<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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 17, 1999
SFX ENTERTAINMENT INC.
(Exact name of registrant as specified in its charter)
DELAWARE 1-14993 13-3977880
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File No.) Identification No.)
650 MADISON AVENUE
16TH FLOOR
NEW YORK, NEW YORK 10022
(Address, including zip code, of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 838-3100
No Change
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
SFX ENTERTAINMENT, INC.
ITEM 5. OTHER EVENTS.
This Form 8-K/A is an amendment to the Form 8-K dated
September 17, 1999 relating to the acquisition by SFX Entertainment, Inc.
("SFX") of Apollo Leisure Group Limited. The purpose of this amendment is to
file the unaudited pro forma condensed combined financial statements of SFX
for the year ended December 31, 1998 and as of and for the six months ended
June 30, 1999, which give effect to the Apollo acquisition and certain
other transactions.
ITEM 7. EXHIBITS.
C. Exhibits.
Unaudited Pro Forma Condensed Combined Financial Statements 99.1
-2-
<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 hereunto duly authorized.
SFX ENTERTAINMENT, INC.
Dated: September 29, 1999 By: /s/ Howard J. Tytel
---------------------------------
Name: Howard J. Tytel
Title: Executive Vice President
General Counsel and Member
of the Office of the Chairman
-3-
<PAGE>
EXHIBIT INDEX
-------------
Description Exhibit
- ----------- -------
Unaudited Pro Forma Condensed Combined Financial Statements 99.1
<PAGE>
SFX UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following information is based on the audited and unaudited financial
statements of SFX Entertainment, Inc. and certain of the companies which we have
acquired as well as the audited and unaudited financial statements of Apollo
Leisure Group Limited ("Apollo"). The pro forma information set forth below does
not give effect to our recently completed acquisitions of certain assets of
Livent Inc. and its affiliates ("Livent"), Midland Concert Promotions Group
Limited ("MCP"), a 50% interest in Cardenas/Fernandez & Associates ("CFA"), Inc.
and Tellem & Associates ("Tellem").
The SFX Unaudited Pro Forma Condensed Combined Balance Sheet at June 30,
1999, is presented as if SFX had completed the Apollo acquisition, our new
$1.1 billion senior credit facility (the "New Senior Credit Facility"), our
July 1999 consent solicitation with respect to our outstanding 9 1/8% Senior
Subordinated Notes and our August 1999 equity offering as of June 30, 1999.
The SFX Unaudited Pro Forma Condensed Combined Statement of Operations for
the year ended December 31, 1998, is presented as if the following transactions
had occurred on January 1, 1998:
o the acquisitions we completed in 1998 and 1999 (other than Livent, MCP,
CFA and Tellem),
o our February and November 1998 offerings of $350 million and $200
million of 9 1/8% Senior Subordinated Notes due 2008, respectively,
o our May 1998, February 1999 and August 1999 equity offerings,
o our July 1999 consent solicitation,
o the consummation of the New Senior Credit Facility, and
o the Apollo acquisition.
The SFX Unaudited Pro Forma Condensed Combined Statement of Operations for
the six months ended June 30, 1999 give effect to the following transactions as
if they had occurred on January 1, 1998:
o the acquisitions we completed in 1999 (other than Livent, MCP, CFA and
Tellem),
o our February 1999 and August 1999 equity offerings,
o our July 1999 consent solicitation,
o the consummation of the New Senior Credit Facility, and
o the Apollo acquisition.
In addition, the SFX 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.
In our opinion, all adjustments necessary to fairly present this pro forma
information have been made. The SFX Unaudited Pro Forma Condensed Combined
Financial Statements are based upon, and should be read in conjunction with, the
historical financial statements of SFX and certain of the businesses acquired by
SFX and the related notes to such financial statements previously filed by SFX.
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 SFX's future results. Purchase accounting is based upon
preliminary asset valuations, which are subject to change. Final asset
valuations are not expected to differ materially from the preliminary
valuations. In addition, the statement of operations data include adjustments to
operating expenses to reflect anticipated savings that SFX management believes
it will be able to achieve through the implementation of its operating strategy.
However, there can be no assurance that SFX will be able to achieve such
savings.
1
<PAGE>
The SFX Unaudited Pro Forma Condensed Combined Financial Statements and
notes thereto contain forward-looking statements that involve risks and
uncertainties. Therefore, the actual results of SFX may differ materially from
those discussed herein. SFX 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.
2
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
JUNE 30, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA FOR THE APOLLO ACQUISITION
AND THE NEW SENIOR CREDIT FACILITY
I
---------------------------------------------
APOLLO NEW SENIOR PRO FORMA
SFX ACQUISITION CREDIT FACILITY ADJUSTMENTS
(ACTUAL) A B C
-------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents .................... $ 99,353 $ 18,030 $ 348,500 $ (13,700)
Other current assets ......................... 169,205 22,349 -- --
Property and equipment, net of accumulated
depreciation of $29,619...................... 352,397 117,604 -- --
Intangible assets, net of accumulated
amortization of $89,571 ..................... 1,221,494 156,895 17,500 13,700
(4,379)
Other assets ................................. 113,150 3,393 --
---------- -------- ----------- ---------
Total Assets ................................. $1,955,599 $318,271 $ 361,621 $ --
========== ======== =========== =========
Liabilities and Shareholders' Equity:
Current liabilities .......................... $ 306,538 $ 71,681 $ -- $ --
Deferred income taxes ........................ 39,877 3,571 --
Existing senior credit facility .............. 234,000 -- (234,000) --
New senior credit facility ................... -- 196,456 600,000 --
Senior subordinated notes .................... 550,000 -- -- --
Other long-term debt ......................... 17,609 -- -- --
Capital lease obligations .................... 12,574 536 -- --
Deferred purchase consideration .............. 34,030 -- -- --
Other liabilities ............................ 5,005 5,459 --
Minority interest ............................ 7,812 3,096 -- --
Temporary equity--stock subject to
redemption .................................. 19,920 -- -- --
Shareholders' equity:
Class A common stock ........................ 533 10 -- --
Class B common stock ........................ 26 -- -- --
Additional paid-in capital .................. 826,859 37,462 -- --
Deferred compensation ....................... (4,900) -- -- --
Accumulated deficit ......................... (94,284) -- (4,379) --
---------- -------- ----------- ---------
Total shareholders' equity ................... 728,234 37,472 (4,379) --
---------- -------- ----------- ---------
Total Liabilities & Shareholders' Equity ..... $1,955,599 $318,271 $ 361,621 $ --
========== ======== =========== =========
<CAPTION>
PRO FORMA
FOR THE APOLLO
ACQUISITION, THE
PRO FORMA NEW SENIOR
FOR THE THE AUGUST CREDIT FACILITY
APOLLO ACQUISITION 1999 EQUITY AND THE AUGUST
AND THE NEW SENIOR OFFERING 1999 EQUITY
CREDIT FACILITY II OFFERING
--------------------- --------------- ----------------------
<S> <C> <C> <C>
Assets:
Cash and cash equivalents .................... $ 452,183 $338,435 $ 790,618
Other current assets ......................... 191,554 -- 191,554
Property and equipment, net of accumulated
depreciation of $29,619...................... 470,001 -- 470,001
Intangible assets, net of accumulated
amortization of $89,571 ..................... 1,405,210 -- 1,405,210
Other assets ................................. 116,543 -- 116,543
---------- -------- ----------
Total Assets ................................. $2,635,491 $338,435 $2,973,926
========== ======== ==========
Liabilities and Shareholders' Equity:
Current liabilities .......................... $ 378,219 $ -- $ 378,219
Deferred income taxes ........................ 43,448 -- 43,448
Existing senior credit facility .............. -- -- --
New senior credit facility ................... 796,456 -- 796,456
Senior subordinated notes .................... 550,000 -- 550,000
Other long-term debt ......................... 17,609 -- 17,609
Capital lease obligations .................... 13,110 13,110
Deferred purchase consideration .............. 34,030 -- 34,030
Other liabilities ............................ 10,464 -- 10,464
Minority interest ............................ 10,908 -- 10,908
Temporary equity--stock subject to
redemption .................................. 19,920 -- 19,920
Shareholders' equity:
Class A common stock ........................ 543 75 618
Class B common stock ........................ 26 -- 26
Additional paid-in capital .................. 864,321 338,360 1,202,681
Deferred compensation ....................... (4,900) -- (4,900)
Accumulated deficit ......................... (98,663) -- (98,663)
---------- -------- ----------
Total shareholders' equity ................... 761,327 338,435 1,099,762
---------- -------- ----------
Total Liabilities & Shareholders' Equity ..... $2,635,491 $338,435 $2,973,926
========== ======== ==========
</TABLE>
3
<PAGE>
I. PRO FORMA FOR THE APOLLO ACQUISITION AND THE NEW SENIOR CREDIT FACILITY
A. APOLLO ACQUISITION
<TABLE>
<CAPTION>
AS OF JUNE 30, 1999 (IN THOUSANDS)*
----------------------------------------------------------
U.K. TO U.S.
AS GAAP
REPORTED ADJUSTMENTS
-------------------------- -------------------------------
<S> <C> <C>
Assets:
Cash and cash equivalents ..... (pounds sterling)10,462 (pounds sterling) --
Other current assets .......... 12,710 50 (d)
Property and equipment,
net .......................... 79,150 (10,267)(a)
(2,075)(a)
129 (b)
Intangible assets, net ........ -- 3,271 (c)
Other assets .................. 2,116
------
Total Assets .................. (pounds sterling)104,438 (pounds sterling)(8,892)
========================= ============================
Liabilities & Stockholders'
Equity:
Current liabilities ........... (pounds sterling)43,840 (pounds sterling)
Deferred taxes ................ 2,227 --
Senior credit facility ........ -- --
Other long-term debt .......... 26,267
Capital lease obligations ..... 334
Deferred purchase
consideration ................ --
Other liabilities ............. 3,626 (221)(e)
Minority interest ............. 1,931 --
Temporary equity--stock
subject to redemption ........ -- --
Stockholders' equity .......... 26,213 (10,267)(a)
(2,075)(a)
129 (b)
3,271 (c)
50 (d)
221 (e)
------------------------- ----------------------------
Total liabilities &
stockholders' equity ......... (pounds sterling)104,438 (pounds sterling)(8,892)
========================= ============================
<CAPTION>
AS OF JUNE 30, 1999 (IN THOUSANDS)*
-----------------------------------------------------------------------------------------
ADJUSTED BARRY CLAYMAN
FOR U.K. TO CONVERSION CORPORATION PRO FORMA APOLLO
U.S. GAAP TO U.S.$(I) LIMITED(H) ADJUSTMENTS ACQUISITION
-------------------------- ------------- -------------- -------------------- ------------
<S> <C> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ..... (pounds sterling)10,462 $ 16,774 $1,974 $ (718)(g) $ 18,030
Other current assets .......... 12,760 20,458 1,173 718 (g) 22,349
Property and equipment,
net .......................... 66,937 107,320 17 10,267 (f) 117,604
Intangible assets, net ........ 3,271 5,244 -- 151,651 (f) 156,895
Other assets .................. 2,116 3,393 -- -- 3,393
------ -------- ------ ------------ --------
Total Assets .................. (pounds sterling)95,546 $153,189 $3,164 $ 161,918 $318,271
========================= ======== ====== ============ ========
Liabilities & Stockholders'
Equity:
Current liabilities ........... (pounds sterling)43,840 $ 70,288 $1,393 $ 71,681
Deferred taxes ................ 2,227 3,571 -- 3,571
Senior credit facility ........ -- -- -- 196,456 (f) 196,456
Other long-term debt .......... 26,267 42,114 -- (42,114)(f) --
Capital lease obligations ..... 334 536 -- -- 536
Deferred purchase
consideration ................ -- -- -- -- --
Other liabilities ............. 3,405 5,459 -- -- 5,459
Minority interest ............. 1,931 3,096 -- -- 3,096
Temporary equity--stock
subject to redemption ........ -- -- -- -- --
Stockholders' equity .......... 17,542 28,125 1,771 7,576 (f) 37,472
------ -------- ------ ------------ --------
Total liabilities &
stockholders' equity ......... (pounds sterling)95,546 $153,189 $3,164 $ 161,918 $318,271
========================= ======== ====== ============ ========
</TABLE>
- ----------
* As of May 15, 1999
PRO FORMA AND U.K. TO U.S. GAAP ADJUSTMENTS:
(a) To reverse the revaluation of property and equipment allowed under
U.K. GAAP but not permitted under U.S. GAAP and to eliminate the
reserve within equity for negative goodwill. Under U.S. GAAP, the
negative goodwill is allocated to the long-term assets obtained at
the time of the acquisition.
(b) To capitalize interest on capital projects which qualify for
capitalization under U.S. GAAP.
(c) To record the net unamortized goodwill set up by Apollo at the time
it made prior acquisitions.
(d) To record Apollo's short-term investments in marketable securities
under U.S. GAAP.
(e) To reverse the write-off of goodwill during fiscal 1998 resulting
from an earn-out provision related to an acquisition, as the final
amount of the earn-out will not be estimable until the time of
payment.
4
<PAGE>
(f) To reflect the $196.5 million borrowed under the New Senior Credit
Facility to complete the Apollo acquisition, based on the exchange
rate as of September 17, 1999 and the issuance of $37.5 million of
SFX Class A common stock (based on a market price of $38.25 per share
on the acquisition date), including the repayment of $42.1 million of
Apollo's debt and to reflect the excess of the purchase price paid
over the fair value of the net tangible assets acquired.
(g) To properly classify Apollo's investments in productions as other
current assets.
(h) Represents the acquisition of 100% of Barry Clayman Corporation
Limited, a promoter of concert and other live entertainment events
in the U.K.
(i) Converted from pounds sterling to U.S. dollars utilizing the May 15,
1999 exchange rate.
B. NEW SENIOR CREDIT FACILITY
In August 1999, SFX entered into the New Senior Credit Facility which
provides SFX with total borrowing capacity of up to $1.1 billion, comprised of a
$250.0 million multi-draw, multi-currency term loan maturing on December 31,
2005, a $600.0 million single-draw, U.S. dollar loan maturing on June 30, 2006,
and a $250.0 million multi-currency reducing revolver maturing on December 31,
2005. Borrowings under the New Senior Credit Facility are secured by
substantially all the assets of SFX and its domestic subsidiaries (and to the
extent a foreign subsidiary is a borrower, substantially all of the assets of
such foreign subsidiary), including a pledge of the outstanding stock of
substantially all of its subsidiaries and foreign subsidiaries, and is
guaranteed by substantially all of SFX's domestic subsidiaries and, in the event
a foreign subsidiary is a borrower, SFX. A portion of the consideration in the
Apollo acquisition consisted of borrowings under the New Senior Credit Facility
in an amount of $196.5 million. In connection with the consummation of the New
Senior Credit Facility, SFX incurred debt issuance costs of approximately
$17.5 million.
In addition, SFX has $4.4 million in unamortized costs recorded associated
with its prior senior credit facility, which will be written off as an
extraordinary charge in the third quarter of 1999. The write-off is expected to
be $2.7 million (net of taxes of $1.7 million).
C. PRO FORMA ADJUSTMENTS
To reflect costs incurred related to the consent solicitation with respect
to the 9 1/8% senior subordinated notes whereby SFX obtained approval from the
holders to modifications of certain covenants in the indentures governing the
notes. The modifications, among other things, provide SFX with more flexibility
to make investments and acquisitions internationally and permit SFX's foreign
subsidiaries to incur indebtedness, subject to certain limitations. In
connection with the solicitation, SFX paid consenting holders a fee equal to
2.5% of the principal amount of the notes for which consents were received.
II. THE AUGUST 1999 EQUITY OFFERING
The adjustments reflect the approximate gross proceeds from the Company's
August 1999 equity offering of $353.6 million (calculated as 8,625,000 shares of
SFX's Class A common stock at $41.00 per share), net of an underwriting discount
of approximately $13.2 million and approximately $2.0 million of fees and
expenses related to this offering.
5
<PAGE>
SFX ENTERTAINMENT, INC.
SUMMARY OF DEPRECIATION AND AMORTIZATION EXPENSE
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA AMORTIZATION EXPENSE
---------------------------------
GOODWILL AND OTHER PROPERTY AND YEAR ENDED SIX MONTHS ENDED
INTANGIBLE ASSETS, AMORTIZATION EQUIPMENT, DEPRECIATION DECEMBER 31, JUNE 30,
COMPANY/ACTIVITY GROSS PERIOD GROSS PERIOD 1998 1999
- ------------------- -------------------- -------------- -------------- -------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Delsener/Slater $ 23,627 15 years $ 28,310 5-20 years 1,575 788
Meadows 3,282 15 years 27,053 5-39 years 219 110
Sunshine 38,019 15 years 30,545 5-40 years 2,535 1,268
Westbury 5,588 15 years 6,662 5-30 years 373 187
BGP 50,593 15 years 47,481 7 years 3,373 1,687
PACE and Pavilion 196,437 2-15 years 105,887 7-30 years 13,987 6,994
Contemporary 68,940 15 years 25,632 7-30 years 4,596 2,298
Network 72,870 15 years 4,955 7-20 years 4,858 2,429
Concert/Southern 17,110 15 years 847 7 years 1,141 571
USA Motor Sports 11,261 15 years 2,303 -- 751 376
Avalon 22,745 15 years 4,629 7-30 years 1,517 759
Oakdale 12,574 15 years 1,113 7 years 839 420
FAME 126,175 15 years 817 7 years 8,412 4,206
Don Law 65,742 15 years 31,412 7-30 years 4,383 2,192
Magicworks 114,431 15 years 5,802 7 years 7,629 3,815
Other 1998
acquisitions 129,229 10-15 years 1,396 7-30 years 10,634 5,317
Corporate -- 15 years 15,860 3-10 years -- --
Deferred financing
costs 53,736 10 years -- -- -- --
Cellar Door 66,883 15 years 33,614 7-30 years 4,459 2,230
Marquee 132,685 15 years 2,830 7 years 8,846 4,423
Nederlander 59,858 1,640 7-30 years 3,991 1,996
Other 1999
acquisitions 66,101 15 years 3,228 7-30 years 4,407 2,196
Apollo 156,895 15 years 117,604 7-30 years 10,460 5,230
---------- -------- ------ -----
Total $1,494,781 $499,620 $98,985 $49,492
========== ======== ======= =======
<CAPTION>
PRO FORMA
DEPRECIATION AND AMORTIZATION
PRO FORMA DEPRECIATION EXPENSE EXPENSE
--------------------------------- --------------------------------
YEAR ENDED SIX MONTHS ENDED YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, JUNE 30, DECEMBER 31, JUNE 30,
COMPANY/ACTIVITY 1998 1999 1998 1999
- ------------------- -------------- ------------------ -------------- -----------------
<S> <C> <C> <C> <C>
Delsener/Slater 1,829 915 3,404 1,703
Meadows 1,212 606 1,431 716
Sunshine 1,507 754 4,042 2,022
Westbury 291 146 664 333
BGP 2,188 1,094 5,561 2,781
PACE and Pavilion 5,315 2,658 19,302 9,652
Contemporary 1,239 620 5,835 2,918
Network 458 229 5,316 2,658
Concert/Southern 116 58 1,257 629
USA Motor Sports 435 218 1,186 594
Avalon 215 108 1,732 867
Oakdale 201 101 1,040 521
FAME 131 66 8,543 4,272
Don Law 2,146 1,073 6,529 3,265
Magicworks 722 361 8,351 4,176
Other 1998
acquisitions 274 139 10,908 5,456
Corporate 5,154 4,405 5,154 4,405
Deferred financing
costs -- -- -- --
Cellar Door 1,511 749 5,970 2,979
Marquee 566 276 9,412 4,699
Nederlander 68 34 4,059 2,030
Other 1999
acquisitions 170 85 4,577 2,281
Apollo 3,920 1,960 14,380 7,190
----- ----- ------ -----
Total $29,668 $16,655 $128,653 $66,147
======= ======= ======== =======
</TABLE>
- -------------
6
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CERTAIN 1999
ACQUISITIONS AND
SFX 1998 PRO FORMA FOR THE FEBRUARY 1999 APOLLO
(ACTUAL) ACQUISITIONS THE 1998 EQUITY OFFERING ACQUISITION
I II ACQUISITIONS III IV
------------ -------------- --------------- ------------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue ............................ $884,286 $ 247,061 $1,131,347 $204,028 $137,657
Equity income from investments ..... 4,630 1,435 6,065 2,634 1,229
-------- --------- ---------- -------- --------
Total revenue ...................... 888,916 248,496 1,137,412 206,662 138,886
Cost of revenue .................... 678,756 179,592 858,348 142,072 78,453
Selling, general and
administrative expenses ........... 111,748 29,194 140,942 32,135 41,323
Depreciation & amortization,
including integration and
start-up costs .................... 62,197 28,058 90,255 24,018 14,380
Corporate expenses, net of
Triathlon fees .................... 11,194 161 11,355 -- --
Non-recurring charges .............. 5,600 -- 5,600 -- --
Noncash compensation and other
non cash charges .................. 34,051 -- 34,051 389 --
-------- --------- ---------- -------- --------
Operating income (loss) ............ (14,630) 11,491 (3,139) 8,048 4,730
Interest expense ................... (50,759) (21,516) (72,275) (4,107) (14,735)
Other income (expenses) ............ 2,455 (2,310) 145 870 1,457
-------- --------- ---------- -------- --------
Income (loss) before income tax
expense ........................... (62,934) (12,335) (75,269) 4,811 (8,548)
Income tax (expense) benefit ....... (3,000) (280) (3,280) (1,759) (1,077)
-------- --------- ---------- -------- --------
Net income (loss) .................. $(65,934) $ (12,615) $ (78,549) $ 3,052 $(9,625)
========= ========
Accretion on put option ............ (2,750) (3,300) (315)
-------- ---------- --------
Net loss applicable to common
shares ............................ $(68,684) $ (81,849) $ 2,737
======== ========== ========
Net loss per common share .......... $ (1.83) $ (1.83)
======== ==========
Weighted average common
shares outstanding (1) (2) ........ 37,467 45,465
======== ==========
<CAPTION>
PRO FORMA FOR
THE 1998
ACQUISITIONS,
PRO FORMA FOR CERTAIN 1999
THE 1998 ACQUISITIONS,
ACQUISITIONS, THE FEBRUARY 1999
CERTAIN 1999 EQUITY OFFERING,
ACQUISITIONS, THE APOLLO
THE FEBRUARY 1999 ACQUISITION,
EQUITY OFFERING, THE NEW
THE APOLLO SENIOR CREDIT
ACQUISITION FACILITY AND
NEW SENIOR AND THE THE AUGUST THE AUGUST
CREDIT FACILITY NEW SENIOR 1999 EQUITY 1999 EQUITY
V CREDIT FACILITY OFFERING OFFERING
-------------------- ------------------- --------------- ------------------
<S> <C> <C> <C> <C>
Revenue ............................ $ -- $1,473,032 $ -- $1,473,032
Equity income from investments ..... 9,928 -- 9,928
---------- ---------- ----------
Total revenue ...................... -- 1,482,960 1,482,960
Cost of revenue .................... -- 1,078,873 -- 1,078,873
Selling, general and
administrative expenses ........... -- 214,400 -- 214,400
Depreciation & amortization,
including integration and
start-up costs .................... -- 128,653 -- 128,653
Corporate expenses, net of
Triathlon fees .................... -- 11,355 -- 11,355
Non-recurring charges .............. -- 5,600 -- 5,600
Noncash compensation and other
non cash charges .................. -- 34,440 -- 34,440
------------ ---------- ---------- ----------
Operating income (loss) ............ 9,639 -- 9,639
Interest expense ................... (39,132) (a) (130,249) (130,249)
Other income (expenses) ............ 2,472 -- 2,472
---------- ---------- ----------
Income (loss) before income tax
expense ........................... (39,132) (118,138) -- (118,138)
Income tax (expense) benefit ....... -- (6,116) -- (6,116)
------------ ---------- ---------- ----------
Net income (loss) .................. $ (39,132) $ (124,254) $ -- $ (124,254)
============ ==========
Accretion on put option ............ (3,615) (3,615)
---------- ----------
Net loss applicable to common
shares ............................ $ (127,869) $ (127,869)
========== ==========
Net loss per common share .......... $ (2.28) $ (1.98)
========== ==========
Weighted average common
shares outstanding (1) (2) ........ 56,825 65,450
========== ==========
</TABLE>
See footnotes on following pages.
7
<PAGE>
- ----------
(1) Includes 750,000 shares of SFX Class A common stock issued to the PACE
sellers in connection with the fifth year put option and 69,978 shares of
SFX Class A common stock related to the ProServ put options issued by
Marquee. Such shares are not included in calculating the net loss per
common share.
(2) Reconciliation of historical weighted average shares outstanding to
proforma weighted average shares (in thousands):
<TABLE>
<CAPTION>
CLASS A & B
DATE SHARES WEIGHTED AVERAGE
ISSUANCE OF COMMON SHARES ISSUED OUTSTANDING SHARES
- ------------------------------------------------------------------------------ ---------- ------------- -----------------
<S> <C> <C> <C>
Class A common shares outstanding ............................................ 1/1/98 20,369 20,369
Class B common shares outstanding ............................................ 1/1/98 1,570 1,570
Class A common shares issued for Westbury, PACE, BGP, Contemporary,
and Network acquisitions .................................................... 4/27/98 6,226 4,247
Class A common shares issued to employees in connection with the Spin-Off..... 4/27/98 2,300 1,569
Class B common shares issued to employees in connection with the Spin-Off..... 4/27/98 975 665
Class A common shares issued in the 1998 equity offering ..................... 5/5/98 12,075 7,973
Class A common shares issued in the FAME acquisition ......................... 6/4/98 1,500 867
Class A common shares issued for the 1998 Other Acquisitions ................. 7/10/98 450 207
------ ------
Subtotal ..................................................................... 45,465 37,467
======
Class A common shares issued in the Cellar Door acquisition .................. 2/19/99 519
Class A common shares issued in the Marquee acquisition ...................... 3/16/99 2,103
Class A common shares issued in the Other 1999 Acquisitions .................. 2/99 143
Class A common shares issued in the February 1999 equity offering ............ 2/11/99 7,424
Class A common shares issued in connection with the SFX stock option plan..... 6/15/99 31
Class A common shares issued as deferred purchase consideration .............. 3/31/99 160
Class A common shares issued in the Apollo acquisition ....................... 9/17/99 980
------
Subtotal ..................................................................... 56,825
Class A common shares issued in the August 1999 equity offering .............. 8/17/99 8,625
------
Pro forma as adjusted weighted average common shares outstanding ............. 65,450
======
</TABLE>
NOTES TO PRO FORMA STATEMENTS:
I. Represents SFX's actual operating results for the year ended December 31,
1998.
EBITDA for the year ended December 31, 1998, was $47.6 million and $138.3
million for SFX on an actual basis and a pro forma basis, respectively.
EBITDA is defined as earnings before interest, taxes, other income and
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, we believe that the
entertainment industry accepts EBITDA as a generally recognized measure of
performance and that analysts who report publicly on the performance of
entertainment companies use EBITDA. Nevertheless, you should not consider
this measure in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure for
determining SFX's operating performance or liquidity that is calculated in
accordance with GAAP. EBITDA, as we calculate it, may not be comparable to
calculations of similarly titled measures presented by other companies.
Cash flows from operating, investing and financing activities for SFX for
the year ended December 31, 1998, were $27.4 million, ($891.9) million and
$906.5 million, respectively.
We believe there are other adjustments that could affect our operating
performance that are not reflected herein. If we had made such adjustments,
Adjusted EBITDA on a pro forma basis would have been approximately $191.1
million for the year ended December 31, 1998. The adjustments include the
elimination of non-cash compensation and other non-cash charges of $34.4
million, the expected cost savings in connection with the 1998 and 1999
acquisitions associated with the elimination of duplicative staffing and
general and administrative expenses of $8.8 million, net of additional
corporate overhead, personnel and administrative expenses of $500,000
resulting from the 1998 and 1999 acquisitions, a non-recurring charge of
$5.6 million related to certain fees paid to Livent for the Ragtime and
Showboat touring productions and certain related deferred expenses which,
as a result of the Livent bankruptcy, will not be recovered and a one-time
charge of $4.0 million related to the write-off of Apollo's historical
costs related to the Dr. Dolittle production. While management believes
that such cost savings are achievable, SFX's ability to fully achieve such
cost savings is subject to numerous factors, certain of which may be beyond
SFX's control.
8
<PAGE>
II. 1998 ACQUISITIONS
SFX acquired PACE, including USA Motor Sports, and Pavilion, Contemporary,
BGP, Network and Concert/Southern on February 25, 1998, February 27, 1998,
February 24, 1998, February 27, 1998, and March 4, 1998, respectively. In May
1998, SFX acquired Avalon. In June 1998, SFX acquired FAME and Oakdale. In July
1998, SFX acquired Don Law, and in September 1998, SFX acquired Magicworks. In
addition, in the third quarter of 1998 SFX acquired seven other companies
herein defined as the Other Acquisitions. The following represents the
historical operating results of these companies prior to their acquisition by
SFX.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
-------------------------------------------------------------------------------------
PACE & CONCERT/
PAVILION CONTEMPORARY BGP NETWORK SOUTHERN FAME
ACQUISITIONS ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITION
-------------- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ..................... $ 84,199 $7,882 $16,075 $4,154 $ 524 $2,144
Equity income (loss) from
investments ................ (151) -- -- -- (20) --
-------- ------ ------- ------ ------ ------
Total revenue ............... 84,048 7,882 16,075 4,154 504 2,144
Cost of revenue ............. 65,737 6,711 13,509 1,047 276 1,742
Selling, general &
administrative expenses 17,906 1,544 2,652 2,902 362 295
Depreciation &
amortization ............... 1,049 254 213 51 9 27
Corporate expenses .......... -- -- -- -- -- --
-------- ------ ------- ------ ------ ------
Operating income (loss) ..... (644) (627) (299) 154 (143) 80
Interest (expense) .......... (1,148) -- (165) (37) -- (42)
Other income (expenses)...... (19) 122 (67) 14 -- 26
Income (loss) before
income tax expense ......... (1,811) (505) (531) 131 (143) 64
Income tax expense
(benefit) .................. 475 -- -- (3) -- --
-------- ------ ------- -------- ------ ------
Net income (loss) ........... $ (1,336) $ (505) $ (531) $ 128 $ (143) $ 64
======== ====== ======= ======= ====== ======
<CAPTION>
YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
------------------------------------------------------------------------------------------
OTHER PRO FORMA
AVALON OAKDALE DON LAW MAGICWORKS 1998 ADJUSTMENTS
ACQUISITION ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS A
------------- ------------- ------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Revenue ..................... $ 2,270 $5,982 $20,566 $54,547 $48,718 $ --
Equity income (loss) from
investments ................ 370 -- -- 2 958 276 (f)
-------- ------ ------- ------- ------- -----------
Total revenue ............... 2,640 5,982 20,566 54,549 49,676 276
Cost of revenue ............. 2,467 3,427 14,598 46,294 23,784 --
Selling, general &
administrative expenses 1,338 1,535 2,262 5,564 6,512 (13,941)(a)
263 (b)
Depreciation &
amortization ............... 220 28 2,661 -- 191 23,355 (c)
Corporate expenses .......... -- -- -- -- -- 161 (d)
-------- ------ ------- ------- ------- -----------
Operating income (loss) ..... (1,385) 992 1,045 2,691 19,189 (9,562)
Interest (expense) .......... -- -- -- -- (404) (19,720)(e)
Other income (expenses)...... -- -- (9) -- 272 (2,373)(g)
(276)(f)
-----------
Income (loss) before
income tax expense ......... (1,385) 992 1,036 2,691 19,057 (31,931)
Income tax expense
(benefit) .................. -- -- -- (950) -- 198 (h)
-------- ------ -------- ------- ------- -----------
Net income (loss) ........... $ (1,385) $ 992 $1,036 $ 1,741 $19,057 $ (31,733)
======== ====== ======== ======= ======= ===========
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
(IN THOUSANDS)
--------------
PRO FORMA
FOR THE
1998
ACQUISITIONS
-------------
<S> <C>
Revenue ..................... $ 247,061
Equity income (loss) from
investments ................ 1,435
---------
Total revenue ............... 248,496
Cost of revenue ............. 179,592
Selling, general &
administrative expenses 29,194
Depreciation &
amortization ............... 28,058
Corporate expenses .......... 161
---------
Operating income (loss) ..... 11,491
Interest (expense) .......... (21,516)
Other income (expenses)...... (2,310)
Income (loss) before
income tax expense ......... (12,335)
Income tax expense
(benefit) .................. (280)
---------
Net income (loss) ........... $ (12,615)
=========
</TABLE>
9
<PAGE>
- ----------
A. PRO FORMA ADJUSTMENTS:
(a) To reflect the elimination of $11.5 million of PACE's non-cash stock
and other non-recurring compensation, as well as $1.2 million and
$1.3 million of Network's and FAME's excess compensation,
respectively.
(b) Reflects salaries and officers' life insurance premiums to be paid
by SFX.
(c) Reflects the increase of $23.4 million in depreciation and
amortization resulting from the preliminary purchase accounting
treatment of the 1998 Acquisitions. SFX amortizes goodwill and other
intangibles over periods ranging for up to 15 years.
(d) To record incremental corporate overhead, personnel and
administrative expenses that management estimates will be necessary
as a result of SFX's acquisitions.
(e) Reflects the incremental interest expense associated with additional
borrowing related to the 1998 acquisitions.
(f) Reflects the elimination of PACE's equity income in certain
Magicworks tours.
(g) Reflects the elimination of interest income earned from investing
borrowings used to fund acquisitions.
(h) Represents an adjustment to the provision for state and local income
taxes and a Federal tax benefit for interest expense at Magicworks.
The calculation treats all companies to be acquired as "C"
corporations and reflects the impact of non-deductible goodwill.
III. PRO FORMA FOR CERTAIN 1999 ACQUISITIONS AND THE FEBRUARY 1999 EQUITY
OFFERING
<TABLE>
<CAPTION>
MARQUEE
CELLAR DOOR MERGER NEDERLANDER
A B C
(IN THOUSANDS) ------------- ----------- -------------
<S> <C> <C> <C>
Revenue ................................... $85,671 $ 67,807 $26,028
Equity income (loss) from investments ..... 988 -- 2,634
------- -------- -------
Total revenue ............................. 86,659 67,807 28,662
Cost of revenue ........................... 68,318 42,120 22,590
Selling, general & administrative ......... 9,292 15,417 216
Depreciation & amortization ............... 5,969 9,412 4,058
Corporate expenses ........................ -- -- --
Non recurring charges ..................... -- -- --
Non cash charges .......................... -- 389 --
------- -------- -------
Operating income (loss) ................... 3,080 469 1,798
Interest (expense) ........................ -- -- --
Other income (expenses) ................... 60 (231) --
------- -------- -------
Income (loss) before income tax
expense .................................. 3,140 238 1,798
Income tax expense ........................ -- (1,359) --
------- -------- -------
Net income (loss) ......................... $ 3,140 $ (1,121) $ 1,798
======= =======
Accretion on put option ................... (315)
--------
Net income (loss) applicable to common
shares ................................... $ (1,436)
========
<CAPTION>
PRO FORMA
FOR CERTAIN
1999
1999 PRO FORMA ACQUISITIONS AND
OTHER ADJUSTMENTS THE FEBRUARY
D E 1999 EQUITY OFFERING
(IN THOUSANDS) ---------- ------------------- ---------------------
<S> <C> <C> <C>
Revenue ................................... $24,522 $204,028
Equity income (loss) from investments ..... -- $ (988)(b) 2,634
------- ----------- --------
Total revenue ............................. 24,522 (988) 206,662
Cost of revenue ........................... 9,044 -- 142,072
Selling, general & administrative ......... 7,210 -- 32,135
Depreciation & amortization ............... 4,579 -- 24,018
Corporate expenses ........................ -- -- --
Non recurring charges ..................... -- -- --
Non cash charges .......................... -- -- 389
------- ----------- --------
Operating income (loss) ................... 3,689 (988) 8,048
Interest (expense) ........................ -- (4,107)(a) (4,107)
Other income (expenses) ................... 53 988 (b) 870
------- ----------- --------
Income (loss) before income tax
expense .................................. 3,742 (4,107) 4,811
Income tax expense ........................ -- (400)(c) (1,759)
------- ----------- --------
Net income (loss) ......................... $ 3,742 $ (4,507) $ 3,052
======= ===========
Accretion on put option ................... (315)
--------
Net income (loss) applicable to common
shares ................................... $ 2,737
========
</TABLE>
10
<PAGE>
A. CELLAR DOOR
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
-------------------------------------------------
PRO FORMA CELLAR DOOR
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------------ ------------
<S> <C> <C> <C>
Revenue ............................................ $ 86,829 $ (1,158)(a) $85,671
Equity income (loss) from investments .............. 988 -- 988
-------- ---------- -------
Total revenue ...................................... 87,817 (1,158) 86,659
Cost of revenue .................................... 69,657 (1,339)(a) 68,318
Selling, general & administrative expenses ......... 14,514 (84)(a) 9,292
(5,138)(b)
Depreciation & amortization ........................ 2,200 3,769 (c) 5,969
-------- ---------- -------
Operating income ................................... 1,446 1,634 3,080
Interest (expense) ................................. (2,028) 2,028 (d) --
Other income ....................................... 60 -- 60
-------- ---------- -------
Income (loss) before income tax expense ............ (522) 3,662 3,140
Income tax expense ................................. -- -- --
-------- ---------- -------
Net income (loss) .................................. $ (522) $ 3,662 $ 3,140
======== ========== =======
</TABLE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of a Cellar Door entity that was
discontinued.
(b) Reflects the elimination of certain officers' salaries, bonuses and
other management fees which will not be paid under SFX's new
employment and other contracts.
(c) Reflects the increase of $3.8 million in depreciation and
amortization resulting from the preliminary purchase accounting
treatment of Cellar Door. SFX amortizes goodwill over 15 years.
(d) Reflects the elimination of $2.0 million of historical interest
expense related to debt which was not assumed by SFX.
B. MARQUEE
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
---------------------------------------------------------------------
MARQUEE
1998 PRO FORMA MARQUEE
AS REPORTED ACQUISITIONS (1) ADJUSTMENT ACQUISITION
------------- ------------------ ----------------- ------------
<S> <C> <C> <C> <C>
Revenue ............................................... $ 54,429 $13,378 $ -- $ 67,807
Equity income (loss) from investments ................. -- -- -- --
-------- ------- --------- --------
Total revenue ......................................... 54,429 13,378 -- 67,807
Cost of revenue ....................................... 35,069 8,544 (1,493)(a) 42,120
Selling, general & administrative ..................... 13,006 2,826 (415)(b) 15,417
Depreciation & amortization ........................... 2,759 66 6,587 (c) 9,412
Corporate expenses .................................... -- -- -- --
Non cash charges ...................................... 389 -- -- 389
-------- ------- --------- --------
Operating income (loss) ............................... 3,206 1,942 (4,679) 469
Interest (expense) income ............................. (1,194) 17 1,177 (d) --
Other expenses ........................................ (231) -- -- (231)
-------- ------- --------- --------
Income (loss) before income tax expense ............... 1,781 1,959 (3,502) 238
Income tax expense .................................... (900) (161) (298)(e) (1,359)
-------- ------- --------- --------
Net income (loss) ..................................... $ 881 $ 1,798 $ (3,800) $ (1,121)
Accretion on put option ............................... (315) -- -- (315)
-------- ------- --------- --------
Net income (loss) applicable to common shares ......... $ 566 $ 1,798 $ (3,800) $ (1,436)
======== ======= ========= ========
</TABLE>
11
<PAGE>
PRO FORMA ADJUSTMENTS
(1) Marquee acquired Alphabet City, Cambridge, PAL, Tollin/Robbins, and Tony
Stephens during 1998 and included the results of their operations only
from their respective acquisition dates in its consolidated results of
operations for the year ended December 31, 1998. Therefore, for pro forma
purposes, the results of operations of Marquee's 1998 acquisitions for
the period prior to their acquisition dates are presented separately and
are as follows (in thousands):
<TABLE>
<CAPTION>
COMBINED
MARQUEE
ALPHABET TOLLIN/ TONY 1998
CITY CAMBRIDGE PAL ROBBINS STEPHENS ACQUISITIONS
---------- ----------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues .................................. $1,476 $ 691 $2,576 $5,509 $3,126 $13,378
Equity income (loss) from investments ..... -- -- -- -- -- --
------ ----- ------ ------ ------ -------
Total revenue ............................. 1,476 691 2,576 5,509 3,126 13,378
Cost of revenue ........................... 1,186 303 1,966 2,424 2,665 8,544
Selling, general and administrative
expenses ................................. 346 156 906 1,259 159 2,826
Depreciation and amortization ............. 4 2 -- 50 10 66
------ ----- ------ ------ ------ -------
Operating income (loss) ................... (60) 230 (296) 1,776 292 1,942
Interest (expense) income ................. -- 1 8 -- 8 17
------ ----- ------ ------ ------ -------
Other (income) expense ....................
Income/(loss) before income taxes
expense .................................. (60) 231 (288) 1,776 300 1,959
Income taxes (expense) benefit ............ (20) (85) 30 (86) (161)
------ ----- ------ ------ -------
Net income (loss) ......................... $ (80) $ 146 $ (258) $1,776 $ 214 $ 1,798
====== ===== ====== ====== ====== =======
</TABLE>
(a) To adjust expenses to reflect compensation agreements entered into
in connection with Marquee's 1998 acquisitions.
(b) To reduce expenses for loss on transfer of property to former owners
of PAL and other nonrecurring costs.
(c) Reflects the increase of $6.6 million in depreciation and
amortization resulting from the preliminary purchase accounting
treatment of Marquee. SFX amortizes goodwill over 15 years.
(d) Reflects the elimination of $1.2 million of historical interest
expense for debt that was refinanced by SFX.
(e) To record the impact on income taxes of Marquee's 1998 acquisitions.
C. NEDERLANDER
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
--------------------------------------------
PRO FORMA NEDERLANDER
AS REPORTED ADJUSTMENTS ACQUISITION
------------- --------------- ------------
<S> <C> <C> <C>
Revenue ........................................ $26,028 $ -- $26,028
Equity income from investments ................. 2,634 -- 2,634
------- -------- -------
Total revenue .................................. 28,662 -- 28,662
Cost of revenue ................................ 23,566 (976)(a) 22,590
Selling, general & administrative expenses ..... 216 -- 216
Depreciation & amortization .................... 155 3,903 (b) 4,058
Corporate expenses ............................. -- -- --
Non cash charges ............................... -- -- --
------- -------- -------
Operating income (loss) ........................ 4,725 (2,927) 1,798
Interest (expense) income ...................... (113) 113 (c) --
Other income (expenses) ........................ -- -- --
------- -------- -------
Income (loss) before income tax expense ........ 4,612 (2,814) 1,798
Income tax expense ............................. -- -- --
------- -------- -------
Net income (loss) .............................. $ 4,612 $ (2,814) $ 1,798
======= ======== =======
</TABLE>
12
<PAGE>
- ----------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of management fees, booking fees and other
expenses which will not be paid under SFX's contracts.
(b) Reflects the increase of $3.9 million in depreciation and
amortization resulting from the preliminary purchase accounting
treatment of Nederlander. SFX amortizes goodwill over 15 years.
(c) Reflects the elimination of $113,000 of historical interest expense
related to debt which was not assumed by SFX.
D. OTHER 1999 ACQUISITIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
-----------------------------------------------
PRO FORMA
PRO FORMA OTHER 1999
AS REPORTED ADJUSTMENTS ACQUISITIONS
------------- --------------- -------------
<S> <C> <C> <C>
Revenue ............................................ $24,522 $ -- $24,522
Equity income (loss) from investments .............. -- -- --
------- -------- -------
Total revenue ...................................... 24,522 -- 24,522
Cost of revenue .................................... 9,044 -- 9,044
Selling, general & administrative expenses ......... 7,645 (435)(a) 7,210
Depreciation & amortization ........................ 264 4,315 (b) 4,579
Corporate expenses ................................. -- -- --
Non cash charges ................................... -- -- --
------- -------- -------
Operating income (loss) ............................ 7,569 (3,880) 3,689
Interest (expense) income .......................... (11) 11 (c) --
Other income (expenses) ............................ 53 -- 53
------- -------- -------
Income/(loss) before income tax expense ............ 7,611 (3,869) 3,742
Income tax expense (benefit) ....................... -- --
------- -------
Net income (loss) .................................. $ 7,611 $ (3,869) $ 3,742
======= ======== =======
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of legal fees and bonuses incurred as a
result of sale of a business to a third party.
(b) Reflects the increase of $4.3 million in depreciation and
amortization resulting from the preliminary purchase accounting
treatment of the other acquisition.
(c) Reflects the elimination of $11,000 of historical interest expense
related to debt which was not assumed by SFX.
E. PRO FORMA ADJUSTMENTS
(a) Reflects the incremental interest expenses incurred in connection
with the 1999 acquisitions and the February 1999 equity offering.
(b) To reflect the elimination of Cellar Door's equity income in certain
PACE businesses.
(c) Reflects an increase of $400,000 for state and local taxes related
to the Cellar Door and Nederlander acquisitions.
13
<PAGE>
IV. APOLLO ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
------------------------------------------------------
U.K. TO
U.S. GAAP
AS REPORTED ADJUSTMENTS
--------------------------- --------------------------
<S> <C> <C>
Revenue ......................... (pounds sterling)79,343 (pounds sterling)--
Equity income from
investments .................... -- 742 (h)
------ ----
Total revenue ................... 79,343 742
Cost of revenue ................. 46,059 --
Selling, general and
administrative expenses 24,682 --
Depreciation and
amortization ................... 4,525 (251)(a)
250 (b)
Corporate expenses .............. -- --
Non-recurring charges ........... -- --
Non-cash compensation
and other non-cash
charges ........................ -- --
------ ----
Operating income (loss) ......... 4,077 743
Interest (expense) .............. (2,368) --
Equity income from
investments .................... 742 (742)(h)
Other income (expenses) ......... 1,697 (248)(h)
65 (c)
------ ----
Income (loss) before
income tax expenses ............ 4,148 (182)
Income tax expenses ............. (1,936) --
Minority interest ............... (248) 248 (h)
------ ----
Net income (loss) ............... (pounds sterling)1,964 (pounds sterling)66
========================= ==========================
<CAPTION>
YEAR ENDED DECEMBER 31, 1998 (IN THOUSANDS)
----------------------------------------------------------------------------------------
ADJUSTED
FOR BARRY CLAYMAN
U.K. TO CONVERSION TO CORPORATION PRO FORMA APOLLO
U.S. GAAP U.S.$(I) LIMITED(J) ADJUSTMENTS ACQUISITION
-------------------------- --------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue ......................... (pounds sterling)79,343 $131,432 $5,109 $ 1,116(d) $ 137,657
Equity income from
investments .................... 742 1,229 -- -- 1,229
------ -------- ------ ---------- ---------
Total revenue ................... 80,085 132,661 5,109 $ 1,116 138,886
Cost of revenue ................. 46,059 76,297 2,156 -- 78,453
Selling, general and
administrative expenses 24,682 40,883 1,228 (788)(f) 41,323
Depreciation and
amortization ................... 4,524 7,496 -- 6,884 (e) 14,380
Corporate expenses .............. -- -- -- -- --
Non-recurring charges ........... -- -- -- -- --
Non-cash compensation
and other non-cash
charges ........................ -- -- -- -- --
------ -------- ------ ---------- ---------
Operating income (loss) ......... 4,820 7,985 1,725 (4,980) 4,730
Interest (expense) .............. (2,368) (3,923) (1) (10,811)(g) (14,735)
Equity income from
investments .................... -- -- -- -- --
Other income (expenses) ......... 1,514 2,508 65 (1,116)(d) 1,457
------ -------- ------ ---------- ---------
Income (loss) before
income tax expenses ............ 3,966 6,570 1,789 (16,907) (8,548)
Income tax expenses ............. (1,936) (3,207) (583) 2,713 (k) (1,077)
Minority interest ............... -- -- -- -- --
------ -------- ------- ---------- ---------
Net income (loss) ............... (pounds sterling)2,030 $ 3,363 $1,206 $ (14,194) $ (9,625)
======================== ======== ======= ========== =========
</TABLE>
Apollo's statement of operations covers the twelve months ended November 30,
1998. Barry Clayman Corporation Limited's statement of operations covers the
period from May 27, 1998 (Inception) to February 28, 1999.
- ----------
PRO FORMA AND U.K. TO U.S. GAAP ADJUSTMENTS
(a) To reverse excess depreciation taken as a result of Apollo's
revaluation of property not permitted by U.S. GAAP.
(b) To record goodwill amortization for fiscal 1998 in accordance with
U.S. GAAP.
(c) To record Apollo's short-term investments in marketable securities
under U.S. GAAP.
(d) To reclassify rental income from other income into consolidated
revenues .
(e) To reflect the increase in depreciation and amortization resulting
from the preliminary purchase accounting treatment of Apollo.
(f) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under SFX's new employment contracts.
(g) To record the incremental interest expense associated with the
Apollo acquisition.
(h) To reclassify minority interest into other income (expenses) and
equity income from investments into consolidated revenue.
(i) Converted from pounds sterling to U.S. dollars utilizing the monthly
average exchange rate for the twelve month period ended November 30,
1998.
(j) Represents the acquisition of 100% of Barry Clayman Corporation
Limited, a promoter of concerts and other live entertainment events
throughout the U.K.
(k) Represents U.K. tax effect of the pro-forma adjustments with the
exception of additional amortization for goodwill.
V. NEW SENIOR CREDIT FACILITY
(a) To reflect the incremental interest expense incurred in connection
with the New Senior Credit Facility.
14
<PAGE>
SFX ENTERTAINMENT, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
CERTAIN 1999 PRO FORMA FOR
ACQUISITIONS CERTAIN 1999
AND THE ACQUISITIONS
FEBRUARY 1999 AND THE
SFX EQUITY FEBRUARY 1999 APOLLO
(ACTUAL) OFFERING EQUITY ACQUISITION
I II OFFERING III
------------ --------------- --------------- -------------
<S> <C> <C> <C> <C>
Revenue ........................... 679,900 $13,619 $ 693,519 $ 65,385
Equity income (loss) from
investments ...................... 3,906 49 3,955 488
------- ------- --------- --------
Total revenue ..................... 683,806 13,668 697,474 65,873
Cost of revenue ................... 509,158 9,935 519,093 27,569
Selling, general and
administrative expenses .......... 91,916 4,419 96,335 26,293
Depreciation & amortization,
including integration and
start-up costs ................... 59,156 (199) 58,957 7,190
Corporate expenses, net of
Triathlon fees ................... 9,772 -- 9,772 --
Non-recurring charges ............. -- -- -- --
Noncash compensation and other
non cash charges ................. 2,147 -- 2,147 --
------- ------- --------- --------
Operating income (loss) ........... 11,657 (487) 11,170 4,821
Interest (expense) ................ (38,809) 617 (38,192) (7,367)
Other income (loss) ............... 1,094 -- 1,094 (453)
------- ------- --------- --------
Income (loss) before income tax
expense .......................... (26,058) 130 (25,928) (2,999)
Income tax (expense) benefit ...... (1,619) (59) (1,678) (1,033)
------- ------- --------- --------
Net income (loss) ................. $ (27,677) 71 $ (27,606) $ (4,032)
========
Accretion on put option ........... (1,737) (87) (1,824)
--------- ------- ---------
Net loss applicable to common
shares ........................... $ (29,414) $ (16) $ (29,430)
========= ======= =========
Net loss per common share ......... $ 0.55 $ (0.53)
========= =========
Weighted average common
shares outstanding (1) (2) ....... 53,121 55,845
========= =========
<CAPTION>
PRO FORMA FOR
PRO FORMA CERTAIN 1999
FOR CERTAIN ACQUISITIONS,
1999 THE FEBRUARY
ACQUISITIONS, 1999 EQUITY
THE FEBRUARY 1999 OFFERING,
EQUITY THE APOLLO
OFFERING, ACQUISITION,
THE APOLLO THE NEW SENIOR
NEW SENIOR ACQUISITION CREDIT FACILITY
CREDIT AND THE THE AUGUST AND THE AUGUST
FACILITY NEW SENIOR 1999 EQUITY 1999 EQUITY
IV CREDIT FACILITY OFFERING OFFERING
------------------ ------------------- ---------- ----------------
<S> <C> <C> <C> <C>
Revenue ........................... $ -- $ 758,904 $-- $ 758,904
Equity income (loss) from
investments ...................... -- 4,443 -- 4,443
----------- --------- --- ---------
Total revenue ..................... 763,347 763,347
Cost of revenue ................... -- 546,662 -- 546,662
Selling, general and
administrative expenses .......... -- 122,628 -- 122,628
Depreciation & amortization,
including integration and
start-up costs ................... -- 66,147 -- 66,147
Corporate expenses, net of
Triathlon fees ................... -- 9,772 -- 9,772
Non-recurring charges ............. -- -- -- --
Noncash compensation and other
non cash charges ................. -- 2,147 -- 2,147
----------- --------- --- ---------
Operating income (loss) ........... 15,991 -- 15,991
Interest (expense) ................ (19,566)(a) (65,125) (65,125)
Other income (loss) ............... -- 641 -- 641
----------- --------- --- ---------
Income (loss) before income tax
expense .......................... (19,566) (48,943) -- (48,943)
Income tax (expense) benefit ...... 4,534 (b) 1,823 1,823
----------- --------- ---------
Net income (loss) ................. $ (15,032) $ (46,670) $-- $ (46,670)
=========== ===
Accretion on put option ........... (1,824) (1,824)
--------- ---------
Net loss applicable to common
shares ........................... $ (48,494) $ (48,494)
========= =========
Net loss per common share ......... $ (0.87) $ (0.75)
========= =========
Weighted average common
shares outstanding (1) (2) ....... 56,825 65,450
========= =========
</TABLE>
See footnotes on following page.
15
<PAGE>
- ----------
(1) Includes 750,000 shares of SFX Class A common stock issued to the PACE
sellers in connection with the fifth year put option and 69,978 shares of
SFX Class A common stock related to the ProServ put options issued by
Marquee. Such shares are not included in calculating the net loss per
common share.
(2) Reconciliation of historical weighted average shares outstanding to
proforma weighted average shares (in thousands):
<TABLE>
<CAPTION>
CLASS A & B
DATE SHARES WEIGHTED AVERAGE
ISSUANCE OF COMMON SHARES ISSUED OUTSTANDING SHARES
- --------------------------------------------------------------------------- ---------- ------------- -----------------
<S> <C> <C> <C>
Class A common shares outstanding ......................................... 1/1/99 42,920 42,920
Class B common shares outstanding ......................................... 1/1/99 2,545 2,545
Class A common shares issued in the Cellar Door acquisition ............... 2/19/99 519 378
Class A common shares issued in the Marquee acquisition ................... 3/16/99 2,103 1,215
Class A common shares issued in the Other 1999 Acquisitions ............... 2/99 143 123
Class A common shares issued in the February 1999 equity offering ......... 2/11/99 7,424 5,859
Class A common shares issued as deferred purchase consideration ........... 3/31/99 160 80
Class A common shares issued in connection with the SFX option plan ....... 6/15/99 31 1
------ ------
Subtotal .................................................................. 55,845 53,121
======
Class A common shares issued in the Apollo acquisition .................... 9/17/99 980
------
Subtotal .................................................................. 56,825
Class A common shares issued in the August 1999 equity offering ........... 8/17/99 8,625
------
Pro forma as adjusted weighted average common shares outstanding .......... 65,450
======
</TABLE>
NOTES TO PRO FORMA STATEMENTS:
I. Represents SFX's actual operating results for the six months ended June 30,
1999.
EBITDA for the six months ended June 30, 1999, was $70.8 million and $82.1
million for SFX on an actual basis and a pro forma basis, respectively.
EBITDA is defined as earnings before interest, taxes, other income and
depreciation and amortization. Although EBITDA is not a measure of
performance calculated in accordance with GAAP, we believe that the
entertainment industry accepts EBITDA as a generally recognized measure of
performance and that analysts who report publicly on the performance of
entertainment companies use EBITDA. Nevertheless, you should not consider
this measure in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure for
determining SFX's operating performance or liquidity that is calculated in
accordance with GAAP. EBITDA, as we calculate it, may not be comparable to
calculations of similarly titled measures presented by other companies.
Cash flows from operating, investing and financing activities for SFX for
the six months ended June 30, 1999, were $94.4 million, ($335.5) million
and $292.5 million, respectively.
We believe there are other adjustments that could affect our operating
performance that are not reflected herein. If we had made such adjustments,
Adjusted EBITDA on a pro forma basis would have been approximately $85.7
million for the six months ended June 30, 1999. The adjustments include the
elimination of non-cash compensation and other non-cash charges of $2.1
million, and the expected cost savings in connection with the 1998 and 1999
Acquisitions associated with the elimination of duplicative staffing and
general and administrative expenses of $1.4 million. While management
believes that such cost saving are achievable, SFX's ability to fully
achieve such cost savings is subject to numerous factors, certain of which
may be beyond SFX's control.
16
<PAGE>
II. 1999 ACQUISITIONS
SFX acquired ISI, Nederlander and Marquee on February 18, 1999, March 16,
1999 and March 16, 1999, respectively. The following represents the historical
operating results of these companies prior to their acquisition by SFX.
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999 (IN THOUSANDS)
-------------------------------------------------------------------------
PRO FORMA
PRO FORMA FOR CERTAIN
ISI NEDERLANDER MARQUEE ADJUSTMENTS 1999
ACQUISITION ACQUISITION ACQUISITION A ACQUISITIONS
------------- ------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Revenue ............................................ $1,090 $ 893 $ 11,636 $ -- $13,619
Equity (income) loss from investments .............. -- 49 -- 49
------ ----- -------- -------
Total revenue ...................................... $1,090 $ 942 $ 11,636 $ -- 13,668
Cost of revenue .................................... 794 441 8,700 -- 9,935
Selling, general & administrative expenses ......... 884 926 2,609 -- 4,419
Depreciation & amortization ........................ 13 88 1,089 (1,389)(a) (199)
Corporate expenses ................................. -- -- -- -- --
------ ----- -------- --------- -------
Operating income (loss) ............................ (601) (513) (762) 1,389 (487)
Interest (expense) income .......................... (2) (80) (665) 1,364 (b) 617
Other income (expenses) ............................ -- -- -- -- --
------- ----- -------- --------- -------
Income (loss) before income tax expense ............ (603) (593) (1,427) 2,753 130
Income tax (expense) benefit ....................... -- (1) (58) -- (59)
------- -------- -------- --------- -------
Net income (loss) .................................. $(603) $(594) $ (1,485) $ 2,753 $ 71
======= ======= =========
Accretion on put option ............................ (87) (87)
-------- -------
Net income applicable to common shares ............. $ (1,572) $ (16)
======== =======
</TABLE>
- ----------
A. PRO FORMA ADJUSTMENTS:
(a) Reflects the decrease of $1.4 million in depreciation and
amortization resulting from the preliminary purchase price
accounting treatment of the 1999 acquisitions. SFX amortizes
goodwill and other intangibles over periods ranging for up to 15
years.
(b) Reflects incremental interest expense associated with additional
borrowing related to the 1999 acquisitions.
17
<PAGE>
III. APOLLO ACQUISITION
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
-------------------------------------------------------
U.K. TO U.S.
AS GAAP
REPORTED ADJUSTMENTS
--------------------------- ---------------------------
<S> <C> <C>
Revenue ............................ (pounds sterling)36,583 (pounds sterling) --
Equity income from investments...... -- 299 (h)
------ ----
Total revenue ...................... 36,583 299
Cost of revenue .................... 15,001
Selling, general and
administrative expenses ........... 16,127
Depreciation and amortization ...... 2,301 (123)(a)
129 (b)
Corporate expenses ................. -- --
Non-recurring changes .............. -- --
Non-cash compensation and
other non-cash changes ............ -- --
------ ----
Operating income (loss) ............ 3,154 293
Equity income from investments ..... 299 (299)(h)
Interest (expense) ................. (1,016) --
Other income (expenses) ............ 405 50 (j)
(441)(h)
------ ----
Income (loss) before income tax
expense ........................... 2,842 (397)
Income tax (expense) benefit ....... (1,171) --
Minority interest .................. (441) 441 (h)
------ ----
Net income (loss) .................. (pounds sterling)1,230 (pounds sterling)44
========================= ===========================
<CAPTION>
SIX MONTHS ENDED JUNE 30, 1999
(IN THOUSANDS)
--------------------------------------------------------------------------------------
ADJUSTED
FOR U.K. BARRY CLAYMAN
TO U.S. CONVERSION CORPORATION PRO FORMA APOLLO
GAAP TO U.S.$(I) LIMITED(K) ADJUSTMENTS ACQUISITION
-------------------------- ------------- -------------- ----------------- ------------
<S> <C> <C> <C> <C> <C>
Revenue ............................(pounds sterling)36,583 $ 59,733 5,131 $ 521(c) $ 65,385
Equity income from investments...... 299 488 -- -- 488
------ -------- ----- ---------- --------
Total revenue ...................... 36,882 60,221 5,131 521 65,873
Cost of revenue .................... 15,001 24,494 3,075 27,569
Selling, general and
administrative expenses ........... 16,127 26,332 349 (388)(e) 26,293
Depreciation and amortization ...... 2,307 3,767 -- 3,423 (d) 7,190
Corporate expenses ................. -- -- -- -- --
Non-recurring changes .............. -- -- -- -- --
Non-cash compensation and
other non-cash changes ............ -- -- -- -- --
------ -------- ----- ---------- --------
Operating income (loss) ............ 3,447 5,628 1,707 (2,514) 4,821
Equity income from investments ..... -- -- -- -- --
Interest (expense) ................. (1,016) (1,659) (12) (5,696)(f) (7,367)
Other income (expenses) ............ 14 23 45 (521)(c) (453)
------ -------- ----- ---------- --------
Income (loss) before income tax
expense ........................... 2,445 3,992 1,740 (8,731) (2,999)
Income tax (expense) benefit ....... (1,171) (1,912) (567) 1,446 (g) (1,033)
Minority interest .................. -- -- -- -- --
------ -------- ----- ---------- --------
Net income (loss) .................. (pounds sterling)1,274 $ 2,080 $1,173 $ (7,285) $ (4,032)
======================== ======== ====== ========== ========
</TABLE>
Apollo's statement of operations covers the six month period ended May 15,
1999. Barry Clayman Corporation Limited's statement of operations covers the
four months ended June 30, 1999.
- ----------
PRO FORMA AND U.K. TO U.S. GAAP ADJUSTMENTS
(a) To reverse excess depreciation taken as a result of Apollo's
revaluation of property and equipment not permitted by U.S. GAAP.
(b) To record goodwill amortization for fiscal 1998 in accordance with
U.S. GAAP.
(c) To reclassify rental income from other income into consolidated
revenues.
(d) To reflect the increase in depreciation and amortization resulting
from the preliminary purchase accounting treatment of Apollo.
(e) Reflects the elimination of certain officers' salaries and bonuses
which will not be paid under SFX's new employment contracts.
(f) To record the incremental interest expense associated with the
Apollo acquisition.
(g) Represents U.K. tax effect of the pro forma adjustments with the
exception of additional amortization for goodwill.
(h) To reclassify equity income from investments into consolidated
revenue and minority interest into other income (expenses).
(i) Converted from pounds sterling to U.S. dollars utilizing the monthly
average exchange rate for the six months ended May 31, 1999.
(j) To record Apollo's short-term investments in marketable securities
under U.S. GAAP.
(k) Represents the acquisition of 100% of Barry Clayman Corporation
Limited, a promoter of concert and other live entertainment events
in the U.K.
IV. NEW SENIOR CREDIT FACILITY
(a) To reflect the incremental interest expense incurred in connection
with the New Senior Credit Facility.
(b) To record the incremental benefit for the pro forma adjustment based
on the U.S. effective tax rate.
18
