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Technology Stocks : The New QLogic (ANCR) -- Ignore unavailable to you. Want to Upgrade?

To: Greg Hull who wrote (24051)	9/10/1999 5:28:00 PM
From: trendmastr	Read Replies (2) \| Respond to of 29386

Extra SFX's Robert Sillerman Replies to Yesterday's Column By Herb Greenberg Senior Columnist 9/9/99 5:27 PM ET Don't forget to check out this morning's regular installment of Herb on TheStreet. ------------------------------------------------------------------------ From the fair and equal treatment department: SFX (SFX:NYSE) Chairman Robert Sillerman -- not one who could ever be called a wallflower -- didn't agree with this column's interpretation of red flags flying over his company. His reasons, in a letter that arrived here late today: We believe in strong future growth for the contemporary music business; however, SFX Entertainment is a broadly diversified company that derives approximately 25% of its revenue from what is generally considered contemporary music. Our leading position in general music, theatrical, indoor motor sports, talent representation and other aspects of our business contribute to our success and help protect us from the vagaries of any one area of the entertainment and sports business. Moreover, while it is true that in the area of contemporary music we don't "own" the talent and cannot dictate when these bands or shows tour, there is a long history to indicate there's more than adequate "product" out there. In fact, the growth in revenue for the concert industry over the last dozen years has averaged almost 12% compounded. To suggest that there is a lack of artists and that revenue from that isolated source might decline has no historical basis, and we believe that our strong relationship with artists, combined with the outstanding quality of our network of venues, ensure our ability to continue to prosper in the contemporary music venue. In responding to your "Red Flags," let me begin with your concern about a company that is focused on EBITDA. In fact, EBITDA is a traditional and highly respected measuring mechanism for a company and an industry that has very little need for capital expenditures and where amortization charges are generally reflective of the accounting treatment for the "goodwill" component of acquisition costs rather than a measure of a future cost to replace or restore depreciating capital assets. Red Flag #2. The last quarter we reported pro-forma growth of 22% in revenue and 48% in EBITDA. That's comparing all of the same businesses as if they were owned in 1998 and in 1999, or as is customarily phrased, "same store" growth. That's growth from good management, and the combination of assets creating both revenue enhancement and cost savings, rather than "roll-up" growth. Red Flag #3. I have never felt the pressure to make acquisitions for the sake of acquisitions, and nothing in my long business history indicates that the companies I have been involved with are anything but disciplined acquirers. Throughout our history, our acquisitions after consolidation have been made at multiples significantly below our own trading multiple. The ultimate test of performance is return to our investors, whose money has grown 15-fold since 1993. Red Flag #4. An amount of debt is relevant only in the context of the predictable cash flow available to service it. It is more helpful to discuss how our ratio of debt to cash flow is not only conservative and manageable, but in fact after our recent equity offering is at the lowest point of any acquisition-minded company in any industry that I am aware of. Additionally, we presently have $700 million of cash on hand available to pay down debt or complete additional acquisitions, bringing in additional revenue and EBITD -- without incurring additional debt. I can't comment on your Red Flag #5 because I don't understand why it would be a problem. In fact, we sifted through close to 15 companies to determine those that we felt could best serve our shareholders. We view it as a sign of support and confidence that so many highly respected firms want to be involved with us. Interestingly, in all of the acquisitions we've completed we have paid no outside investment bankers with the exception of one very modest fee. We are not a candidate for significant M&A fees, the most profitable part of business on Wall Street, and all the firms know it. We maintain that capacity internally. We always have, and we always will. Therefore, the decision to include "so many" underwriters was made only with the interest of gaining the best distribution of our stock, and the goal of the underwriters to participate was only based on the desire to participate in a growing and respected company. In order to give investors a more balanced view of our company, we hope you will post this letter in the same prominent position that your original article enjoyed. Consider it done.