<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 30, 1998
SFX BROADCASTING, INC.
(Exact name of registrant as specified in charter)
Delaware 0-22486 13-3649750
- ------------------------------- --------------------- -----------------------
(State or Other Jurisdiction of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
650 Madison Avenue, New York, New York 10022
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 407-9191
N/A
- -------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
Attached hereto are selected consolidated financial data and
the pro forma financial statements of SFX Broadcasting, Inc. (the "Company")
and the selected consolidated financial data of SFX Entertainment, Inc. The pro
forma financial statements of the Company supersede the pro forma financial
statements filed as part of the Definitive Information Statement of the Company
filed on Schedule 14C on January 28, 1998 and the Supplements to the Consent
Solicitation Statements of the Company filed as Exhibits 99.1 and 99.2 to the
Current Report on Form 8-K of the Company filed on January 29, 1998.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereto duly authorized.
SFX BROADCASTING, INC.
By: /s/ Howard J. Tytel
--------------------------------
Name: Howard J. Tytel
Title: Executive President
Date: January 30, 1998
3
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA OF SFX ENTERTAINMENT
(in thousands, except per share amounts)
The Summary Consolidated Financial Data of SFX Entertainment includes the
historical financial statements of Delsener/Slater and affiliated companies,
the predecessor of SFX Entertainment, for each of the five years ended
December 31, 1996 and the nine months ended September 30, 1996, and the
historical financial statements of SFX Entertainment for the nine months
ended September 30, 1997. The statement of operations data with respect to
Delsener/Slater for the years ended December 31, 1992 and 1993, and the
balance sheet data as of December 31, 1993 and 1994 is unaudited. The
financial information presented below should be read in conjunction with the
information set forth in "Unaudited Pro Forma Condensed Combined Financial
Statements" and the notes thereto and the historical financial statements and
the notes of SFX Entertainment, the Recent Acquisitions and the Pending
Acquisitions included herein. The financial information has been derived from
the audited and unaudited financial statements of SFX Entertainment, the
Recent Acquisitions and the Pending Acquisitions. The pro forma summary data
as of September 30, 1997 and for the year ended December 31, 1996 and the
nine months ended September 30, 1997 are derived from the unaudited pro forma
condensed combined financial statements which, in the opinion of management,
reflect all adjustments necessary for a fair presentation of the transactions
for which such pro forma financial information is given. Operating results
for the nine months ended September 30, 1997 are not necessarily indicative
of the results that may be achieved for the fiscal year ending December 31,
1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------- -----------
PREDECESSOR (ACTUAL) 1996 (1)
---------------------------------------------------- PRO FORMA
1992 1993 1994 1995 1996 (UNAUDITED)
--------- --------- --------- --------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $38,017 $46,526 $92,785 $47,566 $50,362 $552,365
Operating expenses .... 36,631 45,635 90,598 47,178 50,687 505,537
Depreciation &
amortization.......... 758 762 755 750 747 37,795
Corporate
expenses (2).......... -- -- -- -- -- 3,000
--------- --------- --------- --------- --------- -----------
Operating income
(loss)................ 628 129 1,432 (362) (1,072) 6,033
Interest expense....... (171) (148) (144) (144) (60) (43,000)
Other income, net .... 74 85 138 178 198 1,832
Equity income (loss)
from investments ..... -- -- (9) 488 525 3,402
--------- --------- --------- --------- --------- -----------
Income (loss) before
income taxes.......... 531 66 1,417 160 (409) (31,733)
Income tax (provision)
benefit............... (32) (57) (5) (13) (106) (1,500)
--------- --------- --------- --------- --------- -----------
Net income (loss)...... $ 499 $ 9 $ 1,412 $ 147 $ (515) (33,233)
========= ========= ========= ========= ========= ==========
Accretion on temporary
equity (7)............ (3,300)
Net loss applicable to -----------
common shares ........ $(36,533)
Net loss ===========
per common share...... $ (1.79)
Weighted average ===========
common shares
outstanding (9)....... 20,400
OTHER OPERATING DATA: ===========
EBITDA (3)............. $ -- $ -- $ 2,187 $ 388 $ (325) $ 43,828
========= ========= ========= ========= ========= ===========
Cash flow from:
Operating activities . $ -- $ -- $ 2,959 $ (453) $ 4,214 $ --
Investing activities . -- -- 0 0 (435) --
Financing activities . -- -- (477) (216) (1,431) --
Ratio of earnings to
fixed charges (4)..... 4.1x 1.4x 10.8x 5.5x 2.9x --
</TABLE>
1
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
--------------------------------------
PREDECESSOR
-------------
1996 1997 (1)
ACTUAL 1997 PRO FORMA
(UNAUDITED) ACTUAL (UNAUDITED)
------------- ---------- -----------
<S> <C> <C> <C>
STATEMENT OF
OPERATIONS DATA:
Revenue................ $41,609 $74,396 $500,843
Operating expenses .... 42,930 63,045 440,266
Depreciation &
amortization.......... 744 4,041 28,378
Corporate
expenses (2).......... -- 1,307 2,807
------------- ---------- -----------
Operating income
(loss)................ (2,065) 6,003 29,392
Interest expense....... (60) (956) (32,206)
Other income, net .... 143 213 779
Equity income (loss)
from investments ..... 525 1,344 5,653
------------- ---------- -----------
Income (loss) before
income taxes.......... (1,457) 6,604 3,618
Income tax (provision)
benefit............... (80) (2,952) (3,500)
------------- ---------- -----------
Net income (loss)...... $(1,537) $ 3,652 118
============= ========== ==========
Accretion on temporary
equity (7)............ (2,475)
-----------
Net loss applicable to
common shares ........ $ (2,357)
===========
Net loss
per common share...... $ (0.12)
===========
Weighted average
common shares
outstanding (9)....... 20,400
===========
OTHER OPERATING DATA:
EBITDA (3)............. $ 1,321 $10,044 $ 57,770
Cash flow from:
Operating activities . $ 2,761 $ 789 $ --
Investing activities . 0 (71,997) --
Financing activities . 684 78,302 --
Ratio of earnings to
fixed charges (4)..... -- 9.3x 1.3x
</TABLE>
2
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA OF SFX ENTERTAINMENT
(in thousands)
BALANCE SHEET DATA(5):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------------
PREDECESSOR (ACTUAL)
-------------------------------------
1993 1994 1995 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Current assets............ $1,823 $4,453 $3,022 $6,191
Property and equipment,
net...................... 4,484 3,728 2,978 2,231
Intangible assets, net ... -- -- -- --
Total assets.............. 6,420 8,222 6,037 8,879
Current liabilities....... 4,356 3,423 3,138 7,973
Long-term debt, including
current portion.......... -- 1,830 -- --
Temporary equity(7)....... -- -- -- --
Stockholders' equity ..... 6,420 2,969 2,900 907
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-----------------------
PRO FORMA
ACTUAL (UNAUDITED)(6)
---------- --------------
<S> <C> <C>
Current assets............ $ 12,189 $117,326
Property and equipment,
net...................... 55,882 185,371
Intangible assets, net ... 59,721 427,566
Total assets.............. 135,470 772,114
Current liabilities....... 11,333 89,619
Long-term debt, including
current portion.......... 16,453 497,322
Temporary equity(7)....... -- 16,500
Stockholders' equity ..... 101,378 143,223(8)
</TABLE>
- ------------
(1) The Unaudited Pro Forma Statement of Operations Data for the year ended
December 31, 1996 and the nine months ended September 30, 1997 are
presented as if SFX Entertainment had completed the Recent
Acquisitions, the Financing, the Pending Acquisitions, the Spin-Off and
the Broadcasting Merger as of January 1, 1996. There can be no
assurance that any of the Financing, the Pending Acquisitions, the
Spin-Off and the Broadcasting Merger will be consummated on the terms
assumed in preparing such pro forma data or at all. See "Risk
Factors--Company-Specific Risks--Pending Acquisitions."
(2) Pro forma corporate expenses are reduced by $3,000,000 and $1,693,000
for fees earned from Triathlon Broadcasting Company ("Triathlon") for
the year ended December 31, 1996 and for the nine months ended
September 30, 1997, respectively. The right to receive such fees in the
future is to be assigned to SFX Entertainment by SFX in connection with
the Spin-Off. Future fees may vary, above the minimum fee of $500,000,
depending upon the level of acquisition and financing activities of
Triathlon. See "Certain Relationships and Related
Transactions--Triathlon Fees."
3
<PAGE>
(3) "EBITDA" is defined as earnings before interest, taxes, other income,
net, equity income (loss) from investments and depreciation and
amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principals
("GAAP"), SFX Entertainment believes that EBITDA is accepted by the
entertainment industry as a generally recognized measure of performance
and is used by analysts who report publicly on the performance of
entertainment companies. Nevertheless, this measure should not be
considered in isolation or as a substitute for operating income, net
income, net cash provided by operating activities or any other measure
for determining SFX Entertainment's operating performance or liquidity
which is calculated in accordance with GAAP.
There are other adjustments that could effect EBITDA but have not been
reflected herein. Had such adjustments been made, EBITDA as so adjusted
("Adjusted EBITDA") on a pro forma basis would have been approximately
$58,200,000 for the year ended December 31, 1996 and $67,300,000 for
the nine months ended September 30, 1997. These adjustments include the
elimination of non-recurring charges including a litigation settlement
recovered by PACE and Pavilion of $6,000,000 and $0, expected cost
savings in connection with the Pending Acquisitions associated with the
elimination of duplicative staffing and general and administrative
expenses of $5,000,000 and $3,800,000 and include SFX Entertainment's
pro rata share of equity income from investments of $3,400,000 and
$5,700,000, for the year ended December 31, 1996 and the nine months
ended September 30, 1997, respectively.
While management believes that such cost savings and the elimination of
non-recurring expenses are achievable, SFX Entertainment's ability to
fully achieve such cost savings and to eliminate the non-recurring
expenses is subject to numerous factors certain of which may be beyond
SFX Entertainment's control.
(4) For purposes of computing the ratio of earnings to fixed charges,
"earnings" consists of earnings before income taxes and fixed charges.
"Fixed charges" consists of interest on all indebtedness. Earnings were
insufficient to cover fixed charges by $932,000 for the nine months
ended September 30, 1996 and $28,311,000 on a pro forma basis for the
year ended December 31, 1996.
(5) The required 1992 balance sheet data for Delsener/Slater has not been
included herein due to the difficulty in accumulating a verifiable
balance sheet as of that date coupled with management's belief that
such information would not be of use to a potential investor. The
difficulties in accumulating a verifiable balance sheet are due to the
fact that Delsener/Slater was not audited at the time, included a
number of companies with different year ends, and significant attention
was not paid to GAAP financial reporting as they were private entities.
The lack of usefulness of the information is due to (i) the fact that
Delsener/Slater is the predecessor and therefore its accounts have been
adjusted to a new basis upon acquisition; (ii) the balance sheet is
principally comprised of cash, leasehold improvements and accruals for
bonuses to the prior owners and would not include the operating lease
for the Jones Beach Amphitheater, which management believes is
Delsener/Slater's most significant operating agreement; and (iii) very
little is on the balance sheet of Delsener/Slater as of December 31 in
any year as the concert business is seasonal with most concerts in the
summer and the promotion business does not require large amounts of
capital investment.
(6) The Unaudited Pro Forma Balance Sheet Data at September 30, 1997 is
presented as if SFX Entertainment had completed the Financing, the
Pending Acquisitions, the Spin-Off and the Broadcasting Merger as of
September 30, 1997.
(7) The PACE Agreement provides that each PACE Seller (as defined) shall
have an option (a "Fifth Year Put Option"), exercisable during a period
beginning on the fifth anniversary of the closing of the PACE
Acquisition and ending 90 days thereafter, to require SFX Entertainment
to purchase up to one-third of SFX Entertainment's Class A Common Stock
received by such PACE Seller (representing 500,000 shares in the
aggregate) for a cash purchase price of $33.00 per share. With certain
limited exceptions, the Fifth Year Put Option rights are not assignable
by the PACE Sellers. The maximum amount payable under all Fifth Year
Put Options ($16,500,000) has been presented as temporary equity on the
pro forma balance sheet.
(8) Retained earnings on a pro forma basis for the Financing, the Pending
Acquisitions, the Spin-Off and the Broadcasting Merger have not been
adjusted for future charges to earnings which will result from the
issuance of stock and options granted to certain executive officers and
other employees of SFX Entertainment. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity
and Capital Resources--Future Charges to Earnings."
(9) 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.
4
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
The Summary Consolidated Financial Data of the Company includes the
historical financial statements of Capstar Communications, Inc., a predecessor
of the Company ("Capstar"), and the historical financial statements of the
Company since its formation on February 26, 1992. The financial information
presented below should be read in conjunction with the information set forth in
"Unaudited Pro Forma Condensed Combined Financial Statements" and the notes
thereto and the financial statements and the notes of the Company incorporated
by reference in this Proxy Statement. The financial information has been
derived from the audited and unaudited financial statements of the Company and
the entities acquired or to be acquired by the Company since January 1, 1996.
The pro forma summary data as of September 30, 1997 and for the year ended
December 31, 1996 and the nine months ended September 30, 1997 are derived from
the unaudited pro forma condensed combined financial statements which, in the
opinion of the management, reflect all adjustments necessary for a fair
presentation of the transactions for which such pro forma financial information
is given. Operating results for the nine months ended September 30, 1997, are
not necessarily indicative of the results that may be achieved for the fiscal
year ending December 31, 1997. The historical consolidated financial results
for SFX are not comparable from year to year because of the acquisition and
disposition of various business operations during the periods covered.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------
PRO FORMA
FOR THE
COMPLETED PRO FORMA
AND PENDING FOR THE
TRANSACTIONS(8) SPIN-OFF(9)
(UNAUDITED) (UNAUDITED)
1992 1993 1994 1995 1996 1996 1996
-------- --------- ------- -------- --------- -------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCASTING REVENUE........................ $15,003 $ 34,233 $55,556 $ 76,830 $ 143,061 $ 272,694 $272,694
CONCERT PROMOTION REVENUE....................... -- -- -- -- -- 552,365 --
STATION AND OTHER OPERATING EXPENSES............ 9,624 21,555 33,956 51,039 92,816 184,267 184,267
CONCERT PROMOTION OPERATING EXPENSES............ -- -- -- -- -- 505,537 --
DEPRECIATION, AMORTIZATION, DUOPOLY INTEGRATION
COSTS AND ACQUISITION RELATED COSTS(1) ........ 3,208 4,475 5,873 9,137 17,311 85,451 47,656
CORPORATE EXPENSES.............................. 769 1,808 2,964 3,797 6,313 8,000 5,000
NON-RECURRING CHARGES INCLUDING ADJUSTMENTS TO
BROADCAST RIGHTS AGREEMENT(2)(3)(4)(5) ........ -- 13,980 -- 5,000 28,994 25,662 25,662
-------- --------- ------- -------- --------- -------------- ---------
OPERATING INCOME (LOSS)......................... 1,402 (7,585) 12,763 7,857 (2,373) 16,142 10,109
INVESTMENT AND OTHER (INCOME) LOSS/NET ......... -- (17) 121 (650) (2,117) (4,588) (2,756)
EQUITY (INCOME) LOSS FROM INVESTMENTS ......... -- -- -- -- -- (3,402) --
INTEREST EXPENSE, INCLUDING AMORTIZATION OF
DEFERRED FINANCING COSTS....................... 3,610 7,351 9,332 12,903 34,897 113,937 70,937
-------- --------- ------- -------- --------- -------------- ---------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE................. (2,208) (14,919) 3,310 (4,396) (35,153) (89,805) (58,072)
INCOME TAX EXPENSE (BENEFIT).................... -- 1,015 1,474 -- 480 3,500 2,000
EXTRAORDINARY LOSS ON DEBT RETIREMENT........... -- 1,665 -- -- 15,219 -- --
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE...................................... -- 182 -- -- -- -- --
-------- --------- ------- -------- --------- -------------- ---------
NET INCOME (LOSS)............................... (2,208) (17,781) 1,836 (4,396) (50,852) (93,305) (60,072)
REDEEMABLE PREFERRED STOCK DIVIDENDS AND
ACCRETION(6)................................... 385 557 348 291 6,061 41,424 38,124
-------- --------- ------- -------- --------- -------------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK ... $(2,593) $(18,338) $ 1,488 $ (4,687)$ (56,913) $(134,729) $(98,196)
======== ========= ======= ======== ========= ============== =========
NET INCOME (LOSS) PER SHARE..................... $ (2.20) $ (7.08) $ 0.26 $ (0.71)$ (7.52) $ (8.51) $ (6.20)
======== ========= ======= ======== ========= ============== =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..... 1,179 2,589 5,792 6,596 7,564 15,840 15,840
OTHER OPERATING DATA: (7)
BROADCAST CASH FLOW............................. $ 5,379 $ 12,678 $21,600 $ 25,791 $ 50,245 $ 88,427 $ 88,427
CONCERT CASH FLOW............................... -- -- -- -- -- 46,828 --
EBITDA.......................................... 4,610 10,870 18,636 21,994 43,932 127,255 83,427
CASH FLOW FROM:
OPERATING ACTIVITIES............................ 1,171 76 1,174 499 (13,447) -- --
INVESTING ACTIVITIES............................ (115) (47,221) (6,184) (25,697) (470,513) -- --
FINANCING ACTIVITIES............................ (495) 66,122 (2,083) 33,897 502,668 -- --
5
<PAGE>
<CAPTION>
[TABLE RESTUBBED FROM ABOVE]
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------
PRO FORMA
FOR THE
COMPLETED PRO FORMA
AND PENDING FOR THE
ACTUAL ACTUAL TRANSACTIONS(8) SPIN-OFF(9)
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
1996 1997 1997 1997
--------- --------- -------------- ---------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
NET BROADCASTING REVENUE........................ $ 92,840 $ 188,984 $222,731 $222,731
CONCERT PROMOTION REVENUE....................... -- 75,740 500,843 --
STATION AND OTHER OPERATING EXPENSES............ 61,448 115,871 142,934 142,934
CONCERT PROMOTION OPERATING EXPENSES............ -- 63,394 440,266 --
DEPRECIATION, AMORTIZATION, DUOPOLY INTEGRATION
COSTS AND ACQUISITION RELATED COSTS(1) ........ 10,663 31,429 61,677 33,299
CORPORATE EXPENSES.............................. 4,475 6,849 8,698 5,891
NON-RECURRING CHARGES INCLUDING ADJUSTMENTS TO
BROADCAST RIGHTS AGREEMENT(2)(3)(4)(5) ........ 27,489 17,995 17,995 17,995
--------- --------- -------------- ---------
OPERATING INCOME (LOSS)......................... (11,235) 29,186 52,004 22,612
INVESTMENT AND OTHER (INCOME) LOSS/NET ......... (3,320) (2,692) (3,261) (2,482)
EQUITY (INCOME) LOSS FROM INVESTMENTS ......... -- -- (5,653) --
INTEREST EXPENSE, INCLUDING AMORTIZATION OF
DEFERRED FINANCING COSTS....................... 22,169 46,438 85,254 53,048
--------- --------- -------------- ---------
INCOME (LOSS) BEFORE INCOME TAXES,
EXTRAORDINARY ITEM AND CUMULATIVE EFFECT OF A
CHANGE IN ACCOUNTING PRINCIPLE................. (30,084) (14,560) (24,336) (27,954)
INCOME TAX EXPENSE (BENEFIT).................... -- 845 4,500 1,000
EXTRAORDINARY LOSS ON DEBT RETIREMENT........... 15,219 -- -- --
CUMULATIVE EFFECT OF A CHANGE IN ACCOUNTING
PRINCIPLE...................................... -- -- -- --
--------- --------- -------------- ---------
NET INCOME (LOSS)............................... (45,303) (15,405) (28,836) (28,954)
REDEEMABLE PREFERRED STOCK DIVIDENDS AND
ACCRETION(6)................................... 3,551 27,723 31,381 28,906
--------- --------- -------------- ---------
NET INCOME (LOSS) APPLICABLE TO COMMON STOCK ... $ (48,854) $ (43,128) $(60,217) $(57,860)
========= ========= ============== =========
NET INCOME (LOSS) PER SHARE..................... $ (6.61) $ (4.61) $ (3.80) $ (3.65)
========= ========= ============== =========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING ..... 7,394 9,364 15,840 15,840
OTHER OPERATING DATA: (7)
BROADCAST CASH FLOW............................. $ 31,392 $ 73,113 $ 79,797 $ 79,797
CONCERT CASH FLOW............................... -- 12,346 60,577 --
EBITDA.......................................... 26,917 78,610 131,676 73,906
CASH FLOW FROM:
OPERATING ACTIVITIES............................ (18,773) (3,418) -- --
INVESTING ACTIVITIES............................ (442,797) (492,300) -- --
FINANCING ACTIVITIES............................ 489,816 485,309 -- --
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA OF THE COMPANY
(IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30, 1997
--------------------------------------------------- -----------------------------------------
PRO FORMA FOR PRO FORMA
THE PENDING FOR THE
ACTUAL TRANSACTIONS(10) SPIN-OFF(11)
1992 1993 1994 1995 1996 (UNAUDITED) (UNAUDITED) (UNAUDITED)
--------- --------- --------- --------- --------- ----------- -------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Current assets ............. $ 4,515 $ 31,273 $ 28,367 $ 30,949 $ 88,689 $ 140,689 $ 245,826 $ 128,500
Total assets................ 36,127 152,871 145,808 187,337 859,327 1,392,887 2,006,682 1,246,636
Long-term debt ............. 39,011 81,627 81,516 81,850 481,460 784,255 1,220,373 735,352
Temporary Equity ........... -- -- -- -- -- -- 16,500 --
Redeemable Preferred Stock:
Series A Preferred Stock . 3,892 917 -- -- -- -- -- --
Series B Preferred Stock . -- 2,784 2,466 1,735 917 998 998 998
Series C Preferred Stock . -- -- -- 1,550 1,636 1,703 1,703 1,703
Series D Preferred Stock . -- -- -- -- 149,500 149,500 149,500 149,500
Series E Preferred Stock . -- -- -- -- -- 215,636 215,636 215,636
Stockholders' equity
(deficiency) .............. (9,411) 48,598 48,856 83,061 94,517 69,554 134,215 (9,008)
</TABLE>
- ------------
(1) Includes $1,380,000, $1,137,000 and $565,000 of duopoly integration
costs incurred during the years ended December 31, 1995 and 1996 and the
nine months ended September 30, 1997, respectively.
(2) In 1993, non-recurring charges related to the valuation of common stock
issued to the Company's founders at the Company's initial public
offering in September 1993 and certain pooling costs related to the
merger of Capstar with and into a subsidiary of the Company.
(3) In 1995, a $5.0 million charge was incurred with respect to the
diminished value of a contract to broadcast the Texas Rangers.
(4) In 1996, the non-recurring charges represent the repurchase of stock
from and the forgiveness of a loan to the Company's former president, a
reserve of a loan and the issuance of warrants to a related party, the
purchase of an officer's options and a charge related to the termination
of a broadcast rights agreement.
(5) In 1997, the non-recurring and unusual charges, represent amounts
related to the pending Spin-Off and Merger, consisting of $11.6 million
of executive bonuses, the establishment of a reserve for a loan from the
Company's Executive Chairman of $2.6 million and $3.8 million of legal
and professional fees associated with the pending transaction.
(6) Includes dividends on preferred stock which the Company redeemed in
1993, accretion on outstanding redeemable preferred stock, dividends on
the Series D Preferred Stock and dividends on the Series E Preferred
Stock.
(7) "Broadcast Cash Flow" means net revenues less station operating
expenses. "Concert Cash Flow" means concert revenues less concert costs.
"EBITDA" means net income (loss) before (i) extraordinary items, (ii)
provisions for income taxes, (iii) interest (income) expense, (iv) other
(income) expense, (v) cumulative effects of changes in accounting
principles, (vi) depreciation, amortization, duopoly integration costs
and acquisition related costs, and (vii) non-recurring charges. The
difference between Broadcast Cash Flow and EBITDA is that EBITDA
reflects the impact of corporate expenses. Although Broadcast Cash Flow
and EBITDA are not measures of performance calculated in accordance with
GAAP, the Company believes that Broadcast Cash Flow and EBITDA are
accepted by the broadcasting industry as generally recognized measures
of performance and are used by analysts who report publicly on the
performance of broadcasting companies. Nevertheless, these measures
should not be considered in isolation or as a substitute for operating
income, net income, net cash provided by operating activities or any
other measure for determining the Company's operating performance or
liquidity which is calculated in accordance with GAAP.
(8) The unaudited pro forma Statement of Operations Data for the Recent and
Pending Transactions for the nine months ended September 30, 1997, and
the year ended December 31, 1996, are presented as if the Company had
completed the Recent and Pending Transactions as of January 1, 1996. The
terms "Recent Transactions" and "Pending Transactions" are defined in
the Glossary to the Unaudited Pro Forma Condensed Combined Financial
Statements.
7
<PAGE>
(9) The unaudited pro forma Statement of Operations for the Spin-Off for the
nine months ended September 30, 1997, and the year ended December 31,
1996 are presented as if the Company had completed the sale of the
Company as defined in the Glossary to the Unaudited Pro Forma Condensed
Combined Financial Statements.
(10) The unaudited pro forma Balance Sheet Data at September 30, 1997, is
presented as if the Company had completed the Pending Transactions as of
September 30, 1997. The term "Pending Transactions" is defined in the
Glossary to the Unaudited Pro Forma Condensed Combined Financial
Statements.
(11) The unaudited pro forma Balance Sheet Data at September 30, 1997, is
presented as if the Company had completed the Spin-Off as of September
30, 1997.
8
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following financial statements and notes thereto contain
forward-looking statements that involve risks and uncertainties. The actual
results of SFX Broadcasting, Inc. ("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.
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 are based upon, and should be read in
conjunction with, the historical financial statements and the respective
notes to such financial statements incorporated herein by reference. The pro
forma information is based upon tentative allocations of the purchase price
for acquisitions completed within the last year and acquisitions still
pending, and does not purport to be indicative of the results that would have
been reported had such events actually occurred on the dates specified, nor
is it indicative of SFX's future results. SFX cannot predict whether the
consummation of the Pending Acquisition and Disposition--Broadcasting or
Pending Acquisitions and the Financing--Entertainment will conform to the
assumptions used in the preparation of the Unaudited Pro Forma Condensed
Combined Financial Statements.
See Glossary at the end of these Unaudited Pro Forma Condensed Combined
Financial Statements for the definition of certain terms not otherwise
defined herein.
The Unaudited Pro Forma Condensed Combined Balance Sheet at September 30,
1997 is presented as if SFX had completed the Pending Acquisition and
Disposition--Broadcasting, the Pending Acquisitions and the
Financing--Entertainment and the Spin-Off of SFX Entertainment as of
September 30, 1997. No adjustment has been made to the Unaudited Pro Forma
Condensed Combined Balance Sheet for the Chancellor Exchange, other than the
receipt of cash, as it will be recorded at historical cost.
The Unaudited Pro Forma Condensed Combined Statements of Operations for
the year ended December 31, 1996 and the nine months ended September 30, 1997
are presented as if SFX had completed the Completed Transactions, the Pending
Acquisition and Disposition--Broadcasting, the Pending Acquisitions and the
Financing--Entertainment and the Spin-Off of SFX Entertainment as of January
1, 1996. The Albany Acquisition has not been reflected in the Unaudited Pro
Forma Condensed Combined Statement of Operations for the year ended December
31, 1996 as it would not have a material impact.
The Unaudited Pro Forma Condensed Combined Financial Statements have been
prepared assuming that the approximately 4.2 million shares of SFX
Entertainment Class A common stock being issued in connection with certain of
the Pending Acquisitions--Entertainment are valued at $13.33 per share, the
value negotiated with the sellers for purposes of the Pending
Acquisitions--Entertainment and is based upon certain financial projections
developed jointly by SFX Entertainment and the sellers. There is presently no
trading market for the SFX Entertainment Class A common stock. There can be
no assurance that the assumptions upon which the valuation is based will, in
fact, be correct or that the valuation will approximate the actual trading
prices of the SFX Entertainment Class A common stock.
9
<PAGE>
<TABLE>
<CAPTION>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
PENDING SFX ENTERTAINMENT
PENDING ACQUISITIONS PRO FORMA PRO FORMA
SFX ACQUISITION AND AND THE PRO FORMA FOR THE FOR THE
BROADCASTING, DISPOSITION-- FINANCING-- FOR THE PENDING SPIN-OFF
INC. AS BROADCASTING ENTERTAINMENT PENDING ACQUISITIONS OF SFX
REPORTED (A) (B) TRANSACTIONS (C) ENTERTAINMENT
--------------- --------------- ------------- -------------- ----------------- -------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets .............. $ 140,689 $ -- $105,137 $ 245,826 $117,326 $ 128,500
Property and equipment, net 132,707 (610) 129,489 261,586 185,371 76,215
Intangible assets, net ... 1,097,751 (8,345) 359,395 1,448,801 415,374 1,033,427
Other assets ................ 21,740 (5,444) 34,173 50,469 41,975 8,494
--------------- --------------- ------------- -------------- ----------------- -----------
Total assets ................ $1,392,887 $(14,399) $628,194 $2,006,682 $760,046 $1,246,636
=============== =============== ============= ============== ================= ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities ......... $ 61,188 $ (914) $ 78,286 $ 138,566 $ 91,640 $ 46,920
Deferred taxes .............. 105,497 -- 12,731 118,228 13,759 104,469
Long-term debt (including
current portion):
Privately placed debt....... -- -- 275,000 275,000 275,000 --
Credit Facility ............ 316,000 (35,921) 197,419 477,498 193,568 283,930
Senior Subordinated Notes .. 450,000 -- -- 450,000 -- 450,000
Other long-term debt ....... 18,255 (380) -- 17,875 16,453 1,422
Other liabilities ........... 4,556 -- 5,583 10,139 9,073 1,066
Minority Interest ........... -- -- 830 830 830 --
Temporary Equity ............ -- -- 16,500 16,500 16,500 --
Redeemable preferred stock
Series B Preferred Stock .. 998 -- -- 998 -- 998
Series C Preferred Stock .. 1,703 -- -- 1,703 -- 1,703
Series D Preferred Stock .. 149,500 -- -- 149,500 -- 149,500
Series E Preferred Stock .. 215,636 -- -- 215,636 -- 215,636
Stockholders' equity ........ 69,554 22,816 41,845 134,215 143,223 (9,008)
(9,008)
--------------- --------------- ------------- -------------- ----------------- -----------
Total liabilities and
stockholders' equity ........ $1,392,887 $(14,399) $628,194 $2,006,682 $760,046 $1,246,636
=============== =============== ============= ============== ================= ===========
</TABLE>
10
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(A) Pending Acquisition and Disposition--Broadcasting
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
-------------------------------------------------------------
PENDING
ACQUISITION
CAPSTAR NASHVILLE PRO FORMA AND
DISPOSITION (1) ACQUISITION ADJUSTMENTS (2) DISPOSITION
--------------- ------------- --------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
Current assets .............................. $ 59,921 $1,370 $(33,000)(a) $ --
(1,370)(a)
(2,000)(b)
11,000 (c)
(35,921)(d)
Property and equipment, net ................. (4,828) 4,218 (610)
Intangible assets, net ...................... (33,567) 3,303 27,479 (a) (8,345)
2,000 (b)
3,440 (b)
(11,000)(c)
Other assets ................................ (4) 566 (566)(a) (5,444)
(2,000)(a)
(3,440)(b)
--------------- ------------- --------------- -------------
Total assets ............................... $ 21,522 $9,457 $(45,378) $(14,399)
=============== ============= =============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ (914) $ 545 $ (545)(a) $ (914)
Long-term debt (including current portion):
Senior Credit Facility...................... (35,921)(d) (35,921)
Other long-term debt ....................... (380) (380)
Stockholders' equity ........................ 22,816 8,912 (8,912)(a) 22,816
--------------- ------------- --------------- -------------
Total liabilities and stockholders' equity $ 21,522 $9,457 $(45,378) $(14,399)
=============== ============= =============== =============
</TABLE>
(1) Capstar Disposition
To reflect the Capstar Disposition for $60,000,000 in cash to SFX. SFX
will record a gain of approximately $23,000,000 on the disposition.
<TABLE>
<CAPTION>
JACKSON
AND
BILOXI CAPSTAR
SALE PROCEEDS STATIONS DISPOSITION
--------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets .............................. $60,000 $ (79) $ 59,921
Property and equipment, net ................. (4,828) (4,828)
Intangible assets, net ...................... (33,567) (33,567)
Other assets ................................ (4) (4)
--------------- ----------- -------------
Total assets ............................... $60,000 $(38,478) $ 21,522
=============== =========== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities ......................... $ (914) $ (914)
Long-term debt .............................. (380) (380)
Stockholders' equity ........................ $60,000 (37,184) 22,816
--------------- ----------- -------------
Total liabilities and stockholders' equity $60,000 $(38,478) $ 21,522
=============== =========== =============
</TABLE>
11
<PAGE>
SFX expects to use the proceeds from the Capstar Disposition to complete
a similar acquisition so that the Capstar Disposition can be treated as a
like-kind exchange which would be substantially tax free. Should SFX be
unable to structure such a transaction, SFX would utilize its available net
operating loss carryforwards and pay approximately $6,000,000 in additional
income taxes. No adjustment has been made for the potential payment of any
additional income taxes.
(2) Pro Forma Adjustments
a. To reflect the Nashville Acquisition for $33,000,000 in cash (net
of a $2,000,000 deposit made in August 1997), the related excess of
the purchase price paid over net book value of $27,479,000, and the
adjustments to remove $1,370,000 of current assets, $566,000 of
other assets, $545,000 of current liabilities, and stockholders'
equity of $8,912,000.
b. To reflect additional acquisition costs of approximately $2,000,000
related to the Nashville Acquisition and Chancellor Exchange,
principally consisting of professional fees and to reclassify
deposits, professional fees and other payments of approximately
$3,440,000 included in other assets as of September 30, 1997.
c. To reflect the $11,000,000 of cash to be received in the Chancellor
Exchange. No gain or loss will be recognized because the fair
market value of the stations received, as adjusted for cash
received or paid, equals the carrying value of the stations
exchanged.
d. To use the net cash proceeds from the Capstar Disposition,
Nashville Acquisition and Chancellor Exchange to reduce debt under
SFX's Credit Agreement.
12
<PAGE>
(B) Pending Acquisitions--Entertainment
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 (IN THOUSANDS)
--------------------------------------------------
PACE CONTEMPORARY NETWORK BGP
ACQUISITION ACQUISITION ACQUISITION ACQUISITION
I II III IV
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
ASSETS:
Current assets.............. $(150,730) $(72,800) $(44,510) $(54,222)
Property and equipment,
net........................ 82,489 25,000 1,000 20,000
Intangible assets, net ..... 125,314 66,500 61,701 50,179
Other assets................ 34,706 -- 391 222
----------- ------------ ----------- -----------
TOTAL ASSETS................ $ 91,779 $ 18,700 $ 18,582 $ 16,179
=========== ============ =========== ===========
LIABILITIES &
STOCKHOLDER'S EQUITY:
$
Current liabilities......... $ 63,756 -- $ 8,468 $ 6,062
Deferred taxes.............. -- -- 114 2,617
Note Offering............... -- -- -- --
Senior Credit Facility ..... -- -- -- --
Other long-term debt........ -- -- -- --
Other liabilities........... 5,583 -- -- --
Minority interest........... 2,440 -- --
Temporary Equity............ 16,500 -- -- --
Stockholders' Equity........ 3,500 18,700 10,000 7,500
----------- ------------ ----------- -----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY....... $ 91,779 $ 18,700 $ 18,582 $ 16,179
=========== ============ =========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SEPTEMBER 30, 1997 (IN THOUSANDS)
--------------------------------------------------------
PRO FORMA FOR
CONCERT/ PRO FORMA THE PENDING
SOUTHERN PRO FORMA ADJUSTMENT FOR ACQUISITIONS--
ACQUISITION ADJUSTMENTS THE FINANCINGS ENTERTAINMENT AND
V VI VII THE FINANCINGS
----------- ----------- -------------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Current assets.............. $(16,615) $ 2,145 (a) $352,893 $105,137
(30,550)(b) 88,976
30,550
Property and equipment,
net........................ 1,000 -- -- 129,489
Intangible assets, net ..... 15,151 10,000 (d) 359,395
30,550 (b)
Other assets................ 464 (1,610)(c) -- 34,173
----------- ----------- -------------- -----------------
TOTAL ASSETS................ $ -- $ 10,535 $472,419 $628,194
=========== =========== ============== =================
LIABILITIES &
STOCKHOLDER'S EQUITY:
$ $ $
Current liabilities......... -- -- -- $ 78,286
Deferred taxes.............. -- 10,000 (d) -- 12,731
Note Offering............... -- -- 275,000 275,000
Senior Credit Facility ..... -- -- 197,419 197,419
Other long-term debt........ -- -- --
Other liabilities........... -- -- -- 5,583
Minority interest........... -- (1,610)(c) -- 830
Temporary Equity............ -- -- -- 16,500
Stockholders' Equity........ -- 2,145 (a) -- 41,845
----------- ----------- -------------- -----------------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY....... $ -- $ 10,535 $472,419 $628,194
=========== =========== ============== =================
</TABLE>
13
<PAGE>
I. PACE ACQUISITION
Reflects the PACE Acquisition and the separate acquisitions of the
remaining two partners' interests in Pavilion. The PACE Acquisition is not
conditioned on the consummation of the Pavilion Acquisition.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 (000'S)
----------------------------------------------------------
PACE PAVILION PRO FORMA PACE
AS REPORTED AS REPORTED ADJUSTMENTS TOTAL (F)
------------- ------------- --------------- ------------
<S> <C> <C> <C> <C>
Current assets........................... $45,087 $ 30,178 $(109,500)(a) $(150,730)
(25,523)(a)
(9,507)(b)
(4,171)(b)
(27,500)(c)
(49,794)(e)
Property and equipment, net.............. -- 59,938 5,000 (a) 82,489
9,103 (b)
(19,052)(d)
27,500 (c)
Intangible assets, net................... 17,894 -- 107,420 (a) 125,314
Other assets............................. 26,856 12,660 9,507 (b) 34,706
(4,810)(d)
(9,507)(d)
------------- ------------- --------------- ------------
Total Assets............................. $89,837 $102,776 $(100,834) $ 91,779
============= ============= =============== ============
Current liabilities...................... $43,171 $ 17,254 $ 2,000 (b) $ 63,756
2,932 (b)
Deferred taxes........................... -- 1,601 (d) --
Long-term debt (including current
portion)................................ 25,523 57,700 (25,523)(a) --
(7,906)(d)
(49,794)(e)
Other Liabilities........................ 4,063 1,520 5,583
Minority interest........................ -- 2,440 -- 2,440
Temporary Equity ........................ -- -- 16,500 (a) 16,500
Stockholders' Equity..................... 17,080 23,862 (17,080)(a) 3,500
20,000 (a)
(16,500) (a)
(23,862)(d)
- ---------------------------------------- ------------- ------------- --------------- ------------
Total Liabilities & Stockholders'
Equity.................................. $89,837 $102,776 $(100,834) $ 91,779
============= ============= =============== ============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the PACE Acquisition for $109,500,000 in cash, the issuance
of 1,500,000 shares of SFX Entertainment's Class A Common Stock valued
by the parties at $20,000,000, the assumption of debt of $25,523,000
which is expected to be repaid shortly after closing, the related
increase in the fair value allocated to fixed assets of $5,000,000; the
related excess of the purchase price paid over the fair value of net
tangible assets of $107,420,000, and the elimination of stockholder's
equity of $17,080,000. Pursuant to the terms of the PACE Agreement,
additional consideration is required to be paid by SFX Entertainment if
the deemed value of SFX Entertainment's Class A Common Stock is below
$13.33 per share at the time of the Spin-Off under certain
circumstances.
The PACE Agreement further provides that each PACE Seller shall have a
Fifth Year Put Option, exercisable during a period beginning on the
fifth anniversary of the closing of the PACE Acquisition and ending 90
days thereafter, to require SFX Entertainment to purchase up to
one-third of SFX Entertainment's Class A Common Stock (500,000 shares)
received by such PACE Seller for a cash purchase price of $33.00 per
share. With certain limited exceptions, the Fifth Year Put Option
rights are not assignable by the PACE Sellers. The maximum amount
payable under the Fifth Year Put
14
<PAGE>
Option ($16,500,000) has been presented as temporary equity on the pro
forma balance sheet.
Pursuant to the PACE Agreement, certain notes receivables and loans
made to key executives will be repaid in connection with the closing of
the PACE Acquisition. Such repayment has not been reflected herein.
(b) To reflect the acquisition of an additional 33.33% indirect interest in
Pavilion from Blockbuster for $4,171,000 in cash, the assumption of
$2,932,000 in liabilities and the granting of naming rights of three
venues for a two-year period with an estimated value of $2,000,000,
which will be recognized as income over such two year period, and the
related increase in the fair value allocated to fixed assets of
$9,103,000. Also reflects the purchase of a note receivable from
Blockbuster, due from Pavilion at its current outstanding balance,
including accrued interest, of $9,507,000. This note will be eliminated
in consolidation upon the acquisition of Sony's interest in Pavilion,
as described below.
(c) To reflect the acquisition of an additional 33.33% indirect interest in
Pavilion from Sony for $27,500,000 in cash.
(d) To eliminate PACE's equity method investment in Pavilion following the
acquisition of 100% of Pavilion and to eliminate Pavilion's historical
equity. Also reflects the elimination of the $7,906,000 intercompany
notes receivable and accrued interest of $1,601,000 acquired from
Blockbuster. There can be no assurance that SFX Entertainment will be
able to consummate the acquisition of either or both of Blockbuster's
and Sony's respective interests in Pavilion and, as a result, SFX
Entertainment may not obtain 100% of Pavilion.
(e) To reflect the repayment of Pavilion's third party debt at the closing
of the Pavilion Acquisition.
(f) SFX Entertainment has agreed to lend PACE up to $25,000,000 for
potential acquisitions to be made by PACE whether or not the PACE
Acquisition is consummated. None of these acquisitions are considered
probable. As a result, none of such loans or acquisitions have been
reflected in the pro forma adjustment.
II. 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, MO that is operated by Contemporary. The
Contemporary Acquisition is not conditioned upon the consummation of the
acquisition of such 50% interest.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 (000'S)
-------------------------------------------------------------
RIVERPORT
CONTEMPORARY AMPHITHEATER PRO FORMA CONTEMPORARY
AS REPORTED PARTNERS ADJUSTMENTS(A) ACQUISITION
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Current assets........................... $13,375 $ 2,603 $(72,800) $(72,800)
(15,978)
Property and equipment, net.............. 2,838 11,355 10,807 25,000
Intangible assets, net................... -- -- 66,500 66,500
Other assets............................. 7,430 8 (1,205) --
(6,233)
-------------- -------------- -------------- --------------
Total Assets............................. $23,643 $13,966 $(18,909) $ 18,700
============== ============== ============== ==============
Current liabilities...................... $ 7,786 $ 1,022 $ (8,808) $ --
Other long-term debt (including current
portion)................................ 1,578 -- (1,578) --
Other liabilities........................ 5,390 478 (5,868) --
-------------- -------------- -------------- --------------
Total Liabilities........................ 14,754 1,500 (16,254) --
Stockholders' Equity..................... 8,889 12,466 18,700 18,700
(21,355)
-------------- -------------- -------------- --------------
Total Liabilities & Stockholders'
Equity.................................. $23,643 $13,966 $(18,909) $ 18,700
============== ============== ============== ==============
</TABLE>
15
<PAGE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the Contemporary Acquisition for $72,800,000 in cash,
including the additional acquisition of the remaining 50% interest in
the Riverport Amphitheater Partners not already owned by Contemporary
and the issuance of 1,402,851 shares of SFX Entertainment Class A
common stock valued at $18,700,000, the related increase in the fair
value allocated to fixed assets of $10,807,000, the related excess of
the purchase price paid over the fair value of net tangible assets of
$66,500,000, and the adjustment to eliminate $15,978,000 of current
assets, $6,233,000 of other assets, $8,808,000 of current liabilities,
$1,578,000 of notes payable, $5,868,000 of other liabilities, and
stockholders' equity of $21,355,000, and to reflect the elimination of
Contemporary Group's equity investment in Riverport Amphitheather
Partners. Pursuant to the Contemporary Agreement, SFX Entertainment has
eliminated certain cash and receivables from current assets, accounts
payable and accrued expenses from current liabilities, and other assets
and other liabilities (principally, deferred revenue), which will not
be acquired or assumed by SFX Entertainment upon closing the
Contemporary Acquisition. Adjustment to eliminate Contemporary's
historical stockholders' equity and replace it with value of the equity
securities to be issued by SFX Entertainment in connection with the
Contemporary Acquisition has also been made.
If Contemporary is unable to complete this acquisition of the remaining
50% interest in Riverport Amphitheater Partners, the cash consideration
paid by SFX Entertainment for Contemporary will be reduced by
$10,500,000.
The acquisition agreement provides that in the event the Contemporary
Acquisition is consummated prior to the consummation of the Spin-Off,
1,402,851 shares of Preferred Stock of SFX Entertainment will be issued to
the sellers. Such Preferred Stock is to be converted into an equal number of
shares of Class A Common Stock upon consummation of the Spin-Off or, if the
Spin-Off shall not have occurred prior to July 1, 1998, such Preferred Stock
is to be redeemed at its fair market value, but in no event less than
$18,700,000. In addition, pursuant to the terms of the Contemporary
Agreement, SFX Entertainment has agreed to make certain payments to any
Contemporary sellers that own shares of SFX Entertainment's Class A Common
Stock on the second anniversary of the closing of the Contemporary
Acquisition if the average trading price of such stock on the 20-day period
ending on such period is less than $13.33 per share.
III. NETWORK ACQUISITION
The Network Acquisition consists of the separate acquisitions of Network
Magazine and SJS. Each of these acquisitions is conditioned on the concurrent
closing of the other.
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 (000'S)
----------------------------------------------------------
NETWORK
MAGAZINE SJS PRO FORMA NETWORK
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Current assets........................... $ 3,127 $4,325 $(52,000)(a) $(44,510)
1,516 (b)
(1,478)(c)
Property and equipment, net.............. 304 334 362 (a) 1,000
Intangible assets, net................... -- -- 63,217 (a) 61,701
(1,516)(b)
Other assets............................. 299 92 -- 391
------------- ------------- -------------- -------------
Total Assets............................. $ 3,730 $4,751 $ 10,101 $ 18,582
============= ============= ============== =============
Current liabilities...................... $ 3,659 $4,809 -- $ 8,468
Deferred taxes........................... 114 -- -- 114
Long-term debt (including current
portion)................................ 1,478 -- (1,478)(c) --
------------- ------------- -------------- -------------
Total Liabilities........................ 5,251 4,809 (1,478) 8,582
Stockholders' Equity..................... (1,521) (58) 1,579 (a) 10,000
10,000 (a)
------------- ------------- -------------- -------------
Total Liabilities & Stockholders'
Equity.................................. $ 3,730 $4,751 $ 10,101 $ 18,582
============= ============= ============== =============
</TABLE>
16
<PAGE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the Network Acquisition for $52,000,000 in cash and the
issuance of 750,188 shares of SFX Entertainment Class A common stock
valued by the parties at $10,000,000, the related increase in fair
value allocated to fixed assets of $362,000, and the related excess of
the purchase price paid over the fair value of net tangible assets of
$63,217,000, and the elimination of stockholder's deficiency of
$1,579,000.
SFX Entertainment's purchase agreement for Network Magazine and SJS
provides that the purchase price will be increased by $4,000,000 if
total 1998 EBITDA for Network and SJS as defined equals or exceeds
$9,000,000; by an additional $4 for each $1 increase in such EBITDA
between $9,000,000 and $10,000,000 and by an additional $6 for each $1
increase in such EBITDA between $10,000,000 and $11,000,000 (up to a
maximum of $14,000,000 of additional consideration). The additional
consideration is payable in shares of SFX Entertainment's Class A
Common Stock or, in certain circumstances, in cash. The pro forma
financial statements assume that no additional consideration is paid.
(b) To reflect a net working capital adjustment as required in the Network
Acquisition agreement. Pursuant to the Network Agreement, the final
cash purchase price of Network Magazine and SJS shall be adjusted for
any difference between net working capital, as defined, and $500,000.
The working capital adjustment is calculated as the difference between
current assets and current liabilities of Network Magazine and SJS at
closing.
(c) To reflect the repayment of Network Magazine's long-term debt at
closing.
SFX Entertainment's purchase agreement for Network Magazine and SJS
provides SFX Entertainment with an option to acquire an office building
in Burbank, California, which currently serves as Network Magazine's
headquarters, at a cost of approximately $2,400,000. This potential
transaction has not been reflected on the pro forma balance sheet.
IV. BGP ACQUISITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 (000'S)
--------------------------------------------
PRO FORMA BGP
AS REPORTED ADJUSTMENTS ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
Current assets........................... $18,759 $(60,800)(a) $(54,222)
(12,181)(b)
Property and equipment, net.............. 9,233 10,767 (a) 20,000
Intangible assets, net .................. 1,460 48,719 (a) 50,179
Other assets............................. 222 -- 222
------------- -------------- -------------
Total Assets............................. $29,674 $(13,495) $ 16,179
============= ============== =============
Current liabilities...................... $ 6,062 $ -- $ 6,062
Deferred taxes .......................... 2,617 -- 2,617
Other long-term debt (including current
portion)................................ 12,181 (12,181)(b) --
------------- -------------- -------------
Total Liabilities........................ 20,860 (12,181) 8,679
Stockholders' Equity..................... 8,814 (8,814)(a) 7,500
7,500 (a)
------------- -------------- -------------
Total Liabilities & Stockholders'
Equity.................................. $29,674 $(13,495) $ 16,179
============= ============== =============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the BGP Acquisition for $60,800,000 in cash and the issuance
of 563,000 shares of SFX Entertainment's Class A common stock valued at
$7,500,000, the related increase in fair value allocated to fixed
assets of $10,767,000, and the related excess of the purchase price
paid over the fair value of net tangible assets of $48,719,000, and the
elimination of $8,814,000 of stockholder's equity.
17
<PAGE>
(b) To reflect the repayment of BGP's long-term debt at closing. Although
SFX Entertainment is assuming $12,200,000 of long-term debt, BGP is
required to have working capital at least equal to such liabilities at
the closing of the BGP Acquisition. The purchase price will be reduced
dollar-for-dollar to the extent that long-term debt exceeds working
capital.
V. CONCERT/SOUTHERN ACQUISITION
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1997 (000'S)
--------------------------------------------
CONCERT/
PRO FORMA SOUTHERN
AS REPORTED ADJUSTMENTS(A) ACQUISITION
------------- -------------- -------------
<S> <C> <C> <C>
Current assets........................... $1,921 $(16,615) $(16,615)
(1,921)
Property and equipment, net.............. 360 640 1,000
Intangible assets, net................... -- 15,151 15,151
Other assets............................. 919 (455) 464
------------- -------------- -------------
Total Assets............................. $3,200 $ (3,200) $ --
============= ============== =============
Current liabilities...................... $1,254 $ (1,254) $ --
------------- -------------- -------------
Total Liabilities........................ 1,254 (1,254) --
Stockholders' Equity..................... 1,946 (1,946) --
------------- -------------- -------------
Total Liabilities & Stockholders'
Equity.................................. $3,200 $ (3,200) $ --
============= ============== =============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) To reflect the Concert/Southern Acquisition for $16,615,000 in cash;
the related increase in fair value allocated to fixed assets of
$640,000, the related excess of the purchase price paid over the fair
value of net tangible assets of $15,151,000; and the adjustments to
eliminate $1,921,000 of current assets, $1,254,000 of current
liabilities, stockholders' equity of $1,946,000 and a $455,000
investment in a non-entertainment affiliated entity not being acquired
by SFX Entertainment. Pursuant to the Concert/Southern Agreement, SFX
Entertainment has eliminated certain cash and receivables from current
assets and accounts payable and other accrued expenses from current
liabilities, which will not be acquired or assumed by SFX Entertainment
upon closing the Concert/Southern Acquisition. Adjustment to eliminate
Concert/Southern's historical combined stockholders' equity and replace
it with the value of the equity securities to be issued by SFX
Entertainment in connection with the Concert/Southern Acquisition has
also been made.
VI. PRO FORMA ADJUSTMENTS FOR PENDING ACQUISITIONS--ENTERTAINMENT
(a) The Distribution Agreement provides that SFX will transfer any positive
Working Capital in existence at the closing of the SFX Merger to SFX
Entertainment, and that if Working Capital is negative at that time,
SFX Entertainment will pay the amount of such shortfall to SFX. As of
September 30, 1997 the amount of positive Working Capital would have
been $2,145,000 and such amount is reflected in the cash to be acquired
by SFX Entertainment pursuant to the Distribution Agreement. The actual
amount of Working Capital as of the closing of the SFX Merger may
differ substantially from the amount in existence on September 30,
1997, and will be a function of, among other things, the operating
results of SFX through the date of the SFX Merger and the actual cost
of consummating the SFX Merger and the related transactions.
Additionally, SFX Entertainment will be responsible for any taxes
resulting from the Spin-Off to the extent such taxes result from any
gain on the distribution.
(b) To reflect estimated costs associated with the Pending Acquisitions and
the Financing and the related transactions. Consists of approximately
(i) $6 million in fees and expenses in connection with the Pending
Acquisitions, (ii) $8.8 million in fees in connection with the
Spin-Off, the Consent Solicitations and other required consents and
(iii) $15.8 million of fees and expenses in connection with the
Financing, of which approximately $10.2 million related to the Note
Offering. The
18
<PAGE>
information relating to fees and expenses is based on management's
estimates, and may not be indicative of, and are likely to vary from,
the actual fees and expense incurred by SFX Entertainment relating to
the Financing, the Pending Acquisitions, the Spin-Off and the
Broadcasting Merger.
(c) To reflect the consolidation of GSAC Partners (the entity which
operates the PNC Bank Arts Center) following the acquisition of the
remaining 50% ownership interest in GSAC currently owned by Pavilion.
(d) To reflect deferred taxes associated with differences between the book
and tax bases of assets and liabilities acquired.
VII. PRO FORMA ADJUSTMENTS FOR THE FINANCINGS
Represents assumed borrowings to finance the Pending Acquisitions
including the Offering and borrowings under the Senior Credit Facility. There
can be no assurance that SFX Entertainment will be able to enter into or
obtain financing under the proposed Senior Credit Facility, on acceptable
terms, or at all. SFX Entertainment anticipates using $352.8 million of
proceeds to finance the cash portion of the Pending Acquisitions, $90 million
for the repayment of debt assumed in the Pending Acquisitions and $30.6
million for the payment of estimated costs associated with the Pending
Acquisitions and the Financing and related transactions. The repayment of
assumed debt includes $25.5 million in connection with the PACE Acquisition,
$49.8 million in connection with the Pavilion Acquisition, $12.2 million in
connection with the BGP Acquisition and $1.4 million in connection with the
Network Acquisition.
(C) SFX Entertainment Pro Forma for the Pending Acquisitions
Reflects SFX Entertainment after the Pending Acquisitions.
(D) Pro Forma for the Spin-Off of SFX Entertainment
Represents the Pro Forma balance sheet of SFX after the Spin-Off of SFX
Entertainment.
19
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PENDING PENDING
ACQUISITION ACQUISITIONS
SFX AND AND THE
BROADCASTING, COMPLETED DISPOSITION-- FINANCING--
INC. AS TRANSACTIONS BROADCASTING ENTERTAINMENT
REPORTED (A) (B) (C)
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net broadcast revenues . $188,984 $38,685 $(4,938)
Concert promotion
revenue ............... 74,396 12,293 $414,154
Station and other
operating expenses ... 115,871 28,289 (1,226)
Concert promotion
operating expense ..... 63,045 12,236 364,985
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs.................. 31,429 7,090 (95) 23,253
Corporate expenses...... 7,198* 1,500
Other .................. 17,995
--------------- -------------- -------------- ------------
Operating income
(loss)................. 27,842 3,363 (3,617) 24,416
Interest expense ....... 46,438 8,408 30,408
Other expense (income) . (2,692) -- (3) (566)
Equity (income) loss
from investments....... (1,344) -- -- (4,309)
--------------- -------------- -------------- -------------
Income before income
tax expense ........... (14,560) (5,045) (3,614) (1,117)
Income tax expense
(benefit).............. 845 32 (3) 3,626
--------------- -------------- -------------- -------------
Net income (loss) ...... (15,405) (5,077) (3,611) (4,743)
Preferred stock
dividend requirement .. 27,723 1,183 2,475
--------------- -------------- -------------- -------------
Net income (loss)
applicable to common
shares................. $(43,128) $(6,260) $(3,611) $ (7,218)
=============== ============== ============== =============
Net loss per common
share.................. $ (4.61)
Average common shares
outstanding............ 9,364
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SFX PRO FORMA
ENTERTAINMENT FOR THE
PRO FORMA FOR FOR THE SPIN-OFF
THE COMPLETED PENDING OF SFX
AND PENDING ACQUISITIONS ENTERTAINMENT
TRANSACTIONS (D) (E)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net broadcast revenues . $222,731 $222,731
Concert promotion
revenue ............... 500,843 $500,843 --
Station and other
operating expenses ... 142,934 142,934
Concert promotion
operating expense ..... 440,266 440,266 --
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs.................. 61,677 28,378 33,299
Corporate expenses...... 8,698* 2,807 5,891
--------------- --------------- ---------------
Other .................. 17,995 17,995
--------------- --------------- ---------------
Operating income
(loss)................. 52,004 29,392 22,612
Interest expense ....... 85,254 32,206 53,048
Other expense (income) . (3,261) (779) (2,482)
Equity (income) loss
from investments....... (5,653) (5,653) --
--------------- --------------- ---------------
Income before income
tax expense ........... (24,336) 3,618 (27,954)
Income tax expense
(benefit).............. 4,500 3,500 1,000
--------------- --------------- ---------------
Net income (loss) ...... (28,836) 118 (28,954)
Preferred stock
dividend requirement .. 31,381 2,475 28,906
--------------- --------------- ---------------
Net income (loss)
applicable to common
shares................. $(60,217) $ (2,357) $(57,860)
=============== =============== ===============
Net loss per common
share.................. $ 0.12 $ (3.65)
Average common shares
outstanding............ 20,400 15,840
</TABLE>
- ------------
* Net of $1,693,000 of fees from Triathlon.
20
<PAGE>
SFX BROADCASTING, INC.
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PENDING PENDING
ACQUISITION ACQUISITIONS
SFX AND AND THE
BROADCASTING, COMPLETED DISPOSITION-- FINANCING--
INC. AS TRANSACTIONS BROADCASTING ENTERTAINMENT
REPORTED (A) (B) (C)
--------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C>
Net broadcast
revenues.............. $143,061 $131,014 $(1,381)
Concert promotion
revenue .............. 104,784 $447,581
Station and other
operating expenses ... 92,816 90,243 1,208
Concert promotion
operating expense ... 91,240 414,297
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs................. 17,311 36,528 650 30,962
Corporate expenses .... 6,313 (313) 2,000
Other.................. 28,994 (3,332) --
--------------- -------------- -------------- ---------------
Operating income
(loss)................ (2,373) 21,432 (3,239) 322
Interest expense ...... 34,897 38,496 40,544
Other expense
(income).............. (2,117) (467) (538) (1,466)
Equity (income) loss
from investments ..... (525) (2,877)
--------------- -------------- -------------- ---------------
Income before income
tax expense........... (35,153) (16,072) (2,701) (35,879)
Income tax expense
(benefit)............. 480 1,315 1,705
--------------- -------------- -------------- ---------------
Net income (loss)...... (35,633) (17,387) (2,701) (37,584)
Preferred stock
dividend requirement . 6,061 32,063 3,300
--------------- -------------- -------------- ---------------
Net income (loss)
applicable to common
shares................ $(41,694) $(49,450) $(2,701) $(40,884)
=============== ============== ============== ===============
Net loss per common
share ................ $ (4.57)
Average common shares
outstanding........... 9,128 71
</TABLE>
<PAGE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
SFX
ENTERTAINMENT PRO FORMA
PRO FORMA FOR THE
PRO FORMA FOR FOR THE SPIN-OFF
THE COMPLETED PENDING OF SFX
AND PENDING ACQUISITIONS ENTERTAINMENT
TRANSACTIONS (D) (E)
--------------- --------------- ---------------
<S> <C> <C> <C>
Net broadcast
revenues.............. $ 272,694 $272,694
Concert promotion
revenue .............. 552,365 $552,365 --
Station and other
operating expenses ... 184,267 184,267
Concert promotion
operating expense ... 505,537 505,537 --
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs................. 85,451 37,795 47,656
Corporate expenses .... 8,000 3,000 5,000
Other.................. 25,662 -- 25,662
--------------- --------------- ---------------
Operating income
(loss)................ 16,142 6,033 10,109
Interest expense ...... 113,937 43,000 70,937
Other expense
(income).............. (4,588) (1,832) (2,756)
Equity (income) loss
from investments ..... (3,402) (3,402) --
--------------- --------------- ---------------
Income before income
tax expense........... (89,805) (31,733) (58,072)
Income tax expense
(benefit)............. 3,500 1,500 2,000
--------------- --------------- ---------------
Net income (loss)...... (93,305) (33,233) (60,072)
Preferred stock
dividend requirement . 41,424 3,300 38,124
--------------- --------------- ---------------
Net income (loss)
applicable to common
shares................ $(134,729) $(36,533) $(98,196)
=============== =============== ===============
Net loss per common
share ................ $ (1.79) $ (6.20)
Average common shares
outstanding........... 20,400 15,840
</TABLE>
- ------------
* Net of $3,000,000 of fees from Triathlon.
21
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED
STATEMENTS OF OPERATIONS
(A) Completed Transactions
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
----------------------------------------------------------------------------
CBS SECRET
TEXAS COAST HARTFORD MEADOWS EXCHANGE COMMUNICATIONS RICHMOND
ACQUISITION ACQUISITION ACQUISITION (6) ACQUISITION ACQUISITION
----------- ----------- ----------- ---------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues $652 $638 $ (60) $20,626 $5,105
Concert promotion revenue $ 601
Station and other
operating expenses 401 664 630 11,230 3,722
Concert promotion
operating expense 631
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs -- -- 221 -- 1,207 456
Corporate expenses -- -- -- -- -- --
----------- ----------- ----------- ---------- -------------- -----------
Operating income (loss) 251 (26) (251) (690) 8,189 927
Interest expense -- -- 199 -- 1,459 481
Other expense (income) -- -- -- -- 79 --
----------- ----------- ----------- ---------- -------------- -----------
Income (loss) before
income tax expense 251 (26) (450) (690) 6,651 446
Income tax expense
(benefit) -- -- -- 32 -- --
----------- ----------- ----------- ---------- -------------- -----------
Net income (loss) 251 (26) (450) (722) 6,651 446
Preferred stock dividend
requirements -- -- -- -- -- --
----------- ----------- ----------- ---------- -------------- -----------
Net income (loss)
applicable to common
shares $251 $(26) $(450) $(722) $ 6,651 $ 446
=========== =========== =========== ========== ============== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
-------------------------------------------------------------
CHARLOTTE PRO FORMA
EXCHANGE SUNSHINE HEARST ADJUSTMENTS COMPLETED
(7) ACQUISITION ACQUISITION (8) TRANSACTIONS
---------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net broadcast revenues $1,564 $10,160 $38,685
Concert promotion revenue $11,692 12,293
Station and other
operating expenses 1,328 -- 10,314 28,289
Concert promotion
operating expense 11,605 12,236
Depreciation,
amortization, duopoly
integration costs and
acquisition related
costs 375 686 -- $ 125 (a) 7,090
2,512 (b)
393 (c)
884 (l)
231 (m)
Corporate expenses -- -- -- -- --
---------- ----------- ----------- ----------- ------------
Operating income (loss) (139) (599) (154) (4,145) 3,363
Interest expense (730) 1,106 -- (47,397)(a) 8,408
16,848 (a)
36,282 (a)
195 (h)
(35)(j)
Other expense (income) -- -- -- (79)(i) --
---------- ----------- ----------- ----------- ------------
Income (loss) before
income tax expense 591 (1,705) (154) (9,959) (5,045)
Income tax expense
(benefit) -- -- -- 32
---------- ----------- ----------- ----------- ------------
Net income (loss) 591 (1,705) (154) (9,959) (5,077)
Preferred stock dividend
requirements -- -- -- 1,183 (n) 1,183
---------- ----------- ----------- ----------- ------------
Net income (loss)
applicable to common
shares $ 591 $(1,705) $ (154) $(11,142) $(6,260)
========== =========== =========== =========== ============
</TABLE>
22
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
------------------------------------------------------------------------------------------------------------
LIBERTY PRISM
ACQUISITION ACQUISITION HOUSTON
INCLUDING INCLUDING OTHER EXCHANGE
MMR WASHINGTON LOUISVILLE 1996 AND DALLAS DELSENER/ TEXAS
MERGER DISPOSITIONS DISPOSITIONS ACQUISITIONS DISPOSITION SLATER COAST HARTFORD MEADOWS
(1) (2) (3) (4) (5) ACQUISITION ACQUISITION ACQUISITION ACQUISITIONS
-------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues........... $20,038 $24,992 $13,511 $ 4,728 $ (8,680) $4,281 $5,742
Concert promotion
revenue............ $50,361 $10,175
Station and other
operating expenses 11,531 17,774 10,897 2,869 (10,307) 2,968 5,607
Concert promotion
operating expense . 50,686 9,306
Depreciation,
amortization,
duopoly integration
costs and
acquisition related
costs.............. 6,081 5,150 1,241 1,492 (284) 747 36 27 1,550
Corporate expenses . 1,253 1,478 808 111 110 -- -- -- --
Other............... 577 -- -- -- (3,500) -- (48) -- --
-------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------
Operating income
(loss)............. 596 590 565 256 5,301 (1,072) 1,325 108 (681)
Interest expense.... -- 3,326 773 382 (1,667) 60 -- 19 1,275
Other expense
(income) .......... -- 5,935 -- (11,948) -- (198) (65) (8) (30)
Equity (income) loss
from investments . -- -- -- -- -- (525) -- -- --
-------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------
Income (loss) before
income tax expense 596 (8,671) (208) 11,822 6,968 (409) 1,390 97 (1,926)
Income tax expense
(benefit).......... -- (3,378) -- 45 938 106 22 32 17
-------- ------------ ------------ ------------ ----------- ----------- ----------- ----------- ------------
Net income (loss) .. 596 (5,293) (208) 11,777 6,030 (515) 1,368 65 (1,943)
Preferred stock
dividend
requirement........ -- -- -- -- -- -- -- -- --
Net income (loss)
applicable to common
shares............. $ 596 $(5,293) $ (208) $ 11,777 $ 6,030 $ (515) $1,368 $ 65 $(1,943)
======= ============ ============ ============ =========== =========== =========== ========= =============
Average common shares
outstanding .........
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
----------------------------------------------------------------------------------------------------
PRO
CBS SECRET CHARLOTTE FORMA
EXCHANGE COMMUNICATIONS RICHMOND EXCHANGE SUNSHINE HEARST ADJUSTMENTS COMPLETED
(6) ACQUISITION ACQUISITION (7) ACQUISITION ACQUISITION (8) TRANSACTIONS
-------- -------------- ----------- --------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net broadcast
revenues............. $ 10 $35,532 $ 9,007 $6,222 $15,631 $131,014
Concert promotion
revenue.............. $44,248 104,784
Station and other
operating expenses .. 1,288 20,844 7,757 3,885 15,130 90,243
Concert promotion
operating expense ... 37,326 (6,078)(o) 91,240
Depreciation,
amortization,
duopoly integration
costs and
acquisition related
costs................ -- 3,970 780 500 1,522 293 $ 1,491 (a) 36,528
8,052 (b)
559 (d)
3,014 (l)
308 (m)
Corporate expenses ... -- -- 1,037 -- -- 169 (3,713)(e) (313)
1,434 (e)
(3,000)(f)
Other................. (363) 2 -- -- -- -- (3,332)
-------- -------------- ----------- --------- ----------- ----------- ----------- ------------
Operating income
(loss)............... (915) 10,716 (567) 1,837 5,400 39 (2,066) 21,432
Interest expense...... -- -- 1,210 -- 3,019 -- (5,583)(a) 38,496
22,462 (a)
(35,635)(a)
48,375 (a)
547 (h)
(67)(j)
Other expense
(income) ............ -- 1,175 -- -- (138) -- (5,935)(g) (467)
11,920 (g)
(1,175)(i)
Equity (income) loss
from investments ... -- -- -- -- -- -- (525)
-------- -------------- ----------- --------- ----------- ----------- ----------- ------------
Income (loss) before
income tax expense .. (915) 9,541 (1,777) 1,837 2,519 39 (36,975) (16,072)
Income tax expense
(benefit)............ 783 -- -- -- 1,138 -- 1,612 (g) 1,315
-------- -------------- ----------- --------- ----------- ----------- ----------- ------------
Net income (loss) .... (1,698) 9,541 (1,777) 1,837 1,381 39 (38,587) (17,387)
Preferred stock
dividend
requirement.......... -- -- -- -- -- -- 32,063 (n) 32,063
Net income (loss)
applicable to common
shares............... $(1,698) $ 9,541 $(1,777) $1,837 $ 1,381 $ 39 $(70,650) $(49,450)
======== ============== =========== ========= =========== =========== =========== ============
Average common shares
outstanding ......... 70,796 (k) 70,796
</TABLE>
23
<PAGE>
(1) MMR Merger
Reflects the net effect of the historical operations of Multi-Market
Radio, Inc. ("MMR") as adjusted for acquisitions and dispositions. SFX has
not included in the pro forma statement of operations cost savings of
$792,000 it believes would have been achieved in connection with the MMR
Hartford Acquisition had the transaction been consummated as of January 1,
1996, consisting principally of the elimination of certain duplicative
technical sales and general and administrative functions due to the
operation of a cluster of stations in the Hartford market.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------------------
MMR
AS MMR HARTFORD PRO FORMA MMR
REPORTED DISPOSITIONS(A) ACQUISITION ADJUSTMENTS MERGER
---------- --------------- ------------- ------------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Net broadcast revenues....... $18,832 $(1,623) $2,829 $20,038
Station operating expenses .. 11,422 (1,931) 2,040 11,531
Depreciation/amortization ... 7,611 (1,833) 277 $ 26 (b) 6,081
Corporate expenses........... 2,517 -- -- 1,253 (c) 1,253
(2,517)(c)
Other........................ 63 -- -- 514 (e) 577
---------- --------------- ------------- ------------- ---------
Operating income (loss) ..... (2,781) 2,141 512 724 596
Interest expense............. 5,265 -- 274 (5,539)(d) --
Other expense (income)....... -- (57) (12) 69 (d) --
Income tax expense
(benefit)................... -- 7 (7)(d) --
---------- --------------- ------------- ------------- ---------
Net income (loss)............ $(8,046) $ 2,198 $ 243 $ 6,201 $ 596
========== =============== ============= ============= =========
</TABLE>
- -------------
(a) Reflects the elimination of the operations of stations WRSF-FM,
sold in March 1996, WRXR-FM and WKBG-FM, sold in July 1996,
WYAK-FM and WMYB-FM, sold in March 1997, and KOLL-FM, sold in
April 1997.
(b) Reflects $26,000 for the year ended December 31, 1996 in
amortization of intangible assets recorded in connection with the
MMR Merger, Myrtle Beach Acquisition, MMR Hartford Acquisition,
related incremental deferred taxes and change in amortization
periods.
(c) To record incremental corporate overhead charges of $1,253,000
associated with the MMR Merger for the year ended December 31,
1996, and to eliminate MMR's existing corporate overhead of
$2,517,000 for the year ended December 31, 1996.
(d) Elimination of nonrecurring income of $69,000 for the year ended
December 31, 1996, interest expense of $5,539,000 for the year
ended December 31, 1996, and income tax expense of $7,000 for the
year ended December 31, 1996.
(e) Reflects non-cash compensation charge for the issuance of shares
of the Series A and Series B Convertible Preferred Stock of MMR.
The shares of Series A and Series B stock were issued to certain
officers and advisors of MMR in July and November 1996,
respectively, and converted into Class A Common Stock of SFX upon
consummation of the MMR Merger. Certain of the shares issued
pursuant to the Series A and Series B conversions which were
issued to individuals currently employed by SFX are being held in
escrow and are being released in five equal annual installments
ending in April 2001.
24
<PAGE>
(2) Liberty Acquisition
Reflects the net effect of the historical operations of the Liberty
Acquisition adjusted for the Washington Dispositions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------
LIBERTY AS WASHINGTON LIBERTY
REPORTED DISPOSITIONS ACQUISITION
------------ -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues .... $25,966 $ (974) $24,992
Station operating
expenses.................. 19,337 (1,563) 17,774
Depreciation/amortization . 5,926 (776) 5,150
Corporate expenses......... 1,566 (88) 1,478
------------ -------------- -------------
Operating income........... (863) 1,453 590
Interest expense........... 3,467 (141) 3,326
Other expense (income) ... 5,935 -- 5,935
Income tax benefit......... (3,378) -- (3,378)
------------ -------------- -------------
Net income (loss).......... $(6,887) $ 1,594 $(5,293)
============ ============== =============
</TABLE>
(3) Prism Acquisition
Reflects the net effect of the historical operations of the Prism
Acquisition adjusted for the Louisville Dispositions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-----------------------------------------
PRISM AS LOUISVILLE PRISM
REPORTED DISPOSITIONS ACQUISITION
---------- -------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C>
Net broadcast revenues .... $16,859 $(3,348) $13,511
Station operating
expenses.................. 13,373 (2,476) 10,897
Depreciation/amortization . 1,599 (358) 1,241
Corporate expenses......... 808 -- 808
---------- -------------- -------------
Operating income (loss) ... 1,079 (514) 565
Interest expense........... 773 -- 773
---------- -------------- -------------
Net loss................... $ 306 $ (514) $ (208)
========== ============== =============
</TABLE>
25
<PAGE>
(4) Other 1996 Acquisitions
Reflects the net effect of the combined historical operations of the
Greensboro Acquisition, the Raleigh-Greensboro Acquisitions, the
Greenville Acquisition and the Jackson Acquisitions.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
--------------------------------------------------------
RALEIGH-
GREENSBORO AND
GREENSBORO GREENVILLE JACKSON
ACQUISITIONS ACQUISITION ACQUISITIONS TOTAL
-------------- ------------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $3,619 $ 639 $470 $ 4,728
Station operating expenses 2,264 271 334 2,869
Depreciation/amortization . 1,168 244 80 1,492
Corporate expenses ......... 4 107 -- 111
-------------- ------------- -------------- ----------
Operating income (loss) .... 183 17 56 256
Interest expense............ 59 323 -- 382
Other expense (income) ..... (51) (11,897) -- (11,948)
Income tax expense.......... 45 -- -- 45
-------------- ------------- -------------- ----------
Net income (loss)........... $ 130 $ 11,591 $ 56 $ 11,777
============== ============= ============== ==========
</TABLE>
(5) Houston Exchange and Dallas Disposition
To reflect the exchange of KRLD-AM and the Texas State Networks for
KKRW-FM in the Houston Exchange, and the sale of KTCK-AM in the Dallas
Disposition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
----------------------------------------------------------------------------------------
HOUSTON EXCHANGE
DISPOSITIONS ACQUISITION ADJUSTMENTS* AND DALLAS DISPOSITION
------------------------------------------------ -------------- ----------------------
KRLD-AM TSN KTCK-AM KKRW-FM
----------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net broadcast revenues .... $(10,711) $(2,843) $(2,136) $7,010 $ -- $ (8,680)
Station operating expenses (9,316) (2,222) (2,490) 3,721 -- (10,307)
Depreciation/amortization . (1,157) (226) (284) 81 1,302 (284)
Corporate expenses ......... -- -- -- 110 -- 110
Other....................... (1,600) -- (1,900) -- -- (3,500)
----------- ---------- ---------- ------------- -------------- ----------------------
Operating income (loss) ... 1,362 (395) 2,538 3,098 (1,302) 5,301
Interest expense ........... (1,482) (373) 188 -- -- (1,667)
Other expense (income) .... -- -- -- 938 -- 938
----------- ---------- ---------- ------------- -------------- ----------------------
Net income (loss) .......... $ 2,844 $ (22) $ 2,350 $2,160 $(1,302) $ 6,030
=========== ========== ========== ============= ============== ======================
</TABLE>
- -----------
(*) To reflect historical depreciation and amortization of KRLD-AM
and the Texas State Networks and the disposition of KTCK-AM.
26
<PAGE>
(6) CBS Exchange
To reflect the net effect of the exchange of WHFS-FM for KTXQ-FM and
KRRW-FM in the CBS Exchange.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
------------------------------------------------
KTXQ-FM WHFS-FM CBS
KRRW-FM DISPOSAL ADJUSTMENTS* EXCHANGE
--------- ---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues .... $1,628 $1,688 $ -- $ (60)
Station operating
expenses.................. 1,655 1,025 -- 630
Depreciation/amortization . 54 783 729 --
--------- ---------- -------------- ----------
Operating income (loss) ... (81) (120) (729) (690)
Income tax expense......... 32 -- -- 32
--------- ---------- -------------- ----------
Net income (loss).......... $ (113) $ (120) $(729) $(722)
========= ========== ============== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
------------------------------------------------
KTXQ-FM WHFS-FM CBS
KRRW-FM DISPOSAL ADJUSTMENTS* EXCHANGE
--------- ---------- -------------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net broadcast revenues........ $9,572 $9,562 $ -- $ 10
Station operating expenses ... 7,116 5,828 -- 1,288
Depreciation/amortization .... 218 1,548 1,330 --
Other ........................ -- 363 -- (363)
--------- ---------- -------------- ----------
Operating income.............. 2,238 1,823 (1,330) (915)
Income tax expense (benefit) 783 -- -- 783
--------- ---------- -------------- ----------
Net income (loss)............. $1,455 $1,823 $(1,330) $(1,698)
========= ========== ============== ==========
</TABLE>
- -------
* To eliminate depreciation of KTXQ-FM and KRRW-FM and reflect
depreciation of WHFS-FM.
(7) Charlotte Exchange
Reflects the transfer of WDSY-FM and $20,000,000 in exchange for WRFX-FM
in the Charlotte Exchange.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997
-------------------------------------------------------
WDSY-FM WRFX-FM CHARLOTTE
DISPOSITION ACQUISITION ADJUSTMENTS EXCHANGE
------------- ------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues................... $(4,367) $5,931 $1,564
Station operating expenses .... (1,794) 3,122 1,328
Depreciation, amortization and
acquisition related costs .... (183) -- $ 558 375
------------- ------------- ------------- -----------
Operating income............... (2,390) 2,809 (558) (139)
------------- ------------- ------------- -----------
Interest expense............... (730) -- -- (730)
Net income (loss).............. $(1,660) $2,809 $(558) $ 591
============= ============= ============= ===========
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
-------------------------------------------------------
WDSY-FM WRFX-FM CHARLOTTE
DISPOSITION ACQUISITION ADJUSTMENTS EXCHANGE
------------- ------------- ------------- -----------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Net revenues................... $(3,697) $9,919 $6,222
Station operating expenses .... (1,593) 5,478 3,885
Depreciation, amortization and
acquisition related costs .... -- 2,907 $(2,407)* 500
------------- ------------- ------------- -----------
Operating income............... (2,104) 1,534 2,407 1,837
------------- ------------- ------------- -----------
Net income (loss).............. $(2,104) $1,534 $ 2,407 $1,837
============= ============= ============= ===========
</TABLE>
- ---------
* To reflect historical depreciation of WDSY-FM net of decrease in
amortization due to the exchange allocation.
(8) Pro Forma Adjustments
SFX has not included in the pro forma adjustments certain cost savings
totaling $11,559,000 it believes would have been realized for the year
ended December 31, 1996 following the Liberty Acquisition, the Prism
Acquisition, the Houston Exchange, the Jackson Acquisitions, the Hearst
Acquisition, the Charlotte Exchange, the Richmond Acquisition, the
Texas Coast Acquisition and Hartford Acquisition and $2,881,000 for the
nine months ended September 30, 1997 following the Richmond
Acquisition, the Hearst Acquisition, the Charlotte Exchange, Hartford
Acquisition, and Texas Coast Acquisition, had these transactions been
consummated as of January 1, 1996. The cost savings consist principally
of the elimination of certain duplicative technical, sales and general
and administrative functions due to the operation of a cluster of
stations in each of its principal markets, a reduction of employee
benefit costs and commission rates and the elimination of programming
personnel due to automation and simulcasting.
While management believes that such cost savings and the elimination
of non-recurring expenses are reasonably achievable, and many of which
have been achieved, SFX's ability to fully achieve such cost savings
and to eliminate the non-recurring expenses is subject to numerous
factors, many of which are beyond SFX's control. These factors may
include difficulties in integrating the acquired stations and the
incurrence of unanticipated severance, promotional or other costs and
expenses. There can be no assurance that SFX will realize all such
cost savings.
a. To reflect interest expense of $36,282,000 and $48,375,000 for the
nine months ended September 30, 1997 and the year ended December 31,
1996, respectively, related to the $450,000,000 of Senior
Subordinated Notes at 10.75% issued in 1996, amortization of deferred
financing costs of $125,000 and $1,491,000 for the nine months ended
September 30, 1997 and the year ended December 31, 1996,
respectively, interest expense of $16,848,000 and $22,462,000
relating to the borrowings from the Credit Agreement at 8% for the
nine months ended September 30, 1997 and the year ended December 31,
1996, respectively, and elimination of existing interest expense (net
of interest on other debt) of $47,397,000 and $41,218,000 related to
SFX and the sellers for the nine months ended September 30, 1997 and
the year ended December 31, 1996, respectively.
28
<PAGE>
b. Reflects increase (decrease) in amortization of intangible assets
resulting from the purchase price allocation, deferred taxes
recorded and change in amortization period:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 NINE MONTHS ENDED SEPTEMBER 30, 1997
--------------------------------------------------------------------------------------------
INCREASE DUE DECREASE DUE INCREASE DUE DECREASE DUE
TO PURCHASE TO CHANGE IN TO PURCHASE TO CHANGE IN
PRICE AMORTIZATION NET INCREASE PRICE AMORTIZATION NET INCREASE
ALLOCATION PERIODS (DECREASE) ALLOCATION PERIODS (DECREASE)
-------------- -------------- -------------- -------------- -------------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Liberty Acquisition .. $1,699 $(2,399) $ (700)
Prism Acquisition .... 1,010 (642) 368
Charlotte WTDR/WLYT
Acquisition ......... 490 490
Jackson Acquisitions . 108 108
Greenville and
Greensboro
Acquisitions......... 597 (623) (26)
Albany Acquisition .. 23 23 $ 2 $ 2
Hartford Acquisition 910 910 152 152
Texas Coast
Acquisition.......... 1,067 1,067 89 89
Richmond Acquisition . 1,053 (164) 889 527 (82) 445
Hearst Acquisition ... 733 733 428 428
Secret Communications
Acquisition ......... 6,207 (2,018) 4,189 2,069 (673) 1,396
-------------- --------------
Total Pro Forma
adjustments........ $8,052 $2,512
============== ==============
</TABLE>
c. To reflect depreciation expense for fixed assets associated with the
Texas Coast, Hartford and Richmond Acquisitions as per SFX's
depreciation policy.
d. To reflect $559,000 in amortization relating to the present value of
the Triathlon consulting fees assigned to SFX under the SCMC
Termination Agreement for the year ended December 31, 1996.
e. To record incremental corporate overhead charges of $1,434,000 for
the year ended December 31, 1996, relating to increases in personnel,
professional fees and administrative expenses associated with the
increased size of SFX due to the Completed Transactions and Pending
Acquisition and Disposition--Broadcasting and the elimination of
$3,713,000 for the year ended December 31, 1996, of the corporate
overhead of the sellers.
f. Reflects fees of $3,000,000 incurred by Triathlon and would have been
payable to SFX under the revised SCMC Agreement for the year ended
December 31, 1996. Future fees may be lesser or greater based upon
future acquisition and financing activity by Triathlon. Minimum
annual fees will be $1,000,000 per year.
g. Elimination of acquisition related costs of $5,935,000 recorded on
the income statement of Liberty for the year ended December 31, 1996,
a gain on the sale of assets of $11,920,000 recorded on the books of
ABS Greenville Partners, L.P. for the year ended December 31, 1996
and net income tax benefit of $1,612,000 for the year ended December
31, 1996.
h. To record interest expense of $195,000 and $547,000 for the nine
months ended September 30, 1997 and the year ended December 31, 1996,
respectively, in connection with the long-term payments due for the
Delsener/Slater Acquisition, the Texas Coast Acquisition and the
Sunshine Acquisition.
i. Elimination of LMA fees paid by Secret Communications for WJJJ-FM
and WDSY-FM.
j. Elimination of interest expense on Jackson note payable to third
party acquired by Capstar.
k. Reflects the issuance of 70,796 shares of SFX Class A common stock in
connection with the Sunshine Acquisition for a total value of
$2,000,000.
l. To reflect the depreciation and amortization expense adjustment of
$3,014,000 and $884,000 associated with the Delsener/Slater, Meadows,
and Sunshine concert acquisitions for the year ended December 31,
1996 and the nine months ended September 30, 1997, respectively.
m. To reflect the amortization of $231,000 and $308,000 associated with
the John Boy and Billy Network contract payments for the nine months
ended September 30, 1997 and the year ended December 31, 1996,
respectively.
29
<PAGE>
n. To record the incremental Series D Preferred Stock and the Series E
Preferred Stock dividends issued to finance a portion of the Pending
Acquisition and Disposition--Broadcasting at a rate of 6.5% and 12
5/8%, respectively.
o. Reflects the elimination of non-recurring Delsener/Slater officer's
bonuses and wages not being paid under SFX's new employment
contracts.
(B) Pending Acquisition & Disposition--Broadcasting
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
----------------------------------------------------------------------
PENDING
CAPSTAR NASHVILLE PRO FORMA ACQUISITION AND
DISPOSITION ACQUISITION ADJUSTMENTS (1) DISPOSITION--BROADCASTING
------------- ------------- --------------- ------------------------
<S> <C> <C> <C> <C>
Net broadcast revenues ................ $(9,831) $4,893 $(4,938)
Station and other operating expenses . (5,489) 4,263 (1,226)
Depreciation, amortization, duopoly
integration costs and acquisition
related costs ........................ (1,201) 467 39 (c) (95)
207 (d)
393 (b)
------------- ------------- --------------- ------------------------
Operating income (loss) ............... (3,141) 163 (639) (3,617)
Interest expense ...................... (36) -- 36 (a)
Other expense (income) ................ -- (3) (3)
------------- ------------- --------------- ------------------------
Income (loss) before income tax
expense .............................. (3,105) 166 (675) (3,614)
Income tax expense (benefit) .......... -- (3) (3)
------------- ------------- --------------- ------------------------
Net income (loss) ..................... (3,105) 169 (675) (3,611)
------------- ------------- --------------- ------------------------
Net income (loss) applicable to common
shares ............................... $(3,105) $ 169 $ (675) $(3,611)
============= ============= =============== ========================
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
----------------------------------------------------------------------
PENDING
CAPSTAR NASHVILLE PRO FORMA ACQUISITION AND
DISPOSITION ACQUISITION ADJUSTMENTS (1) DISPOSITION--BROADCASTING
------------- ------------- --------------- ------------------------
Net broadcast revenues................. $(9,012) $8,081 $ (450)(d) $(1,381)
Station and other operating expenses .. (5,265) 6,473 1,208
Depreciation, amortization, duopoly
integration costs and acquisition
related costs ........................ (852) 652 275 (d) 650
50 (c)
525 (b)
------------- ------------- --------------- ------------------------
Operating income (loss)................ (2,895) 956 (1,300) (3,239)
Interest expense....................... (2,108) -- 2,108 (a)
Other expense (income)................. (538) -- (538)
------------- ------------- --------------- ------------------------
Income (loss) before income tax
expense............................... (249) 956 (3,408) (2,701)
Income tax expense (benefit)........... -- --
------------- ------------- --------------- ------------------------
Net income (loss)...................... (249) 956 (3,408) (2,701)
------------- ------------- --------------- ------------------------
Net income (loss) applicable to common
shares................................ $ (249) $ 956 $(3,408) $(2,701)
============= ============= =============== ========================
</TABLE>
30
<PAGE>
(1) Pro Forma Adjustments
SFX has not included in the pro forma adjustments certain cost savings
totalling $539,000 it believes would have been realized for the year ended
December 31, 1996 following the Nashville Acquisition and the Chancellor
Exchange and $375,000 for the nine months ended September 30, 1997 following
the Nashville Acquisition and the Chancellor Exchange, had these transactions
been consummated as of January 1, 1996. The cost savings consist principally
of the elimination of certain duplicative technical, sales and general and
administrative functions due to the operation of a cluster of stations in
each of its principal markets, a reduction of employee benefit costs and
commission rates and the elimination of programming personnel due to
automation and simulcasting.
While management believes that such cost savings and the elimination of
non-recurring expenses are reasonably achievable, SFX's ability to fully
achieve such cost savings and to eliminate the non-recurring expenses is
subject to numerous factors, many of which are beyond SFX's control. These
factors may include difficulties in integrating the acquired stations and the
incurrence of unanticipated severance, promotional or other costs and
expenses. There can be no assurance that SFX will realize all such cost
savings.
a. To reflect the elimination of existing interest expense of $36,000
and $2,108,000 related to the Capstar Disposition for the nine months
ended September 30, 1997 and the year ended December 31, 1996,
respectively.
b. Reflects increase in amortization of intangible assets of $393,000
and $525,000 for the nine months ended September 30, 1997 and the
year ended December 31, 1996, respectively, resulting from the
purchase price allocation and change in amortization period related
to the Nashville Acquisition.
c. Amortization of $39,000 and $50,000 for acquisition costs associated
with the Nashville Acquisition for the nine months ended September
30, 1997 and the year ended December 31, 1996, respectively.
d. To reflect the reduced amortization of goodwill and elimination of
LMA fees of the Chancellor Exchange.
31
<PAGE>
(C) Pending Acquisitions and the Financing--Entertainment
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
----------------------------------------------------------
PACE CONTEMPORARY NETWORK BGP
ACQUISITION ACQUISITION ACQUISITION ACQUISITION
I II III IV
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue.............. $229,480 $85,570 $20,563 $65,448
Operating expenses .. 205,365 75,784 13,893 59,312
Depreciation &
amortization........ 4,476 1,081 207 611
Corporate expenses .. -- -- -- --
------------- -------------- ------------- -------------
Operating income
(loss).............. 19,639 8,705 6,463 5,525
Interest expense .... 4,803 227 196 837
Other (income)
expenses............ 1,594 (170) (123) (764)
Equity (income) loss
from investments ... (5,321) -- -- --
------------- -------------- ------------- -------------
Income/(loss) before
income tax expense . 18,563 8,648 6,390 5,452
Income tax expense
(benefit)........... 3,751 -- 135 2,133
------------- -------------- ------------- -------------
Net income (loss) ... $ 14,812 $ 8,648 $ 6,255 $ 3,319
============= ============== ============= =============
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
--------------------------------------------
CONCERTS/ PRO FORMA
SOUTHER PRO FORMA PRO FORMA PENDING
ACQUISITION ADJUSTMENTS FOR FINANCING ACQUISITIONS--
V VI VII ENTERTAINMENT
------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenue.............. $13,093 $ -- $ -- $414,154
Operating expenses .. 10,631 -- -- 364,985
Depreciation &
amortization........ 57 16,821 (a) -- 23,253
Corporate expenses .. -- 1,500 (b) -- 1,500
------------- ------------- --------------- ---------------
Operating income
(loss).............. 2,405 (18,321) -- 24,416
Interest expense .... -- -- (6,063)(a) 30,408
-- 30,408 (b)
Other (income)
expenses............ (57) (1,046)(c) -- (566)
Equity (income) loss
from investments ... (34) 1,046 (c) -- (4,309)
------------- ------------- --------------- ---------------
Income/(loss) before
income tax expense . 2,496 (18,321) (24,345) (1,117)
Income tax expense
(benefit)........... -- (2,393)(d) -- 3,626
------------- ------------- --------------- ---------------
Net income (loss) ... $ 2,496 $(15,928) (24,345) $ (4,743)
============= ============= =============== ===============
</TABLE>
32
<PAGE>
I. PACE ACQUISITION
Reflects the PACE Acquisition and the separate acquisitions of PACE's two
partners' interests in Pavilion, a partnership that owns certain
amphitheaters operated by PACE. The PACE Acquisition is not conditional on
the consummation of the Pavilion Acquisition.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 IN (000'S)
---------------------------------------------------------
PACE PAVILION PRO FORMA PACE
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue ................................ $137,616 $91,114 $ 750 (a) $229,480
Operating expenses...................... 131,473 75,319 (1,427)(b) 205,365
Depreciation & amortization............. 1,462 3,014 -- 4,476
Other expenses.......................... 447 -- (447)(c) --
------------- ------------- ------------- -------------
Operating income........................ 4,234 12,781 2,624 19,639
Interest expense........................ 1,517 3,286 -- 4,803
Other expenses.......................... 64 1,530 -- 1,594
Equity (income) loss from investments .. (6,949) (1,654) 3,282 (d) (5,321)
------------- ------------- ------------- -------------
Income/(loss) before income tax
expense................................ 9,602 9,619 (658) 18,563
Income tax expense...................... 3,751 -- -- 3,751
------------- ------------- ------------- -------------
Net income (loss)....................... $ 5,851 $ 9,619 $ (658) $ 14,812
============= ============= ============= =============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) To reflect non-cash revenue resulting from SFX Entertainment 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 Partners.
(b) Reflects the elimination of $520,000 of certain officer's bonuses and
wages which will not be paid under SFX Entertainment's new employment
contracts and of $907,000 of non-recurring costs incurred in connection
with PACE's planned initial public offering.
(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. PACE currently owns 33 1/3% in Pavilion and has agreed to
acquire the remaining 66 2/3% interest in Pavilion pursuant to the
Blockbuster Acquisition and Sony Acquisition. There can be no assurance
that SFX Entertainment will be able to consummate the acquisition of
either or both of Blockbuster's and Sony's respective interest in
Pavilion and, as a result, SFX Entertainment may not obtain 100% of
Pavilion.
II. 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.
The Contemporary Acquisition is not conditioned upon the consummation of the
acquisition of such 50% interest.
33
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 IN (000'S)
-----------------------------------------------------------
CONTEMPORARY RIVERPORT PRO FORMA CONTEMPORARY
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue ................................ $71,141 $14,429 $ -- $85,570
Operating expenses...................... 66,764 11,223 (2,203)(a) 75,784
Depreciation & amortization............. 498 583 -- 1,081
-------------- ------------- ------------- --------------
Operating income........................ 3,879 2,623 2,203 8,705
Interest expense........................ 153 74 -- 227
Other income............................ (122) (48) -- (170)
Equity (income) from investments ....... (1,298) -- 1,298 (b) --
-------------- ------------- ------------- --------------
Income (loss) before income tax
expense................................ 5,146 2,597 905 8,648
Income tax expense...................... -- -- -- --
-------------- ------------- ------------- --------------
Net income (loss)....................... $ 5,146 $ 2,597 $ 905 $ 8,648
============== ============= ============= ==============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's salary and bonuses and
other consulting expenses which will not be paid under SFX
Entertainment's new employment and other contracts.
(b) Reflects the elimination of Contemporary's equity income in Riverport
Amphitheater Partners. Contemporary has entered into an agreement to
acquire its partners' 50% interest in this venture. If Contemporary is
unable to complete this acquisition of the remaining 50% interest in
Riverport Amphitheater Partners, the cash consideration paid by SFX
Entertainment for Contemporary will be reduced by $10,500,000.
The Contemporary Agreement provides that in the event the Contemporary
Acquisition is consummated prior to the consummation of the Spin-Off,
1,402,851 shares of preferred stock will be issued to the sellers. Such
preferred stock is to be converted into an equal number of shares of SFX
Entertainment Class A Common Stock upon consummation of the Spin-Off or, if
the Spin-Off shall not have occurred prior to July 1, 1998, such preferred
stock is to be redeemed at their fair market value, but in no event less than
$18,700,000.
34
<PAGE>
III. NETWORK ACQUISITION
The Network Acquisition consists of the separate acquisitions of Network
Magazine and SJS. Each of these acquisitions is conditioned on the concurrent
closing of the other.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 IN (000'S)
--------------------------------------------------------------
THE NETWORK
MAGAZINE SJS PRO FORMA NETWORK
AS REPORTED (A) AS REPORTED (A) ADJUSTMENTS ACQUISITIONS
--------------- --------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue ................................ $12,047 $10,737 $(2,221)(c) $20,563
Operating expenses...................... 11,878 10,717 (6,481)(b) 13,893
(2,221)(c)
Depreciation & amortization............. 119 88 -- 207
--------------- --------------- ------------- --------------
Operating income (loss)................. 50 (68) 6,481 6,463
Interest expense........................ 163 33 -- 196
Other income............................ (43) (80) -- (123)
--------------- --------------- ------------- --------------
(Loss) income before income tax
expense................................ (70) (21) 6,481 6,390
Income tax expense ..................... -- 135 -- 135
--------------- --------------- ------------- --------------
Net (loss) income ...................... $ (70) $ (156) $ 6,481 $ 6,255
=============== =============== ============= ==============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) SFX Entertainment's purchase agreement for Network Magazine and SJS
provides that the purchase price will be increased by $4,000,000 if
total 1998 EBITDA as defined equals $9,000,000; by an additional $4 for
each $1 increase in EBITDA between $9,000,000 and $10,000,000 and by an
additional $6 for each $1 increase in EBITDA between $10,000,000 and
$11,000,000 (maximum of $14,000,000 additional consideration). The
additional consideration is payable in stock or cash at SFX
Entertainment's option. The pro forma statement of operation assumes
that no additional consideration is paid.
(b) Reflects the elimination of certain officer's bonuses and wages which
will not be paid under SFX Entertainment's new employment contracts.
(c) Reflects the elimination of transactions between Network Magazine and
SJS.
35
<PAGE>
IV. BGP ACQUISITION
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 IN
(000'S)
---------------------------------------------
PRO FORMA BGP
AS REPORTED (A) ADJUSTMENTS ACQUISITION
--------------- ------------- -------------
<S> <C> <C> <C>
Revenue ......................... $65,448 $ -- $65,448
Operating expenses............... 59,312 -- 59,312
Depreciation & amortization ..... 611 -- 611
--------------- ------------- -------------
Operating income ................ 5,525 -- 5,525
Interest expense................. 837 -- 837
Other income..................... (764) -- (764)
--------------- ------------- -------------
Income before income tax
expense......................... 5,452 -- 5,452
Income tax expense............... 2,133 -- 2,133
--------------- ------------- -------------
Net income....................... $ 3,319 $ -- 3,319
=============== ============= =============
</TABLE>
(a) Reflects BGP's audited actual operating results for the nine months
ended October 31, 1997.
V. CONCERT/SOUTHERN ACQUISITION
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1997 IN
(000'S)
-------------------------------------------
CONCERT/
PRO FORMA SOUTHERN
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue .............................. $13,093 $ -- $13,093
Operating expenses.................... 11,097 (466)(a) 10,631
Depreciation & amortization........... 57 -- 57
------------- ------------- -------------
Operating income...................... 1,939 466 2,405
Interest expense...................... -- -- --
Other income.......................... (57) -- (57)
Equity loss (income) from
investments.......................... 11 (45)(b) (34)
------------- ------------- -------------
Income before income tax expense ..... 1,985 511 2,496
Income tax expense.................... -- -- --
------------- ------------- -------------
Net income............................ $ 1,985 $ 511 $ 2,496
============= ============= =============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's bonuses and wages which
will not be paid under SFX Entertainment's new employment contracts.
(b) Reflects the elimination of equity income of a non-entertainment
affiliated entity which is not being acquired by SFX Entertainment.
VI. PRO FORMA ADJUSTMENTS:
(a) Reflects the increase in depreciation and amortization resulting from
the preliminary purchase accounting treatment of the Pending
Acquisitions. SFX Entertainment amortizes goodwill over 15 years.
(b) To record incremental corporate overhead charges associated with
incremental headquarters personnel and general and administrative
expenses that management estimates will be necessary following
completion of the Pending Acquisitions.
(c) To reclassify Delsener/Slater's equity income in the PNC Bank Arts
Center venue following the acquisition of Pavilion which owns the other
50% equity interest in the venue.
36
<PAGE>
(d) Represents an adjustment to the provision for income taxes to reflect
an approximate pro forma tax provision of $3,500,000. The calculation
treats all companies to be acquired pursuant to the Pending
Acquisitions as "C" Corporations and includes a benefit of
approximately $6,000,000 related to the pro forma loss carryforward of
approximately $16,000,000 from the twelve months ended December 31,
1996. The above provision also reflects the non-deductibility of
approximately $12,000,000 of goodwill amortization, tax savings related
to the pro forma adjustments for the Financing and state taxes of
approximately $3,500,000.
VII. PRO FORMA FOR THE FINANCINGS:
(a) Represents the elimination of existing interest expense for the Pending
Acquisitions.
(b) Reflects interest expense associated with the Notes, the Senior Credit
Facility and other debt and deferred compensation costs related to the
Pending Acquisitions. The interest rates assumed in the Notes Offering
and Senior Credit Facility are 9% and 8% per annum, respectively. A
one-quarter percent increase or decrease in the assumed weighted
average interest rate for the Financing would change the annual pro
forma interest expense by approximately $886,000. There can be no
assurance that the Company will be able to consummate the Financing on
acceptable terms, or at all.
37
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
--------------------------------------------------
PACE CONTEMPORARY NETWORK BGP
ACQUISITION ACQUISITION ACQUISITION ACQUISITION
I II III IV
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenue......................... $246,548 $71,545 $24,556 $92,331
Operating expenses.............. 237,429 64,320 18,403 84,466
Depreciation & amortization .... 5,336 1,334 268 1,474
Corporate expenses.............. -- -- -- --
----------- ------------ ----------- -----------
Operating income (loss)......... 3,783 5,891 5,885 6,391
Interest expense................ 5,456 383 294 1,258
Other (income) expenses......... (265) (216) (42) (584)
Equity (income) loss from
investments.................... (3,227) -- -- --
----------- ------------ ----------- -----------
Income (loss) before income tax
expense ....................... 1,819 5,724 5,633 5,717
Income tax expense (benefit) .. (714) 35 303 1,272
----------- ------------ ----------- -----------
Net income (loss) .............. $ 2,533 $ 5,689 $ 5,330 $ 4,445
=========== ============ =========== ===========
</TABLE>
(RESTUBBED TABLE CONTINUED FROM ABOVE)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
--------------------------------------------------
CONCERT/ PRO FORMA
SOUTHERN PRO FORMA PRO FORMA PENDING
ACQUISITION ADJUSTMENTS FOR FINANCING ACQUISITIONS-
V VI VII ENTERTAINMENT
----------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Revenue......................... $12,601 $ -- $ -- $447,581
Operating expenses.............. 9,679 -- -- 414,297
Depreciation & amortization .... 69 22,481 (a) -- 30,962
Corporate expenses.............. -- 2,000 (b) -- 2,000
----------- ----------- ------------- -------------
Operating income (loss)......... 2,853 (24,481) -- 322
(7,391)(a)
Interest expense................ -- -- 40,544 (b) 40,544
Other (income) expenses......... (47) (312)(d) -- (1,466)
Equity (income) loss from
investments.................... 38 312 (d) -- (2,877)
----------- ----------- ------------- -------------
Income (loss) before income tax
expense ....................... 2,862 (24,481) (33,153) (35,879)
Income tax expense (benefit) .. -- 809 (c) -- 1,705
----------- ----------- ------------- -------------
Net income (loss) .............. $ 2,862 $(25,290) $(33,153) $(37,584)
=========== =========== ============= =============
</TABLE>
38
<PAGE>
I. PACE ACQUISITION
Reflects the PACE Acquisition and the separate acquisitions of two
partners' interest in a partnership that owns certain amphitheaters operated
by PACE. The PACE Acquisition is not conditioned on the consummation of the
Pavilion Acquisition.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 IN (000'S)
--------------------------------------------------------------------------------------
PACE PAVILION PAVILION PAVILION PRO FORMA PACE
AS REPORTED (A) 1 MONTH (B) 11 MONTHS (B) AS REPORTED ADJUSTMENTS ACQUISITION
--------------- ----------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenue......................... $156,325 $5,259 $83,964 $89,223 $ 1,000(c) $246,548
Operating expenses.............. 155,533 5,199 77,267 82,466 (570)(d) 237,429
Depreciation & amortization .... 1,737 253 3,346 3,599 -- 5,336
Other expenses.................. 3,675 -- -- -- (3,675)(e) --
--------------- ----------- ------------- ------------- ------------- -------------
Operating (loss) income ........ (4,620) (193) 3,351 3,158 5,245 3,783
Interest expense................ 1,206 395 3,855 4,250 -- 5,456
Other income.................... (59) (123) (83) (206) -- (265)
Equity (income) loss from
investments.................... (3,048) 82 (129) (47) (132)(f) (3,227)
--------------- ----------- ------------- ------------- ------------- -------------
Income (loss) before income tax
expense........................ (2,719) (547) (292) (839) 5,377 1,819
Income tax (benefit)............ (714) -- -- -- -- (714)
--------------- ----------- ------------- ------------- ------------- -------------
Net (loss) income .............. $ (2,005) $ (547) $ (292) $ (839) $ 5,377 $ 2,533
=============== =========== ============= ============= ============= =============
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS:
(a) Reflects PACE's audited operating results for fiscal year ended
September 30, 1996.
(b) Reflects Pavilion unaudited operating results for the one month ended
October 31, 1995 and the audited operating results for the eleven
months ended September 30, 1996. During 1996, Pavilion changed its
fiscal year-end from October 31 to September 30.
PACE currently owns 33 1/3% in Pavilion and has agreed to acquire the
remaining 66 2/3% interest from the two partners Blockbuster and Sony.
(c) To reflect non-cash revenue resulting from SFX Entertainment 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.
(d) Reflects the elimination of $570,000 of certain officer's salary and
bonuses which will not be paid under SFX Entertainment's new employment
contracts.
(e) Reflects the elimination of non-recurring restricted stock compensation
to PACE executives.
(f) To eliminate PACE's income from its 33 1/3% equity investment in
Pavilion. PACE currently owns 33 1/3% in Pavilion and has agreed to
acquire the remaining 66 2/3% interest in Pavilion pursuant to the
Blockbuster Acquisition and Sony Acquisition. There can be no assurance
that SFX Entertainment will be able to consummate the acquisition of
either or both of Blockbuster's and Sony's respective interests in
Pavilion and, as a result, SFX Entertainment may not obtain 100% of
Pavilion.
39
<PAGE>
II. 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, MO that is operated by Contemporary. The
Contemporary Acquisition is not conditioned upon the consummation of the
acquisition of such 50% interest.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 IN (000'S)
-----------------------------------------------------------
CONTEMPORARY RIVERPORT PRO FORMA CONTEMPORARY
AS REPORTED AS REPORTED ADJUSTMENTS ACQUISITION
-------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue................................. $59,852 $11,693 $ -- $71,545
Operating expenses...................... 58,189 9,168 (3,037)(a) 64,320
Depreciation & amortization............. 567 767 -- 1,334
-------------- ------------- ------------- --------------
Operating income ....................... 1,096 1,758 3,037 5,891
Interest expense........................ 213 170 -- 383
Other income............................ (159) (57) -- (216)
Equity (income) loss from investments .. (822) -- 822 (b) --
-------------- ------------- ------------- --------------
Income (loss) before income tax
expense................................ 1,864 1,645 2,215 5,724
Income tax expense ..................... 35 -- 35
-------------- ------------- ------------- --------------
Net income.............................. $ 1,829 $ 1,645 $ 2,215 $ 5,689
============== ============= ============= ==============
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's bonuses and wages not
expected to be paid under SFX Entertainment new employment contracts.
(b) Reflects the elimination of Contemporary's equity income in Riverport
Amphitheater Partners. Contemporary had entered into an agreement to
acquire its partners' 50% interest in this venture. If Contemporary is
unable to complete this acquisition of the remaining 50% interest in
Riverport Amphitheater Partners, the cash consideration paid by SFX
Entertainment for Contemporary will be reduced by $10,500,000.
The Contemporary Agreement provides that in the event the Contemporary
Acquisition is consummated prior to the consummation of the Spin-Off,
1,402,851 shares of preferred stock of SFX Entertainment will be issued to
the Sellers. Such preferred stock is to be converted into an equal number of
shares of SFX Entertainment's Class A Common Stock upon consummation of the
Spin-Off or, if the Spin-Off shall not have occurred prior to July 1, 1998,
such preferred stock is to be redeemed by SFX Entertainment at its fair
market value, but in no event less than $18,700,000.
40
<PAGE>
III. NETWORK ACQUISITIONS
The Network Acquisitions consist of the separate acquisitions of Network
Magazine and SJS. Each of these acquisitions is conditioned on the concurrent
closing of the other.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 IN (000'S)
------------------------------------------------------------
THE NETWORK
MAGAZINE SJS PRO FORMA NETWORK
AS REPORTED (A) AS REPORTED ADJUSTMENTS ACQUISITIONS
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenue.......................... $14,767 $11,375 $(1,586)(c) $24,556
Operating expenses............... 14,275 11,259 (5,545)(b) 18,403
(1,586)(c)
Depreciation & amortization ..... 184 84 -- 268
--------------- ------------- ------------- --------------
Operating income ................ 308 32 5,545 5,885
Interest expense................. 291 3 -- 294
Other income..................... (42) -- -- (42)
--------------- ------------- ------------- --------------
Income before income tax
expense......................... 59 29 5,545 5,633
Income tax expense .............. 212 91 -- 303
--------------- ------------- ------------- --------------
Net (loss) income ............... $ (153) $ (62) $ 5,545 $ 5,330
=============== ============= ============= ==============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects Network Magazine's audited operating results for fiscal year
ended September 30, 1996. SFX Entertainment's purchase agreement for
Network Magazine and SJS provides that the purchase price will be
increased by $4,000,000 if total 1998 EBITDA as defined equals
$9,000,000; by an additional $4 for each $1 increase in EBITDA between
$9,000,000 and $10,000,000 and by an additional $6 for each $1 increase
in EBITDA between $10,000,000 and $11,000,000 (maximum of $14,000,000
additional consideration). The additional consideration is payable is
stock or cash at SFX Entertainment's option. The pro forma statement of
operations assumes that no additional consideration is paid.
(b) Reflects the elimination of certain officer's bonuses and wages which
will not be paid under SFX Entertainment's new employment contracts.
(c) Reflects the elimination of transactions between Network Magazine and
SJS.
41
<PAGE>
IV. BGP ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 IN (000'S)
---------------------------------------------
PRO FORMA BGP
AS REPORTED (A) ADJUSTMENTS ACQUISITION
--------------- ------------- -------------
<S> <C> <C> <C>
Revenue.......................... $92,331 $ -- $92,331
Operating expenses............... 87,520 (3,054)(b) 84,466
Depreciation & amortization ..... 1,474 -- 1,474
--------------- ------------- -------------
Operating income ................ 3,337 3,054 6,391
Interest expense................. 1,258 -- 1,258
Other Expense.................... (584) -- (584)
--------------- ------------- -------------
Income before income tax
expense......................... 2,663 3,054 5,717
Income tax expense .............. 1,272 -- 1,272
--------------- ------------- -------------
Net income ...................... $ 1,391 $ 3,054 $ 4,445
=============== ============= =============
</TABLE>
- ------------
PRO FORMA ADJUSTMENTS:
(a) Reflects BGP's audited operating results for the fiscal year ended
January 31, 1997.
(b) Reflects the elimination of certain officer's bonuses, wages,
partnership life insurance, profit sharing and other expenses which
will not be paid under SFX Entertainment's new employment contracts.
42
<PAGE>
V. CONCERT/SOUTHERN ACQUISITION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996 IN (000'S)
-------------------------------------------
CONCERT/
PRO FORMA SOUTHERN
AS REPORTED ADJUSTMENTS ACQUISITION
------------- ------------- -------------
<S> <C> <C> <C>
Revenue.......................... $12,601 $ -- $12,601
Operating expenses............... 10,873 (1,194)(a) 9,679
Depreciation & amortization ..... 69 -- 69
------------- ------------- -------------
Operating income ................ 1,659 1,194 2,853
Investment income................ (47) -- (47)
Equity loss from investments .... 27 11 (b) 38
------------- ------------- -------------
Income before income tax
expense......................... 1,679 1,183 2,862
Income tax expense .............. -- -- --
------------- ------------- -------------
Net income ...................... $ 1,679 $ 1,183 $ 2,862
============= ============= =============
</TABLE>
PRO FORMA ADJUSTMENTS:
(a) Reflects the elimination of certain officer's bonuses and wages which
will not be paid under the SFX Entertainment new employment contracts.
(b) Reflects the elimination of equity loss of a non-entertainment
affiliated entity which is not being acquired by SFX Entertainment.
VI. PRO FORMA ADJUSTMENTS:
(a) Reflects the increase in depreciation and amortization resulting from
the preliminary purchase accounting treatment of the Pending
Acquisitions. SFX Entertainment amortizes goodwill over 15 years.
(b) To record incremental corporate overhead charges associated with
incremental headquarters personnel that management estimates will be
necessary following completion of the Pending Acquisitions.
(c) Reflects estimated state and local income taxes. On a consolidated pro
forma basis, SFX Entertainment has a net operating loss for the year
ending December 31, 1996 of approximately $16 million for which no
federal tax benefit has been provided.
(d) To reclassify the Delsener/Slater's equity income in the PNC Bank Arts
Center venue following the acquisition of Pavilion which owns the other
50% equity interest in the venue.
VII. PRO FORMA FOR THE FINANCING:
(a) Represents the elimination of existing interest expense for the Pending
Acquisitions.
(b) Reflects interest expense associated with the $275,000,000 in
privately-placed debt, the senior credit facility, other debt and
deferred compensation costs for the Pending Acquisitions. The interest
rates assumed in the Notes Offering and Senior Credit Facility are 9%
and 8% per annum, respectively. A one-quarter percentage increase or
decrease in the assumed weighted average interest rate for the
financing would change annual pro forma interest expense by
approximately $1.2 million. There can be no assurance that SFX
Entertainment will be able to obtain such financing on acceptable
terms, or at all.
(D) SFX Entertainment Pro Forma for the Pending Acquisitions
o Reflects pro forma operating results of SFX Entertainment had all the
Pending Acquisitions--Entertainment and the Delsener/Slater, Meadows,
and Sunshine Acquisitions been consummated at January 1, 1996.
(E) Pro Forma for the Spin-Off of SFX Entertainment
o Reflects pro forma operating results of SFX after the Spin-Off of SFX
Entertainment.
43
