<PAGE>
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C) OF THE
SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[X] Definitive Information Statement (Additional Material)
SFX BROADCASTING, INC.
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(NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE>
[SFX Broadcasting, Inc.]
SUPPLEMENT NO. 1
TO THE
INFORMATION STATEMENT
DATED JANUARY 7, 1998
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Reference is made to the Information Statement dated January 7, 1998 (the
"Information Statement") furnished to the holders of shares of Class A Common
Stock, par value $.01 per share (the "Class A Common Stock"), of SFX
Broadcasting, Inc., a Delaware corporation (the "Company"), in connection
with certain waivers in respect of, and amendments to, the Certificate of
Designations (the "Series E Certificate") relating to the Company's 12 5/8%
Series E Cumulative Exchangeable Preferred Stock Due October 31, 2006 (the
"Series E Preferred Stock").
The Company has supplemented its Series E Consent Solicitation Statement (the
"Series E Supplement") to raise the Consent Fee to $2.25 per share of Series
E Preferred Stock, to change the Expiration Date and to modify the Proposed
Amendments. The Series E Supplement is attached hereto as Annex 1.
This Supplement should be read in conjunction with the Information Statement.
All capitalized terms that are used in this Supplement (including the
attached Annex) but not defined herein shall have the meanings given them in
the Information Statement.
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NO APPROVAL BY THE HOLDERS OF SHARES OF CLASS A COMMON STOCK OF THE
AMENDMENTS TO THE SERIES E CERTIFICATE IS REQUIRED OR SOUGHT. WE ARE NOT
ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
THE INFORMATION CONTAINED IN THE INFORMATION STATEMENT, AS SUPPLEMENTED BY
THIS SUPPLEMENT (INCLUDING THE INFORMATION CONTAINED IN ANNEX 1 ATTACHED
THERETO AND HERETO), IS PROVIDED AS CONTEXT FOR CERTAIN WAIVERS IN RESPECT
OF, AND AMENDMENTS TO, THE SERIES E CERTIFICATE AND IS INTENDED TO BE FOR
INFORMATION PURPOSES ONLY. UNDER ALL CIRCUMSTANCES ANY INFORMATION PROVIDED
IN THIS SUPPLEMENT REGARDING THE PROPOSALS TO BE VOTED UPON AT THE UPCOMING
SPECIAL MEETING OF STOCKHOLDERS OF THE COMPANY (INCLUDING THE MERGER
DESCRIBED THEREIN) IS SUPERSEDED BY ANY INFORMATION CONTAINED IN THE
DEFINITIVE PROXY STATEMENT TO BE SENT TO HOLDERS OF SHARES OF CLASS A COMMON
STOCK IN CONNECTION WITH THAT MEETING. HOLDERS OF SHARES OF CLASS A COMMON
STOCK ARE ENTITLED TO VOTE ON, AND PROXIES WILL BE SOUGHT FOR, THE PROPOSALS
TO BE VOTED UPON AT THE SPECIAL MEETING.
THE DATE OF THIS SUPPLEMENT IS JANUARY 28, 1998. IT IS FIRST BEING SENT TO
HOLDERS OF CLASS A COMMON STOCK ON SUCH DATE.
<PAGE>
ANNEX 1
[SFX Broadcasting, Inc.]
SUPPLEMENT NO. 1
TO THE
CONSENT SOLICITATION STATEMENT DATED JANUARY 7, 1998
RELATING TO
THE COMPANY'S 12 5/8% SERIES E CUMULATIVE EXCHANGEABLE PREFERRED STOCK
DUE OCTOBER 31, 2006
Reference is made to the Consent Solicitation Statement dated January 7,
1998 (the "Consent Solicitation Statement") whereby SFX Broadcasting, Inc., a
Delaware corporation (the "Company"), is soliciting consents (the "Consents")
from Holders (as defined in the Consent Solicitation Statement) of its 12
5/8% Series E Cumulative Exchangeable Preferred Stock due October 31, 2006
(the "Series E Stock" or the "Shares") to certain waivers in respect of, and
amendments to, the Certificate of Designations, Preferences and Relative,
Participating, Optional, and Other Special Rights of Preferred Stock (the
"Series E Certificate") pursuant to which the Shares were issued.
This Supplement No. 1 should be read in conjunction with the Consent
Solicitation Statement. All capitalized terms that are used in this
Supplement No. 1 (including the Annexes attached hereto) and that are not
defined herein shall have the meanings given them in the Consent Solicitation
Statement.
The Company has raised the Consent Fee to $2.25 per Share held as of the
Record Date. The Partial Payment shall continue to be $.10 per Share held as
of the Record Date. The Company has also extended the Expiration Date until
5:00 p.m., New York City time, on February 3, 1998. Holders who deliver
Consents after such revised Expiration Date will not be entitled to receive
the Consent Fee.
In addition to the foregoing changes to the Consent Solicitation
Statement, the Company has revised certain sections of the Consent
Solicitation Statement. The following annexes attached hereto replace, and
should be substituted for, the indicated sections of the Consent Solicitation
Statement:
1. Annex A (entitled "Amendments to Indenture") replaces, and should be
substituted for, Annex A of the Consent Solicitation Statement. Differences
between Annex A to the Consent Solicitation Statement and this amended Annex
A are indicated by bold lines in the margin.
2. Annex B (entitled "Unaudited Pro Forma Condensed Combined Financial
Statements of SFX Broadcasting, Inc.") replaces, and should be substituted
for, pages F-1 though F-39 of the Consent Solicitation Statement. The pro
forma financial statements on Annex B have been revised from the pro forma
financial statements in the Consent Solicitation Statement to reflect, among
other things, the increase in the Consent Fees payable pursuant to the
Consent Solicitation Statement and the consent solicitation statement
relating to the Company's 10 3/4% Senior Subordinated Notes due 2006 (from
$10 to $22.50 per $1,000 in principal amount of such Notes).
The pro forma financial information set forth in Annex B supercedes the
pro forma financial information set forth in the section of the Consent
Solicitation Statement at pages 12-13 entitled "Summary Consolidated
Financial Data of the Company." The pro forma financial information set forth
in Amendment No. 2 to the Registration Statement on Form S-1 of SFX
Entertainment, Inc., which is expected to be filed with the Securities and
Exchange Commission on or about January 30, 1998, and which will be deemed to
be incorporated herein by reference, supercedes the pro forma financial
information set forth in the section of the Consent Solicitation Statement at
pages 14-15 entitled "Summary Consolidated Financial Data of SFX
Entertainment, Inc."
HOLDERS OF SHARES AS OF THE RECORD DATE WHO HAVE PREVIOUSLY DELIVERED A
LETTER OF WAIVER AND CONSENT WILL BE ENTITLED TO RECEIVE THE REVISED CONSENT
FEE WITHOUT THE NECESSITY OF EXECUTING AND DELIVERING A REVISED LETTER OF
WAIVER AND CONSENT. HOLDERS OF SHARES AS OF THE RECORD DATE WHO HAVE NOT
delivered a Letter of Waiver and Consent and who wish to consent to the
Proposed Amendments should deliver to the Depository at the address set forth
on the last page of this Supplement No. 1 a Letter of Waiver and Consent in
the form that accompanied the Consent Solicitation Statement. Holders of
Shares as of the Record Date who wish to revoke Consents that have previously
been delivered should follow the procedures set forth in the Consent
Solicitation Statement under the caption "The Consent Solicitation
Statement--Revocation of Consents." Any Holders with questions or needing
additional information or a Letter of Waiver and Consent should contact
either the Solicitation Agent or the Information Agent at the addresses set
forth on the last page of this Supplement No. 1.
------------------------------
The Solicitation Agent for the Consent Solicitation is:
LEHMAN BROTHERS
------------------------------
The Date of this Supplement No. 1 is January 28, 1998
<PAGE>
ANNEX A
AMENDMENTS TO SERIES E CERTIFICATE
The following sets forth certain provisions of the Series E Certificate
substantially as it would read if the Proposed Amendments were adopted and
became operative. Language which is double-underscored will be added to the
Series E Certificate; deletions are indicated by a caret ( ). The following
descriptions are qualified in their entirety by reference to the Series E
Certificate and this Consent Solicitation Statement. Capitalized terms used
below without definition have the same meanings as set forth in the Series E
Certificate.
1. Certain Definitions
Acquisition Agreements. The term "Acquisition Agreements" shall mean the
acquisition agreements relating to the Pending Acquisitions (as defined in
the Consent Solicitation of the Corporation dated January 7, 1998, as
supplemented by Supplement No. 1 thereto dated January 28, 1998) as they may
be amended from time to time and all transactions and agreements specifically
contemplated thereby or by instruments referred to therein.
Class A Common Stock. The term "Class A Common Stock" shall mean the
Corporation's Class A Common Stock, par value $.01 per share.
Class B Common Stock. The term "Class B Common Stock" shall mean the
Corporation's Class B Common Stock, par value $.01 per share.
Consolidated Cash Flow. The term "Consolidated Cash Flow" shall mean, with
respect to any Person for any period, the Consolidated Net Income of such
Person for such period plus (i) an amount equal to any extraordinary loss
plus any net loss realized in connection with an Asset Sale by such Person or
any of its Subsidiaries during such period (to the extent such losses were
deducted in computing such Consolidated Net Income), plus (ii) provision for
taxes based on income or profits of such Person and its Subsidiaries for such
period, to the extent that such provision for taxes was included in computing
such Consolidated Net Income, plus (iii) Consolidated Interest Expense of
such Person for such period, to the extent any such Consolidated Interest
Expense was deducted in computing such Consolidated Net Income, plus (iv)
depreciation, amortization (including amortization of goodwill and other
intangibles but excluding amortization of prepaid cash expenses that were
paid in a prior period) and other non-cash charges (excluding any such
non-cash charge to the extent that it represents an accrual of or reserve for
cash charges in any future period) of such Person and its Subsidiaries for
such period to the extent that such depreciation, amortization and other
non-cash charges were deducted in computing such Consolidated Net Income,
plus (v) the Specified Charges (as defined in the Corporation's Consent
Solicitation Statement dated January 7, 1998 , as supplemented by Supplement
No. 1 thereto dated January 28, 1998, relating to the Series E Preferred
Stock), plus (vi) to the extent that such Consolidated Net Income was reduced
thereby (a) amortization of the expenses incurred in connection with the
Consulting, Non-Compete and Termination Agreement among the Corporation, SBI
Holding Corporation and Robert F.X. Sillerman dated as of August 24, 1997,
(b) consent fees and expenses directly related to the Consent Solicitations,
(c) legal and other costs associated with pending or threatened litigation in
connection with the SBI Merger and (d) other unusual and nonrecurring charges
paid or accrued in 1997 or 1998 (including, but not limited to, legal,
accounting, investment banking, severance and termination fees) relating to
the SBI Merger, the Spin-Off, the Pending Acquisitions or transactions
related thereto; provided that the aggregate amount of charges that may be
added to Consolidated Net Income pursuant to this clause (d) to determine
Consolidated Cash Flow for any four-quarter period will not exceed $13.5
million (net of expenses reimbursed or paid by SFX Entertainment) less (vii)
all non-cash items increasing Consolidated Net Income for such period
(excluding any such non-cash income to the extent it represents an accrual of
cash income in any future period), in each case, on a consolidated basis and
determined in accordance with GAAP.
"Consent Solicitations" means the consent solicitations of the Company
made pursuant to the Consent Solicitation Statements dated January 7, 1998,
as supplemented by Supplements No. 1 thereto dated January 28, 1998, to the
holders of the Company's 10 3/4% Senior Subordinated Notes due 2006 and to
the holders of Series E Preferred Stock and the related Information
Statement.
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Entertainment Companies. The term "Entertainment Companies" shall mean
SFX Entertainment and any and all of its direct and indirect Subsidiaries.
Meadows Repurchase. The term "Meadows Repurchase" shall mean the
redemption by the Corporation of up to 250,838 shares of Class A Common Stock
for $33.00 per share, pursuant to the Agreement of Merger, dated February 12,
1997, by and among the Corporation, NOC-Acquisition Corp., CAPCO Acquisition
Corp., QN Acquisition Corp., Nederlander of Connecticut, Inc., Connecticut
Ampitheater Development Corporation, QN Corp., Connecticut Performing Arts,
Inc. and Connecticut Performing Arts Partners and the Stockholders of
Nederlander of Connecticut, Inc., Connecticut Ampitheater Development
Corporation and QN Corp. listed on the signature page thereto.
Merger Agreement. The term "Merger Agreement" shall mean the Agreement and
Plan of Merger, dated as of August 24, 1997, as it may be amended from time
to time, among the Corporation, SBI Holding Corporation and SBI Radio
Acquisition Corporation and all transactions and agreements specifically
contemplated thereby or by instruments referred to therein.
SBI Merger. The term "SBI Merger" shall mean a merger of SBI Radio
Acquisition Corporation into the Corporation pursuant to the Merger
Agreement.
SFX Entertainment. The term "SFX Entertainment" shall mean SFX
Entertainment, Inc., a subsidiary of the Corporation, newly formed in
Delaware, to which the Corporation will contribute cash and all of the
capital stock of SFX Concerts, Inc. (formerly known as Delsener/Slater
Enterprises, Inc.,) that the Corporation directly or indirectly owns.
Spin-Off. The term "Spin-Off" shall mean the distribution of SFX
Entertainment common stock pro rata to the holders of Class A Common Stock
and the Class B Common Stock (and the transfer to an escrow account for
delivery to the holders of certain warrants to receive Class A Common Stock)
or other disposition pursuant to, or as permitted by, the Merger Agreement of
all of the capital stock and assets of the Entertainment Companies.
Spin-Off Transactions. The term "Spin-Off Transactions" shall mean the
Spin-Off, the Pending Acquisitions and the Merger Agreement as it relates to
the transactions described or referred to under the "Proposed Amendments" and
"Spin-Off" sections of the Consent Solicitation Statement of the Corporation
dated January 7, 1998, as supplemented by Supplement No. 1 thereto dated
January 28, 1998, relating to this Certificate of Designations.
Subsidiary. The term "Subsidiary" shall mean, with respect to any person,
(i) any corporation, association or other business entity of which more than
50% of the total voting power of shares of Voting Stock thereof is at the
time owned or controlled, directly or indirectly, by such person or one or
more of the other Subsidiaries of that person (or a combination thereof) and
(ii) any partnership (a) the sole general partner or the managing general
partner of which is such person or a Subsidiary of such person or (b) the
only general partners of which are such person or of one or more Subsidiaries
of such person (or any combination thereof); however, with respect to the
Corporation, "Subsidiary" does not include the Entertainment Companies.
8. Certain Covenants
(a) Restricted Payments. The Corporation shall not, and shall not permit
any of its Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the
Corporation's Parity Securities or Junior Securities (including, without
limitation, any payment in connection with any merger or consolidation
involving the Corporation) or to the direct or indirect holders of the
Corporation's Parity Securities or Junior Securities in their capacity as
such (other than dividends or distributions payable in Capital Stock (other
than Disqualified Stock) of the Corporation); (ii) purchase, redeem or
otherwise acquire or retire for value any Parity Securities or Junior
Securities of the Corporation; (iii) make any payment on, or purchase,
redeem, defease or otherwise acquire or retire for value any Junior
Securities, except payments of the Liquidation Preference thereof at final
maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively
referred to as "Restricted Payments"), unless, at the time of and after
giving effect to such Restricted Payment:
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(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Corporation would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $l.00 of additional Indebtedness (other
than Permitted Debt) pursuant to the Debt to Cash Flow Ratio test set
forth below under Section 8(b) hereof; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments declared or made after the Initial Issue Date
(other than Restricted Payments permitted by clauses (2), (5), (6) ,
(10), (13) or (14) of the following paragraph) shall not exceed, at the
date of determination, the sum of (1) an amount equal to the Corporation's
Consolidated Cash Flow from the Initial Issue Date to the end of the
Corporation's most recently ended full fiscal quarter for which internal
financial statements are available, taken as a single accounting period,
less the product of 1.4 times the Corporation's Consolidated Interest
Expense from the Initial Issue Date to the end of the Corporation's most
recently ended full fiscal quarter for which internal financial statements
are available, taken as a single accounting period, plus (2) an amount
equal to the net cash proceeds received by the Corporation from the issue
or sale after the Initial Issue Date of Equity Interests of the
Corporation (other than (i) sales of Disqualified Stock and (ii) Equity
Interests sold to any of the Corporation's Subsidiaries) or of debt
securities or Disqualified Stock (other than the Series D Preferred Stock)
of the Corporation issued after the Initial Issue Date that have been
converted into such Equity Interests plus (3) to the extent that any
Restricted Investment that was made after the Initial Issue Date is sold
for cash or otherwise liquidated or repaid for cash, the lesser of (A) the
cash return of capital with respect to such Restricted Investment (less
the cost of disposition, if any) and (B) the initial amount of such
Restricted Investment.
If no Voting Rights Triggering Event shall have occurred and be continuing
as a result thereof, the foregoing provisions will not prohibit: (1) the
payment of any dividend within 60 days after the date of declaration thereof,
if at said date of declaration such payment would have complied with the
provisions of this Certificate of Designations; (2) the redemption,
repurchase, retirement or other acquisition of any Equity interests of the
Corporation in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Subsidiary of the Corporation) of other
Equity Interests of the Corporation (other than any Disqualified Stock);
provided that the amount of any such net cash proceeds that are utilized for
any such redemption, repurchase, retirement or other acquisition shall be
excluded from clause (c)(2) of the preceding paragraph; (3) cash payments
made in respect of fractional shares of Capital Stock not to exceed $100,000
in the aggregate in any fiscal year; (4) the payment of dividends on the
shares of Series D Preferred Stock in accordance with the terms thereof as in
effect on the Initial Issue Date; (5) the issuance of Series D Exchange Notes
in exchange for the Series D Preferred Stock; provided that such issuance is
permitted by Section 8(b) hereof; (6) the issuance of Exchange Debentures in
exchange for the Series E Preferred Stock; provided that such issuance is
permitted by Section 8(b) hereof; (7) in the event that the Corporation
elects to issue the Series D Exchange Notes in exchange for the Series D
Preferred Stock, cash payments made in lieu of the issuance of Series D
Exchange Notes having a face amount less than $50 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (8) in the event that the
Corporation elects to issue Exchange Debentures in exchange for Series E
Preferred Stock, cash payments made in lieu of the issuance of Exchange
Debentures having a face amount less than $l,000 and any cash payments
representing accrued and unpaid dividends in respect thereof, not to exceed
$100,000 in the aggregate in any fiscal year; (9) payments made by the
Corporation to SCMC for facilities maintenance and other services and
reimbursements pursuant to the Shared Facilities Agreement, as amended from
time to time, to the extent that such payments do not exceed the amount of
payments which would have been due if calculated in accordance with the terms
of the Shared Facilities Agreement as in effect on the Initial Issue Date;
(10) payments by the Corporation pursuant to the Management Termination
Agreements in accordance with the terms thereof as in effect on the Initial
Issue Date; (11) the redemption by the Corporation of its Series C Preferred
Stock in accordance with the terms thereof as in effect on the Initial
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Issue Date; (12) the redemption by the Corporation of its Series B Preferred
Stock in accordance with the terms thereof as in effect on the Initial Issue
Date; provided that payments made by the Corporation to redeem the Series B
Preferred Stock shall not exceed $1.0 million in any fiscal year or $2.0
million in the aggregate since the Initial Issue Date; (13) the Spin-Off
Transactions; and (14) the Meadows Repurchase.
The amount of all Restricted Payments (other than cash) shall be the Fair
Market Value (evidenced by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Board of Directors) on the date
of the Restricted Payment of the asset(s) or securities proposed to be
transferred by the Corporation or such Subsidiary, as the case may be,
pursuant to the Restricted Payment. Not later than the date of making any
Restricted Payment, the Corporation shall deliver to the Board of Directors
an Officers' Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by this
covenant were computed, which calculations may be based upon the
Corporation's latest available financial statements.
(b) Incurrence of Indebtedness and Issuance of Preferred Stock. The
Corporation shall not, and shall not permit any of its Subsidiaries to,
directly or indirectly, create, incur, issue, assume, guarantee or otherwise
become directly or indirectly liable, contingently or otherwise, with respect
to (collectively, "incur") any Indebtedness (including Acquired Debt) and
that the Corporation will not issue any Disqualified Stock and will not
permit any of its Subsidiaries to issue any shares of Preferred Stock;
provided, however, that (i) the Corporation may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and (ii) (A) the
Subsidiaries may guarantee Senior Debt and (B) the Subsidiaries may issue
Preferred Stock other than Disqualified Stock if, in either case, the
Corporation's Debt to Cash Flow Ratio at the time of incurrence of such
Indebtedness or the issuance of such Disqualified Stock or the Guarantee of
such Senior Debt or the issuance of such Preferred Stock, as the case may be,
after giving pro forma effect to such incurrence or issuance or Guarantee as
of such date and to the use of proceeds therefrom as if the same had occurred
at the beginning of the most recently ended four full fiscal quarter period
of the Corporation for which internal financial statements are available,
would have been no greater than 7.0 to 1.
The foregoing provisions will not apply to the incurrence of any of the
following Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Corporation and its Subsidiaries of
Indebtedness pursuant to one or more Bank Facilities, so long as the
aggregate principal amount of all Indebtedness outstanding under all Bank
Facilities does not, at the time of incurrence, exceed an amount equal to
$225.0 million;
(ii) the incurrence by the Corporation and its Subsidiaries of the
Existing Indebtedness;
(iii) Indebtedness under the Exchange Debentures;
(iv) the issuance of Disqualified Stock by the Corporation that by its
items would not require or permit any payment of dividends or other
distributions that would violate the covenant Section 8(a) above;
(v) the incurrence by the Corporation or any of its Subsidiaries of
Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior
owner of such assets or such Subsidiary prior to such acquisition by the
Corporation or one of its Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Corporation or one
of its Subsidiaries; and provided further that, after giving pro forma
effect to such incurrence of Indebtedness as of such date and to the use
of proceeds therefrom as if the same had occurred at the beginning of the
most recently ended four full fiscal quarter period for which internal
financial statements are available, the Corporation's Debt to Cash Flow
Ratio would have been no greater than 7.0 to 1.
(vi) the incurrence by the Corporation or any of its Subsidiaries of
Permitted Refinancing Debt in exchange for, or the net proceeds of which
are used to extend, refinance, renew, replace, defease or refund,
Indebtedness that was permitted by this Certificate of Designations to be
incurred;
A-4
<PAGE>
(vii) the incurrence by the Corporation or any of its Subsidiaries of
intercompany Indebtedness between or among the Corporation and any of its
Subsidiaries; provided, however, that (i) if the Corporation is the
obligor on such Indebtedness, such Indebtedness is expressly subordinate
to the payment in full of all Obligations with respect to the Exchange
Debentures and (ii)(A) any subsequent issuance or transfer of Equity
Interests that results in any such Indebtedness being held by a Person
other than the Corporation or a Subsidiary and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the
Corporation or a Subsidiary shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Corporation or such Subsidiary,
as the case may be;
(viii) the incurrence by the Corporation or any of its Subsidiaries of
Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Certificate of Designations to be
outstanding; and
(ix) the incurrence by the Corporation and any of its Subsidiaries of
Indebtedness (in addition to Indebtedness permitted by any other clause of
this paragraph) in an aggregate principal amount (or accreted value, as
applicable) at any time outstanding not to exceed $10.0 million.
(c) Merger, Consolidation or Sale of Assets. The Corporation shall not
consolidate or merge with or into (whether or not the Corporation is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or
more related transactions, to another corporation, Person or entity unless
(i) the Corporation is the surviving corporation or the entity or the Person
formed by or surviving any such consolidation or merger (if other than the
Corporation) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made is a corporation organized or
existing under the laws of the United States, any states, any state thereof
or the District of Columbia; (ii) the Series E Preferred Stock shall be
converted into or exchanged for and shall become shares of such successor,
transferee or resulting Person, having in respect of such successor,
transferee or resulting Person the same powers, preferences and relative
participating, optional or other special rights and the qualifications,
limitations or restrictions thereon, that the Series E Preferred Stock had
immediately prior to such transaction; (iii) immediately after such
transaction no Voting Rights Triggering Event exists; (iv) such transaction
will not result in the loss or suspension or material impairment of any
Material Broadcast License; and (v) except in the case of a merger of the
Corporation with or into a Wholly Owned Subsidiary of the Corporation, the
Corporation or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Corporation), or to which such
sale, assignment, transfer, lease, conveyance or other disposition shall have
been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the
Corporation immediately preceding the transaction and (B) will, at the time
of such transaction and after giving pro forma effect thereto as if such
transaction had occurred at the beginning of the applicable four-quarter
period, be permitted to incur at least $1.00 of additional Indebtedness
pursuant to the Debt to Cash Flow Ratio test set forth in Section 8(b)
hereof.
(d) Transactions with Affiliates. The Corporation shall not, and shall not
permit any of its Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Corporation or the relevant Subsidiary than those that
would have been obtained in a comparable transaction by the Corporation or
such Subsidiary with an unrelated Person and (ii) the Corporation delivers to
the Holders (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies
with clause (i) above and that such Affiliate Transaction has been approved
by a majority of the members of the Board of Directors that are disinterested
as to such Affiliate Transaction and (b) with respect to any Affiliate
Transaction or series of related Affiliate Transactions involving aggregate
consideration in excess of $5.0 million, an opinion as to the fairness to the
Holders of such Affiliate Transaction from a financial point of view issued
by an accounting, appraisal or investment banking firm of national standing;
provided
A-5
<PAGE>
that (1) transactions between or among the Corporation and/or its
Wholly-Owned Subsidiaries, (2) the redemption or repurchase of the Existing
MMR Indebtedness, (3) transactions and agreements specifically contemplated
by the Termination and Assignment Agreement between the Corporation and SCMC
as in effect on the Initial Issue Date, (4) payments required by the terms of
the joint lease among the Corporation, SCMC and the landlord thereunder for
the Corporation's corporate headquarters located at 650 Madison Avenue, New
York, New York and any agreements directly related thereto, in each case, as
the same are in effect on the Initial Issue Date, (5) payments made by the
Corporation to SCMC for the facilities maintenance and other services and
reimbursements pursuant to the Shared Facilities Agreement, (6) payments and
other transactions by the Corporation pursuant to the Management Termination
Agreements, (7) any Restricted Payments that are permitted by Section 8(a)
hereof and any Permitted Investments, (8) the transactions and agreements
specifically contemplated by the Merger Agreement, the Acquisition Agreements
or by instruments referred to in any such agreements and (9) any Spin-Off
Transaction, in each case, shall not be deemed to be Affiliate Transactions.
(e) Payments for Consent. Neither the Corporation nor any of its
Subsidiaries shall, directly or indirectly, pay or cause to be paid any
consideration, whether by way of dividend or other distribution, fee or
otherwise, to any Holder of any Series E Preferred Stock for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of this Certificate of Designations or the Series E Preferred
Stock unless such consideration is offered to be paid and is paid to all
Holders of the Series E Preferred Stock that consent, waive or agree to amend
in the time frame set forth in the solicitation documents relating to such
consent, waiver or agreement.
(f) Reports.
(i) Whether or not required by the rules and regulations of the
Securities and Exchange Commission (the "Commission"), so long as any
shares of Series E Preferred Stock are outstanding, the Corporation shall
furnish to the Holders of Series E Preferred Stock (i) all quarterly and
annual financial information that would be required to be contained in a
filing with the Commission on Forms 10-Q and 10-K if the Corporation were
required to file such Forms, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and, with
respect to the annual information only, a report thereon by the
Corporation's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K
if the Corporation were required to file such reports. In addition,
whether or not required by the rules and regulations of the Commission,
the Corporation shall file a copy of all such information and reports with
the Commission for public availability (unless the Commission will not
accept such a filing) and make such information available to securities
analysts and prospective investors upon request.
(ii) The Corporation shall deliver to the Holders, within 90 days after
the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Corporation and its Subsidiaries during
the preceding fiscal year has been made under the supervision of the
signing officers with a view to determining whether the Corporations has
kept, observed, performed and fulfilled its obligations under this
Certificate of Designations and further stating, as to each such officer
signing such certificate, that to the best of his or her knowledge the
Corporation has kept, observed, performed and fulfilled each and every
covenant contained in this Certificate of Designations and is not in
default in the performance or observance of any of the terms, provisions
and conditions of this Certificate of Designations (or, if any such
default shall have occurred, describing all such defaults of which he or
she may have knowledge and what action the Corporation is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of
which payments on account of the Liquidation Preference of or dividends,
if any, on the Series E Preferred Stock is prohibited or if such event has
occurred, a description of the event and what action the Corporation is
taking or proposes to take with respect thereto.
(iii) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 8(f)(i) above shall be
accompanied by a written statement of the Corporation's independent public
accountants (who shall be a firm of established national reputation) that
in making the examination
A-6
<PAGE>
necessary for certification of such financial statements, nothing has come
to their attention that would lead them to believe that the Corporation
has violated any provisions of this Certificate of Designations or, if any
such violation has occurred, specifying the nature and period of existence
thereof, it being understood that such accountants shall not be liable
directly or indirectly to any Person for any failure to obtain knowledge
of any such violation.
(iv) The Corporation shall, so long as any of the shares of Series E
Preferred Stock are outstanding, deliver to the Holders, forthwith upon
any Executive Officer of the Corporation becoming aware of any default
under this Certificate of Designations, an Officers' Certificate
specifying such default and what action the Corporation is taking or
proposes to take with respect thereto.
(g) Conflicts with By-laws. If any provisions of the Corporation's By-laws
conflict in any way with this Certificate of Designations, the Corporation
shall, so long as any of the shares of Series E Preferred Stock are
outstanding, take all necessary actions to amend such By-laws and thereby
resolve the conflict.
(h) Waiver Relating to Certain Transactions.
[DELETED IN ITS ENTIRETY]
A-7
<PAGE>
ANNEX B
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS OF SFX
BROADCASTING, INC.
<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Unaudited Pro Forma Condensed Combined Financial Statements ........................... B-2
SFX Broadcasting, Inc.: Unaudited Pro Forma Condensed Combined Balanced Sheet as of
September 30, 1997 ................................................................... B-3
SFX Broadcasting, Inc.: Unaudited Pro Forma Condensed Combined Statement of Operations
for the Nine Months Ended September 30, 1997 ......................................... B-13
SFX Broadcasting, Inc.: Unaudited Pro Forma Condensed Combined Statement of Operations
for the Year Ended December 31, 1996 ................................................. B-14
Glossary to Unaudited Pro Forma Condensed Combined Financial Statements ............... B-37
</TABLE>
B-1
<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.
B-2
<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>
B-3
<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>
B-4
<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.
B-5
<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>
B-6
<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
B-7
<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>
B-8
<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>
B-9
<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.
B-10
<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
B-11
<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.
B-12
<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) (1,101)
--------------- -------------- -------------- -------------
Net income (loss) ...... (15,405) (5,077) (3,611) (16)
Preferred stock
dividend requirement .. 27,723 1,183
--------------- -------------- -------------- -------------
Net income (loss)
applicable to common
shares................. $(43,128) $(6,260) $(3,611) $ (16)
=============== ============== ============== =============
Net loss per common
share.................. $ (4.61)
Average common shares
outstanding............ 9,364
EBITDA (1) .............
Adjusted EBITDA (2) ...
</TABLE>
(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).............. (227) 3,500 3,727
--------------- --------------- ---------------
Net income (loss) ...... (24,109) 118 (24,227)
Preferred stock
dividend requirement .. 28,906 0 28,906
--------------- --------------- ---------------
Net income (loss)
applicable to common
shares................. $(53,015) $ 118 $(53,133)
=============== =============== ===============
Net loss per common
share.................. $ 0.06 $ (3.68)
Average common shares
outstanding............ 20,056 15,840
EBITDA (1) ............. $ 56,483 $ 73,906
Adjusted EBITDA (2) ... $ 68,754 $ 77,161
</TABLE>
- ------------
* Net of $1,693,000 of fees from Triathlon.
(1) EBITDA is defined as earnings before interest, taxes, depreciation and
amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles
("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.
(2) Represents EBITDA adjusted for nonrecurring charges and cost savings
associated with the elimination of duplicative staffing and general and
administrative expenses.
B-13
<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 (654)
--------------- -------------- -------------- ---------------
Net income (loss)...... (35,633) (17,387) (2,701) (35,225)
Preferred stock
dividend requirement . 6,061 32,063 --
--------------- -------------- -------------- ---------------
Net income (loss)
applicable to common
shares................ $(41,694) $(49,450) $(2,701) $(35,225)
=============== ============== ============== ===============
Net loss per common
share ................ $ (4.57)
Average common shares
outstanding........... 9,128 71
EBITDA (1) ............
Adjusted EBITDA .......
</TABLE>
(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)............. 1,141 1,500 (359)
--------------- --------------- ---------------
Net income (loss)...... (90,946) (33,233) (57,713)
Preferred stock
dividend requirement . 38,124 38,124
--------------- --------------- ---------------
Net income (loss)
applicable to common
shares................ $(129,070) $(33,233) $(95,837)
=============== =============== ===============
Net loss per common
share ................ $ (1.80) $ (6.24)
Average common shares
outstanding........... 20,056 15,840
EBITDA (1) ............ $ 40,743 (2) $ 83,427
Adjusted EBITDA ....... $ 55,524 (3) $ 96,317
</TABLE>
- ------------
* Net of $3,000,000 of fees from Triathlon.
(1) EBITDA is defined as earnings before interest, taxes depreciation and
amortization. Although EBITDA is not a measure of performance
calculated in accordance with generally accepted accounting principles
("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 and
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 GAAP.
(2) Represents EBITDA adjusted for nonrecurring charges, including a
litigation settlement recorded by PACE and Pavilion Partners, and cost
savings associated with the elimination of duplicative staffing and
general and administrative expenses.
(3) Represents EBITDA adjusted for nonrecurring charges and cost savings
associated with the elimination of duplicative staffing and general and
administrative expenses.
B-14
<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>
B-15
<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>
B-16
<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.
B-17
<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>
B-18
<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.
B-19
<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>
B-20
<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.
B-21
<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.
B-22
<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>
B-23
<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.
B-24
<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)........... -- (7,120)(d) -- (1,101)
------------- ------------- --------------- ---------------
Net income (loss) ... $ 2,496 $(11,201) (24,345) $ (16)
============= ============= =============== ===============
</TABLE>
B-25
<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.
B-26
<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.
B-27
<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.
B-28
<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.
B-29
<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.
B-30
<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) .. -- (1,550)(c) -- (654)
----------- ----------- ------------- -------------
Net income (loss) .............. $ 2,862 $(22,931) $(33,153) $(35,225)
=========== =========== ============= =============
</TABLE>
B-31
<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.
B-32
<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.
B-33
<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.
B-34
<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.
B-35
<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.
B-36
<PAGE>
GLOSSARY TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
"Albany Acquisition" means the acquisition by SFX, consummated in January
1997, of substantially all of the assets used in the operation of WYSR-FM,
operating in Albany, New York.
"BGP Acquisition" means the pending acquisition by SFX Entertainment of BG
Presents, Inc., a concert promotion company operating in San Francisco,
California.
"Capstar Disposition" means the pending sale by SFX of the Jackson
stations and the Biloxi station.
"CBS Exchange" means the exchange by SFX, consummated in March 1997 of
radio station WHFS-FM, operating in Washington, D.C./Baltimore, Maryland, for
KTXQ-FM and KRRW-FM, both operating in Dallas, Texas, and owned by CBS, Inc.
As such, historical operating results for WHFS-FM, KTXQ-FM and KRRW-FM have
been added to SFX, as reported amounts for the twelve months ending December
31, 1996 and from January 1, 1997 through March 31, 1997.
"Chancellor Exchange" means the pending exchange of SFX's radio stations
WBAB-FM, WHFM-FM, WBLI-FM and WGBB-AM, each operating on Long Island, New
York, for WFYV-FM and WAPE-FM, both operating in Jacksonville, Florida, and a
payment to SFX of $11.0 million in cash.
"Charlotte Acquisition" means the acquisition by SFX, consummated in
February 1996, of WTDR-FM and WLYT-FM, both operating in Charlotte, North
Carolina. As such, historical operating results for WTDR-FM and WLYT-FM have
been added to SFX, as reported amounts from January 1, 1996 through February
1, 1996.
"Charlotte Exchange" means the exchange by SFX, consummated in August 1997
of WDSY-FM in Pittsburgh, Pennsylvania and $20 million in cash for WRFX-FM in
Charlotte, North Carolina. As such, historical operating results for WRFX-FM
have been added to SFX, as reported amounts for the year ending December 31,
1996 and from January 1, 1997 through August 1, 1997.
"Completed Transactions" means, collectively, the MMR Merger, the
Greensboro Acquisition, the Liberty Acquisition, the Prism Acquisition, the
Jackson Acquisitions, the Greenville Acquisition, the CBS Exchange, the
Louisville Acquisition, the Raleigh-Greensboro Acquisitions, the Houston
Exchange, the Albany Acquisition, the Delsener/Slater Acquisition, the
Meadows Acquisition, the Secret Communications Acquisition, the Sunshine
Acquisition, the Richmond Acquisition, the Hearst Acquisition, the
acquisitions of WTDR-FM and WLYT-FM, both operating in Charlotte, North
Carolina, KTCK-FM, operating in Dallas, Texas, and KYXY-FM, operating in San
Diego, California, the Little Rock Disposition, the Washington Dispositions,
the Louisville Dispositions, the Dallas Disposition.
"Concert/Southern Acquisition" means the pending acquisition by SFX
Entertainment of Concerts/Southern, a concert promotion company, operating
in Atlanta, Georgia.
"Contemporary Acquisition" means the pending acquisition by SFX
Entertainment of the Contemporary Group, a concert promotion company,
operating in St. Louis, Missouri, and certain affiliated entities.
"Credit Agreement" means the definitive credit agreement SFX entered into
on June 23, 1997, which increases amounts available under its senior credit
facility to $400 million.
"Dallas Disposition" means the sale by SFX, consummated in October 1996,
of radio station KTCK-AM, operating in Dallas, Texas. As such, historical
operating results for KTCK-AM have been added to SFX, as reported amounts
from January 1, 1996 through October 17, 1996.
"Delsener/Slater Acquisition" means the acquisition by SFX, consummated in
January 1997, of Delsener/Slater Enterprises, Ltd., a concert promotion
company, and certain affiliated entities (collectively, "Delsener/Slater").
As such, historical the operating results for Delsener/Slater have been added
to SFX, as reported amounts for the 12 months ending December 31, 1996.
"Greensboro Acquisition" means the acquisition by SFX, consummated in
December 1996, of substantially all of the assets of WHSL-FM, operating in
Greensboro, North Carolina. As such, historical the operating results for
WHSL-FM have been added to SFX, as reported amounts from January 1, 1996
through December 6, 1996.
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<PAGE>
"Greenville Acquisition" means the acquisition by SFX, consummated in June
1996, of substantially all of the assets of WROQ-FM, operating in
Greenville-Spartanburg, South Carolina. As such, historical the operating
results for WROQ-FM have been added to SFX, as reported amounts from January
1, 1996 through June 25, 1996.
"Hartford Acquisition" means the acquisition by SFX, consummated in
February 1997, of WWYZ-FM, which operates in Hartford, Connecticut. As such,
historical the operating results for WWYZ-FM have been added to SFX, as
reported amounts for the year ending December 31, 1996 and from January 1,
1997 through February 28, 1997.
"Hearst Acquisition" means the acquisition by SFX, consummated in August
1997, of two radio stations operating in Pittsburgh, Pennsylvania and two
stations in Milwaukee, Wisconsin for cash. As such, historical operating
results for the Pittsburgh and Milwaukee Stations have been added to SFX, as
reported amounts for the year ending December 31, 1996 and from January 1,
1997 through August 1, 1997.
"Houston Exchange" means the exchange by SFX, consummated in December
1996, of SFX's radio station KRLD-AM, operating in Dallas, Texas, and SFX's
Texas State Networks for radio station KKRW-FM, operating in Houston, Texas.
As such, historical the operating results for KRLD-FM and KKRW-FM have been
added to SFX, as reported amounts from January 1, 1996 through December 1,
1996.
"Jackson Acquisitions" means, collectively, the acquisitions by SFX,
consummated in the third quarter of 1996, of substantially all of the assets
of WJDX-FM, WSTZ-FM and WZRX-AM, each operating in Jackson, Mississippi. As
such, historical the operating results for WJDX-FM have been added to SFX, as
reported amounts from January 1, 1996 through July 19, 1996, while the
historical operating results for WSTZ-FM and WZRX-AM have been added to SFX,
as reported amounts from January 1, 1996 through August 29, 1996.
"Liberty Acquisition" means the acquisition by SFX, consummated in July
1996, of Liberty Broadcasting Incorporated, which owned and operated or
provided programming to or sold advertising on behalf of 14 FM and six AM
radio stations located in six markets: Washington, DC/Baltimore, Maryland;
Nassau-Suffolk, New York; Providence, Rhode Island; Hartford, Connecticut;
Albany, New York; and Richmond, Virginia. As such, historical the operating
results for the 14 FM and six AM stations have been added to SFX, as reported
amounts from January 1, 1996 through July 1, 1996.
"Louisville Acquisition" means the acquisition by SFX, consummated in
September 1996, from Prism of substantially all of the assets of WVEZ-FM,
WTFX-FM and WWKY-AM, each operating in Louisville, Kentucky. As such,
historical the operating results for the three stations have been added to
SFX, as reported amounts from January 1, 1996 through September 17, 1996.
"Louisville Dispositions" means the sale by SFX, consummated in October
1996, of the three stations acquired in the Louisville Acquisition. As such,
historical operating results for the three stations have been added to SFX,
as reported amounts from January 1, 1996 through October 1, 1996.
"Meadows Acquisition" means the acquisition by SFX, consummated in March
1997, of the Meadows Music Theater in Hartford, Connecticut. As such,
historical operating results for Meadows Music Theater have been added to
SFX, as reported amounts for the year ending December 31, 1996 and from
January 1, 1997 through March 19, 1997.
"MMR" means Multi-Market Radio, Inc.
"MMR Hartford Acquisition" means MMR's acquisition by SFX, consummated in
September 1996, of WKSS-FM, operating in Hartford, Connecticut. As such,
historical operating results for WKSS-FM have been added to SFX, as reported
amounts from January 1, 1996 through September 4, 1996.
"MMR Merger" means the merger, consummated in November 1996, of a
wholly-owned subsidiary of SFX with and into MMR, as a result of which MMR
became a wholly-owned subsidiary of SFX. As such, historical operating
results for MMR have been added to SFX, as reported amounts from January 1,
1996 through November 22, 1996.
"Myrtle Beach Acquisition" means MMR's acquisition of WMYB-FM, operating
in Myrtle Beach, South Carolina.
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<PAGE>
"Nashville Acquisition" means the pending acquisition by SFX of WJZC-FM,
WLAC-FM and WLAC-AM, each operating in Nashville, Tennessee, from Sinclair
Broadcasting Group.
"Network Acquisition" means the pending acquisition by SFX Entertainment
of the Network Magazine Group and SJS Entertainment, a creator, producer and
distributor of live concert programming and network radio special events.
"PACE Acquisition" means the pending acquisition by SFX Entertainment of
PACE Entertainment Corporation (including the purchase of the Pavilion
Partners), a concert promotion company operating in Houston, Texas.
"Pending Acquisition and Disposition--Broadcasting" means, collectively,
the Capstar Disposition and the Nashville Acquisition.
"Pending Acquisitions--Entertainment" means, collectively, the BGP
Acquisition, the Concerts/Southern Acquisition, the Contemporary
Acquisition, the Network Acquisitions, and the PACE Acquisition.
"Pending Transactions" means the Pending Acquisition and
Disposition--Broadcasting and the Pending Acquisitions--Entertainment.
"Prism Acquisition" means the acquisition by SFX, consummated in the third
quarter of 1996, of substantially all of the assets of Prism used in the
operation of ten FM and six AM radio stations located in five markets:
Louisville, Kentucky; Jacksonville, Florida; Raleigh, North Carolina; Tucson,
Arizona; and Wichita, Kansas. As such, historical operating results for the
Prism stations have been added to SFX, as reported amounts from January 1,
1996 through July 8, 1996.
"Raleigh-Greensboro Acquisitions" means the acquisition by SFX,
consummated in June 1996, of substantially all of the assets of WMFR-AM,
WMAG-FM and WTCK-AM, each operating in Greensboro, North Carolina, and
WTRG-FM and WRDU-FM, both operating in Raleigh, North Carolina. As such,
historical operating results for the Raleigh-Greensboro stations have been
added to SFX, as reported amounts from January 1, 1996 through June 28, 1996.
"Richmond Acquisition" means the acquisition by SFX, consummated in July
1997, of ABS Communications L.L.C., which owns or will acquire WVGO-FM,
WLEE-FM, WKHK-FM and WBZU-FM, each operating in Richmond, Virginia, net of
the pending disposition of WVGO for $4.5 million. As such, historical
operating results for the four stations have been added to SFX, as reported
amounts for the year ending December 31, 1996 and from January 1, 1997
through July 2, 1997.
"Sale of SFX Broadcasting" means the pending sale of substantially all the
radio assets of SFX Broadcasting for approximately $2 billion in cash and
acquired debt.
"Secret Communications Acquisition" means the acquisition by SFX of
WFBQ-FM, WRZX-FM and WNDE-AM, each operating in Indianapolis, Indiana,
consummated in April 1997, and WDVE-FM, WXDX-FM, and WJJJ-FM, each operating
in Pittsburgh, Pennsylvania, consummated in June 1997. As such, historical
operating results for the Indianapolis stations have been added to SFX, as
reported amounts for the year ending December 31, 1996 and from January 1,
1997 through April 1, 1997, while the operating results for the Pittsburgh
stations have been added to SFX, as reported amounts are included for the
year ending December 31, 1996 and from January 1, 1997 through June 1, 1997.
"Sunshine Acquisition" means the acquisition by SFX, consummated in June
1997, of Sunshine Promotions, Inc. a concert promotion company, and certain
affiliated entities (collectively "Sunshine"). As such, historical operating
results for Sunshine Promotions have been added to SFX, as reported amounts
for the year ending December 31, 1996 and from January 1, 1997 through June
1, 1997.
"Texas Coast Acquisition" means the acquisition by SFX, consummated in
February 1997, of radio stations KQUE-FM and KNUZ-AM in Houston, Texas. As
such, historical operating results for KQUE-FM and KNUZ-AM have been added to
SFX, as reported amounts for the year ending December 31, 1996 and from
January 1, 1997 through February 28, 1997.
"Washington Dispositions" means the sale by SFX, consummated in July 1996,
of three of the stations acquired from Liberty Broadcasting, each operating
in the Washington, D.C./Baltimore, Maryland market. As such, historical the
operating results for the three stations have been added to SFX, as reported
amounts from January 1, 1996 through July 1, 1996.
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<PAGE>
The Depository for the Consent Solicitation is:
THE BANK OF NEW YORK
<TABLE>
<CAPTION>
<S> <C> <C>
BY MAIL: BY FACSIMILE TRANSMISSION: BY HAND OR OVERNIGHT COURIER
P. O. Box 11248 (For Eligible Institutions Only) 101 Barclay Street
New York, New York 10286-1248 (212) 815-6213 Receive & Deliver Window
For Information by Telephone: New York, New York 10286
(800) 507-9357
</TABLE>
TO AVOID BACKUP WITHHOLDING AND/OR UNNECESSARY DELAY, FOREIGN PERSONS MUST
DELIVER THE HOLDERS' LETTER OF CONSENT AND ANY OTHER REQUIRED DOCUMENTS TO
THE DEPOSITORY AS SET FORTH ABOVE.
Any questions or requests for assistance or for additional copies of this
Statement or related documents may be directed to the Information Agent at
one of its telephone numbers set forth below. A Holder may also contact such
Holders' broker, dealer, commercial bank, trust company or other nominee for
assistance concerning the Consent Solicitation.
The Information Agent for the Consent Solicitation is:
D.F. KING & CO., INC.
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Telephone:
(800) 848-3416
(212) 493-6925
Any questions regarding the terms of the Consent Solicitation may be
directed to the Solicitation Agent at its telephone number set forth below.
The Solicitation Agent for the Consent Solicitation is:
LEHMAN BROTHERS
Liability Management Group
3 World Financial Center
200 Vesey Street, 9th Floor
New York, New York 10285
Collect: (212) 528-7581
Toll Free: (800) 438-3242
Attn: David Parsons
