UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________ 
Form 10-Q
____________________________________ 
x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2015
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                  to                
Commission File Number 001-32601
____________________________________ 
LIVE NATION ENTERTAINMENT, INC.
(Exact name of registrant as specified in its charter)
____________________________________ 
Delaware
 
20-3247759
(State of Incorporation)
 
(I.R.S. Employer Identification No.)
9348 Civic Center Drive
Beverly Hills, CA 90210
(Address of principal executive offices, including zip code)
(310) 867-7000
(Registrant’s telephone number, including area code)
____________________________________ 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
Accelerated filer
 
¨
 
 
 
 
 
 
Non-accelerated filer
 
¨  (Do not check if a smaller reporting company)
Smaller reporting company
 
¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    ¨  Yes    x  No
On August 4, 2015, there were 202,362,219 outstanding shares of the registrant’s common stock, $0.01 par value per share, including 938,389 shares of unvested restricted stock awards and excluding 408,024 shares held in treasury.
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
INDEX TO FORM 10-Q

 
 
Page
PART I—FINANCIAL INFORMATION
 
 
 
 
 
 
PART II—OTHER INFORMATION
 


Table of Contents

LIVE NATION ENTERTAINMENT, INC.
GLOSSARY OF KEY TERMS 
    
AOCI
Accumulated other comprehensive income (loss)
AOI
Adjusted operating income (loss)
Company
Live Nation Entertainment, Inc. and subsidiaries
FASB
Financial Accounting Standards Board
GAAP
United States Generally Accepted Accounting Principles
Live Nation
Live Nation Entertainment, Inc. and subsidiaries
SEC
United States Securities and Exchange Commission
Ticketmaster
For periods prior to May 6, 2010, Ticketmaster means Ticketmaster Entertainment LLC and its predecessor companies (including without limitation Ticketmaster Entertainment, Inc.); for periods on and after May 6, 2010, Ticketmaster means the Ticketmaster ticketing business of the Company

1

Table of Contents

PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
 
June 30,
2015
 
December 31,
2014
 
 
 
(as adjusted)
 
(in thousands)
ASSETS
 
 
 
Current assets
 
 
 
Cash and cash equivalents
$
1,525,819

 
$
1,382,029

Accounts receivable, less allowance of $18,671 and $17,489, respectively
524,227

 
419,301

Prepaid expenses
655,805

 
440,272

Other current assets
46,897

 
26,089

Total current assets
2,752,748

 
2,267,691

Property, plant and equipment
 
 
 
Land, buildings and improvements
816,708

 
808,116

Computer equipment and capitalized software
456,949

 
454,925

Furniture and other equipment
228,297

 
209,624

Construction in progress
107,751

 
78,111

 
1,609,705

 
1,550,776

Less accumulated depreciation
907,942

 
855,439

 
701,763

 
695,337

Intangible assets
 
 
 
Definite-lived intangible assets, net
785,086

 
682,713

Indefinite-lived intangible assets
369,522

 
369,480

Goodwill
1,619,123

 
1,479,037

Other long-term assets
485,274

 
474,103

Total assets
$
6,713,516

 
$
5,968,361

LIABILITIES AND EQUITY
 
 
 
Current liabilities
 
 
 
Accounts payable, client accounts
$
722,720

 
$
658,108

Accounts payable
86,087

 
74,151

Accrued expenses
635,490

 
675,880

Deferred revenue
1,201,446

 
543,122

Current portion of long-term debt, net
57,289

 
47,443

Other current liabilities
24,248

 
12,035

Total current liabilities
2,727,280

 
2,010,739

Long-term debt, net
1,973,173

 
1,995,957

Long-term deferred income taxes
194,607

 
196,759

Other long-term liabilities
128,346

 
112,204

Commitments and contingent liabilities


 


Redeemable noncontrolling interests
245,545

 
168,855

Stockholders’ equity
 
 
 
Common stock
2,016

 
2,004

Additional paid-in capital
2,430,002

 
2,414,428

Accumulated deficit
(1,085,826
)
 
(1,042,603
)
Cost of shares held in treasury
(6,865
)
 
(6,865
)
Accumulated other comprehensive loss
(87,931
)
 
(70,010
)
Total Live Nation stockholders’ equity
1,251,396

 
1,296,954

Noncontrolling interests
193,169

 
186,893

Total equity
1,444,565

 
1,483,847

Total liabilities and equity
$
6,713,516

 
$
5,968,361


See Notes to Consolidated Financial Statements
2

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands except share and per share data)
Revenue
$
1,765,777

 
$
1,665,785

 
$
2,886,089

 
$
2,793,101

Operating expenses:
 
 
 
 
 
 
 
Direct operating expenses
1,279,099

 
1,184,696

 
2,000,388

 
1,915,847

Selling, general and administrative expenses
326,839

 
325,925

 
641,384

 
628,330

Depreciation and amortization
88,571

 
76,219

 
173,112

 
158,807

Gain on disposal of operating assets
(76
)
 
(3,787
)
 
(37
)
 
(3,281
)
Corporate expenses
26,342

 
25,717

 
50,702

 
46,891

Acquisition transaction expenses
2,757

 
1,329

 
2,230

 
3,129

Operating income
42,245

 
55,686

 
18,310

 
43,378

Interest expense
25,650

 
27,590

 
51,013

 
52,082

Interest income
(394
)
 
(1,146
)
 
(1,959
)
 
(1,812
)
Equity in losses (earnings) of nonconsolidated affiliates
367

 
(960
)
 
(2,613
)
 
(3,766
)
Other expense (income), net
(8,500
)
 
(330
)
 
12,528

 
(1,506
)
Income (loss) before income taxes
25,122

 
30,532

 
(40,659
)
 
(1,620
)
Income tax expense
4,910

 
4,710

 
5,655

 
2,655

Net income (loss)
20,212

 
25,822

 
(46,314
)
 
(4,275
)
Net income (loss) attributable to noncontrolling interests
5,156

 
2,888

 
(3,091
)
 
5,239

Net income (loss) attributable to common stockholders of Live Nation
$
15,056

 
$
22,934

 
$
(43,223
)
 
$
(9,514
)
 
 
 
 
 
 
 
 
Basic and diluted net income (loss) per common share available to common stockholders of Live Nation
$
0.06

 
$
0.11

 
$
(0.25
)
 
$
(0.06
)
 
 
 
 
 
 
 
 
Weighted average common shares outstanding:
 
 
 
 
 
 
 
Basic
200,767,811

 
198,701,762

 
200,463,314

 
198,282,044

Diluted
208,778,589

 
205,989,271

 
200,463,314

 
198,282,044


See Notes to Consolidated Financial Statements
3

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(UNAUDITED)

 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Net income (loss)
$
20,212

 
$
25,822

 
$
(46,314
)
 
$
(4,275
)
Other comprehensive income (loss), net of tax:
 
 
 
 
 
 
 
Unrealized loss on cash flow hedges
(182
)
 
(5
)
 

 
(8
)
Realized loss on cash flow hedges
12

 
16

 
25

 
33

Change in funded status of defined benefit pension plan
108

 

 
113

 
30

Foreign currency translation adjustments
26,609

 
9,324

 
(18,059
)
 
19,143

Comprehensive income (loss)
46,759

 
35,157

 
(64,235
)
 
14,923

Comprehensive income (loss) attributable to noncontrolling interests
5,156

 
2,888

 
(3,091
)
 
5,239

Comprehensive income (loss) attributable to common stockholders of Live Nation
$
41,603

 
$
32,269

 
$
(61,144
)
 
$
9,684



See Notes to Consolidated Financial Statements
4

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 
Six Months Ended 
 June 30,
 
2015
 
2014
 
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net loss
$
(46,314
)
 
$
(4,275
)
Reconciling items:
 
 
 
Depreciation
63,705

 
61,906

Amortization
109,407

 
96,901

Deferred income tax benefit
(1,415
)
 
(12,064
)
Amortization of debt issuance costs, discounts and premium, net
5,301

 
10,101

Non-cash compensation expense
17,562

 
22,568

Gain on disposal of operating assets
(37
)
 
(3,281
)
Equity in losses (earnings) of nonconsolidated affiliates, net of distributions
3,732

 
(1,930
)
Other, net
(4,189
)
 
248

Changes in operating assets and liabilities, net of effects of acquisitions and dispositions:
 
 
 
Increase in accounts receivable
(122,058
)
 
(126,528
)
Increase in prepaid expenses
(268,937
)
 
(295,818
)
Increase in other assets
(48,629
)
 
(30,609
)
Increase in accounts payable, accrued expenses and other liabilities
28,614

 
114,764

Increase in deferred revenue
620,412

 
508,323

Net cash provided by operating activities
357,154

 
340,306

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Collections and advances of notes receivable, net
(14,136
)
 
(3,429
)
Investments made in nonconsolidated affiliates
(11,023
)
 
(1,512
)
Purchases of property, plant and equipment
(67,344
)
 
(66,388
)
Cash paid for acquisitions, net of cash acquired
(69,244
)
 
(24,518
)
Other, net
(2,194
)
 
366

Net cash used in investing activities
(163,941
)
 
(95,481
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Proceeds from long-term debt, net of debt issuance costs
101

 
514,612

Payments on long-term debt
(17,170
)
 
(15,126
)
Contributions from noncontrolling interests

 
81

Distributions to noncontrolling interests
(9,370
)
 
(18,036
)
Purchases and sales of noncontrolling interests, net
(9,491
)
 
(3,528
)
Proceeds from exercise of stock options
13,015

 
11,737

Payments for deferred and contingent consideration
(4,125
)
 
(5,541
)
Net cash provided by (used in) financing activities
(27,040
)
 
484,199

Effect of exchange rate changes on cash and cash equivalents
(22,383
)
 
13,478

Net increase in cash and cash equivalents
143,790

 
742,502

Cash and cash equivalents at beginning of period
1,382,029

 
1,299,184

Cash and cash equivalents at end of period
$
1,525,819

 
$
2,041,686




See Notes to Consolidated Financial Statements
5

Table of Contents

LIVE NATION ENTERTAINMENT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

NOTE 1—BASIS OF PRESENTATION AND OTHER INFORMATION
Preparation of Interim Financial Statements
The accompanying unaudited consolidated financial statements have been prepared in accordance with GAAP for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X issued by the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, they include all normal and recurring accruals and adjustments necessary to present fairly the results of the interim periods shown.
The financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2014 Annual Report on Form 10-K filed with the SEC on February 26, 2015, as amended by the Form 10-K/A filed with the SEC on June 30, 2015.
Seasonality
Due to the seasonal nature of shows at outdoor amphitheaters and festivals, which primarily occur from May through September, the Concerts and Sponsorship & Advertising segments experience higher revenue during the second and third quarters. The Artist Nation segment’s revenue is impacted, to a large degree, by the touring schedules of artists it represents and generally experiences higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events. The Ticketing segment’s revenue is impacted by fluctuations in the availability of events for sale to the public, which vary depending upon scheduling by its clients. The Company’s seasonality also results in higher balances in cash and cash equivalents, accounts receivable, prepaid expenses, accrued expenses and deferred revenue at different times in the year. Therefore, the results to date are not necessarily indicative of the results expected for the full year.
Cash and Cash Equivalents
Included in the June 30, 2015 and December 31, 2014 cash and cash equivalents balance is $618.3 million and $533.8 million, respectively, of cash received that includes the face value of tickets sold on behalf of ticketing clients and their share of service charges, which amounts are to be remitted to the clients.
Acquisitions
During the first six months of 2015, the Company completed several acquisitions that were accounted for as business combinations under the acquisition method of accounting and were not significant either on an individual basis or in the aggregate.
Reclassifications
Certain reclassifications have been made to the prior year consolidated financial statements to conform to the 2015 presentation. The Company has reclassified $20.0 million of debt issuance costs originally included in other long-term assets in the December 31, 2014 balance sheet and now reflects it as a reduction of the current portion of long-term debt and long-term debt in connection with the retrospective application of new accounting guidance for debt issuance costs as discussed below. 
Recent Accounting Pronouncements
Recently Adopted Pronouncements
In April 2014, the FASB issued guidance that raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The Company adopted this guidance on January 1, 2015 and there has been no impact from its adoption.
In April 2015, the FASB issued guidance that simplifies the presentation of debt issuance costs. The guidance requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a deduction from the carrying amount of that debt liability, consistent with debt discounts. The guidance is effective for financial statements issued for fiscal years beginning after December 15, 2015 and interim periods within that year. The guidance should be applied on a retrospective basis to all periods presented in the financial statements. Early adoption is permitted and the Company adopted this guidance on January 1, 2015. See “Reclassifications” above for discussion of the impact of implementation.
 

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Recently Issued Pronouncements
In May 2014, the FASB issued a comprehensive new revenue recognition standard that will supersede nearly all existing revenue recognition guidance under GAAP. The new standard provides a five-step analysis of transactions to determine when and how revenue is recognized. The core principle of the guidance is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for annual and interim periods beginning after December 15, 2016, and early adoption of the standard is not permitted. The guidance should be applied retrospectively, either to each prior period presented in the financial statements, or only to the most current reporting period presented in the financial statements with a cumulative-effect adjustment as of the date of adoption. In July 2015, the FASB affirmed its proposal to defer the effective date of the new revenue recognition standard by one year. The FASB also affirmed its proposal to allow early adoption of the standard, but not before the original effective date. Assuming final guidance is issued deferring the effective date, the Company will adopt this standard on January 1, 2018, and is currently assessing which implementation method it will apply and the impact its adoption will have on its financial position and results of operations.
In April 2015, the FASB amended its guidance on internal-use software providing guidance to customers about whether a cloud computing arrangement includes a software license. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The amendments to this guidance are effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted. The guidance should be applied either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. The Company will adopt this standard on January 1, 2016, and is currently assessing which implementation method it will apply and the impact its adoption will have on its financial position and results of operations.
In February 2015, the FASB issued amendments to the consolidation guidance that make changes to the analysis a reporting entity must perform to determine whether it should consolidate certain types of legal entities. This guidance is effective for annual and interim periods beginning after December 15, 2015, and early adoption is permitted. The guidance should be applied either using a modified retrospective approach or retrospectively. The Company will adopt this standard on January 1, 2016, and is currently assessing which implementation method it will apply and the impact its adoption will have on its financial position and results of operations.
NOTE 2—LONG-LIVED ASSETS
Definite-lived Intangible Assets
The Company has definite-lived intangible assets which are amortized over the shorter of either the lives of the respective agreements or the period of time the assets are expected to contribute to the Company’s future cash flows. The amortization is recognized on either a straight-line or expected cash flows basis.

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The following table presents the changes in the gross carrying amount and accumulated amortization of definite-lived intangible assets for the six months ended June 30, 2015:
 
Revenue-
generating
contracts
 
Client /
vendor
relationships
 
Non-compete
agreements
 
Venue
management
and
leaseholds
 
Technology
 
Trademarks
and
naming
rights
 
Other
 
Total
 
(in thousands)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
$
635,127

 
$
355,992

 
$
123,552

 
$
83,322

 
$
15,330

 
$
24,266

 
$
3,581

 
$
1,241,170

Accumulated amortization
(272,071
)
 
(123,195
)
 
(98,512
)
 
(50,490
)
 
(4,246
)
 
(8,701
)
 
(1,242
)
 
(558,457
)
Net
363,056

 
232,797

 
25,040

 
32,832

 
11,084

 
15,565

 
2,339

 
682,713

Gross carrying amount:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Acquisitions— current year
115,097

 
15,000

 

 

 
17,950

 
42,470

 

 
190,517

Acquisitions— prior year
(4,246
)
 
(1,523
)
 
1,500

 

 
11

 

 

 
(4,258
)
Foreign exchange
(7,470
)
 
(4,124
)
 

 
(341
)
 
143

 
(203
)
 

 
(11,995
)
Other (1)
(16,473
)
 
(2,655
)
 

 
(6,212
)
 

 
(9
)
 

 
(25,349
)
Net change
86,908

 
6,698

 
1,500

 
(6,553
)
 
18,104

 
42,258

 

 
148,915

Accumulated amortization:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amortization
(36,676
)
 
(25,371
)
 
(5,904
)
 
(4,506
)
 
(1,761
)
 
(1,718
)
 
(194
)
 
(76,130
)
Foreign exchange
2,839

 
961

 

 
333

 
(39
)
 
182

 

 
4,276

Other (1)
16,473

 
2,655

 

 
6,172

 

 
12

 

 
25,312

Net change
(17,364
)
 
(21,755
)
 
(5,904
)
 
1,999

 
(1,800
)
 
(1,524
)
 
(194
)
 
(46,542
)
Balance as of June 30, 2015:
 
 
 
 
 
 
 
 
 
 
 
 
Gross carrying amount
722,035

 
362,690

 
125,052

 
76,769

 
33,434

 
66,524

 
3,581

 
1,390,085

Accumulated amortization
(289,435
)
 
(144,950
)
 
(104,416
)
 
(48,491
)
 
(6,046
)
 
(10,225
)
 
(1,436
)
 
(604,999
)
Net
$
432,600

 
$
217,740

 
$
20,636

 
$
28,278

 
$
27,388

 
$
56,299

 
$
2,145

 
$
785,086

_________
(1) 
Other includes net downs of fully amortized or impaired assets.
Included in the current year acquisitions amount above of $190.5 million are intangibles for revenue-generating contracts and trademarks and naming rights primarily associated with the acquisitions of controlling interests in two festival promoters located in the United States and the acquisition of a ticketing business located in the United States previously accounted for under the equity method.
The 2015 additions to definite-lived intangible assets from acquisitions have weighted-average lives as follows:
  
Weighted-
Average
Life (years)
 
 
Revenue-generating contracts
9
Client/vendor relationships
8
Technology
10
Trademarks and naming rights
10
All categories
9
Amortization of definite-lived intangible assets for the three months ended June 30, 2015 and 2014 was $43.5 million and $33.3 million, respectively, and for the six months ended June 30, 2015 and 2014 was $76.1 million and $67.9 million,

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respectively. Amortization related to nonrecoupable ticketing contract advances for the three months ended June 30, 2015 and 2014 was $13.2 million and $11.6 million, respectively, and for the six months ended June 30, 2015 and 2014 was $32.8 million and $29.0 million, respectively.
The following table presents the Company’s estimate of future amortization expense for the remainder of 2015 through 2019 for definite-lived intangible assets that exist at June 30, 2015:
 
(in thousands)
July 1 - December 31, 2015
$
75,497

2016
$
144,778

2017
$
125,955

2018
$
110,133

2019
$
97,110

As acquisitions and dispositions occur in the future and the valuations of intangible assets for recent acquisitions are completed, amortization may vary. Therefore, the expense to date is not necessarily indicative of the expense expected for the full year.
Goodwill
The following table presents the changes in the carrying amount of goodwill in each of the Company’s reportable segments for the six months ended June 30, 2015:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
&  Advertising
 
Total
 
(in thousands)
Balance as of December 31, 2014:
 
 
 
 
 
 
 
 
 
Goodwill
$
577,891

 
$
657,631

 
$
345,513

 
$
302,865

 
$
1,883,900

Accumulated impairment losses
(386,915
)
 

 
(17,948
)
 

 
(404,863
)
                 Net
190,976

 
657,631

 
327,565

 
302,865

 
1,479,037

 
 
 
 
 
 
 
 
 
 
Acquisitions—current year
79,915

 
79,277

 
4,800

 
20,455

 
184,447

Acquisitions—prior year
(35,844
)
 
(4,245
)
 
4,461

 
4,335

 
(31,293
)
Foreign exchange
(2,159
)
 
(6,779
)
 
343

 
(4,473
)
 
(13,068
)
 
 
 
 
 
 
 
 
 
 
Balance as of June 30, 2015:
 
 
 
 
 
 
 
 
 
Goodwill
619,803

 
725,884

 
355,117

 
323,182

 
2,023,986

Accumulated impairment losses
(386,915
)
 

 
(17,948
)
 

 
(404,863
)
                 Net
$
232,888

 
$
725,884

 
$
337,169

 
$
323,182

 
$
1,619,123

Included in the current year acquisitions amount above of $184.4 million is goodwill primarily associated with the acquisitions of controlling interests in two festival promoters and the acquisition of a ticketing business previously accounted for under the equity method, all located in the United States.
Included in the prior year acquisitions amount above is a decrease of $31.3 million of goodwill primarily associated with the acquisition of a controlling interest in a festival and concert promoter located in the United States.
The Company is in various stages of finalizing its acquisition accounting for recent acquisitions, which include the use of external valuation consultants, and the completion of this accounting could result in a change to the associated purchase price allocations, including goodwill and its allocation between segments.

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NOTE 3—FAIR VALUE MEASUREMENTS
The following table shows the fair value of the Company’s significant financial assets that are required to be measured at fair value on a recurring basis, which are classified on the balance sheets as cash and cash equivalents:
 
Fair Value Measurements 
 at June 30, 2015
 
Fair Value Measurements 
 at December 31, 2014
 
Level 1
 
Level 1
 
(in thousands)
Assets:
 
 
 
       Cash equivalents
$
130,035

 
$
111

The Company has cash equivalents which consist of money market funds. Fair values for cash equivalents are based on quoted prices in an active market which are considered to be Level 1 inputs as defined in the FASB guidance.
The Company’s outstanding debt held by third-party financial institutions is carried at cost, adjusted for any premium, discounts or debt issuance costs. The Company’s debt is not publicly traded and the carrying amounts typically approximate fair value for debt that accrues interest at a variable rate, which are considered to be Level 2 inputs as defined in the FASB guidance. The estimated fair values of the Company’s 7% senior notes, 5.375% senior notes and 2.5% convertible senior notes were $451.6 million, $255.0 million and $298.5 million, respectively, at June 30, 2015. The estimated fair values of the 7% senior notes, 5.375% senior notes and 2.5% convertible senior notes were $451.3 million, $250.3 million and $296.3 million, respectively, at December 31, 2014. The estimated fair value of the Company’s third-party fixed-rate debt is based on quoted market prices in active markets for the same or similar debt, which are considered to be Level 2 inputs. The Company had fixed-rate debt held by noncontrolling interest partners with a face value of $30.4 million and $30.0 million at June 30, 2015 and December 31, 2014, respectively. The Company is unable to determine the fair value of this debt.
NOTE 4—COMMITMENTS AND CONTINGENT LIABILITIES
Ticketing Fees Consumer Class Action Litigation
In October 2003, a putative representative action was filed in the Superior Court of California challenging Ticketmaster’s charges to online customers for shipping fees and alleging that its failure to disclose on its website that the charges contain a profit component is unlawful. The complaint asserted a claim for violation of California’s Unfair Competition Law (“UCL”) and sought restitution or disgorgement of the difference between (i) the total shipping fees charged by Ticketmaster in connection with online ticket sales during the applicable period, and (ii) the amount that Ticketmaster actually paid to the shipper for delivery of those tickets. In August 2005, the plaintiffs filed a first amended complaint, then pleading the case as a putative class action and adding the claim that Ticketmaster’s website disclosures in respect of its ticket order processing fees constitute false advertising in violation of California’s False Advertising Law. On this new claim, the amended complaint seeks restitution or disgorgement of the entire amount of order processing fees charged by Ticketmaster during the applicable period. In April 2009, the Court granted the plaintiffs’ motion for leave to file a second amended complaint adding new claims that (a) Ticketmaster’s order processing fees are unconscionable under the UCL, and (b) Ticketmaster’s alleged business practices further violate the California Consumer Legal Remedies Act. Plaintiffs later filed a third amended complaint, to which Ticketmaster filed a demurrer in July 2009. The Court overruled Ticketmaster’s demurrer in October 2009.
The plaintiffs filed a class certification motion in August 2009, which Ticketmaster opposed. In February 2010, the Court granted certification of a class on the first and second causes of action, which allege that Ticketmaster misrepresents/omits the fact of a profit component in Ticketmaster’s shipping and order processing fees. The class would consist of California consumers who purchased tickets through Ticketmaster’s website from 1999 to present. The Court denied certification of a class on the third and fourth causes of action, which allege that Ticketmaster’s shipping and order processing fees are unconscionably high. In March 2010, Ticketmaster filed a Petition for Writ of Mandate with the California Court of Appeal, and plaintiffs also filed a Motion for Reconsideration of the Superior Court’s class certification order. In April 2010, the Superior Court denied plaintiffs’ Motion for Reconsideration of the Court’s class certification order, and the Court of Appeal denied Ticketmaster’s Petition for Writ of Mandate. In June 2010, the Court of Appeal granted the plaintiffs’ Petition for Writ of Mandate and ordered the Superior Court to vacate its February 2010 order denying plaintiffs’ motion to certify a national class and enter a new order granting plaintiffs’ motion to certify a nationwide class on the first and second claims. In September 2010, Ticketmaster filed its Motion for Summary Judgment on all causes of action in the Superior Court, and that same month plaintiffs filed their Motion for Summary Adjudication of various affirmative defenses asserted by Ticketmaster. In November 2010, Ticketmaster filed its Motion to Decertify Class.
In December 2010, the parties entered into a binding agreement providing for the settlement of the litigation and the resolution of all claims therein. In September 2011, the Court declined to approve the settlement in its then-current form.

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Litigation continued, and later that same month, the Court granted in part and denied in part Ticketmaster’s Motion for Summary Judgment. The parties reached a new settlement in September 2011, which was preliminarily approved, but in September 2012 the Court declined to grant final approval. In June 2013, the parties reached a revised settlement, which was preliminarily approved by the Court in April 2014. In February 2015, the Court granted the parties’ motion for final approval of the settlement. Ticketmaster and its parent, Live Nation, have not acknowledged any violations of law or liability in connection with the matter.
As of June 30, 2015, the Company had accrued $34.9 million, its best estimate of the probable costs associated with the settlement referred to above. The calculation of this liability is based in part upon an estimated redemption rate. Any difference between the Company’s estimated redemption rate and the actual redemption rate it experiences will impact the final settlement amount; however, the Company does not expect this difference to be material.
Other Litigation
From time to time, the Company is involved in other legal proceedings arising in the ordinary course of its business, including proceedings and claims based upon purported violations of antitrust laws, intellectual property rights and tortious interference, which could cause the Company to incur significant expenses. The Company has also been the subject of personal injury and wrongful death claims relating to accidents at its venues in connection with its operations. As required, the Company has accrued its estimate of the probable settlement or other losses for the resolution of any outstanding claims. These estimates have been developed in consultation with counsel and are based upon an analysis of potential results, including, in some cases, estimated redemption rates for the settlement offered, assuming a combination of litigation and settlement strategies. It is possible, however, that future results of operations for any particular period could be materially affected by changes in the Company’s assumptions or the effectiveness of its strategies related to these proceedings.
NOTE 5—INCOME TAXES
The Company calculates interim effective tax rates in accordance with the FASB guidance for income taxes and applies the estimated annual effective tax rate to year-to-date pretax income (or loss) at the end of each interim period to compute a year-to-date tax expense (or benefit). This guidance requires departure from effective tax rate computations when losses incurred within tax jurisdictions cannot be carried back and future profits associated with operations in those tax jurisdictions cannot be assured beyond any reasonable doubt. Accordingly, the Company has calculated and applied an expected annual effective tax rate of approximately 30% for 2015, excluding significant, unusual or extraordinary items, for ordinary income associated with operations for which the Company currently expects to have annual taxable income, which are principally outside of the United States. The Company has not recorded tax benefits associated with losses from operations for which future taxable income cannot be reasonably assured.
As almost all earnings from the Company’s continuing foreign operations are permanently reinvested and not distributed, the Company’s income tax provision does not include additional United States taxes on those foreign operations. The Company currently believes that the majority of its undistributed foreign earnings that are not currently subject to United States federal income tax will be indefinitely reinvested in its foreign operations.
The tax years 2005 through 2014 remain open to examination by the major tax jurisdictions to which the Company is subject.

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NOTE 6—EQUITY
The following table shows the reconciliation of the carrying amount of stockholders’ equity attributable to Live Nation, equity attributable to noncontrolling interests, total equity and also redeemable noncontrolling interests for the six months ended June 30, 2015:
 
Live Nation
Stockholders’  Equity
 
Noncontrolling
Interests
 
Total
Equity
 
Redeemable
Noncontrolling
Interests
 
(in thousands)
 
(in thousands)
Balance at December 31, 2014
$
1,296,954

 
$
186,893

 
$
1,483,847

 
$
168,855

Non-cash and stock-based compensation
17,562

 

 
17,562

 

Common stock issued under stock plans, net of shares withheld for employee taxes
(5,321
)
 

 
(5,321
)
 

Exercise of stock options
13,015

 

 
13,015

 

Acquisitions

 
17,069

 
17,069

 
74,911

Purchases of noncontrolling interests
(4,819
)
 
(3,233
)
 
(8,052
)
 

Sales of noncontrolling interests
2,142

 

 
2,142

 
147

Redeemable noncontrolling interests fair value adjustments
(6,993
)
 

 
(6,993
)
 
6,993

Cash distributions

 
(9,178
)
 
(9,178
)
 
(192
)
Other

 
(513
)
 
(513
)
 
53

Comprehensive loss:
 
 
 
 

 
 
Net loss
(43,223
)
 
2,131

 
(41,092
)
 
(5,222
)
Realized loss on cash flow hedges
25

 

 
25

 

Change in funded status of defined benefit pension plan
113

 

 
113

 

Foreign currency translation adjustments
(18,059
)
 

 
(18,059
)
 

Balance at June 30, 2015
$
1,251,396

 
$
193,169

 
$
1,444,565

 
$
245,545


Accumulated Other Comprehensive Income (Loss)
The following table presents changes in the components of AOCI, net of taxes, for the six months ended June 30, 2015:
 
Gains and Losses On Cash Flow Hedges
 
Defined Benefit Pension Items
 
Foreign Currency Items
 
Total
 
(in thousands)
Balance at December 31, 2014
$
(25
)
 
$
(581
)
 
$
(69,404
)
 
$
(70,010
)
Other comprehensive income (loss) before reclassifications

 
113

 
(18,059
)
 
(17,946
)
Amount reclassified from AOCI
25

 

 

 
25

Net other comprehensive income (loss)
25

 
113

 
(18,059
)
 
(17,921
)
Balance at June 30, 2015
$

 
$
(468
)
 
$
(87,463
)
 
$
(87,931
)
The realized loss on cash flow hedges reclassified from AOCI consists of one interest rate swap agreement that expired on June 30, 2015.

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Earnings Per Share
The following table sets forth the computation of basic and diluted net income (loss) per common share:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands except share and per share data)
Net income (loss) attributable to common stockholders of Live Nation
$
15,056

 
$
22,934

 
$
(43,223
)
 
$
(9,514
)
Accretion of redeemable noncontrolling interests
(3,105
)
 
(460
)
 
(6,993
)
 
(2,504
)
Net income (loss) available to common stockholders of Live Nation—basic and diluted
$
11,951

 
$
22,474

 
$
(50,216
)
 
$
(12,018
)
Weighted average common shares—basic
200,767,811

 
198,701,762

 
200,463,314

 
198,282,044

Effect of dilutive securities:
 
 
 
 
 
 
 
        Stock options and restricted stock
8,010,778

 
7,287,509

 

 

Weighted average common shares—diluted
208,778,589

 
205,989,271

 
200,463,314

 
198,282,044

Basic and diluted net income (loss) per common share available to common stockholders of Live Nation
$
0.06

 
$
0.11

 
$
(0.25
)
 
$
(0.06
)
Basic net income (loss) per common share is computed by dividing the net income (loss) available to common stockholders by the weighted average number of common shares outstanding during the period. The calculation of diluted net income (loss) per common share includes the effects of the assumed exercise of any outstanding stock options, the assumed vesting of shares of restricted stock awards and the assumed conversion of the convertible senior notes where dilutive. The following table shows securities excluded from the calculation of diluted net income (loss) per common share because such securities are anti-dilutive:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Options to purchase shares of common stock
3,075

 
5,108

 
16,657

 
17,755

Restricted stock awards—unvested
242

 
715

 
1,047

 
1,770

Conversion shares related to the convertible senior notes
7,930

 
16,035

 
7,930

 
16,035

Number of anti-dilutive potentially issuable shares excluded from diluted common shares outstanding
11,247

 
21,858

 
25,634

 
35,560

NOTE 7—STOCK-BASED COMPENSATION
The following is a summary of stock-based compensation expense recorded by the Company:
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
 
(in thousands)
Selling, general and administrative expenses
$
4,028

 
$
8,255

 
$
8,770

 
$
13,175

Corporate expenses
4,037

 
4,295

 
8,792

 
9,393

Total
$
8,065

 
$
12,550

 
$
17,562

 
$
22,568

In the second quarter of 2014, the Company granted an award of equity in a subsidiary to an employee that vested at issuance.
As of June 30, 2015, there was $61.2 million of total unrecognized compensation cost related to stock-based compensation arrangements for stock options, restricted stock awards and other equity awards. This cost is expected to be recognized over a weighted-average period of 2.4 years.

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NOTE 8—SEGMENT DATA
The Company’s reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising. The Concerts segment involves the promotion of live music events globally in the Company’s owned or operated venues and in rented third-party venues, the production of music festivals and the operation and management of music venues. The Ticketing segment involves the management of the Company’s global ticketing operations, including providing ticketing software and services to clients, ticket resale services and online access for customers relating to ticket and event information, and is responsible for the Company’s primary websites, www.livenation.com and www.ticketmaster.com. The Artist Nation segment provides management services to artists and other services including merchandise sales. The Sponsorship & Advertising segment manages the development of strategic sponsorship programs in addition to the sale of international, national and local sponsorships and placement of advertising including signage, promotional programs, rich media offerings, including live streaming and music-related original content, and banner ads across the Company’s distribution network of venues, events and websites.
Revenue and expenses earned and charged between segments are eliminated in consolidation. Corporate expenses and all line items below operating income (loss) are managed on a total company basis. The Company’s capital expenditures include accruals and expenditures funded by outside parties such as landlords or replacements funded by insurance companies.
The Company manages its working capital on a consolidated basis. Accordingly, segment assets are not reported to, or used by, the Company’s management to allocate resources to or assess performance of the segments, and therefore, total segment assets have not been presented.
The following table presents the results of operations for the Company’s reportable segments for the three and six months ended June 30, 2015 and 2014:
 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Three Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,268,382

 
$
360,197

 
$
87,835

 
$
81,071

 
$
791

 
$

 
$
(32,499
)
 
$
1,765,777

Direct operating expenses
1,075,507

 
171,045

 
53,806

 
10,717

 

 

 
(31,976
)
 
1,279,099

Selling, general and administrative expenses
157,348

 
116,741

 
38,478

 
13,856

 
416

 

 

 
326,839

Depreciation and amortization
40,033

 
35,561

 
10,756

 
2,225

 
13

 
506

 
(523
)
 
88,571

Loss (gain) on disposal of operating assets
(55
)
 
(30
)
 

 

 

 
9

 

 
(76
)
Corporate expenses

 

 

 

 

 
26,342

 

 
26,342

Acquisition transaction expenses
1,341

 
286

 
1,104

 

 

 
26

 

 
2,757

Operating income (loss)
$
(5,792
)
 
$
36,594

 
$
(16,309
)
 
$
54,273

 
$
362

 
$
(26,883
)
 
$

 
$
42,245

Intersegment revenue
$
30,572

 
$
460

 
$
1,467

 
$

 
$

 
$

 
$
(32,499
)
 
$

Three Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,172,166

 
$
371,000

 
$
79,162

 
$
70,903

 
$
839

 
$

 
$
(28,285
)
 
$
1,665,785

Direct operating expenses
969,991

 
183,269

 
47,242

 
9,995

 
1,590

 

 
(27,391
)
 
1,184,696

Selling, general and administrative expenses
166,890

 
111,882

 
34,029

 
12,244

 
880

 

 

 
325,925


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Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Depreciation and amortization
26,189

 
40,968

 
7,665

 
1,739

 
10

 
542

 
(894
)
 
76,219

Loss (gain) on disposal of operating assets
(3,745
)
 
(43
)
 
1

 

 


 

 

 
(3,787
)
Corporate expenses

 

 

 

 


 
25,717

 

 
25,717

Acquisition transaction expenses
456

 
58

 
(265
)
 

 


 
1,080

 

 
1,329

Operating income (loss)
$
12,385

 
$
34,866

 
$
(9,510
)
 
$
46,925

 
$
(1,641
)
 
$
(27,339
)
 
$

 
$
55,686

Intersegment revenue
$
25,604

 
$
187

 
$
2,494

 
$

 
$

 
$

 
$
(28,285
)
 
$

Six Months Ended June 30, 2015
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,891,616

 
$
735,827

 
$
165,780

 
$
133,168

 
$
1,584

 
$

 
$
(41,886
)
 
$
2,886,089

Direct operating expenses
1,561,479

 
356,737

 
100,636

 
21,345

 
1,068

 

 
(40,877
)
 
2,000,388

Selling, general and administrative expenses
308,338

 
229,154

 
75,692

 
26,950

 
1,250

 

 

 
641,384

Depreciation and amortization
69,214

 
78,857

 
20,791

 
4,213

 
24

 
1,022

 
(1,009
)
 
173,112

Loss (gain) on disposal of operating assets
171

 
(179
)
 

 

 

 
(29
)
 

 
(37
)
Corporate expenses

 

 

 

 

 
50,702

 

 
50,702

Acquisition transaction expenses
775

 
433

 
1,110

 

 

 
(88
)
 

 
2,230

Operating income (loss)
$
(48,361
)
 
$
70,825

 
$
(32,449
)
 
$
80,660

 
$
(758
)
 
$
(51,607
)
 
$

 
$
18,310

Intersegment revenue
$
39,311

 
$
460

 
$
2,115

 
$

 
$

 
$

 
$
(41,886
)
 
$

Capital expenditures
$
18,880

 
$
42,117

 
$
868

 
$
1,721

 
$
(13
)
 
$
438

 
$

 
$
64,011


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Table of Contents

 
Concerts
 
Ticketing
 
Artist
Nation
 
Sponsorship
& Advertising
 
Other
 
Corporate
 
Eliminations
 
Consolidated
 
 
 
 
 
 
 
(in thousands)
 
 
 
 
 
 
Six Months Ended June 30, 2014
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
$
1,834,656

 
$
725,461

 
$
151,718

 
$
116,291

 
$
1,585

 
$

 
$
(36,610
)
 
$
2,793,101

Direct operating expenses
1,487,146

 
355,860

 
89,318

 
18,059

 
681

 

 
(35,217
)
 
1,915,847

Selling, general and administrative expenses
316,806

 
225,902

 
59,822

 
24,165

 
1,635

 

 

 
628,330

Depreciation and amortization
54,709

 
86,951

 
15,436

 
1,943

 
20

 
1,141

 
(1,393
)
 
158,807

Loss (gain) on disposal of operating assets
(3,235
)
 
(117
)
 
34

 

 

 
37

 

 
(3,281
)
Corporate expenses

 

 

 

 

 
46,891

 

 
46,891

Acquisition transaction expenses
783

 
63

 
188

 

 

 
2,095

 

 
3,129

Operating income (loss)
$
(21,553
)
 
$
56,802

 
$
(13,080
)
 
$
72,124

 
$
(751
)
 
$
(50,164
)
 
$

 
$
43,378

Intersegment revenue
$
33,034

 
$
460

 
$
3,116

 
$

 
$

 
$

 
$
(36,610
)
 
$

Capital expenditures
$
18,306

 
$
37,438

 
$
943

 
$
449

 
$

 
$
5,271

 
$

 
$
62,407

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“Live Nation” (which may be referred to as the “Company,” “we,” “us” or “our”) means Live Nation Entertainment, Inc. and its subsidiaries, or one of our segments or subsidiaries, as the context requires. You should read the following discussion of our financial condition and results of operations together with the unaudited consolidated financial statements and notes to the financial statements included elsewhere in this quarterly report.
Special Note About Forward-Looking Statements
Certain statements contained in this quarterly report (or otherwise made by us or on our behalf from time to time in other reports, filings with the SEC, news releases, conferences, internet postings or otherwise) that are not statements of historical fact constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934, as amended, notwithstanding that such statements are not specifically identified. Forward-looking statements include, but are not limited to, statements about our financial position, business strategy, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition, the effects of future legislation or regulations and plans and objectives of our management for future operations. We have based our forward-looking statements on our beliefs and assumptions considering the information available to us at the time the statements are made. Use of the words “may,” “should,” “continue,” “plan,” “potential,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “outlook,” “could,” “target,” “project,” “seek,” “predict,” or variations of such words and similar expressions are intended to identify forward-looking statements but are not the exclusive means of identifying such statements.
Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. Factors that could cause actual results to differ from those discussed in the forward-looking statements include, but are not limited to, those set forth below under Part II Item 1A.—Risk Factors, in Part I Item IA.—Risk Factors of our 2014 Annual Report on Form 10-K, as well as other factors described herein or in our annual, quarterly and other reports we file with the SEC (collectively, “cautionary statements”). Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described in any forward-looking statements. All subsequent written and oral forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by the applicable cautionary statements. We do not intend to update these forward-looking statements, except as required by applicable law.
Executive Overview
In the second quarter of 2015, our overall revenue increased by $100.0 million on a reported basis as compared to last year, or $195.7 million, a 12% increase, without the impact of changes in foreign exchange rates. The increase was largely driven by growth in our Concerts segment due to the increase in events and fans. Sponsorship & Advertising increased as well, with growth in both North America and International. Additionally, Ticketing finished ahead of second quarter last year due to the continued expansion of our resale business in North America. For the first six months, our overall revenue was up $93.0 million on a reported basis as compared to last year, or $244.8 million, a 9% increase, without the impact of changes in foreign exchange rates. All of our reported segments delivered revenue increases in the first half of the year, underscoring the continued success of our strategic initiatives and the underlying health of the live event and ticketing businesses. We believe by leveraging our leadership position in the entertainment industry to reach fans through the live concert experience, we will sell more tickets and grow our Sponsorship & Advertising revenue. As the leading global live event and ticketing company, we believe that we are well-positioned to provide the best service to artists, teams, fans and venues and therefore drive growth across all our businesses.
Our Concerts segment revenue for the quarter increased by $96.2 million on a reported basis as compared to last year, or $168.4 million, a 14% increase, without the impact of changes in foreign exchange rates. This increase was largely due to higher arena activity in North America with tours of artists including U2, Imagine Dragons, and Kevin Hart. Our festival business in North America also continues to grow with another strong year for Electric Daisy Carnival in Las Vegas and our first year with Bonnaroo, one of the largest festivals worldwide. In our International festival business, Rock Werchter occured in the second quarter (was in the third quarter last year) and was again a success in Belgium, attracting over 350,000 fans, making it one of the top five festivals in Europe. This growth was partially offset by a reduction in arena and stadium activity in our European markets. Overall, attendance at our shows increased by 7% in the second quarter of 2015 as compared to last year. Our Concerts operating results for the quarter were in line with last year except for higher amortization expense and lower gains on disposal.
For the first six months, our Concerts segment was the largest contributor to our overall revenue growth, with an increase of $57.0 million on a reported basis as compared to last year, or $163.5 million, a 9% increase, without the impact of changes in foreign exchange rates. As in the second quarter, this higher revenue was largely due to an increase in the number of arena shows in North America as well as a 77% growth in attendance in our festivals globally for the second quarter. In the first half of the year, in addition to the acts mentioned above, artists including Maroon 5 and Ariana Grande drove our arena attendance

17

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up by 35%. This growth more than offset a decline in arena and stadium activity in Europe. Year-to-date, there has been a 3% increase in the overall number of fans attending our shows as compared to 2014. Operating results for the first six months of the year were impacted by reduced touring activity in Europe along with investments in our festival business. We will continue to look for expansion opportunities, both domestically and internationally, as well as ways to market our events more effectively, in order to continue to expand our fan base and geographic reach and to sell more tickets and advertising.
Our Ticketing segment revenue for the second quarter decreased by $10.8 million on a reported basis as compared to last year, but increased by $6.9 million, or 2%, without the impact of changes in foreign exchange rates. This increase was largely due to a 38% growth of gross transaction value, or GTV, in our resale ticketing business globally, which includes higher activity from Europe and the launch of resale in Australia. The success of our integrated resale and primary offering continues with GTV in both sports and concerts increasing in the second quarter. While ticket sales in our primary business were essentially flat to last year at 37 million tickets, this is largely due to the timing of on-sales for major concert events. Operating results for the quarter increased over last year, largely as a result of our growing resale ticketing business and reduced costs per ticket on our primary tickets.
For the first six months, Ticketing revenue is up $10.4 million on a reported basis as compared to last year, or $44.9 million, a 6% increase, without the impact of changes in foreign exchange rates. This growth was driven by both our expanding resale business as well as higher primary ticket sales. In our primary business, we have sold 75 million tickets worldwide for the first six months, a 1% increase over last year. Ticketing operating results year-to-date are up due to stronger results in our resale ticketing business, higher primary ticket sales in North America and lower amortization while we continued to invest in technology and new innovations, on both our primary and resale platforms. Mobile, in particular, continues to be an area of focus for us. We have accelerated our mobile app releases, which has resulted in the number of active app users globally increasing year-over-year. For the first six months, 21% of our total tickets were sold via mobile and tablet devices, a 21% increase over last year. We will continue to implement new features to drive further expansion of mobile ticket transactions and invest in initiatives aimed at improving the ticket search, purchase and transfer process. As a result, we expect to attract more ticket buyers and enhance the overall fan and venue client experience.
Our Artist Nation segment revenue for the second quarter increased $8.7 million on a reported basis as compared to last year, or $10.2 million, a 13% increase, without the impact of changes in foreign exchange rates. This increase resulted from higher management commissions although operating results declined largely due to investments in additional service lines which also increased compensation costs. For the first six months of the year, Artist Nation revenue was up $14.1 million on a reported basis as compared to last year, or $17.3 million, an 11% increase, without the impact of changes in foreign exchange rates, again driven by higher management commissions. On a year-to-date basis, Artist Nation’s operating results were down due to higher costs as noted for the second quarter. Our Artist Nation segment is focused on managing its existing clients as well as developing new relationships with top artists and extending the various services it provides.
Our Sponsorship & Advertising segment revenue for the quarter was up $10.2 million on a reported basis as compared to last year, or $14.5 million, a 20% increase, without the impact of changes in foreign exchange rates. Higher revenue resulted from new clients, growth in our online business and increased festival sponsorships, which also grew our operating income. For the first six months, Sponsorship & Advertising revenue was up $16.9 million on a reported basis as compared to last year, or $24.5 million, a 21% increase, without the impact of changes in foreign exchange rates. Our focus on building and expanding our ad network is driving results by increasing our monthly unique visitors to our network, now at 65 million. This higher revenue overall delivered a 12% increase in operating income on a reported basis for Sponsorship & Advertising for the first six months of 2015. We believe that our extensive on-site and online reach, global venue distribution network, artist relationships and ticketing operations are the key to securing long-term sponsorship agreements with major brands, and we plan to expand these assets while extending further into new markets internationally.
We continue to be optimistic about the long-term potential of our company and are focused on the key elements of our business model - expand our concert platform, drive conversion of ticket sales through social and mobile channels, sell more tickets for our Ticketmaster clients, deliver fans a fully integrated offering of primary and secondary tickets together, grow our sponsorship and online revenue, drive cost efficiencies and continue to align our artist management group with our other core businesses.
Our History
We were incorporated in Delaware on August 2, 2005 in preparation for the contribution and transfer by Clear Channel Communications, Inc. of substantially all of its entertainment assets and liabilities to us. We completed the separation on December 21, 2005, and became a publicly traded company on the New York Stock Exchange trading under the symbol “LYV.”
On January 25, 2010, we merged with Ticketmaster and it became a wholly-owned subsidiary of Live Nation. Effective with the merger, Live Nation, Inc. changed its name to Live Nation Entertainment, Inc.

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Segment Overview
Our reportable segments are Concerts, Ticketing, Artist Nation and Sponsorship & Advertising.
Concerts
Our Concerts segment principally involves the global promotion of live music events in our owned or operated venues and in rented third-party venues, the operation and management of music venues and the production of music festivals across the world. While our Concerts segment operates year-round, we experience higher revenue during the second and third quarters due to the seasonal nature of shows at our outdoor amphitheaters and festivals, which primarily occur from May through September. Revenue and related costs for events are generally deferred and recognized when the event occurs. All advertising costs incurred during the year for shows in future years are expensed at the end of the year.
To judge the health of our Concerts segment, we primarily monitor the number of confirmed events in our network of owned or operated and third-party venues, talent fees, average paid attendance and advance ticket sales. In addition, at our owned or operated venues, we monitor ancillary revenue per fan and premium ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.
Ticketing
The Ticketing segment is primarily an agency business that sells tickets for events on behalf of our clients and retains a service charge for these services. We sell tickets through websites, mobile apps, ticket outlets and telephone call centers. Our ticketing sales are impacted by fluctuations in the availability of events for sale to the public, which may vary depending upon scheduling by our clients. We also offer ticket resale services, sometimes referred to as secondary ticketing, primarily through our integrated inventory platform, along with other platforms internationally. Our Ticketing segment also manages our online activities including enhancements to our websites and bundled product offerings. Through our websites, we sell tickets to our own events as well as tickets for our clients and provide event information. Revenue related to ticketing service charges is recognized when the ticket is sold except for our own events where we control ticketing and then the revenue is deferred and recognized as the event occurs.
To judge the health of our Ticketing segment, we primarily review the gross transaction value and the number of tickets sold through our primary ticketing operations, average service charge, the number of clients renewed or added and the average royalty rate paid to clients who use our ticketing services. In addition, we review the number of visits to our websites, the overall number of customers in our database, the number of tickets sold via mobile apps and gross transaction value and fees related to secondary ticket sales. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.
Artist Nation
The Artist Nation segment primarily provides management services to music artists and other clients in exchange for a commission on the earnings of these artists. Our Artist Nation segment also creates and sells merchandise for music artists at live performances, to retailers and directly to consumers via the internet. Revenue earned from our Artist Nation segment is impacted to a large degree by the touring schedules of the artists we represent and generally we experience higher revenue during the second and third quarters as the period from May through September tends to be a popular time for touring events.
To judge the health of our Artist Nation segment, we primarily review the annual commissions earned for each client represented. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.
Sponsorship & Advertising
Our Sponsorship & Advertising segment employs a sales force that creates and maintains relationships with sponsors through a combination of strategic, international, national and local opportunities that allow businesses to reach customers through our concerts, venue, artist relationship and ticketing assets, including advertising on our websites. We drive increased advertising scale to further monetize our concerts platform through rich media offerings including live streaming and music-related original content. We work with our corporate clients to help create marketing programs that drive their business goals and connect their brands directly with fans and artists. We also develop, book and produce custom events or programs for our clients’ specific brands which are typically experienced exclusively by the clients’ consumers. These custom events can involve live music events with talent and media, using both online and traditional outlets. We typically experience higher revenue in the second and third quarters, as a large portion of sponsorships are associated with shows at our outdoor amphitheaters and festivals which primarily occur from May through September.
To judge the health of our Sponsorship & Advertising segment, we primarily review the revenue generated through sponsorship arrangements, the percentage of expected revenue under contract and online advertising revenue through our

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websites. For business that is conducted in foreign markets, we also compare the operating results from our foreign operations to prior periods without the impact of changes in foreign exchange rates.

Consolidated Results of Operations
 
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2015
 
2014
 
2015
 
2014
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
1,765,777

 
$
1,665,785

 
6%
 
$
2,886,089

 
$
2,793,101

 
3%
Operating expenses:
 
 
 
 
 
 
 
 
 
 
 
Direct operating expenses
1,279,099

 
1,184,696

 
8%
 
2,000,388

 
1,915,847

 
4%
Selling, general and administrative expenses
326,839

 
325,925

 
*
 
641,384

 
628,330

 
2%
Depreciation and amortization
88,571

 
76,219

 
16%
 
173,112

 
158,807

 
9%
Gain on disposal of operating assets
(76
)
 
(3,787
)
 
*
 
(37
)
 
(3,281
)
 
*
Corporate expenses
26,342

 
25,717

 
2%
 
50,702

 
46,891

 
8%
Acquisition transaction expenses
2,757

 
1,329

 
*
 
2,230

 
3,129

 
*
Operating income
42,245

 
55,686

 
(24)%
 
18,310

 
43,378

 
(58)%
Operating margin
2.4
%
 
3.3
%
 
 
 
0.6
%
 
1.6
%
 
 
Interest expense
25,650

 
27,590

 
 
 
51,013

 
52,082

 
 
Interest income
(394
)
 
(1,146
)
 
 
 
(1,959
)
 
(1,812
)
 
 
Equity in losses (earnings) of nonconsolidated affiliates
367

 
(960
)
 
 
 
(2,613
)
 
(3,766
)
 
 
Other expense (income), net
(8,500
)
 
(330
)
 
 
 
12,528

 
(1,506
)
 
 
Income (loss) before income taxes
25,122

 
30,532

 
 
 
(40,659
)
 
(1,620
)
 
 
Income tax expense
4,910

 
4,710

 
 
 
5,655

 
2,655

 
 
Net income (loss)
20,212

 
25,822

 
 
 
(46,314
)
 
(4,275
)
 
 
Net income (loss) attributable to noncontrolling interests
5,156

 
2,888

 
 
 
(3,091
)
 
5,239

 
 
Net income (loss) attributable to common stockholders of Live Nation
$
15,056

 
$
22,934

 
 
 
$
(43,223
)
 
$
(9,514
)
 
 
_________
*
Percentages are not meaningful.

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Key Operating Metrics
 
 
Three Months Ended 
 June 30,
 
Six Months Ended 
 June 30,
 
2015
 
2014
 
2015
 
2014
Concerts (1)
 
 
 
 
 
 
 
Estimated events:
 
 
 
 
 
 
 
North America
4,332

 
4,019

 
7,733

 
7,266

International
1,798

 
1,639

 
3,428

 
3,198

Total estimated events
6,130

 
5,658

 
11,161

 
10,464

Estimated fans (rounded):
 
 
 
 
 
 
 
North America
10,743,000

 
9,185,000

 
16,183,000

 
14,885,000

International
4,737,000

 
5,221,000

 
7,880,000

 
8,518,000

Total estimated fans
15,480,000

 
14,406,000

 
24,063,000

 
23,403,000

Ticketing (2)
 
 
 
 
 
 
 
Number of tickets sold (in thousands)
36,602

 
36,910

 
74,522

 
73,563

 _________

(1) 
Events generally represent a single performance by an artist. Fans generally represent the number of people who attend an event. Festivals are counted as one event in the quarter in which the festival begins, but the number of fans is based on the days the fans were present at the festival and thus can be reported across multiple quarters. Events and fan attendance metrics are estimated each quarter.
(2) 
The number of tickets sold includes primary tickets only. This metric includes tickets sold during the period regardless of event timing except for our promoted events in our owned or operated venues and in certain European territories where these tickets are reported as the events occur. The total number of tickets sold reported for the three months ended June 30, 2015 and 2014 excludes approximately 61 million and 61 million, respectively, and for the six months ended June 30, 2015 and 2014 excludes approximately 133 million and 134 million, respectively, of tickets sold using our Ticketmaster systems, through season seat packages and our venue clients’ box offices, for which we do not receive a fee.


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Revenue
Our revenue increased $100.0 million, or 6%, during the three months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in revenue was primarily due to an increase in our Concerts segment of $96.2 million. Excluding the decrease of approximately $95.7 million related to the impact of changes in foreign exchange rates, revenue increased $195.7 million, or 12%.
Our revenue increased $93.0 million, or 3%, during the six months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in revenue was due to increases in our Concerts, Ticketing, Artist Nation and Sponsorship & Advertising segments of $57.0 million, $10.4 million, $14.1 million and $16.9 million, respectively. Excluding the decrease of approximately $151.8 million related to the impact of changes in foreign exchange rates, revenue increased $244.8 million, or 9%.
More detailed explanations of these changes along with the impact of changes in foreign exchange rates, if significant, are included in the applicable segment discussions below.
Direct operating expenses
Our direct operating expenses increased $94.4 million, or 8%, during the three months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in direct operating expenses was primarily due to an increase in our Concerts segment of $105.5 million, partially offset by a decrease in our Ticketing segment of $12.2 million. Excluding the decrease of approximately $70.3 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $164.7 million, or 14%.
Our direct operating expenses increased $84.5 million, or 4%, during the six months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in direct operating expenses was primarily due to increases in our Concerts and Artist Nation segments of $74.3 million and $11.3 million, respectively. Excluding the decrease of approximately $108.0 million related to the impact of changes in foreign exchange rates, direct operating expenses increased $192.5 million, or 10%.
Direct operating expenses include artist fees, event production costs, ticketing client royalties, show-related marketing and advertising expenses, along with other costs.
More detailed explanations of these changes along with the impact of changes in foreign exchange rates, if significant, are included in the applicable segment discussions below.
Selling, general and administrative expenses
Our selling, general and administrative expenses increased $0.9 million during the three months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in selling, general and administrative expenses was primarily due to increases in our Ticketing and Artist Nation segments of $4.9 million and $4.4 million, respectively, partially offset by a decrease in our Concerts segment of $9.5 million. Excluding the decrease of approximately $15.9 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $16.8 million, or 5%.
Our selling, general and administrative expenses increased $13.1 million, or 2%, during the six months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in selling, general and administrative expenses was primarily due to an increase in our Artist Nation segment of $15.9 million. Excluding the decrease of approximately $30.1 million related to the impact of changes in foreign exchange rates, selling, general and administrative expenses increased $43.2 million, or 7%.
More detailed explanations of these changes along with the impact of changes in foreign exchange rates, if significant, are included in the applicable segment discussions below.
Depreciation and amortization
Our depreciation and amortization increased $12.4 million, or 16%, during the three months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in depreciation and amortization was primarily due to an increase in our Concerts segment of $13.8 million. Excluding the decrease of approximately $3.2 million related to the impact of changes in foreign exchange rates, depreciation and amortization increased $15.6 million, or 20%.
Our depreciation and amortization increased $14.3 million, or 9%, during the six months ended June 30, 2015 as compared to the same period of the prior year. The overall increase in depreciation and amortization was primarily due to an increase in our Concerts segment of $14.5 million. Excluding the decrease of $5.9 million related to the impact of changes in foreign exchange rates, depreciation and amortization increased $20.2 million, or 13%.

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Corporate expenses
Corporate expenses increased $3.8 million, or 8%, during the six months ended June 30, 2015 as compared to the same period of the prior year primarily due to higher compensation costs driven by higher headcount and annual salary increases.
Other expense (income), net
Other expense (income), net was income of $8.5 million and expense of $12.5 million for the three and six months ended June 30, 2015, respectively, and includes the impact of net foreign exchange rate gains of $0.3 million and net foreign exchange rate losses of $20.5 million, respectively, primarily from revaluation of certain foreign currency denominated net assets or liabilities held internationally. The three- and six-month periods include gains of $10.0 million recorded in connection with the consolidation of a festival promotion business and a ticketing company that were previously accounted for as equity investments.
Other expense (income), net was income of $0.3 million and $1.5 million for the three and six months ended June 30, 2014, respectively, and includes the impact of net foreign exchange rate gains of $0.5 million and net foreign exchange rate losses of $2.3 million, respectively.
Net income (loss) attributable to noncontrolling interests
Net income (loss) attributable to noncontrolling interests decreased $8.3 million to a loss of $3.1 million for the six months ended June 30, 2015 as compared to income of $5.2 million for the same period of the prior year primarily due to lower operating results from certain concert and festival promotion businesses.
Concerts Results of Operations
Our Concerts segment operating results were, and discussions of significant variances are, as follows:
 
Three Months Ended 
 June 30,
 
%
Change
 
Six Months Ended 
 June 30,
 
%
Change
 
2015
 
2014
 
 
 
2015
 
2014
 
 
 
(in thousands)
 
 
 
(in thousands)
 
 
Revenue
$
1,268,382