a) 43,414
Corporate expenses -- -- 3,000 (b) 3,000
--------------- ------------- ----------- ----------
Operating income (loss) 7,309 5,955 (37,008) 23,555
Interest expense 79 1,602 (9,831) (c) --
Other (income) expenses (143) (79) (862)(d) (521)
Equity (income) loss from
investments -- -- 862 (d) (4,908)
-- 1,581 (f) --
Other expenses -- -- (38)
--------------- ------------- ----------- ----------
Income (loss) before income tax
expense 7,373 4,432 (28,758) 29,022
Income tax expense (benefit) 700 949 (2,832) (e) 4,200
--------------- ------------- ----------- ----------
Net income (loss) $ 6,673 $ 3,483 (25,926) 24,822
=============== ============= =========== ==========
</TABLE>
8
<PAGE>
A. PACE AND PAVILION ACQUISITIONS
Reflects the PACE acquisition, the separate acquisition of two partners'
interest in the Pavilion partnership that owns certain amphitheaters operated
by PACE and the acquisition of USA Motor Sports by PACE in March 1998.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
----------------------------------------------------------------------------
PACE
AS PAVILION USA MOTOR PRO FORMA PACE AND PAVILION
REPORTED AS REPORTED SPORTS ADJUSTMENTS ACQUISITIONS
------------ ------------- ----------- ---------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue .............................. $176,168 $ 98,632 $8,560 $1,000 (a) $284,360
Operating expenses ................... 170,169 83,258 8,306 (1,477)(b) 260,256
Depreciation & amortization .......... 1,985 4,045 23 -- 6,053
Other expenses ....................... 1,139 -- -- (1,139)(c) --
-------- -------- ------ -------- --------
Operating income (loss) .............. $ 2,875 $ 11,329 $ 231 $ 3,616 $ 18,051
Interest expense ..................... 2,384 4,388 -- -- 6,772
Other (income) expenses .............. 53 1,304 (29) -- 1,328
Equity (income) loss from
investments ......................... (8,134) (1,831) -- 2,566 (d) (7,399)
Other expenses ....................... -- -- (38) -- (38)
-------- -------- ------ -------- --------
Income/(loss) before income tax
expense ............................. $ 8,572 $ 7,468 $ 298 $ 1,050 $ 17,388
Income tax expense (benefit) ......... 3,569 -- -- -- 3,569
-------- -------- ------ -------- --------
Net income (loss) .................... $ 5,003 $ 7,468 $ 298 $ 1,050 $ 13,819
======== ======== ====== ======== ========
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) To reflect non-cash revenue resulting from SFX granting Blockbuster
naming rights to three venues for two years for no future
consideration as part of its agreement to acquire Blockbuster's
indirect 33 1/3% interest in Pavilion.
(b) Reflects the elimination of $570,000 of certain officers' salaries
and bonuses which will not be paid under SFX's new employment
contracts and of $907,000 of non-recurring costs incurred in
connection with PACE's previously planned initial public offering,
which was canceled. The amount of the pro forma adjustment to
eliminate salaries and bonuses is based on SFX's agreements with the
affected employees that a bonus will not be paid unless there is a
significant improvement in the results of the PACE acquisition.
Accordingly, no such bonus is reflected in the pro forma statement
of operations because, if PACE's results were similar to those in
these pro forma statements of operations, SFX would not be
contractually obligated to pay a bonus.
(c) Reflects the elimination of non-recurring restricted stock
compensation to PACE executives.
(d) To eliminate PACE's income from its 33 1/3% equity investment in
Pavilion Partners.
9
<PAGE>
B. CONTEMPORARY ACQUISITION
Reflects the Contemporary acquisition and the separate acquisition of the
remaining 50% interest in Riverport Amphitheater Partners, a partnership that
owns an amphitheater in St. Louis, Missouri that is operated by Contemporary.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
-------------------------------------------------------------------
CONTEMPORARY RIVERPORT PRO FORMA CONTEMPORARY
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
-------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
Revenue ......................................... $ 89,053 $14,247 $ -- $103,300
Operating expenses .............................. 90,820 11,630 (11,230)(a) 91,220
Depreciation & amortization ..................... 541 779 -- 1,320
-------- ------- ---------- --------
Operating income (loss) ......................... $ (2,308) $ 1,838 $ 11,230 $ 10,760
Interest expense ................................ 192 74 -- 266
Other (income) expenses ......................... (117) (240) -- (357)
Equity (income) from investments ................ (1,002) -- 1,002 (b) --
-------- ------- ---------- --------
Income/(loss) before income tax expense ......... $ (1,381) $ 2,004 $ 10,228 $ 10,851
Income tax expense (benefit) .................... -- -- -- --
-------- ------- ---------- --------
Net income (loss) ............................... $ (1,381) $ 2,004 $ 10,228 $ 10,851
======== ======= ========== ========
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officers' salaries and bonuses
and other consulting expenses which will not be paid under SFX's new
employment and other contracts. The amount of the pro forma
adjustment to eliminate salaries and bonuses is based on SFX's
agreements with the affected employees that a bonus will not be paid
unless there is a significant improvement in the results of
Contemporary. Accordingly, no such bonus is reflected in the pro
forma statement of operations because, if Contemporary's results
were similar to those in these pro forma statements of operations,
SFX would not be contractually obligated to pay a bonus.
(b) Reflects the elimination of Contemporary's equity income in
Riverport Amphitheater Partners. Contemporary has acquired its
partners' 50% interest in this venture.
C. BGP ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
------------------------------------------------
AS REPORTED PRO FORMA BGP
(a) ADJUSTMENTS ACQUISITION
------------- ----------------- ------------
<S> <C> <C> <C>
Revenue ......................................... $105,553 $ -- $105,553
Operating expenses .............................. 99,958 (3,328)(b) 96,630
Depreciation & amortization ..................... 1,027 -- 1,027
-------- --------- --------
Operating income ................................ $ 4,568 $ 3,328 $ 7,896
Interest expense ................................ 917 -- 917
Other (income) expenses ......................... (270) -- (270)
-------- --------- --------
Income/(loss) before income tax expense ......... $ 3,921 $ 3,328 $ 7,249
Income tax expense (benefit) .................... 1,687 -- 1,687
-------- --------- --------
Net income ...................................... $ 2,234 $ 3,328 $ 5,562
======== ========= ========
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects BGP's operating results for the twelve months ended January
31, 1998.
(b) Reflects the elimination of certain officers' salaries and bonuses
and other consulting expenses which will not be paid under SFX's new
employment and other contracts. The amount of the pro forma
adjustment to eliminate salaries and bonuses is based on SFX's
agreements with the affected employees that a bonus will not be paid
unless there is a significant improvement in the results of BGP.
Accordingly, no such bonus is reflected in the pro forma statement
of operations because, if BGP's results were similar to those in
these pro forma statements of operations, SFX would not be
contractually obligated to pay a bonus.
10
<PAGE>
D. NETWORK ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
------------------------------------------------------------------
THE
NETWORK
MAGAZINE SJS PRO FORMA NETWORK
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITIONS
------------- ------------- ------------------ -------------
<S> <C> <C> <C> <C>
Revenue ......................................... $16,274 $14,218 $ (2,170)(b) $28,322
Operating expenses .............................. 14,651 14,422 (2,170)(b) 19,577
(7,326)(a)
Depreciation & amortization ..................... 224 127 351
------- ------- --------- -------
Operating income (loss) ......................... $ 1,399 $ (331) $ 7,326 $ 8,394
Interest expense, net ........................... 159 36 -- 195
Other (income) expenses ......................... -- (78) -- (78)
------- ------- --------- -------
Income/(loss) before income tax expense ......... $ 1,240 $ (289) $ 7,326 $ 8,277
Income tax expense (benefit) .................... -- (127) -- (127)
------- ------- --------- -------
Net income (loss) ............................... $ 1,240 $ (416) $ 7,326 $ 8,150
======= ======= ========= =======
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under SFX's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses
is based on SFX's agreements with the affected employees that a
bonus will not be paid unless there is a significant improvement in
the results of the Network acquisitions. Accordingly, no such bonus
is reflected in the pro forma statement of operations because, if
Network's results were similar to those in these pro forma
statements of operations, SFX would not be contractually obligated
to pay a bonus.
(b) Reflects the elimination of transactions between Network Magazine
and SJS.
E. CONCERTS/SOUTHERN ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
----------------------------------------------
CONCERTS/
PRO FORMA SOUTHERN
AS REPORTED ADJUSTMENTS ACQUISITION
------------- --------------- ------------
<S> <C> <C> <C>
Revenue ....................................... $14,797 $ -- $14,797
Operating expenses ............................ 12,949 (429)(a) 12,520
Depreciation & amortization ................... 79 -- 79
------- ------- -------
Operating income .............................. $ 1,769 $ 429 $ 2,198
Other (income) expenses ....................... (60) -- (60)
Equity (income) loss from investments ......... 80 (32)(b) 48
------- ------- -------
Income before income tax expense .............. $ 1,749 $ 461 $ 2,210
Income tax expense (benefit) .................. -- -- --
------- ------- -------
Net income .................................... $ 1,749 $ 461 $ 2,210
======= ======= =======
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under SFX's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses
is based on SFX's agreements with the affected employees that a
bonus will not be paid unless there is a significant improvement in
the results of Concert/Southern. Accordingly, no such bonus is
reflected in the pro forma statement of operations because, if
Concert/Southern's results were similar to those in these pro forma
statements of operations, SFX would not be contractually obligated
to pay a bonus.
(b) Reflects the elimination of equity loss of a non-entertainment
affiliated entity which was not acquired by SFX.
11
<PAGE>
F. FAME ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
--------------------------------------------------
PRO FORMA FAME
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------------- ------------
<S> <C> <C> <C>
Revenue ......................................... $ 10,881 $10,881
Operating expenses .............................. 13,002 $ (10,595)(a) 3,457
1,050 (b)
Depreciation & amortization ..................... 115 115
-------- ---------- -------
Operating income (loss) ......................... (2,236) 9,545 7,309
Interest expense ................................ 79 79
Other (income) expenses ......................... (143) (143)
-------- ---------- -------
Income/(loss) before income tax expense ......... (2,172) 9,545 7,373
Income tax expense (benefit) .................... 700 (c) 700
---------- -------
Net income (loss) ............................... $ (2,172) $ 8,845 $ 6,673
======== ========== =======
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officers' distributions of
earnings which will not be paid under SFX's new employment
contracts. The FAME acquisition agreement provides for payments by
SFX to the FAME sellers of additional amounts up to an aggregate of
$15.0 million in equal annual installments over 5 years contingent
on the achievement of certain EBITDA targets and for additional
payments by SFX if FAME's EBITDA performance exceeds the target by
certain amounts.
(b) Reflects salaries and officers' life insurance premiums to be paid
by SFX.
(c) Reflects an adjustment to the provision for state and local income
taxes.
G. OTHER ACQUISITIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
-------------------------------------------------------
AVALON OAKDALE PRO FORMA OTHER
ACQUISITION ACQUISITION ADJUSTMENTS ACQUISITIONS
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenue............. $27,265 $16,435 $43,700
Operating expenses.. 24,404 14,720 (1,840)(a) 37,284
Depreciation &
amortization...... 410 51 461
Corporate expenses.. --
------- ------- ------- -------
Operating income
(loss)........... 2,451 $ 1,664 1,840 5,955
Interest expense.... 94 1,508 1,602
Other (income)
expenses.......... -- (79) (79)
Other expenses...... 1,581 (1,581)(b) --
------- ------- ------- --------
Income/(loss) before
income tax expense $ 776 $ 235 3,421 4,432
Income tax expense
(benefit)......... 249 700(c) 949
------- ------- ------ --------
Net income (loss)... $ 527 $ 235 $2,721 $ 3,483
======= ======= ====== ========
</TABLE>
- --------------
PRO FORMA ADJUSTMENTS
(a) Reflects the elimination of certain officers' bonuses and wages not
expected to be paid under the Company's new employment contracts for
Avalon. The amount of the pro forma adjustment to eliminate salaries and
bonuses is based on the Company's agreements with the affected employees
that a bonus will not be paid unless there is a significant improvement in
the results of Avalon. Accordingly, no such bonus is reflected in the pro
forma statement of operations because, if Avalon's results were similar to
those in these pro forma statements of operations, the Company would not
be contractually obligated to pay a bonus.
(b) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.
(c) Reflects an adjustment to the provision for state and local income taxes.
12
<PAGE>
H. PRO FORMA ADJUSTMENTS
(a) Reflects the increase in depreciation and amortization resulting
from the preliminary purchase accounting treatment of the
acquisitions. The Company amortizes goodwill over 15 years.
(b) To record incremental corporate overhead charges associated with
headquarters personnel and general and administrative expenses that
management estimates will be necessary as a result of the SFX
acquisitions.
(c) Reflects the elimination of $9,831,000 of historical interest
expense.
(d) To reclassify Delsener/Slater's equity income in the PNC Bank Arts
Center venue following the acquisition of Pavilion Partners, which
owns the other 50% equity interest in the venue.
(e) Represents an adjustment to the provision for state and local income
taxes to reflect an approximate pro forma tax provision of
$4,200,000. The calculation treats all companies acquired as
"C" Corporations. The tax provision reflects the non-deductibility
of approximately $17,000,000 of goodwill amortization, and tax
savings related to the pro forma adjustments for the Financing.
(f) To reclassify PACE's equity income in Avalon following the Avalon
acquisition.
13
<PAGE>
III. PRO FORMA FOR THE SUBSEQUENT ACQUISITIONS
A. DON LAW
YEAR ENDED DECEMBER 31, 1997 IN (000'S)
---------------------------------------
DON LAW PRO FORMA
AS REPORTED ADJUSTMENTS DON LAW
------------ ------------- ------------
Revenue $ 50,588 $ 50,588
Operating expenses 44,401 $ (610) (a) 43,741
(50) (b)
Depreciation & amortization 2,033 3,289 (c) 5,322
Corporate expenses --
Other expenses --
------------ ------------- ------------
Operating income (loss) 4,154 (2,629) 1,525
Interest expense 1,072 (1,072) (d) --
Other (income) expenses (329) (329)
------------ ------------- ------------
Income/(loss) before
income tax expense $ 3,411 $ (1,557) $ 1,854
Income tax expense (benefit) --
------------ ------------- ------------
Net income (loss) $ 3,411 $ (1,557) $ 1,854
============ ============= ============
PRO FORMA ADJUSTMENTS:
(a) Reflects adjustment to eliminate payments made to employees associated
with membership interest.
(b) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under the Company's new employment contracts. The
amount of the pro forma adjustment to eliminate salaries and bonuses is
based on the Company's agreements with the affected employees that a bonus
will not be paid unless there is a significant improvement in the results
of Don Law. Accordingly, no such bonus is reflected in the pro forma
statement of operations as should Don Law's results be at a similar level
to that in these pro forma statements of operations no bonus would be
paid, and the Company would not be contractually obligated to pay a bonus.
(c) Reflects the increase of $3,289,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of Don Law.
The Company amortizes goodwill over 15 years.
(d) Reflects the elimination of $1,072,000 of historical interest expense.
IV. OTHER SUBSEQUENT ACQUISITIONS
Reflects the historical balance sheets of the five businesses acquired by the
Company in July and August of 1998.
In the aggregate, such acquisitions are not material to the Company's
financial position or results of operations.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997 IN (000'S)
------------------------------------------------
OTHER
SUBSEQUENT OTHER
ACQUISITIONS PRO FORMA SUBSEQUENT
AS REPORTED ADJUSTMENTS ACQUISITIONS
------------- ------------- ---------------
<S> <C> <C> <C>
Revenue $ 93,050 $ 93,050
Operating expenses 89,240 89,240
--
Depreciation & amortization 430 $ 7,447 (a) 7,877
--
Corporate expenses -- --
Other expenses
------------- ------------- --------------
Operating income (loss) 3,380 (7,447) (4,067)
Interest expense 254 (254)(b) --
Other (income) expenses (31) (31)
Equity (income) loss from investments (1,561) (1,561)
------------- ------------- --------------
Income/(loss) before income tax expense $ 4,718 $ (7,193) $ (2,475)
Income tax expense (benefit) 22 -- 22
------------- ------------- --------------
Net income (loss) $ 4,696 $ (7,193) $ (2,497)
============= ============= ==============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects the increase of $7,447,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the Other
Subsequent Acquisitions. The Company amortizes goodwill over 15 years.
(b) Reflects the elimination of historical interest expense of $254,000.
14
<PAGE>
IV. PRO FORMA ADJUSTMENTS
Reflects the incremental interest expense associated with additional
borrowings under the credit facility and other debt and deferred
compensation costs related to the Transactions and Subsequent Acquisitions.
15
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA FOR THE
SUBSEQUENT ACQUISITIONS
PRO FORMA II
SFX FOR THE -------------------------- PRO FORMA
ENTERTAINMENT TRANSACTIONS DON LAW OTHER ADJUSTMENTS
(ACTUAL) I A B III PRO FORMA
------------------------------------------------------------------------ --------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 292,342 $ 123,226 21,443 52,956 $ 489,967
Operating expenses 270,681 111,568 18,577 38,317 439,143
Depreciation & amortization 19,174 8,317 2,661 3,939 -- 34,091
Corporate expenses, net of
Triathlon Fees 3,329 -- 3,329
Other expenses 32,052 -- -- 32,052
--------- --------- ----------- ------------ ---------- ----------
Operating income (loss) (32,894) 3,341 205 10,700 -- (18,648)
Interest expense 18,221 -- -- 8,060 26,281
Other (income) expenses (2,499) (403) (166) -- (3,068)
Equity (income) loss from
investments (1,825) 569 (985) (2,241)
Other expenses 398 132 -- 530
--------- --------- ----------- ------------ ---------- ----------
Income/(loss) before income tax
expense $ (47,189) 3,043 371 11,685 (8,060) $ (40,150)
Income tax expense (benefit) 1,350 150 -- 1,500
--------- --------- ----------- ------------ ---------- ----------
Net income (loss) (48,539) 2,893 371 11,685 (8,060) $ (41,650)
========= =========== ============ ==========
Accretion on put option (1,100) (1,650)
--------- ----------
Net income (loss) applicable to
common shares $ (49,639) $ (43,300)
========= ==========
Net income (loss) per common
share $ (2.56) $ (1.46)
========= ==========
Average common shares outstanding 19,381 30,090 (2)
========= ==========
</TABLE>
(1) The Pro Forma Financial Statements do not include expected cost savings in
connection with certain acquisitions associated with the elimination of
duplicative staffing and general and administrative expenses of $1,383,000.
(2) Includes 500,000 shares of Class A Common Stock issued to the PACE sellers
in connection with the Fifth Year Put Option (such shares are not included
in calculating the net loss per common share).
16
<PAGE>
I. PRO FORMA FOR THE TRANSACTIONS
a) The Company acquired Pace (including USA Motor Sports), Pavilion,
Contemporary, BGP, Network, Concerts Southern, and FAME on February 25,
1998, February 27, 1998, February 24, 1998, February 27, 1998, March 4,
1998, June 4, 1998, respectively. The following represent the operating
results of these companies prior to their acquisition by the Company.
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
---------------------------------------------
PACE & CONTEMPORARY BGP
PAVILION ACQUISITION ACQUISITION
ACQUISITIONS
-------------- -------------- -------------
<S> <C> <C> <C>
Revenue $ 84,199 $ 7,882 $ 16,075
Operating expenses 83,643 8,255 16,801
Depreciation & amortization 1,049 254 213
Corporate expenses
--------- --------- --------
Operating income (loss) (493) (627) (939)
Interest expense 1,148 -- 165
Other (income) expenses (195) (122) (46)
Equity (income) loss from investments 549
Other expenses 19 113
--------- --------- --------
Income/(loss) before income tax
expense (2,014) (505) (1,171)
Income tax expense (benefit) (475)
--------- --------- --------
Net income (loss) $ (1,539) $ (505) $ (1,171)
========= ========= ========
Accretion on put option
Net income (loss) applicable to
common share
[Restubbed Table Continued From Above]
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS)
-----------------------------------------------------------------------
CONCERTS/ PRO FORMA PRO FORMA
NETWORK SOUTHERN FAME OTHER ADJUSTMENTS FOR THE
ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS I TRANSACTIONS
------------- ------------- ------------- --------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue $4,154 $ 524 $2,144 $ 8,248 $ 123,226
Operating expenses 3,949 638 2,037 9,167 $ (13,185)(a) 111,568
263 (b)
Depreciation & amortization 51 9 27 248 6,466 (c) 8,317
Corporate expenses --
Other expenses -- --
------------- ------------- ------------- --------------- -------------- -------------
Operating income (loss) 154 (123) 80 (1,167) 6,456 3,341
Interest expense 37 42 40 (1,432)(d) --
--
Other (income) expense (14) (26) -- (403)
Equity (income) loss from investments 20 -- 569
Other expenses (370) 370 (e) 132
------------- ------------- ------------- --------------- -------------- -------------
Income/(loss) before income tax
expense 131 (143) 64 (837) 7,518 3,043
Income tax expense (benefit) 3 622 (f) 150
------------- ------------- ------------- --------------- -------------- -------------
Net income (loss) $ 128 $ (143) $ 64 $ (837) $ 6,896 $ 2,893
============= ============= ============= =============== ============== =============
</TABLE>
I. PRO FORMA ADJUSTMENTS:
(a) To reflect the elimination of $10,723,000 of PACE's non-cash stock and
other non-recurring compensation, $1,173,000 and $1,289,000 of Network's
and FAME's excess compensation, respectively.
(b) Reflects salaries and officers' life insurance premiums to be paid by the
Company.
(c) Reflects the increase of $6,466,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the
Transaction and Subsequent Acquisitions. The Company amortizes goodwill
over 15 years.
(d) Reflects the elimination of $1,432,000 of historical interest expense.
(e) To reclassify $370,000 of PACE's equity income in Avalon following the
Avalon acquisition.
(f) Represents an adjustment to the provision for their state and local
income taxes to reflect an approximate pro forma tax provision of $622,000.
The calculation treats all companies to be acquired as "C" Corporations.
17
<PAGE>
III. PRO FORMA FOR THE SUBSEQUENT ACQUISITIONS
A. DON LAW
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998 in (000's)
-------------------------------------------
DON LAW PRO FORMA PENDING
AS REPORTED ADJUSTMENTS ACQUISITION
----------- --------------- -----------
<S> <C> <C> <C>
Revenue 21,443 -- 21,443
Operating expenses 18,577 -- 18,577
Depreciation & amortization 690 (1,971)(a) 2,661
Corporate expenses --
Other expenses -- -- --
-------- ------- ---------
Operating income (loss) 2,176 (1,971) 205
Interest expense 384 (384)(b) --
Other (income) expenses (166) (166)
Equity (income) loss from investments -- --
Other expenses (principally related to the
(Spin-Off) -- --
-------- ------- ---------
Income/(loss) before income tax expense 1,958 (1,587) 371
Income tax expense (benefit) -- -- --
-------- ------- ---------
Net income (loss) 1,958 (1,587) 371
======== ======= =========
</TABLE>
(a) Reflects the increase of $1,971,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of Don Law. The
Company amortizes goodwill over 15 years.
(b) Reflects the elimination of $384,000 of historical interest expense.
B. OTHER SUBSEQUENT ACQUISITIONS
Reflects the historical Balance sheets of the five businesses acquired by the
Company in July and August of 1998.
In the aggregate, such acquisitions are not material to the Company's financial
position or results of operations.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1998 IN (000'S)
--------------------------------------------
OTHER
SUBSEQUENT OTHER
ACQUISITIONS PRO FORMA SUBSEQUENT
AS REPORTED ADJUSTMENTS ACQUISITIONS
------------ ----------- ------------
<S> <C> <C> <C>
Revenue 52,956 52,956
Operating expenses 38,317 38,317
Depreciation & amortization 191 3,748 (a) 3,939
Corporate expenses -- --
Other expenses
----------- ----------- ------------
Operating income (loss) 14,448 (3,748) 10,700
Interest expense 404 (404)(b) --
Other (income) expenses -- --
Equity (income) loss from investments (985) (985)
Other expenses (principally related
to th -- -- --
----------- ----------- ------------
Income/(loss) before
income tax expense 15,029 (3,344) 11,685
Income tax expense (benefit) -- --
----------- ----------- ------------
Net income (loss) 15,029 (3,344) 11,685
=========== =========== ============
</TABLE>
PRO FORMA ADJUSTMENTS:
- ----------------------
(a) Reflects the increase of $3,748,000 in depreciation and amortization
resulting from the preliminary purchase accounting treatment of the Subsequent
Acquisitions, excluding Don Law. The Company amortizes goodwill over 15 years.
(b) Reflects the elimination of $404,000 of historical interest expense
18
<PAGE>
IV. PRO FORMA ADJUSTMENTS
Reflects the recording of incremental interest expense associated with the
borrowings under the credit facility and other debt and deferred
compensation costs related to the Transactions and Subsequent Acquisitions.
19
<PAGE>
SIGNATURES
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 thereto duly authorized.
SFX ENTERTAINMENT, INC.
By: /s/ Thomas P. Benson
----------------------------
Name: Thomas P. Benson
Title: Chief Financial Officer
Date: September 11, 1998
20
